Building Rewarding Relationships
2023 ANNUAL REPORT
Flushing Financial Corporation
(Nasdaq: FFIC) is the holding
company for Flushing Bank®, an FDIC
insured, New York State-chartered
commercial bank that operates
banking offices in Queens, Brooklyn,
Manhattan, and on Long Island. The
Bank has been building relationships
with families, business owners, and
communities since 1929. Today, it
offers the products, services, and
conveniences associated with large
commercial banks, including a full
complement of deposit, loan,
equipment finance, and cash
management services. Rewarding
customers with personalized attention
and bankers who can communicate in
the languages prevalent within these
multicultural markets is what makes
the Bank uniquely different. As an
Equal Housing Lender and leader in
real estate lending, the Bank’s
experienced lending teams create
mortgage solutions for real estate
owners and property managers both
within and outside the New York City
metropolitan area. The Bank also
fosters relationships with consumers
nationwide through its online banking
division with the iGObanking® and
BankPurely® brands.
Financial Highlights
(Dollars in thousands, except per share data)
At or for the years ended
December 31,
Selected Financial Condition Data
Total assets
Loans, net
Securities held to maturity
Securities available for sale
Total Securities
Certificates of deposit
Other deposit accounts
Total Deposits
Stockholders’ equity
Dividends paid per common share
Book value per common share
Selected Operating Data
Net interest income
Net income
Basic earnings per common share
Diluted earnings per common share
Selected Financial Ratios and Other Data
Return on average assets
Return on average equity
Interest rate spread
Net interest margin
Efficiency ratio
Equity to total assets
Nonperforming assets to total assets
Allowance for credit losses to gross loans
Allowance for credit losses to total nonperforming loans
Dividend payout ratio
2023
2022
$ 8,537,236
$ 8,422,946
$ 6,866,789
$ 6,894,327
$
72,923
$ 874,753
$
$
73,711
735,357
$ 947,676
$ 809,068
$ 2,311,290
$
1,526,338
$ 4,503,971
$ 4,959,004
$ 6,815,261
$ 6,485,342
$ 669,837
$
$
$
$
$
$
0.88
23.21
179,152
28,664
0.96
0.96
$
$
$
$
$
$
$
677,157
0.88
22.97
243,616
76,945
2.50
2.50
0.34 %
4.25 %
1.72 %
2.24 %
76.72 %
7.85 %
0.54 %
0.58 %
159.55 %
91.7 %
0.93 %
11.44 %
2.92 %
3.11 %
56.46 %
8.04 %
0.63 %
0.58 %
124.89 %
35.2 %
1
To Fellow Shareholders,
2023 was a challenging year, filled with market volatility, a banking crisis, and aggressive
rate movements by the Federal Reserve (Fed). In March 2023, several large banks faced
liquidity issues that caused a run on these banks by depositors and ultimately resulted
in their failure or takeover. These events negatively impacted the banking industry and
prompted regulators to implement contingent funding plans for the industry.
Fortunately, due to our strong liquidity ($3.7 billion or 3.4x uninsured and uncollateralized
deposits as of March 31, 2023) and secure customer base, the impact on Flushing Bank was
minimal. In fact, deposits increased $250 million in the first quarter of 2023. However, due to
the Fed’s rate moves, our funding costs were pressured, and our net interest margin (NIM) was
compressed. To navigate through these challenges, we implemented a multistep action plan in
the first quarter of 2023, which included moving the Company toward an interest rate neutral
position that allows the Company to remain profitable under all rate scenarios.
We are pleased to report that we made progress against our action plan throughout 2023,
despite the challenging environment. Continuing to emphasize key areas of focus in the short
term produced the following results:
Strong liquidity and capital ratios were maintained throughout 2023.
Credit quality continued to be a strength for the Company, with sixteen basis points
of net charge-offs for the year.
Our loan portfolio remained resilient through the credit cycle, with 89% secured by real
estate, strong debt service coverage ratios, low average loan to values, and controllable
repricing risk.
Total average deposits increased 6% year over year.
Noninterest-bearing deposits grew $20 million in the second half of the year.
For the eighth consecutive year, the Kroll Bond Rating Agency reaffirmed our
investment grade rating.
Total Assets
(in millions)
Net Loan Portfolio
(in millions)
Deposits
(in millions)
Tangible Book
Value per Share
(in dollars)
$9,000
$7,000
$7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
6,000
5,000
4,000
3,000
2,000
1,000
0
$24
20
16
12
8
4
0
7000
6000
5000
4000
3000
2000
1000
0
24
20
16
12
8
4
0
’19 ’20 ’21 ’22 ’23
’19 ’20 ’21 ’22 ’23
’19 ’20 ’21 ’22 ’23
’19 ’20 ’21 ’22 ’23
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
7000
6000
5000
4000
3000
2000
1000
0
Given our progress to date, we are expanding our areas of focus for 2024 to include:
Increasing NIM and reducing volatility
In the fourth quarter of 2023, we delivered sequential GAAP and Core NIM expansion of
seven and eighteen points, respectively. As this is a multiyear initiative, we will continue to
make progress in 2024 as assets reprice upward and deposit increases decelerate.
Maintaining credit discipline
Our credit profile has always been conservative, and our risk profile will not change as
we advance our lending strategy.
Preserving strong liquidity and capital profile
We have a strong liquidity position with over $4 billion of undrawn lines and resources
as of December 31, 2023. We will continue to build on this foundation.
Bending the expense curve
In 2023, we tightened expenses significantly where we could, and this will be an even greater
focus in 2024. We will continue to review our cost structure to look for opportunities to
become more efficient to maintain and enhance the resilience of our business as we move
through the year.
These expanded areas of focus will guide us through the near-term challenges while positioning
the Company for long-term profitability.
Rewarding Relationships
Regulators
Customers
Communities
Employees
Investors
In 2024, we anticipate continued competition for deposits, with loan demand remaining low,
so we will look to grow our low-cost deposits and maintain our traditional conservative
lending with a focus on floating-rate loans. Our funding strategy will optimize the sources and
distribution channels to mitigate margin pressure.
In early 2024, severe operating issues at a major competitor accelerated concerns around two
major classes of real estate in the New York City market. Weakness in the office market has
been well documented following post-pandemic patterns of remote work and large credit
losses predominantly with non-bank lenders. In addition, concerns have accelerated surrounding
interest rate and expense increases outpacing allowable rent increases in the rent regulated
sector of multifamily lending. We expect our low exposure to the office market (less than 1%
of outstandings in the critical Manhattan office sector) and our strong debt service coverage
ratios (1.8) in the rent regulated multifamily space, along with our traditionally conservative
underwriting, borrower profile, and granular portfolio will enable us to positively outperform
the market as we have in prior cycles.
3
The future holds many uncertainties, with one being the Fed’s plan to reduce rates. Despite
these uncertainties, our core business strategy remains focused on delivering value to our
stakeholders through these key initiatives:
Continue to build rewarding customer relationships. Relationships are a core part of our
culture, and we will continue to deepen relationships with existing customers, establish
relationships with new customers, and build relationships with local organizations to
demonstrate our commitment to the communities we serve. We expect that the aforementioned
issues of a major competitor will provide expanded opportunities for us to grow customer
relationships. Our activities and results within the Asian markets in the New York metropolitan
area have continued to be successful and have expanded with our newest branch in
Bensonhurst, Brooklyn. Enhanced activities in the South Asian markets, with the continued
growth of our Hicksville branch and new opportunities in other parts of the city, are expected to
help us build rewarding relationships in that community as well. Our strong employee base
is critical to these efforts, as we celebrate the diversity of our market by supporting various
cultural events, such as Lunar New Year, Juneteenth, and Diwali. Our community-minded
employees give of themselves and support local charities with food and toy drives.
Enhance the customer experience. To meet and exceed our customers’ expectations, we will
continue to survey customers to obtain feedback on our service levels at every touchpoint.
We will continue to increase customer engagement with our digital services that position us
well competitively and translate to a more efficient delivery channel for the customer.
Assess and enhance our distribution strategy. Our two new locations in 2023 expanded
our brand reach in Suffolk County with the Hauppauge branch located in a major industrial
park and in a key Asian market with the Bensonhurst branch. We plan to continue to
expand our footprint in 2024 in strategically aligned markets to support our business
objectives to grow noninterest-bearing deposits and leverage the success of our Asian and
South Asian market initiatives.
The Company has a long history of success in challenging times, volatile markets, and changing
economic environments. Our disciplined approach to credit has kept our losses significantly
lower than the industry, even during difficult times. We expect this trend to continue.
As always, we appreciate the dedication and commitment of our employees. To our valued
customers and shareholders, we are honored to serve you, and we thank you for your
continued trust and support.
Alfred A. DelliBovi
Chairman of the Board
John R. Buran
President and Chief Executive Officer
4
Building Rewarding Relationships
Nothing is more important to us at
Flushing Bank than the customers and
communities we serve. Since 1929, we
have made a difference in the lives of
generations of New Yorkers, helping
people from every background achieve
their personal and business financial
goals. We are connected to the
communities we serve—and in which
we work and call home—supporting
diversity and inclusion and helping
them to flourish.
As a community bank with the products
and services of a large bank, Flushing
Bank provides exceptional customer
service with a highly personalized
touch. Our philosophy and approach
to banking relationships is that we are
“Small enough to know you. Large
enough to help you.®” Across Queens,
Brooklyn, Manhattan, and Long Island,
we have distinguished ourselves as
a leader in serving multicultural
neighborhoods, and we proudly
sponsor cultural and charitable events
throughout our markets. Going beyond
what multicultural communities
typically expect from a banking
partner, our branches are staffed with
bankers who can communicate in the
languages and dialects prevalent within
our customer base to help ensure a
first-rate experience.
Our focus is to invest in our communities
while helping those around us thrive.
We have built our business on
relationships and delivering relevant
value to our customers and communities,
and we are committed to building
rewarding relationships.
5
Flushing Bank can help you
bank better, connect with
your money more easily,
and achieve your financial
goals. From personal and
business banking to lending
and government banking,
we offer an array of financial
services and experienced
professionals who are ready
to help and provide a
rewarding experience. Our
digital banks, iGObanking
and BankPurely, strive for
the same while serving
consumers nationwide.
6
Asian Markets
Given our roots in the ethnically
diverse market of Flushing, we have
established a strong connection
with the Asian community. Currently,
one-third of our branches are located
in predominantly Asian markets, and
our bankers, who speak over thirty
languages, can service customers in
their preferred languages. We also
participate in and sponsor many
culturally relevant events throughout
the year.
Banking—Personal
and Business
Our personal banking products make
banking easy while helping you save
time and money. We are here to help
you achieve what is important to you,
your family, and your financial future,
with a full line of personal services to
choose from supported by the latest
digital innovations. Our retail branch
network focuses on providing a
consistent and superior customer
experience and expanding relationships
with our customers in the New York
metropolitan area.
Our business banking products are
designed to simplify banking so you
can focus on growing your business
or professional practice. We offer a
full range of financial solutions for
companies and practices, large and
small. Our business team takes the
time to understand your unique
situation and gives you options to
keep your business moving in the right
direction. From everyday banking to
specialized professional services, we
remain committed to bringing you
the tools you need to succeed.
Government Banking
Our government banking team is
composed of dedicated, experienced
professionals who focus exclusively
on serving the unique needs of public
entities, municipalities, and school
and fire districts across the New York
area. From deposit products to cash
management services and much
more, you will have access to a full
suite of products—including
operating and investment accounts,
traditional collateral options, letters
of credit, and reciprocal deposits
with full FDIC coverage—designed
to maximize revenues.
Lending—Business
and Real Estate
Our diverse portfolio of lending
options can help you finance new
business opportunities and real estate
purchases. Whether you are an
entrepreneur, real estate owner, or
property manager, financing can be
an integral part of your plan for
success. We offer a host of lending
solutions, customized to your needs,
with competitive rates and terms. Our
experienced lending professionals
have a deep understanding of the
New York market and will collaborate
with you to help secure the financing
option that works best for you.
7
Our goal is to be a reliable
financial partner small
enough to place the
customer at the center
of everything we do yet
large enough to offer
accessibility to the latest
banking conveniences.
Plus, with our innovative and
simple-to-use tools, you can
seamlessly manage your
business while managing
your bank accounts.
8
Business Online
Banking
Supports your busy schedule by
providing online features that help
you keep track of your budget and
manage your money efficiently. View
your balance and transactions while
going paperless with free online
eStatements and eBills. Simplify your
financial agenda by accessing your
online Flushing Bank account
anytime from your mobile device.
Business Mobile
Banking
Experience a fast, secure, and
effortless way to manage and monitor
your accounts with Flushing Bank
Business Mobile Banking. The mobile
banking app gives you access to
valuable tools and services. Take
advantage of financial flexibility
that fits into your schedule—
whenever, wherever.
Remote Deposit
Allows business customers to
deposit checks into their accounts
from their offices using a scanner
attached to their computers. Save
time and maintain cash flow while
enjoying the convenience of
depositing checks anytime.
Cash Management
Services
Provides Cash Manager Direct
business customers online access
to view their account balances
and transaction details and initiate
transactions. Flushing Bank Online
Escrow is a state-of-the-art digital
tool to assist in the management of
escrow and subaccount requirements.
Merchant Services
Offers business owners innovative
payment and point-of-sale solutions
to help run their businesses more
efficiently. Flushing Bank’s business
merchant services can help businesses
streamline operations, increase
productivity, and expand their
customer bases.
9
Our digital platforms provide
a superior experience, with
online and mobile solutions
that offer the latest
technology and provide
customers access to their
personal accounts when and
where they need it. Explore
how these simple solutions
can make your life easier
and help you put more time
back into your day.
10
Assisted Service Kiosk
and Video Banker
Our enhanced self-service ATMs
manage almost any type of transaction,
from cashing a check to providing
cash in preferred denominations. Our
Video Banker service enables
customers to chat face-to-face live
with a banker through a video-chat
platform. Simply press “Help” on the
ATM screen to request assistance with
a wide range of financial transactions.
Online Banking
Flushing Bank Online Banking
features innovative, simple-to-use
tools that give you the flexibility to
manage your account and conduct
transactions at your convenience,
24/7. Simplifying money management
and keeping track of your budget is
easy. View balances and account
history, set alerts, automate payments,
manage your accounts, and much
more from one online account.
Mobile Banking
Flushing Bank Mobile Banking is the
fast, secure, and easy way to manage
your money and monitor your accounts
on the go. Bank when you want,
wherever you are, right from your
smartphone or tablet.
Mobile Check Deposit
Enjoy the flexibility and convenience
of depositing checks into your
Flushing Bank account anywhere,
anytime, with Flushing Bank Mobile
Check Deposit. It is secure and takes
just minutes using your iPhone® or
Android™ smartphone or tablet.
Digital Wallet
Contactless payment methods
continue to gain popularity.
Digital wallets allow you to store
your payment options, such as your
Flushing Bank Debit Card, allowing
you to conveniently use your
smartphone or smartwatch to
make a purchase.
Zelle®
When timing is everything, send
money with Zelle®, a fast, safe, and
easy way to send money to family
and friends using just a U.S. mobile
number or email address. Zelle is
available in the Flushing Bank Mobile
Banking app.
Zelle® and the Zelle® related marks are wholly owned
by Early Warning Services, LLC and are used herein
under license.
11
Corporate Responsibility
Our Company is environmentally
aware and continues to work to
reduce our carbon footprint. We are
committed to helping our multicultural
communities grow and contributing
to their social and economic success.
We strive to be an inclusive and
bias-free company, where employees
feel empowered to achieve their full
potential. The Bank has a leadership
development program, health and
wellness programs, diversity and
inclusion initiatives, and employee
volunteer engagement efforts. Our
strong and diverse Board of Directors,
the majority of whom are independent,
understand both the industry risks and
those risks unique to our Bank.
We believe our corporate responsibility
is all about opening doors for people
in the community and building
something that is better for everyone.
Our Company is committed to enhancing
our efforts and evolving our strategy
to support our vision of building
relationships in our communities while
delivering rewarding value.
12
2023 FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
Commission file number 001-33013
FLUSHING FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
11-3209278
(I.R.S. Employer Identification No.)
220 RXR Plaza, Uniondale, New York 11556
(Address of principal executive offices)
(718) 961-5400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Common Stock, $0.01 par value
FFIC
Securities registered pursuant to Section 12(g) of the Act: None.
Name of each exchange on which
registered
The NASDAQ Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in rule 405 of the Securities Act. Yes X No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes X No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. X Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files). X Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer X
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. X Yes No
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes X No
As of June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter; the aggregate market value of the
voting stock held by non-affiliates of the registrant was $336,406,000. This figure is based on the closing price on that date on the NASDAQ Global
Select Market for a share of the registrant’s Common Stock, $0.01 par value, which was $12.29.
The number of shares of the registrant’s Common Stock outstanding as of February 29, 2024 was 29,067,712 shares.
Portions of the Company’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 29, 2024 are incorporated
DOCUMENTS INCORPORATED BY REFERENCE
herein by reference in Part III.
TABLE OF CONTENTS
Item 1. Business.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART I
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits, Financial Statement Schedules
PART IV
(a) 1. Financial Statements
(a) 2. Financial Statement Schedules
(a) 3. Exhibits Required by Securities and Exchange Commission Regulation S-K
SIGNATURES
POWER OF ATTORNEY
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i
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Statements contained in this Annual Report on Form 10-K (this “Annual Report”) relating to plans, strategies,
economic performance and trends, projections of results of specific activities or investments and other statements that are
not descriptions of historical facts may be forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject
to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of
factors, which include, but are not limited to, factors discussed under the captions “Business — General — Allowance for
Credit Losses” and “Business — General — Market Area and Competition” in Item 1 below, “Risk Factors” in Item 1A
below, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview” in
Item 7 below, and elsewhere in this Annual Report and in other documents filed by the Company with the Securities and
Exchange Commission from time to time. Forward-looking statements may be identified by terms such as “may,” “will,”
“should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “goals”, “forecasts,”
“potential” or “continue” or similar terms or the negative of these terms. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. We have no obligation to update these forward-looking statements.
PART I
As used in this Report, the words “we,” “us,” “our” and the “Company” are used to refer to Flushing Financial
Corporation (the “Holding Company”) and its direct and indirect wholly owned subsidiaries, Flushing Bank (the
“Bank”), Flushing Service Corporation, FSB Properties Inc., and Flushing Preferred Funding Corporation, which was
dissolved as of June 30, 2021.
Item 1. Business.
Overview
GENERAL
The Holding Company is a Delaware corporation organized in 1994. The Bank was organized in 1929 as a New
York State-chartered mutual savings bank. Today the Bank operates as a full-service New York State commercial bank.
Our primary business is the operation of the Bank. The Bank owned two subsidiaries during 2023: Flushing Service
Corporation and FSB Properties Inc. The Bank also operates an internet branch (the “Internet Branch”), which operates
under the brands of iGObanking.com® and BankPurely®. The activities of the Holding Company are primarily funded by
dividends, if any, received from the Bank, issuances of subordinated debt and junior subordinated debt, and issuances of
equity securities. The Holding Company’s common stock is traded on the NASDAQ Global Select Market under the
symbol “FFIC.”
The Holding Company also owns Flushing Financial Capital Trust II, Flushing Financial Capital Trust III, and
Flushing Financial Capital Trust IV (the “Trusts”), which are special purpose business trusts formed to issue a total of
$60.0 million of capital securities and $1.9 million of common securities (which are the only voting securities). The
Holding Company owns 100% of the common securities of the Trusts. The Trusts used the proceeds from the issuance of
these securities to purchase junior subordinated debentures from the Holding Company. The Trusts are not included in our
consolidated financial statements as we would not absorb the losses of the Trusts if losses were to occur.
Unless otherwise disclosed, the information presented in this Annual Report reflects the financial condition and
results of operations of the Company. Management views the Company as operating a single unit – a community bank.
Therefore, segment information is not provided. At December 31, 2023, the Company had total assets of $8.5 billion,
deposits of $6.8 billion and stockholders’ equity of $0.7 billion.
1
Our principal business is attracting retail deposits from the general public and investing those deposits together
with funds generated from ongoing operations and borrowings, primarily in (1) originations and purchases of multi-family
residential properties loans, commercial business loans, commercial real estate mortgage loans and, to a lesser extent, one-
to-four family loans (focusing on mixed-use properties, which are properties that contain both residential dwelling units
and commercial units); (2) construction loans; (3) Small Business Administration (“SBA”) loans; (4) mortgage loan
surrogates such as mortgage-backed securities; and (5) U.S. government securities, corporate fixed-income securities and
other marketable securities. We also originate certain other consumer loans including overdraft lines of credit. At
December 31, 2023, we had gross loans outstanding of $6,898.3 million, with gross mortgage loans totaling $5,425.6
million, or 78.7% of gross loans, and commercial business loans totaling $1,472.7 million, or 21.3% of gross loans.
Mortgage loans are primarily multi-family, commercial and one-to-four family mixed-use properties, which represent
74.6% of gross loans. Our revenues are derived principally from interest on loans, our mortgage-backed securities
portfolio, and interest and dividends on other investments in our securities portfolio. Our primary sources of funds are
deposits, Federal Home Loan Bank of New York (“FHLB-NY”) borrowings, principal and interest payments on loans,
mortgage-backed, other securities and to a lesser extent proceeds from sales of securities and loans. The Bank’s primary
regulator is the New York State Department of Financial Services (“NYDFS”), and its primary federal regulator is the
Federal Deposit Insurance Corporation (“FDIC”). Deposits are insured to the maximum allowable amount by the FDIC.
Additionally, the Bank is a member of the Federal Home Loan Bank (“FHLB”) system.
Non-performing loans totaled $25.2 million, $32.4 million, and $14.9 million at December 31, 2023, 2022, and
2021, respectively. We had net charge-offs of non-performing loans in 2023 totaling $10.8 million compared to $1.5
million and $3.1 million for the years ended December 31, 2022, and 2021, respectively. The Company recorded a
provision (benefit) for credit losses on loans totaling $10.5 million, $4.8 million, and ($4.9) million for the years ended
December 31, 2023, 2022, and 2021, respectively. The provision recorded in 2023 was driven by fully reserving for two
non-accrual business loans and increasing reserves for the elevated risk presented by the current rate environment to
adjustable-rate loan’s debt coverage ratios. The provision recorded in 2022 was primarily due to loan growth, increased
reserves on specific credits, coupled with the ongoing environmental uncertainty resulting from high and rising inflation
including increasing interest rates. The benefit recorded in 2021 was primarily due to improving economic conditions.
Market Area and Competition
We are a community oriented commercial bank offering a wide variety of financial services to meet the needs of
the communities we serve. The Bank’s main office and its executive offices are in Uniondale, New York, located in Nassau
County. At December 31, 2023, the Bank operated 27 full-service offices and the Internet Branch. We have offices located
in the New York City Boroughs of Queens, Brooklyn, and Manhattan, and in Nassau and Suffolk County, New York. The
vast majority of all of our mortgage loans are secured by properties located in the New York City metropolitan area.
We face intense competition both in making loans and in attracting deposits. Our market area has a high density
of financial institutions, many of which have greater financial resources, name recognition and market presence than we
do, and all of which are competitors to varying degrees. Particularly intense competition exists for deposits, as we compete
with 108 banks and thrifts in the counties in which we have branch locations. Our market share of deposits, as of June 30,
2023, in these counties was 0.35% of the total deposits of these FDIC insured competing financial institutions, and we are
the 23rd largest financial institution.1 In addition, we compete with credit unions, the stock market and mutual funds for
customers’ funds. Competition for deposits in our market and for national brokered deposits is primarily based on the
types of deposits offered and rate paid on the deposits. Particularly intense competition also exists in all of the lending
activities we emphasize.
In addition to the financial institutions mentioned above, we compete against mortgage banks and insurance
companies located both within our market and available on the internet. Competition for loans in our market is primarily
based on the types of loans offered and the related terms for these loans, including fixed-rate versus adjustable-rate loans
and the interest rate on the loan. For adjustable-rate loans, competition is also based on the repricing period, the index to
which the rate is referenced, and the spread over the index rate. Also, competition is influenced by the ability of a financial
institution to respond to customer requests and to provide the borrower with a timely decision to approve or deny the loan
application. The internet banking arena also has many larger financial institutions which have greater financial resources,
name recognition and market presence than we do. Our future earnings prospects will be affected by our ability to compete
1 Per June 2023 FDIC Summary of Deposits for the New York State Counties of New York, Kings, Queens, Nassau and Suffolk
2
effectively with other financial institutions and to implement our business strategies. Our strategy for attracting deposits
includes using various marketing techniques, delivering enhanced technology and customer friendly banking services, and
focusing on the unique personal and small business banking needs of the multi-ethnic communities we serve. Our strategy
for attracting new loans is primarily dependent on providing timely response to applicants and maintaining a network of
quality brokers and other business sources. See “Risk Factors – The Markets in Which We Operate Are Highly
Competitive” included in Item 1A of this Annual Report.
For a discussion of our business strategies, see “Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Overview — Management Strategy” included in Item 7 of this Annual Report.
Lending Activities
Loan Portfolio Composition. Our loan portfolio consists primarily of mortgage loans secured by multi-family
residential, commercial real estate, one-to-four family mixed-use property, one-to-four family residential property, and
commercial business loans. In addition, we also offer construction loans, SBA loans and other consumer loans. Most of
our mortgage loans are secured by properties located within our market area.
We have focused our loan origination efforts on multi-family residential mortgage loans, commercial real estate
and commercial business loans with full banking relationships. All of these loan types generally include prepayment
penalties that we collect if the loans pay in full prior to the contractual maturity. We expect to continue this emphasis
through marketing and by maintaining competitive interest rates and origination fees. Our marketing efforts include
frequent contact with mortgage brokers and other professionals who serve as referral sources.
Fully underwritten one-to-four family residential mortgage loans generally are considered by the banking industry
to have less risk than other types of loans. Multi-family residential, commercial real estate and one-to-four family mixed-
use property mortgage loans generally have higher yields than one-to-four family residential property mortgage loans and
shorter terms to maturity, but typically involve higher principal amounts and may expose the lender to a greater risk of
credit loss than one-to-four family residential property mortgage loans. The greater risk associated with multi-family
residential, commercial real estate and one-to-four family mixed-use property mortgage loans could require us to increase
our provisions for credit losses and to maintain an allowance for credit losses as a percentage of total loans in excess of
the allowance we currently maintain. We continually review the composition of our mortgage loan portfolio to manage
the risk in the portfolio. See “General – Overview” in this Item 1 of this Annual Report.
Our loan portfolio consists of adjustable-rate (“ARM”) and fixed-rate loans. Interest rates we charge on loans are
affected primarily by the demand for such loans, the supply of money available for lending purposes, the rate offered by
our competitors and the creditworthiness of the borrower. Many of those factors are, in turn, affected by local, regional
and national economic conditions, and the fiscal, monetary and tax policies of the federal, state and local governments.
In general, consumers show a preference for ARM loans in periods of high interest rates and for fixed-rate loans
when interest rates are low. In periods of declining interest rates, we may experience refinancing activity in ARM loans,
as borrowers show a preference to lock-in the lower rates available on fixed-rate loans. In the case of ARM loans we
originated, volume and adjustment periods are affected by the interest rates and other market factors as discussed above
as well as consumer preferences. We have not in the past, nor do we currently, originate ARM loans that provide for
negative amortization.
Most of our commercial business loans are generated by the Company’s business banking group which focuses
on loan and deposit relationships to businesses located within our market area. These loans are generally personally
guaranteed by the owners, and may be secured by the assets of the business, which at times may include real estate. The
interest rate on these loans are generally adjustable based on a published index. These loans, while providing us a higher
rate of return, also present a higher level of risk. The greater risk associated with commercial business loans could require
us to increase our provision for credit losses, and to maintain an allowance for credit losses as a percentage of total loans
in excess of the allowance we currently maintain.
3
At times, we may purchase whole or participations in loans from banks, mortgage bankers and other financial
institutions when the loans complement our loan portfolio strategy. Loans purchased must meet our underwriting standards
when they were originated. Our lending activities are subject to federal and state laws and regulations. See “— Regulation.”
The following table sets forth the composition of our loan portfolio at the dates indicated:
2023
2022
At December 31,
2021
2020
2019
Amount
of Total Amount
of Total Amount
of Total Amount
of Total Amount
Percent
Percent
Percent
Percent
Percent
of Total
(Dollars in thousands)
Mortgage Loans:
Multi-family residential
Commercial real estate (1)
One-to-four family - mixed-use
property
One-to-four family - residential
Construction
Gross mortgage loans
Commercial business loans:
Small Business Administration
Taxi medallion
Commercial business and other
Gross commercial business
loans
Gross loans
Unearned loan fees and deferred
costs, net
Unallocated portfolio layer basis
adjustments (2)
Less: Allowance for credit losses
Loans, net
$ 2,658,205
1,958,252
38.53 % $ 2,601,384
1,913,040
28.39
37.57 % $ 2,517,026
1,775,629
27.62
37.94 % $ 2,533,952
1,754,754
26.77
37.81 % $ 2,238,591
1,582,008
26.18
530,243
220,213
58,673
5,425,586
7.69
3.19
0.85
78.65
554,314
241,246
70,951
5,380,935
8.00
3.48
1.02
77.69
571,795
276,571
59,761
5,200,782
8.62
4.17
0.90
78.40
602,981
253,262
83,322
5,228,271
9.00
3.78
1.24
78.01
592,471
196,879
67,754
4,677,703
20,205
—
1,452,518
0.29
—
21.06
23,275
—
1,521,548
0.34
—
21.97
93,811
—
1,339,273
1.41
—
20.19
167,376
2,757
1,303,225
2.50
0.04
19.45
14,445
3,309
1,061,478
38.88 %
27.48
10.29
3.42
1.18
81.25
0.25
0.06
18.44
1,472,723
6,898,309
21.35
1,544,823
100.00 % 6,925,758
22.31
1,433,084
100.00 % 6,633,866
21.60
1,473,358
100.00 % 6,701,629
21.99
1,079,232
100.00 % 5,756,935
18.75
100.00 %
9,590
9,011
4,239
3,045
15,271
(949)
(40,161)
$ 6,866,789
—
(40,442)
$ 6,894,327
—
(37,135)
$ 6,600,970
—
(45,153)
$ 6,659,521
—
(21,751)
$ 5,750,455
(1) Balance consists almost exclusively of investor commercial real estate (non-owner occupied). Owner-occupied commercial real estate represents less than 1.0% of the
total for each period shown.
(2) This amount represents portfolio layer method basis adjustments related to loans hedged in a closed portfolio. Under generally accepted accounting principles in the
United States of America (“GAAP”) portfolio layer method basis adjustments are not allocated to individual loans, however, the amounts impact the net loan balance.
These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See Note 20 (“Derivative Financial
Instruments”) of the Notes to the Consolidated Financial Statements.
In the table above, commercial business and other loans include owner-occupied commercial real estate totaling $707.6
million, $732.0 million, $624.0 million, $498.2 million and $340.8 million at December 31, 2023, 2022, 2021, 2020 and
2019, respectively.
4
The following table sets forth our loan originations (including the net effect of refinancing) and the changes in
our portfolio of loans, including purchases, sales and principal reductions for the years indicated:
(In thousands)
Mortgage Loans
At beginning of period
Mortgage loans originated:
Multi-family residential
Commercial real estate
One-to-four family mixed-use property
One-to-four family residential
Construction
Total mortgage loans originated
Mortgage loans purchased:
Commercial real estate
One-to-four family residential
Construction
Total mortgage loans purchased
Less:
Principal reductions
Mortgage loan sales
Charge-Offs
At end of period
Commercial business loans
At beginning of period
Loans originated:
Small Business Administration
Commercial business
Other
Total other loans originated
Commercial business loans purchased:
Commercial business
Total commercial business loans purchased
Less:
Commercial business sales
Principal reductions
Charge-offs
At end of period
For the years ended December 31,
2022
2021
2023
$
5,380,935
$
5,200,782
$
5,228,271
232,715
184,382
20,097
6,883
34,253
478,330
—
—
128
128
474,409
308,455
37,598
25,059
28,732
874,253
—
—
2,860
2,860
246,964
140,948
41,110
13,009
26,375
468,406
27,534
57,952
11,749
97,235
424,734
9,042
31
5,425,586
$
665,377
31,355
228
5,380,935
$
565,606
27,384
140
5,200,782
$
$
1,544,823
$
1,433,084
$
1,473,358
2,300
166,391
4,715
173,406
166,216
166,216
3,461
364,177
4,402
372,040
143,363
375,508
4,594
523,465
272,841
272,841
164,856
164,856
—
400,598
11,124
1,472,723
$
300
530,750
2,092
1,544,823
$
—
723,601
4,994
1,433,084
$
5
Loan Maturity and Repricing. The following table shows the maturity of our total loan portfolio at December 31,
2023. Scheduled repayments are shown in the maturity category in which the payments become due.
(In thousands)
Amounts due within one year
Amounts due after one year:
One to two years
Two to three years
Three to five years
Five to fifteen years
Over fifteen years
Total due after one year
Gross loans
Mortgage loans
One-to-four
family
Commercial business loans
Multi-family Commercial mixed-use
Commercial
One-to-four
business
family
residential real estate property residential Construction Administration and other
Small Business
Total loans
$
359,772 $ 373,483 $
48,171 $
16,843 $
50,379 $
3,474 $
467,807 $ 1,319,929
289,535
269,431
499,102
1,057,022
183,343
2,298,433
257,971
220,296
377,565
706,407
22,530
1,584,769
47,051
46,497
88,816
225,788
73,920
482,072
14,006
12,893
24,191
84,014
68,266
203,370
$ 2,658,205 $ 1,958,252 $ 530,243 $ 220,213 $
4,869
1,456
1,969
—
—
8,294
58,673 $
904,516
289,052
2,032
206,073
757,738
1,092
249,177 1,242,262
1,442
238,303 2,319,127
7,593
354,737
4,572
16,731
984,711 5,578,380
20,205 $ 1,452,518 $ 6,898,309
2,106
Sensitivity of loans to changes in interest rates -
loans due after one year:
Fixed rate loans
Adjustable rate loans
Total loans due after one year (1)
$
291,511 $
98,364 $ 165,078 $
2,006,922
1,486,405
316,994
19,711 $
183,659
$ 2,298,433 $ 1,584,769 $ 482,072 $ 203,370 $
— $
8,294
8,294 $
1,254 $
15,477
16,731 $
581,875 $ 1,157,793
402,836 4,420,587
984,711 $ 5,578,380
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $0.9 million related to loans hedged in a closed pool at
December 31, 2023. See Note 20 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
Multi-family Residential Lending. Loans secured by multi-family residential properties were $2,658.2 million, or
38.53% of gross loans, at December 31, 2023. Our multi-family residential mortgage loans had an average principal
balance of $1.2 million at December 31, 2023, and the largest multi-family residential mortgage loan held in our portfolio
had a principal balance of $28.0 million. We offer both fixed-rate and adjustable-rate multi-family residential mortgage
loans, with maturities of up to 30 years.
In underwriting multi-family residential mortgage loans, we review the expected net operating income generated
by the real estate collateral securing the loan, the age and condition of the collateral, the financial resources and income
level of the borrower and the borrower’s experience in owning or managing similar properties. We typically require debt
service coverage of at least 125% of the monthly loan payment. The weighted average debt service coverage ratio for this
portfolio is approximately 180% based on the most recent annual loan review. We generally originate these loans up to
only 75% of the appraised value or the purchase price of the property, whichever is less. Any loan with a final loan-to-
value ratio in excess of 75% must be approved by the Board of Directors of the Bank (the “Bank Board of Directors”) or
the Loan Committee as an exception to policy. The average loan to value ratio for this loan portfolio is approximately
30.6% based on the most recent appraisal and the loan balance at December 31, 2023. We generally rely on the income
generated by the property as the primary means by which the loan is repaid. However, personal guarantees may be obtained
for additional security from these borrowers. We typically order an environmental report on our multi-family and
commercial real estate loans.
Loans secured by multi-family residential property generally involve a greater degree of risk than residential
mortgage loans and carry larger loan balances. The increased credit risk is the result of several factors, including the
concentration of principal in a smaller number of loans and borrowers, the effects of general economic conditions on
income producing properties and the increased difficulty in evaluating and monitoring these types of loans. Furthermore,
the repayment of loans secured by multi-family residential property is typically dependent upon the successful operation
of the related property, which is usually owned by a legal entity with the property being the entity’s only asset. If the cash
flow from the property is reduced, the borrower’s ability to repay the loan may be impaired. If the borrower defaults, our
only remedy may be to foreclose on the property, for which the market value may be less than the balance due on the
related mortgage loan. Loans secured by multi-family residential property also may involve a greater degree of
environmental risk. We seek to protect against this risk through obtaining an environmental report. See “Asset Quality —
Environmental Concerns Relating to Loans.”
6
At December 31, 2023, $2,262.6 million, or 85.12%, of our multi-family mortgage loans consisted of ARM loans.
We offer ARM loans with adjustment periods typically of five years and for terms of up to 30 years. Interest rates on ARM
loans currently offered by us are adjusted at the beginning of each adjustment period based upon a fixed spread above the
FHLB-NY corresponding Regular Advance Rate. From time to time, due to competitive forces, we may originate ARM
loans at an initial rate lower than the fully indexed rate as a result of a discount on the spread for the initial adjustment
period. Multi-family adjustable-rate mortgage loans generally are not subject to limitations on interest rate increases either
on an adjustment period or aggregate basis over the life of the loan; however, the loans generally contain interest rate
floors. We originated and purchased multi-family ARM loans totaling $210.5 million, $392.0 million, and $188.7 million
during 2023, 2022, and 2021, respectively.
At December 31, 2023, $395.6 million, or 14.88%, of our multi-family mortgage loans consisted of fixed rate
loans. Our fixed-rate multi-family mortgage loans are generally originated for terms up to 15 years and are competitively
priced based on market conditions and our cost of funds. We originated and purchased $22.2 million, $82.4 million, and
$58.3 million of fixed-rate multi-family mortgage loans in 2023, 2022, and 2021, respectively.
The following table shows the geographic distribution of our multi-family portfolio at December 31, 2023:
(Dollars in thousands)
Brooklyn
Manhattan
Queens
Bronx
New York State (excluding NYC)
Other states
Staten Island
Total
Amount
Percent
of Total
$
$
795,994
560,857
467,575
411,640
303,998
106,690
11,451
2,658,205
29.94 %
21.10
17.59
15.49
11.44
4.01
0.43
100.00 %
Commercial Real Estate Lending. Loans secured by commercial real estate were $1,958.3 million, or 28.39% of
gross loans, at December 31, 2023. Our commercial real estate mortgage loans are secured by properties such as
hotels/motels, small business facilities, strip shopping centers, warehouses, and office buildings. At December 31, 2023,
our commercial real estate mortgage loans had an average principal balance of $2.5 million and the largest of such loans
had a principal balance of $30.2 million. Commercial real estate mortgage loans are generally originated in a range of
$100,000 to $10.0 million.
In underwriting commercial real estate mortgage loans, we employ the same underwriting standards and
procedures as are employed in underwriting multi-family residential mortgage loans. The weighted average debt service
coverage ratio for this portfolio is approximately 180% based on the most recent annual loan review. The weighted average
loan to value ratio for this portfolio is approximately 42.7% based on the most recent appraisal and the loan balance at
December 31, 2023.
Our commercial real estate loans are primarily investor properties (non-owner occupied) which are generally
considered to have higher credit risk than multi-family lending. The repayment of principal is primarily dependent on the
successful operation of the underlying tenant’s business.
At December 31, 2023, $1,760.8 million, or 89.92%, of our commercial mortgage loans consisted of ARM loans.
We offer ARM loans with adjustment periods of one to five years and generally for terms of up to 15 years. Interest rates
on ARM loans currently offered by us are adjusted at the beginning of each adjustment period based upon a fixed spread
above the FHLB-NY corresponding Regular Advance Rate. From time to time, we may originate ARM loans at an initial
rate lower than the index as a result of a discount on the spread for the initial adjustment period. Commercial adjustable-
rate mortgage loans generally are not subject to limitations on interest rate increases either on an adjustment period or
aggregate basis over the life of the loan; however, the loans generally contain interest rate floors. We originated and
purchased commercial ARM loans totaling $172.1 million, $273.1 million, and $148.8 million during 2023, 2022, and
2021, respectively.
7
At December 31, 2023, $197.5 million, or 10.08%, of our commercial mortgage loans consisted of fixed-rate
loans. Our fixed-rate commercial mortgage loans are generally originated for terms up to 20 years and are competitively
priced based on market conditions and our cost of funds. We originated and purchased $12.2 million, $35.4 million, and
$19.6 million of fixed-rate commercial mortgage loans in 2023, 2022, and 2021, respectively.
The following table shows the diversification of our investor property commercial real estate loans by major
industry at December 31, 2023:
(Dollars in thousands)
General Commercial
Strip Mall
Shopping Center
Single Tenant Retail
Industrial
Office Multi Tenant
Commercial Special Use
Health Care / Medical Use
Office Single Tenant
Total (1)
Amount
Percent
of Total
$
$
546,645
380,028
360,918
169,142
146,285
117,984
98,405
95,553
43,292
1,958,252
27.91 %
19.41
18.43
8.64
7.47
6.02
5.03
4.88
2.21
100.00 %
(1)
Includes owner-occupied commercial real estate totaling $1.6 million representing 0.84% of total commercial real estate.
One-to-Four Family Mortgage Lending – Mixed-Use Properties. We offer mortgage loans secured by one-to-
four family mixed-use properties. These properties contain up to four residential dwelling units and include a commercial
component. We offer both fixed-rate and adjustable-rate one-to-four family mixed-use property mortgage loans with
maturities of up to 30 years and a general maximum loan amount of $1.0 million. One-to-four family mixed-use property
mortgage loans were $530.2 million, or 7.69% of gross loans, at December 31, 2023.
In underwriting one-to-four family mixed-use property mortgage loans, we employ the same underwriting
standards as are employed in underwriting multi-family residential mortgage loans.
8
At December 31, 2023, $340.6 million, or 64.23%, of our one-to-four family mixed-use property mortgage loans
consisted of ARM loans. We offer adjustable-rate one-to-four family mixed-use property mortgage loans with adjustment
periods typically of five years and for terms of up to 30 years. Interest rates on ARM loans currently offered by the Bank
are adjusted at the beginning of each adjustment period based upon a fixed spread above the FHLB-NY corresponding
Regular Advance Rate. From time to time, we may originate ARM loans at an initial rate lower than the index as a result
of a discount on the spread for the initial adjustment period. One-to-four family mixed-use property adjustable-rate
mortgage loans generally are not subject to limitations on interest rate increases either on an adjustment period or aggregate
basis over the life of the loan; however, the loans generally contain interest rate floors. We originated and purchased one-
to-four family mixed-use property ARM loans totaling $8.7 million, $15.7 million, and $15.1 million during 2023, 2022,
and 2021, respectively.
At December 31, 2023, $189.7 million, or 35.77%, of our one-to-four family mixed-use property mortgage loans
consisted of fixed-rate loans. Our fixed-rate one-to-four family mixed-use property mortgage loans are originated for terms
of up to 15 years and are competitively priced based on market conditions and the Bank’s cost of funds. We originated
and purchased $11.4 million, $21.9 million, and $26.0 million of fixed-rate one-to-four family mixed-use property
mortgage loans in 2023, 2022, and 2021, respectively.
One-to-Four Family Mortgage Lending – Residential Properties. We offer mortgage loans secured by one-to-
four family residential properties, including townhouses and condominium units. For purposes of the description contained
in this section, one-to-four family residential mortgage loans, co-operative apartment loans and home equity loans are
collectively referred to herein as “residential mortgage loans.” We offer both fixed-rate and adjustable-rate residential
mortgage loans with maturities of up to 30 years and a general maximum loan amount of $1.0 million. Residential
mortgage loans were $220.2 million, or 3.19% of gross loans, at December 31, 2023.
We generally originate residential mortgage loans in amounts up to 80% of the appraised value or the sale price,
whichever is less. Private mortgage insurance is required whenever loan-to-value ratios exceed 80% of the appraised value
of the property securing the loan.
At December 31, 2023, $197.4 million, or 89.66%, of our residential mortgage loans consisted of ARM loans.
We offer ARM loans with adjustment periods of one, three, five, seven or ten years. Interest rates on ARM loans currently
offered by us are adjusted at the beginning of each adjustment period based upon a fixed spread above the FHLB-NY
corresponding Regular Advance Rate. From time to time, we may originate ARM loans at an initial rate lower than the
index as a result of a discount on the spread for the initial adjustment period. ARM loans generally are subject to limitations
on interest rate increases of 2% per adjustment period and an aggregate adjustment of 6% over the life of the loan and have
interest rate floors. We originated and purchased residential ARM loans totaling $6.5 million, $21.7 million, and $70.2
million during 2023, 2022, and 2021, respectively.
The retention of ARM loans in our portfolio helps us reduce our exposure to interest rate risks. However, in an
environment of rapidly increasing interest rates, it is possible for the interest rate increase to exceed the maximum
aggregate adjustment on one-to-four family residential ARM loans and negatively affect the spread between our interest
income and our cost of funds.
ARM loans generally involve credit risks different from those inherent in fixed-rate loans, primarily because if
interest rates rise, the underlying payments of the borrower rise, thereby increasing the potential for default. However, this
potential risk is lessened by our policy of originating one-to-four family residential ARM loans with annual and lifetime
interest rate caps that limit the increase of a borrower’s monthly payment.
At December 31, 2023, $22.8 million, or 10.34%, of our residential mortgage loans consisted of fixed-rate loans.
Our fixed-rate residential mortgage loans typically are originated for terms of 15 and 30 years and are competitively priced
based on market conditions and our cost of funds. We originated and purchased $0.4 million, $3.3 million, and $0.8 million
in fixed-rate residential mortgages in 2023, 2022, and 2021, respectively.
At December 31, 2023, home equity loans totaled $19.2 million, or 0.28%, of gross loans. Home equity loans are
included in our portfolio of residential mortgage loans. These loans are offered as adjustable-rate “home equity lines of
credit” on which interest only is due for an initial term of 10 years and thereafter principal and interest payments sufficient
to liquidate the loan are required for the remaining term, not to exceed 30 years. These adjustable “home equity lines of
9
credit” may include a “floor” and/or a “ceiling” on the interest rate that we charge for these loans. These loans also may
be offered as fully amortizing closed-end fixed-rate loans for terms up to 15 years. The majority of home equity loans
originated are owner occupied one-to-four family residential properties and condominium units. To a lesser extent, home
equity loans are also originated on one-to-four residential properties held for investment and second homes. All home
equity loans are subject to an 80% loan-to-value ratio computed on the basis of the aggregate of the first mortgage loan
amount outstanding and the proposed home equity loan. They are generally granted in amounts from $25,000 to $300,000.
Construction Loans. At December 31, 2023, construction loans totaled $58.7 million, or 0.85%, of gross loans.
Our construction loans primarily are adjustable-rate loans to finance the construction of one-to-four family residential
properties, multi-family residential properties and owner-occupied commercial properties. We also, to a limited extent,
finance the construction of commercial properties. Our policies provide that construction loans may be made in amounts
up to 70% of the estimated value of the developed property and only if we obtain a first lien position on the underlying
real estate. Construction loans are generally made with terms of two years or less. Advances are made as construction
progresses and inspection warrants, subject to continued title searches to ensure that we maintain a first lien position. We
originated and purchased construction loans totaling $34.4 million, $31.6 million, and $38.1 million during 2023, 2022,
and 2021, respectively.
Construction loans involve a greater degree of risk than other loans because, among other things, the underwriting
of such loans is based on an estimated value of the developed property, which can be difficult to ascertain in light of
uncertainties inherent in such estimations. In addition, construction lending entails the risk that the project may not be
completed due to cost overruns or changes in market conditions.
Small Business Administration Lending. At December 31, 2023, SBA loans totaled $20.2 million, representing
0.29% of gross loans. These loans are extended to small businesses and are guaranteed by the SBA up to a maximum of
85% of the loan balance for loans with balances of $150,000 or less, and to a maximum of 75% of the loan balance for
loans with balances greater than $150,000. We also provide term loans and lines of credit up to $350,000 under the SBA
Express Program, on which the SBA provides a 50% guaranty. The maximum loan size under the SBA guarantee program
is $5.0 million, with a maximum loan guarantee of $3.75 million. All SBA loans are underwritten in accordance with SBA
Standard Operating Procedures which requires collateral and the personal guarantee of the owners with more than 20%
ownership from SBA borrowers. Typically, SBA loans are originated in the range of $25,000 to $2.0 million with terms
ranging from one to seven years and up to 25 years for owner occupied commercial real estate mortgages. SBA loans are
generally offered at adjustable-rates tied to the prime rate (as published in the Wall Street Journal) with adjustment periods
of one to three months. At times, we may sell the guaranteed portion of certain SBA term loans in the secondary market,
realizing a gain at the time of sale, and retaining the servicing rights on these loans, collecting a servicing fee of
approximately 1%.
We originated and purchased SBA loans totaling $2.3 million, $3.5 million and $143.4 million (including $138.7
million of SBA Paycheck Protection Program loans), during 2023, 2022, and 2021, respectively.
10
Commercial Business and Other Loans. At December 31, 2023, commercial business and other loans totaled
$1,452.5 million, or 21.06%, of gross loans. We originate and purchase commercial business loans and other loans for
business, personal, or household purposes. Commercial business loans are provided to businesses in the New York City
metropolitan area with annual sales of up to $250.0 million. Our commercial business loans include lines of credit and
term loans including owner occupied mortgages. These loans are secured by business assets, including accounts
receivables, inventory, equipment and real estate and generally require personal guarantees. The Bank also enters into
participations/syndications on senior secured commercial business loans, which are serviced by other banks. Commercial
business loans are generally originated in a range of $100,000 to $10.0 million. We generally offer adjustable-rate loans
with adjustment periods of five years for owner occupied mortgages and for lines of credit the adjustment period is
generally monthly. Interest rates on adjustable-rate loans currently offered by us are adjusted at the beginning of each
adjustment period based upon a fixed spread above the FHLB-NY corresponding Regular Advance Rate for owner
occupied mortgages and a fixed spread above the Secured Overnight Financing Rate (“SOFR”) or Prime Rate for lines of
credit. Beginning in mid-2023 the use of the London Interbank Offered Rate (“LIBOR”) was discontinued as an alternative
index, and replaced by SOFR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U.S.
Treasury securities. Commercial business adjustable-rate loans generally are not subject to limitations on interest rate
increases either on an adjustment period or aggregate basis over the life of the loan, however they generally are subject to
interest rate floors. Our fixed-rate commercial business loans are generally originated for terms up to 20 years and are
competitively priced based on market conditions and our cost of funds. We originated and purchased $322.4 million,
$637.0 million, and $540.4 million of commercial business loans during 2023, 2022, and 2021, respectively.
A portion of our commercial business and other loans are commercial loans secured by owner-occupied real
estate, which totaled $707.6 million, $732.0 million and $624.0 million at December 31, 2023, 2022 and 2021,
respectively. These loans are secured by properties used by the borrower for commercial use where the primary source of
repayment is expected to be the income generated by the borrower’s business use of the property. The Company recognizes
in circumstances where the borrower is not performing, the real estate collateral would be the source of repayment. The
Company considers these credits to be less risky than commercial business loans, however, riskier than commercial real
estate loans.
The following table shows the diversification of our commercial business and other loan portfolio by major
industry at December 31, 2023:
(Dollars in thousands)
Automotive
Wholesalers
Financing Companies
Construction / Contractors
Professional Services
Healthcare
Hotels
Manufacturing
Restaurant
Retail
Other
Total
Amount
Percent
of Total
$
$
224,657
163,114
136,025
121,162
101,082
82,056
81,202
75,806
57,616
53,781
376,222
1,472,723
15.25 %
11.08
9.24
8.23
6.86
5.57
5.51
5.15
3.91
3.65
25.55
100.00 %
Other loans generally consist of overdraft lines of credit. Generally, unsecured consumer loans are limited to
amounts of $5,000 or less for terms of up to five years. We originated and purchased $4.7 million, $4.4 million, and $4.6
million of other loans during 2023, 2022, and 2021, respectively. The underwriting standards employed by us for consumer
and other loans include a determination of the applicant’s payment history on other debts and assessment of the applicant’s
ability to meet payments on all of his or her obligations. In addition to the creditworthiness of the applicant, the
underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount.
Unsecured loans tend to have higher risk, and therefore command a higher interest rate.
11
Loan Extensions, Renewals, Modifications and Restructuring. Extensions, renewals, modifications or
restructuring a loan, other than a loan that is experiencing financial difficulties which requires the loan to be fully
underwritten in accordance with our policy. The borrower must be current to have a loan extended, renewed, or modified.
Our policy for modifying a mortgage loan due to the borrower’s request for changes in the terms will depend on the
changes requested. The borrower must be current and have a good payment history to have a loan modified. If the borrower
is seeking additional funds, the loan is fully underwritten in accordance with our policy for new loans. If the borrower is
seeking a reduction in the interest rate due to a decline in interest rates in the market, we generally limit our review as
follows: (1) for income producing properties and commercial business loans, to a review of the operating results of the
property/business and a satisfactory inspection of the property, and (2) for one-to-four residential properties, to a
satisfactory inspection of the property. Our policy on modifying a loan requires the loan to be fully underwritten in
accordance with Company policy. The borrower must demonstrate the ability to repay the loan under the new terms. While
our formal lending policies do not prohibit making additional loans to a borrower or any related interest of the borrower
who is past due in principal or interest more than 90 days, it has been our practice not to make additional loans to a
borrower or a related interest of the borrower if the borrower is past due more than 90 days as to principal or interest.
During the most recent three fiscal years, we did not make any additional loans to a borrower or any related interest of the
borrower who was past due in principal or interest more than 90 days. All extensions, renewals, restructurings, and
modifications must be approved by the appropriate Loan Committee.
The Company may modify loans to enable a borrower experiencing financial difficulties to continue making
payments when it is deemed to be in the Company’s best long-term interest. When modifying a loan, an assessment of
whether a borrower is experiencing financial difficulty is made on the date of modification. This modification may include
reducing the loan interest rate, extending the loan term, any other-than-insignificant payment delay, principal forgiveness
or any combination of these types of modifications. When such modifications are performed, a change to the allowance
for credit losses is generally not required as the methodologies used to estimate the allowance already capture the effect
of borrowers experiencing financial difficulty. On December 31, 2023, there were no commitments to lend additional
funds to borrowers who have received a loan modification as a result of financial difficulty. See Note 3 (“Loans and
Allowance for Credit Losses”) of the Notes to the Consolidated Financial Statements.
Loan Approval Procedures and Authority. The Board of Directors of the Company (the “Board of Directors”)
approved lending policies establishing loan approval requirements for our various types of loan products. Our Residential
Mortgage Lending Policy (which applies to all one-to-four family mortgage loans, including residential and mixed-use
property) establishes authorized levels of approval. One-to-four family mortgage loans that do not exceed $750,000 require
two signatures for approval, one of which must be from either the President, Senior Executive Vice President Chief of
Real Estate Lending, the Executive Vice President of Residential, Mixed Use & Small Multi-family Lending, or Executive
Vice President Real Estate Credit Center (collectively, “Authorized Officers”) and the other from a Senior Underwriter,
Manager, Underwriter, or Junior Underwriter in the Residential Mortgage Loan Department (collectively, “Loan
Officers”), and ratification by the Management Credit Committee. For one-to-four family mortgage loans in excess of
$750,000 and up to $2.0 million, three signatures are required for approval, at least two of which must be from Authorized
Officers, and the other one may be a Loan Officer, and ratification by the Management Credit Committee and the Director’s
Loan Committee. The Director’s Loan Committee or the Bank Board of Directors also must approve one-to-four family
mortgage loans in excess of $2.0 million up to and including $5.0 million after obtaining two signatures from authorized
officers and one signature from loan officers with Management Credit Committee approval. One-to-four family mortgage
loans in excess of $5.0 million may require Director’s inspection.
Pursuant to our Commercial Real Estate Lending Policy, loans secured by commercial real estate and multi-
family residential properties up to $2.0 million are approved by the Executive Vice President of Commercial Real Estate
and the Senior Executive Vice President, Chief of Real Estate Lending, or Executive Vice President Credit Center Manager
and then ratified by the Management Credit Committee and/or the Director’s Loan Committee. Loans provided in excess
of $2.0 million and up to and including $5.0 million must be submitted with the two signatures of the officers to the
Management Credit Committee for final approval and then to the Director’s Loan Committee and/or Board of Directors
for ratification. Loans in excess of $5.0 million and up to and including $25.0 million must be submitted subsequently to
the Director’s Loan Committee and/or the Board of Directors for approval. Loan amounts in excess of $25.0 million must
be approved by the Board of Directors.
12
In accordance with our Business Banking Credit Policy, commercial business and other loans require two
signatures from the Business Loan Committee for approval up to $0.5 million. All commercial business loans and SBA
loans over $0.5 million and up to $2.5 million must be approved by obtaining two signatures from the Business Loan
Committee and ratified by the Management Credit Committee. Commercial business loans and SBA loans in excess of
$2.5 million up to $5.0 million must be approved by the Management Credit Committee and ratified by the Director’s
Loan Committee. Loans in excess of $5.0 million must be submitted to the Director’s Loan Committee and/ or the Board
of Directors for approval.
Our Construction Loan Policy requires construction loans up to and including $2.0 million must be approved by
the Senior Executive Vice President, Chief of Real Estate Lending and the Executive Vice President of Commercial Real
Estate, and ratified by the Management Credit Committee or the Director’s Loan Committee. Such loans in excess of $2.0
million up to and including $5.0 million require the same officer approvals, approval of the Management Credit
Committee, and ratification of the Director’s Loan Committee or the Bank Board of Directors. Loan proposals in excess
of $5.0 million up to and including $25.0 million that are approved by Management Credit Committee will subsequently
be submitted to either the Directors Loan Committee and/or the Board of Directors for their approval. Construction loans
in excess of $25.0 million require the subsequent approval of the Bank Board of Directors. Any loan, regardless of type,
that deviates from our written credit policies must be approved by the Director’s Loan Committee or the Bank Board of
Directors.
For all loans originated by us, upon receipt of a completed loan application, a credit report is ordered, and certain
other financial information is obtained. An appraisal of the real estate intended to secure the proposed loan is required to
be received. An independent appraiser designated and approved by us currently performs such appraisals. Our staff
appraisers review all appraisals. The Bank Board of Directors annually approves the independent appraisers used by the
Bank and approves the Bank’s appraisal policy. It is our policy to require borrowers to obtain title insurance and hazard
insurance on all real estate loans prior to closing. For certain borrowers, and/or as required by law, the Bank may require
escrow funds on a monthly basis together with each payment of principal and interest to a mortgage escrow account from
which we make disbursements for items such as real estate taxes and, in some cases, hazard insurance premiums.
Loan Concentrations. The maximum amount of credit that the Bank can extend to any single borrower or related
group of borrowers generally is limited to 15% of the Bank’s unimpaired capital and surplus, or $123.8 million at
December 31, 2023. Applicable laws and regulations permit an additional amount of credit to be extended, equal to 10%
of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include
real estate. See “-Regulation.” However, it is currently our policy not to extend such additional credit. At December 31,
2023, there were no loans in excess of the maximum dollar amount of loans to one borrower that the Bank was authorized
to make. At that date, the Bank’s three largest aggregate amount of outstanding loans to one borrower were $103.2 million,
$87.6 million, and $78.2 million for each of the three borrowers, all of which were performing according to their terms.
Loan Servicing. At December 31, 2023, we were servicing $46.7 million of loans for others. Our policy is to
retain the servicing rights to the mortgage and SBA loans that we sell in the secondary market, other than sales of
delinquent loans, which are sold with servicing released to the buyer. On mortgage loans and commercial business loan
participations purchased by us for whom the seller retains the servicing rights, we receive monthly reports with which we
monitor the loan portfolio. Based upon servicing agreements with the servicers of the loans, we rely upon the servicer to
contact delinquent borrowers, collect delinquent amounts and initiate foreclosure proceedings, when necessary, all-in
accordance with applicable laws, regulations and the terms of the servicing agreements between us and our servicing
agents. The servicers are required to submit monthly reports on their collection efforts on delinquent loans. At
December 31, 2023 and 2022, we held $364.0 million and $460.0 million, respectively, of loans that were serviced by
others.
Asset Quality
Loan Collection. When a borrower fails to make a required payment on a loan, except for serviced loans as
described above, we take a number of steps to induce the borrower to cure the delinquency and restore the loan to current
status. In the case of mortgage loans, personal contact is made with the borrower after the loan becomes 30 days delinquent.
We take a proactive approach to managing delinquent loans, including conducting site examinations, and encouraging
borrowers to meet with one of our representatives. When deemed appropriate, we develop short-term payment plans that
13
enable borrowers to bring their loans current, generally within six to nine months. We review delinquencies on a loan-by-
loan basis, diligently exploring ways to help borrowers meet their obligations and return them back to current status.
In the case of commercial business or other loans, we generally send the borrower a written notice of non-payment
when the loan is first past due. In the event payment is not then received, additional letters and phone calls generally are
made in order to encourage the borrower to meet with one of our representatives to discuss the delinquency. If the loan
still is not brought current and it becomes necessary for us to take legal action, which typically occurs after a loan is
delinquent 90 days or more, we may attempt to repossess personal or business property that secures a SBA loan,
commercial business loan or consumer loan.
When the borrower has indicated that they will be unable to bring the loan current, or due to other circumstances
which, in our opinion, indicate the borrower will be unable to bring the loan current within a reasonable time, the loan is
classified as non-performing. All loans classified as non-performing, which includes all loans past due 90 days or more,
are on non-accrual status unless there is, in our opinion, compelling evidence the borrower will bring the loan current in
the immediate future. At December 31, 2023, there was one loan for $1.5 million that was past due 90 days or more and
still accruing interest.
Upon classifying a loan as non-performing, we review available information and conditions that relate to the
status of the loan, including the estimated value of the loan’s collateral and any legal considerations that may affect the
borrower’s ability to continue to make payments. Based upon the available information, we will consider the sale of the
loan or retention of the loan. If the loan is retained, we may continue to work with the borrower to collect the amounts due
or start foreclosure proceedings. If a foreclosure action is initiated and the loan is not brought current, paid in full, or
refinanced before the foreclosure sale, the real property securing the loan is sold at foreclosure or by us as soon thereafter
as practicable.
Once the decision to sell a loan is made, we determine what we would consider adequate consideration to be
obtained when that loan is sold, based on the facts and circumstances related to that loan. Investors and brokers are then
contacted to seek interest in purchasing the loan. We have been successful in finding buyers for our non-performing loans
offered for sale that are willing to pay what we consider to be adequate consideration. Terms of the sale include cash due
upon closing of the sale, no contingencies or recourse to us, servicing is released to the buyer and time is of the essence.
These sales usually close within a reasonably short time period.
This strategy of selling non-performing loans has allowed us to optimize our return by quickly converting our
non-performing loans to cash, which can then be reinvested in earning assets. This strategy also allows us to avoid lengthy
and costly legal proceedings that may occur with non-performing loans. There can be no assurances that we will continue
this strategy in the future, or if continued, we will be able to find buyers to pay adequate consideration.
The following table shows delinquent and non-performing loans sold during the periods indicated:
(Dollars in thousands)
Count
Proceeds
Net charge-offs
Gross gains (losses)
For the years ended December 31,
2023
2022
2021
13
7
33
$
7,042 $
(8)
108
6,863 $ 28,632
(121)
335
—
119
Troubled Debt Restructured (Legacy GAAP). For borrowers who are experiencing financial difficulties, we have
restructured certain problem loans by: reducing the interest rate until the next reset date, extending the amortization period
thereby lowering the monthly payments, deferring a portion of the interest payment, principal forgiveness and/or changing
the loan to interest only payments for a limited time period. At times, certain problem loans have been restructured by
combining more than one of these options. These restructurings have not included a reduction of principal balance. We
believe that restructuring these loans in this manner will allow certain borrowers to become and remain current on their
loans. These restructured loans are classified troubled debt restructured (“TDR”). Loans which have been current for six
consecutive months at the time they are restructured as TDR remain on accrual status. Loans which were delinquent at the
14
time they are restructured as a TDR are placed on non-accrual status until they have made timely payments for six
consecutive months.
The following table shows loans classified as TDR under legacy GAAP at amortized cost that were performing
according to their restructured terms at the periods indicated at December 31:
(In thousands)
Accrual Status:
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Commercial business and other
Total
Non-Accrual Status:
One-to-four family - mixed-use property
Taxi Medallion
Commercial business and other
2022
2021
2020
2019
$
1,673
7,572
974
253
1,069
11,541
$
1,690 $
7,572
1,375
483
1,340
12,460
1,700 $
7,702
1,459
507
1,588
12,956
248
—
28
276
11,817
261
—
41
302
12,762 $
$
272
440
2,243
2,955
15,911 $
1,873
—
1,481
531
—
3,885
—
1,668
941
2,609
6,494
Total
Total performing troubled debt restructured
$
Loans that are restructured as TDR but are not performing in accordance with the restructured terms are excluded
from the TDR table above, as they are placed on non-accrual status and reported as non-performing loans. At December 31,
2022, there were two loans totaling $3.3 million which were restructured as TDR not performing in accordance with its
restructured terms.
Delinquent Loans and Non-performing Assets. We generally discontinue accruing interest on delinquent loans
when a loan is 90 days past due. At that time, previously accrued but uncollected interest is reversed from income. Loans
in default 90 days or more as to their maturity date but not their interest payments, however, continue to accrue interest as
long as the borrower continues to timely remit interest payments.
15
The following table shows our non-performing assets at the dates indicated. During the years ended December 31,
2023, 2022, and 2021, the amounts of additional interest income that would have been recorded on non-accrual loans, had
they been current, totaled $2.0 million, $1.6 million, and $1.1 million, respectively. These amounts were not included in
our interest income for the respective periods.
(Dollars in thousands)
2023
2022
2021
2020
2019
At December 31,
Loans 90 days or more past due and still accruing:
Multi-family residential
Commercial real estate
Construction
Total
Non-accrual mortgage loans:
Multi-family residential
Commercial real estate
One-to-four family mixed-use property (1)
One-to-four family residential
Total
Non-accrual commercial business loans:
Small Business Administration
Taxi medallion(1)
Commercial business and other (1)
Total
Total non-accrual loans
Total non-performing loans
Other non-performing assets:
Other Real Estate Owned
Held-to-maturity securities
Other assets acquired through foreclosure
Total
$ 1,463
—
—
1,463
3,206
—
981
5,181
9,368
2,552
—
11,789
14,341
23,709
$
—
—
2,600
2,600
3,206
237
790
4,425
8,658
937
—
20,187
21,124
29,782
$
$
—
—
—
—
$
201
2,547
—
2,748
445
—
—
445
2,431
613
1,309
7,725
12,078
937
—
1,918
2,855
14,933
2,524
1,683
1,366
5,854
11,427
1,151
2,317
3,430
6,898
18,325
2,296
367
274
5,139
8,076
1,151
1,641
1,945
4,737
12,813
25,172
32,382
14,933
21,073
13,258
—
20,981
—
20,981
—
20,981
—
20,981
—
—
—
—
—
—
35
35
239
—
35
274
Total non-performing assets
$ 46,153
$ 53,363
$ 14,933
$ 21,108
$ 13,532
Non-performing loans to gross loans
Non-performing assets to total assets
0.36 %
0.54 %
0.47 %
0.63 %
0.23 %
0.19 %
0.31 %
0.26 %
0.23 %
0.19 %
(1) Not included in the above analysis are the following non-accrual TDRs, under legacy GAAP, that are performing according to their restructured
terms: taxi medallion loans totaling $0.4 million and $1.7 million at December 31, 2020, and 2019, respectively, One-to-four family mixed-use
property loans totaling $0.2 million and $0.3 million at December 31, 2022 and 2021, respectively, and commercial business loans totaling less than
$0.1 million at December 31, 2022, and 2021, and $2.2 million and $0.9 million at December 31, 2020, and 2019, respectively.
16
The following table shows our delinquent loans that are less than 90 days past due and still accruing interest at
the periods indicated:
December 31, 2023 December 31, 2022
60 - 89
30 - 59
60 - 89
30 - 59
days
days
days
(In thousands)
days
Multi-family residential
Commercial real estate
One-to-four family ― mixed-use property
One-to-four family ― residential
Small Business Administration
Commercial business and other
Total
$ 2,722 $
8,090
1,708
1,715
—
420
539 $ 1,475 $ 1,787
—
—
—
—
16
$ 14,655 $ 2,823 $ 18,456 $ 1,803
2,561
3,721
2,734
329
7,636
1,099
124
—
—
1,061
Other Real Estate Owned. We aggressively market our Other Real Estate Owned (“OREO”) properties. At
December 31, 2023 and 2022, we held no OREO.
We may obtain physical possession of residential real estate collateralizing a consumer mortgage loan via
foreclosure through an in-substance repossession. During the years ended December 31, 2023, and 2022, we did not
foreclose any real estate property. Included within net loans as of December 31, 2023 and 2022, was a recorded investment
of $4.8 million and $5.2 million, respectively, of consumer mortgage loans secured by residential real estate properties for
which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.
Environmental Concerns Relating to Loans. We currently obtain environmental reports in connection with the
underwriting of commercial real estate loans, and typically obtain environmental reports in connection with the
underwriting of multi-family loans. For all other loans, we obtain environmental reports only if the nature of the current
or, to the extent known to us, prior use of the property securing the loan indicates a potential environmental risk. However,
we may not be aware of such uses or risks in any case, and, accordingly, there can be no assurance that real estate acquired
by us in foreclosure is free from environmental contamination nor that we will not have any liability with respect thereto.
Criticized and Classified Assets. Our policy is to review our assets, focusing primarily on the loan portfolio,
OREO, and the investment portfolio, to ensure that the credit quality is maintained at the highest levels. When weaknesses
are identified, immediate action is taken to correct the problem through direct contact with the borrower or issuer. We then
monitor these assets, and, in accordance with our policy and current regulatory guidelines, we designate them as “Special
Mention,” which is considered a “Criticized Asset,” and “Substandard,” “Doubtful,” or “Loss” which are considered
“Classified Assets,” as deemed necessary. If a loan does not fall within one of the previous mentioned categories and
management believes weakness is evident then we designate the loan as “Watch”, all other loans would be considered
“Pass”. These loan designations are updated quarterly. We designate an asset as Substandard when a well-defined
weakness is identified that jeopardizes the orderly liquidation of the debt. We designate an asset as Doubtful when it
displays the inherent weakness of a Substandard asset with the added provision that collection of the debt in full, on the
basis of existing facts, is highly improbable. We designate an asset as Loss if it is deemed the debtor is incapable of
repayment. We do not hold any loans designated as loss, as loans that are designated as Loss are charged to the Allowance
for Credit Losses. Assets that are non-accrual are designated as Substandard, Doubtful or Loss. We designate an asset as
Special Mention if the asset does not warrant designation within one of the other categories but contains a potential
weakness that deserves closer attention. Our Criticized and Classified Assets totaled $99.1 million at December 31, 2023,
an increase of $10.2 million from $88.9 million at December 31, 2022.
17
The following table sets forth the Bank’s Criticized and Classified assets at December 31, 2023:
(In thousands)
Special Mention Substandard Doubtful Loss
Total
Loans:
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Small Business Administration
Commercial business and other
Total loans
Investment Securities:
Held-to-maturity securities
Total investment securities
$
1,193 $
1,099
1,284
169
348
16,414
20,507
5,854 $
—
1,217
6,205
2,783
37,180
53,239
— $
—
—
—
—
4,365
4,365
— $
—
—
—
—
—
—
7,047
1,099
2,501
6,374
3,131
57,959
78,111
—
—
20,981
20,981
—
—
—
—
20,981
20,981
Total
$
20,507 $
74,220 $
4,365 $
— $ 99,092
The following table sets forth the Bank’s Criticized and Classified assets at December 31, 2022:
(In thousands)
Special Mention Substandard Doubtful Loss
Total
Loans:
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Construction
Small Business Administration
Commercial business and other
Total loans
Investment Securities:
Held-to-maturity securities
Total investment securities
$
2,732 $
4,041
719
—
—
39
24,620
32,151
4,317 $
262
974
4,305
2,600
1,192
12,071
25,721
— $
—
—
—
—
—
10,042
10,042
— $
—
—
—
—
—
—
—
7,049
4,303
1,693
4,305
2,600
1,231
46,733
67,914
—
—
20,981
20,981
—
—
—
—
20,981
20,981
Total
$
32,151 $
46,702 $ 10,042 $
— $ 88,895
Allowance for Credit Losses
The Allowance for credit losses (“ACL”) is an estimate that is deducted from the amortized cost basis of the
financial asset to present the net carrying value at the amount expected to be collected on the financial assets. Loans are
charged off against that ACL when management believes that a loan balance is uncollectable based on quarterly analysis
of credit risk.
The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects
management’s assessment of the credit quality of the loan portfolio. Management estimates the allowance balance using
relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and
supportable forecasts. The factors are both quantitative and qualitative in nature including, but not limited to, historical
losses, economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio
mix, and internal loan processes.
The quantitative allowance is calculated using a number of inputs and assumptions. The results of this process,
support management’s assessment as to the adequacy of the ACL at each balance sheet date.
18
The process for calculating the allowance for credit losses begins with our historical losses by portfolio segment.
The losses are then incorporated into reasonable and supportable forecast to develop the quantitative component of the
allowance for credit losses.
In calculating the ACL, the Company specifies both the reasonable and supportable forecast and reversion periods
in three economic conditions (expansion, transition, contraction). When calculating the ACL estimate for December 31,
2023, the reasonable and supportable forecast was for a period of two quarters and the reversion period was four quarters.
At December 31, 2023 and 2022, the ACL for loans totaled $40.2 million and $40.4 million, respectively.
Non-performing loans totaled $25.2 million and $32.4 million at December 31, 2023 and 2022, respectively. The
Bank’s underwriting standards generally require a loan-to-value ratio of no more than 75% at the time the loan is
originated. At December 31, 2023, the outstanding principal balance of our non-performing loans was 34.1% of the
estimated current value of the supporting collateral, after considering the charge-offs that have been recorded. We incurred
total net charge-offs of $10.8 million, $1.5 million and $3.1 million during the years ended December 31, 2023, 2022 and
2021, respectively. The Company recorded a provision (benefit) for credit losses on loans totaling $10.5 million, $4.8
million and ($4.9) million for the years ended December 31, 2023, 2022 and 2021, respectively. The provision recorded
in 2023 was driven by fully reserving for two non-accrual business loans and increasing reserves for the elevated risk
presented by the current rate environment to adjustable-rate loan’s debt coverage ratios. The provision recorded in
2022 was primarily due to loan growth, increased reserves on specific credits, coupled with the ongoing economic
uncertainty resulting from high and rising inflation including increasing interest rates. The benefit recorded in 2021 was
primarily due to improving economic conditions. We believe that at December 31, 2023, the allowance was sufficient to
absorb losses inherent in our loan portfolio. The allowance for credit losses represented 0.58% of gross loans outstanding
at December 31, 2023 and 2022. The allowance for credit losses represented 159.6% and 124.9% of non-performing loans
at December 31, 2023 and 2022, respectively.
During the years ended December 31, 2023 and 2022, the Company held one investment security totaling $21.0
million that was modified in 2022 by granting a payment forbearance. The non-performing investment security and
attendant loan are collateralized by a commercial condominium located in Manhattan with a combined LTV of
approximately 69%. At December 31, 2023 and 2022, this security was reported as non-accrual and non-performing. The
ACL for held-to-maturity (“HTM”) securities totaled $1.1 million at December 31, 2023 and 2022.
19
The following table sets forth changes in, and the balance of, our Allowance for credit losses.
(In thousands)
Balance at beginning of period
Loans- charge-off
Loans- recovery
Loans- provision (benefit)
Allowance for credit losses - loans
Balance at beginning of period
HTM securities (benefit) provision
$
$
$
Allowance for credit losses - HTM securities $
Balance at beginning of period
Off-balance sheet- (benefit) provision
Allowance for credit losses - off-balance
sheet
Allowance for credit losses
$
$
$
2023
For the year ended December 31,
2022
2021
40,442
(11,157)
345
10,531
40,161
1,100
(13)
1,087
970
132
1,102
42,350
$
$
$
$
$
$
$
37,135 $
(3,348)
1,813
4,842
40,442 $
862 $
238
1,100 $
1,209 $
(239)
970 $
45,153
(5,134)
2,015
(4,899)
37,135
907
(45)
862
1,815
(606)
1,209
42,512 $
39,206
20
The following table sets forth changes in, and the balance of, our Allowance for credit losses - loans.
(Dollars in thousands)
Balance at beginning of year
Allowance recorded at the time of
Acquisition
CECL Adoption
Provision (benefit) for credit losses
Loans charged-off:
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Small Business Administration
Taxi medallion
Commercial business and other
Total loans charged-off
Recoveries:
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Small Business Administration
Taxi medallion
Commercial business and other
Total recoveries
2023
40,442
$
$
For the year ended December 31,
2022
37,135
2021
$ 45,153
2020
$ 21,751
2019
$ 20,945
—
—
10,531
—
(8)
—
(23)
(7)
—
(11,119)
(11,157)
2
—
1
52
248
—
42
345
—
—
4,842
—
—
(4,899)
4,099
379
22,563
—
—
2,811
(208)
—
—
(20)
(1,053)
—
(2,067)
(3,348)
77
—
—
5
47
447
1,237
1,813
(43)
(64)
(33)
—
—
(2,758)
(2,236)
(5,134)
10
—
133
157
34
1,457
224
2,015
—
—
(3)
—
(178)
(1,075)
(2,749)
(4,005)
38
—
138
12
70
—
108
366
(190)
—
(89)
(113)
—
—
(2,386)
(2,778)
44
37
197
13
60
134
288
773
Net charge-offs
Balance at end of year
(10,812)
40,161
$
(1,535)
40,442
(3,119)
$ 37,135
(3,639)
$ 45,153
(2,005)
$ 21,751
$
Ratio of net charge-offs to average loans
outstanding during the year
Ratio of ACL - loans to gross loans at end
of year
Ratio of ACL - loans to non-accrual loans
at end of the year
Ratio of ACL - loans to non-performing
loans at end of year
Ratio of ACL - loans to non-performing
assets at end of year
0.16 %
0.02 %
0.05 %
0.06 %
0.04 %
0.58 %
0.58 %
0.56 %
0.67 %
0.38 %
169.39 %
135.79 %
248.66 %
246.40 %
169.76 %
159.55 %
124.89 %
248.66 %
214.27 %
164.05 %
87.02 %
75.79 %
248.66 %
213.91 %
160.73 %
21
The following table sets forth our allocation of the allowance for credit losses to the total amount for loans in
each of the loan categories listed at the dates indicated. The numbers contained in the “Amount” column indicate the
allowance for credit losses allocated for each loan category. The numbers contained in the column entitled “Percentage of
Loans in Category to Total Loans” indicate the total amount of loans in each loan category as a percentage of our loan
portfolio:
2023
2022
At December 31,
2021
2020
2019
Loan Category
Mortgage loans:
Percent
Percent
of Loans in
Category to
Amount Total loans Amount Total loans Amount Total loans Amount Total loans Amount Total loans
(Dollars in thousands)
of Loans in
Category to
of Loans in
Category to
of Loans in
Category to
of Loans in
Category to
Percent
Percent
Percent
Multi-family residential
Commercial real estate
One-to-four family mixed-use property
One-to-four family residential
Construction
$ 10,373
8,665
1,610
668
158
21,474
38.53 % $
28.39
7.69
3.19
0.85
78.65
9,552
8,184
1,875
901
261
20,773
37.57 % $
27.62
8.00
3.48
1.02
77.69
8,185
7,158
1,755
784
186
18,068
37.94 % $
26.77
8.62
4.17
0.90
78.40
6,557
8,327
1,986
869
497
18,236
37.81 % $
26.18
9.00
3.78
1.24
78.01
5,391
4,429
1,817
756
441
12,834
38.88 %
27.48
10.29
3.42
1.18
81.25
Gross mortgage loans
Commercial business loans:
Small Business Administration
Taxi medallion
Commercial business and other
Gross commercial business loans
1,626
—
17,061
18,687
0.29
—
21.06
21.35
2,198
—
17,471
19,669
0.34
—
21.97
22.31
1,209
—
17,858
19,067
1.41
—
20.19
21.60
2,251
—
24,666
26,917
2.50
0.04
19.45
21.99
363
—
8,554
8,917
0.25
0.06
18.44
18.75
Total loans
$ 40,161
100.00 % $ 40,442
100.00 % $ 37,135
100.00 % $ 45,153
100.00 % $ 21,751
100.00 %
Investment Activities
General. Our investment policy is designed primarily to manage the interest rate sensitivity of our overall assets
and liabilities, to generate a favorable return without incurring undue interest rate and credit risk, to complement our
lending activities and to provide and maintain liquidity. In establishing our investment strategies, we consider our business
and growth strategies, the economic environment, our interest rate risk exposure, our interest rate sensitivity “gap”
position, the types of securities to be held, and other factors. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Overview—Management Strategy” in Item 7 of this Annual Report.
Although we have authority to invest in various types of assets, we primarily invest in mortgage-backed securities,
securities issued by mutual or bond funds that invest in government and government agency securities, municipal bonds,
corporate bonds and collateralized loan obligations (“CLO”). We did not hold any issues of foreign sovereign debt on
either December 31, 2023, and 2022.
Our ALCO Investment Committee meets quarterly to monitor investment transactions and to establish investment
strategy. The Board of Directors reviews the investment policy on an annual basis and investment activity monthly.
22
Investment securities are classified as available for sale when management intends to hold the securities for an
indefinite period, or when the securities may be utilized for tactical asset/liability purposes and may be sold from time to
time to effectively manage interest rate exposure and resultant prepayment risk and liquidity needs. Securities are classified
as held-to-maturity when management intends to hold the securities until maturity. We carry some of our investments
under the fair value option totaling $13.4 million and $13.0 million at December 31, 2023, and 2022, respectively.
Unrealized gains and losses for investments carried under the fair value option are included in our Consolidated Statements
of Income. Unrealized gains and losses on securities available for sale, are excluded from earnings and included in
accumulated other comprehensive income (loss), net of taxes. Securities held-to-maturity are carried at their amortized
cost basis. As of December 31, 2023, we had $874.8 million of available for sale securities and $72.9 million in held-to-
maturity securities, together they represented 11.10% of total assets. Total securities had an aggregate market value that
approximated 1.4 times the amount of our equity as of December 31, 2023.
The Company’s estimate of expected credit losses for held-to-maturity debt securities is based on historical
information, current conditions, and a reasonable and supportable forecast. On December 31, 2023, the Company’s held-
to-maturity portfolio composition was four securities totaling $74.0 million (before allowance for credit losses). The first
two are structured similar to a commercial owner occupied loan and modeled for credit losses similarly to commercial
business loans secured by real estate; the third is under forbearance and is individually evaluated for allowance for credit
loss; and the fourth is issued and guaranteed by Fannie Mae, which is a government sponsored enterprise that has a credit
rating and perceived credit risk comparable to the U.S. government. Accordingly, the Company assumes a zero-loss
expectation from the Fannie Mae security.
23
The table below sets forth certain information regarding the amortized cost and market values of our securities portfolio,
interest-earning deposits and federal funds sold at the dates indicated. Available for sale securities are represented
exclusive of fair market value adjustments.
2023
Amortized
Cost
Fair
Value
At December 31,
2022
Amortized
Cost
(In thousands)
Fair
Value
2021
Amortized
Cost
Fair
Value
$
66,155 $
58,697 $
66,936 $ 55,561 $ 50,836 $ 53,362
66,155
58,697
66,936
55,561
50,836
53,362
7,855
7,058
7,875
6,989
7,894
8,667
7,855
7,058
7,875
6,989
7,894
8,667
Securities held-to-maturity
Bonds and other debt securities:
Municipal securities (1)
Total bonds and other debt
securities
Mortgage-backed securities:
FNMA
Total mortgage-backed
securities
Total securities held-to-maturity (1)
74,010
65,755
74,811
62,550
58,730
62,029
Securities available for sale
Bonds and other debt securities:
U.S. government agencies
Corporate debentures
Collateralized loan obligations
Total bonds and other debt
securities
82,548
173,184
269,600
81,734
155,449
270,129
83,720
146,430
129,684
81,103
131,766
125,478
5,599
107,423
81,166
5,590
104,370
80,912
525,332
507,312
359,834
338,347
194,188
190,872
Mutual funds
11,660
11,660
11,211
11,211
12,485
12,485
Equity securities:
Common stock
Total equity securities
Mortgage-backed securities:
REMIC and CMO
GNMA
FNMA
FHLMC
Total mortgage-backed
securities
Total securities available for sale
(2)
Interest-earning deposits and
Federal funds sold
Total
1,437
1,437
1,437
1,437
1,516
1,516
1,516
1,516
1,695
1,695
1,695
1,695
160,165
12,402
155,995
89,427
133,574
10,665
135,074
75,031
175,712
9,193
172,690
96,725
148,414
7,317
148,265
80,287
210,948
10,572
203,777
152,760
208,509
10,286
202,938
150,451
417,989
354,344
454,320
384,283
578,057
572,184
956,418
874,753
826,881
735,357
786,425
777,236
145,322
51,699
$ 1,175,750 $ 1,085,830 $ 1,023,585 $ 919,800 $ 896,854 $ 890,964
121,893
145,322
121,893
51,699
(1) Does not include allowance for credit losses totaling $1.1 million for the years ended December 31, 2023, and 2022 and $0.9 million for the year
ended December 31, 2021.
(2) Does not include the unallocated portfolio layer basis adjustments totaling $2.3 million related to available for sale securities hedged in a closed
pool at December 31, 2023. See Note 20 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
24
Mortgage-backed securities. At December 31, 2023, we had available for sale and held-to-maturity mortgage-
backed securities with a market value totaling $361.4 million, of which $17.1 million was invested in adjustable-rate
mortgage-backed securities. The mortgage loans underlying these adjustable-rate securities generally are subject to
limitations on annual and lifetime interest rate increases. We anticipate that investments in mortgage-backed securities
may continue to be used in the future to supplement mortgage-lending activities. Mortgage-backed securities are more
liquid than individual mortgage loans and may be used more easily to collateralize our obligations, including collateralizing
of the governmental deposits of the Bank.
The following table sets forth our available for sale mortgage-backed securities purchases, sales and principal
repayments for the years indicated:
2023
For the years ended December 31,
2022
(In thousands)
2021
Balance at beginning of year
$
384,283 $
572,184 $
404,460
Purchases of mortgage-backed securities
5,431
56,557
340,789
Amortization of unearned premium, net of accretion of unearned
discount
(975)
(2,007)
(2,943)
Net change in unrealized gains (losses) on mortgage-backed securities
available for sale
6,392
(64,164)
(15,232)
Net gains (losses) recorded on mortgage-backed securities carried at
fair value
Sales and maturities of mortgage-backed securities
6
-
(24)
(2)
(84,224)
(8,602)
Principal repayments received on mortgage-backed securities
(40,793)
(94,039)
(146,286)
Net (decrease) increase in mortgage-backed securities
(29,939)
(187,901)
167,724
Balance at end of year
$
354,344 $
384,283 $
572,184
While mortgage-backed securities carry a reduced credit risk as compared to whole loans, such securities remain
subject to the risk that a fluctuating interest rate environment, along with other factors such as the geographic distribution
of the underlying mortgage loans, may alter the prepayment rate of such mortgage loans and so affect both the prepayment
speed and value of such securities.
25
The table below sets forth certain information regarding the amortized cost, fair value, annualized weighted
average yields and maturities of our investment in debt and equity securities and interest-earning deposits at December 31,
2023. The stratification of balances is based on stated maturities. Assumptions for repayments and prepayments are not
reflected for mortgage-backed securities. Securities available for sale are carried at their fair value in the consolidated
financial statements and securities held-to-maturity are carried at their amortized cost.
One year or Less
One to Five Years
Five to Ten Years
More than Ten Years
Total
Weighted
Weighted
Weighted
Average
Weighted Remaining
Amortized Average Amortized Average Amortized Average Amortized Average
Cost
Yield
Yield
Yield
Yield
Cost
Cost
Cost
Years to Amortized
Maturity
Cost
Fair
Value
Weighted
Average
Yield
(Dollars in thousands)
Securities held-to-
maturity
Bonds and other debt
securities:
Municipal securities
(1)
$
Total bonds and
other debt
securities
Mortgage-backed
securities:
FNMA
Total mortgage-
backed securities
Securities available
for sale (2)
Bonds and other debt
securities:
US Treasury
Corporate
debentures
CLO
Total bonds and
other debt
securities
—
— % $
—
— % $
—
— % $ 66,155
2.23 %
22.54 $
66,155 $
58,697
2.23 %
—
—
—
—
—
—
66,155
2.23
22.54
66,155
58,697
2.23
—
—
—
—
—
—
—
—
7,855
3.32
7,855
3.32
—
—
—
—
9.34
7,855
7,058
3.32
9.34
7,855
7,058
3.32
49,979
1.53
19,875
1.64
2,329
7.17
10,365
6.51
3.36
82,548
81,734
2.34
10,000
—
3.20
—
85,182
—
4.76
—
78,002
142,352
3.96
7.13
—
127,248
—
6.45
5.41
9.19
173,184
269,600
155,449
270,129
4.31
6.81
59,979
1.81
105,057
4.17
222,683
6.02
137,613
6.45
7.03
525,332
507,312
5.28
Mutual funds
11,660
2.54
—
—
—
—
—
—
—
11,660
11,660
2.54
Equity securities:
Common stock
Total equity
securities
Mortgage-backed
securities:
REMIC and CMO
GNMA
FNMA
FHLMC
Total mortgage-
backed securities
—
—
—
—
4
—
—
—
—
—
7.50
—
—
—
—
53
—
—
—
—
—
—
—
—
1,437
9.14
1,437
9.14
—
—
1,437
1,437
9.14
1,437
1,437
9.14
—
7.49
—
—
1,892
49
8,840
3,183
2.88
6.98
2.45
3.83
158,273
12,300
147,151
86,244
2.09
3.32
2.30
2.12
28.96
27.24
19.55
20.99
160,165
12,402
155,995
89,427
133,574
10,665
135,074
75,031
2.10
3.36
2.31
2.18
4
7.50
53
7.49
13,964
2.84
403,968
2.21
23.69
417,989
354,344
2.23
Interest-earning
deposits
Total
145,322
$ 216,965
—
4.78
3.84 % $ 105,110
—
—
4.17 % $ 244,502
—
—
5.75 % $ 609,173
—
3.19 %
—
145,322
145,322
14.71 $ 1,175,750 $ 1,085,830
4.78
4.02 %
(1)
(2)
Does not include allowance for credit losses totaling $1.1 million.
Does not include the unallocated portfolio layer basis adjustments totaling $2.3 million related to available for sale securities hedged in a closed
pool at December 31, 2023. See Note 20 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
Sources of Funds
General. Deposits, FHLB-NY borrowings, other borrowings, principal and interest payments on loans, mortgage-
backed and other securities, and proceeds from the sale of loans and securities are our primary sources of funds for lending,
investing and other general purposes.
Deposits. We offer a variety of deposit accounts having a range of interest rates and terms. Our deposits primarily
consist of savings accounts, money market accounts, demand accounts, NOW accounts and certificates of deposit. We
26
have a relatively stable retail deposit base drawn from our market area through our 27 full-service offices and our Internet
Branch. We seek to retain existing depositor relationships by offering quality service and competitive interest rates, while
keeping deposit growth within reasonable limits. It is management’s intention to balance its goal to maintain competitive
interest rates on deposits while seeking to manage its cost of funds to finance its strategies.
In addition to our full-service offices, we operate the Internet Branch and a government banking unit. The Internet
Branch currently offers savings accounts, money market accounts, checking accounts, and certificates of deposit. This
allows us to compete on a national scale without the geographical constraints of physical locations. At December 31, 2023
and 2022, total deposits at our Internet Branch were $183.8 million and $154.6 million, respectively. The government
banking unit provides banking services to public municipalities, including counties, cities, towns, villages, school districts,
libraries, fire districts, and the various courts throughout the New York City metropolitan area. At December 31, 2023 and
2022, total deposits in our government banking unit totaled $1,587.9 million and $1,653.3 million, respectively.
Our core deposits, consisting of savings accounts, NOW accounts, money market accounts, and non-interest
bearing demand accounts, are typically more stable and lower costing than other sources of funding. However, the flow of
deposits into a particular type of account is significantly influenced by general economic conditions, changes in prevailing
interest rates, and competition. We experienced an increase in our due to depositors’ during 2023 of $327.7 million,
primarily due to growth in our certificate of deposits, partially offset by a decline in core deposits. During the year ended
December 31, 2023, the cost of our interest-bearing due to depositors’ accounts increased 231 basis points to 3.19% from
0.88% for the year ended December 31, 2022. The increase in the cost of deposits was primarily due to the Company’s
response to the Federal Reserve increasing rates. While we are unable to predict the direction of future interest rate changes,
if interest rates rise during 2024, the result could be an increase in our cost of deposits, which could reduce our net interest
margin. However, during 2023 the Company successfully initiated an action plan to reduce the liability sensitivity of the
balance sheet by among other things increasing the use of interest rate hedges. Therefore, if rates were to rise in 2024, at
the same level they rose in 2023, the impact to our net interest margin is expected to be less severe than we experienced
in 2023. Similarly, if interest rates decline in 2024, we could see a decline in our cost of deposits, which could increase
our net interest margin, although the benefit would be less than would have been experienced if we did not reduce the
liability sensitivity of our balance sheet.
Included in deposits are certificates of deposit with balances of $250,000 or more (excluding brokered deposits
issued in $1,000 amounts under a master certificate of deposit) was $497.4 million and $377.4 million at December 31,
2023 and 2022, respectively.
We utilize brokered deposits as an additional funding source, to assist in the management of our interest rate risk
and as an underlying funding source for a portion of our interest rate swaps. At December 31, 2023 and 2022, we had
$1,102.0 million and $856.3 million, respectively, classified as brokered deposits. We obtain brokered certificates of
deposit as a wholesale funding source when the interest rate on these deposits are below other wholesale options, or to
extend the maturities of our deposits. Brokered deposits generally have a higher beta than our retail deposits as the interest
rates are typically more sensitive to changes in the Fed funds rates. A portion of our brokered certificates of deposit are
hedged against rising interest rates using interest rate swaps. At December 31, 2023 and December 31, 2022, $680.0
million and $200.0 million, respectively, were hedged using interest rate swaps. See Note 20 (“Derivative Financial
Instruments”) of the Notes to the Consolidated Financial Statements. Brokered deposits obtained by the Bank are generally
fully FDIC insured. At December 31, 2023 and December 31, 2022, the Bank did not hold any uninsured brokered deposits.
The Depository Trust Company (“DTC”) is used as the clearing house, maintaining each deposit under the name
of CEDE & Co. These deposits are transferable just like a stock or bond investment and the customer can open the account
with only a phone call, just like buying a stock or bond. Unlike non-brokered certificates of deposit, where the deposit
amount can be withdrawn with a penalty for any reason, including increasing interest rates, a brokered certificate of deposit
can only be withdrawn in the event of the death, or court declared mental incompetence, of the depositor. These instruments
allow us to better manage the maturity of our deposits and our interest rate risk. At times, we also utilize brokers to obtain
money market deposits and NOW accounts. The rate we pay on brokered money market and NOW accounts are similar
to the rate we pay on non-brokered accounts of these types, and the rate is agreed to in a contract between the Bank and
the broker. These accounts are similar to brokered certificates of deposit accounts in that we only maintain one account
for the total deposit per broker, with the broker maintaining the detailed records of each depositor.
27
We also offer access to FDIC insurance coverage in excess of $250,000 through the IntraFi Network which
arranges for the placement of funds into certificate of deposit accounts, demand accounts or money market accounts issued
by other member banks within the network in increments of less than $250,000. This allows us to accept deposits in excess
of $250,000 from a depositor and to place the deposits through the network to other member banks to provide full FDIC
deposit insurance coverage. We may receive deposits from other member banks in exchange for the deposits we place into
the network. We may also obtain deposits from other network member banks without placing deposits into the network.
We obtain these types of deposits primarily as a short-term funding source. We can also place deposits with other member
banks without receiving deposits from other member banks. Depositors are allowed to withdraw funds, with a penalty,
from these accounts at one or more of the member banks that hold the deposits. Additionally, we place a portion of our
government deposits in the IntraFi Network money market and demand accounts which does not require us to provide
collateral. This allows us to invest our funds in higher yielding assets. At December 31, 2023 and 2022, the Bank held
IntraFi Network money market and demand deposits totaling $869.2 million and $654.2 million, respectively. At
December 31, 2023, $110.2 million of these deposits were classified as brokered deposits. At December 31, 2022, none
of these deposits were classified as brokered deposits.
At December 31, 2023, the Bank had uninsured deposits totaling $2.1 billion, or 30% of deposits with $0.9 billion
of that fully collateralized by some other method leaving uninsured and uncollateralized deposits totaling $1.2 billion or
17% of deposits.
The following table sets forth the distribution of our deposit accounts at the dates indicated and the weighted
average nominal interest rates on each category of deposits presented.
2023
Percent
of Total
Deposits
Amount
Weighted
Average
Nominal
At December 31,
2022
Weighted
Average
Nominal
Percent
of Total
Deposits
(Dollars in thousands)
2021
Percent
of Total
Deposits
Weighted
Average
Nominal
Rate
Rate
Amount
Rate
Amount
Savings accounts
NOW accounts
Demand accounts
Mortgagors' escrow deposits
Total
$
108,605
1,771,164
847,416
50,382
2,777,567
1.59 %
25.99
12.43
0.74
40.75
0.45 % $
3.58
0.00
0.25
2.31
143,641
1,746,190
921,238
48,159
2,859,228
2.21 %
26.93
14.20
0.74
44.08
0.21 % $
2.14
0.00
0.30
1.37
156,554
1,920,779
967,621
51,913
3,096,867
2.45 %
30.08
15.15
0.81
48.49
0.13 %
0.11
0.00
0.01
0.07
Money market accounts
1,726,404
25.33
3.91
2,099,776
32.38
2.47
2,342,003
36.68
0.22
Certificate of deposit accounts with
original maturities of:
Less than 6 Months
6 to less than 12 Months
12 to less than 30 Months
30 to less than 48 Months
48 to less than 72 Months
72 Months or more
Total certificate of deposit
accounts
690,638
346,073
1,185,856
75,541
11,943
1,239
10.13
5.08
17.40
1.11
0.18
0.02
5.46
4.94
3.92
3.64
1.31
0.18
273,696
24,215
1,088,371
79,923
57,701
2,432
4.22
0.37
16.79
1.23
0.89
0.04
3.58
0.44
2.96
3.24
2.70
0.19
128,745
161,624
530,273
52,726
70,030
3,177
2.02
2.53
8.30
0.83
1.10
0.05
0.12
0.33
0.45
0.83
2.64
0.50
2,311,290
33.92
4.51
1,526,338
23.54
3.03
946,575
14.83
0.57
Total deposits
$ 6,815,261
100.00 %
3.46 % $ 6,485,342
100.00 %
2.12 % $ 6,385,445
100.00 %
0.20 %
28
The following table shows the composition of brokered deposits at the periods indicated below:
(In thousands)
NOW accounts
Money market accounts
Certification of deposit
Total brokered deposits
2023
187,119
96,596
818,287
1,102,002
$
$
$
$
At December 31,
2022
80,465
329,042
446,804
856,311
Interest expense on brokered deposits is summarized as follows for the periods indicated:
(In thousands)
NOW accounts
Money market accounts
Certification of deposit
Total interest expense on brokered deposits
2023
At December 31,
2022
$
$
1,286
3,519
17,411
22,216
$
$
567
3,451
3,006
7,024
2021
178,938
251,085
196,248
626,271
2021
294
557
865
1,716
$
$
$
$
The following table presents by various rate categories, the amount of time deposit accounts outstanding at the
dates indicated, and the years to maturity of the certificate accounts outstanding at the periods indicated:
At December 31,
2022
2023
2021
At December 31, 2023
One to
Within
One Year Three Years Thereafter
(In thousands)
Interest rate:
1.99% or less(1)
2.00% to 2.99%(2)
3.00% to 3.99%(3)
4.00% to 4.99% (4)
5.00% to 5.99% (5)
Total
$
98,900 $
183,366
242,334
755,074
1,031,616
307,498 $ 878,744 $
271,215
569,751
377,874
—
37,917
29,914
—
—
69,509 $
181,780
242,138
700,865
1,016,294
$ 2,311,290 $ 1,526,338 $ 946,575 $ 2,210,586 $
25,117 $
1,586
128
49,778
15,322
91,931 $
4,274
—
68
4,431
—
8,773
(1)
(2)
(3)
(4)
(5)
Includes brokered deposits of $7.0 million, $7.3 million, and $186.9 million at December 31, 2023, 2022 and 2021, respectively.
Includes brokered deposits of $9.3 million at December 31, 2021.
Includes brokered deposits of $238.2 million at December 31, 2022.
Includes brokered deposits of $131.9 million and $206.6 million at December 31, 2023 and 2022, respectively.
Includes brokered deposits of $680.7 million at December 31, 2023.
The following table presents by remaining maturity categories the amount of certificate of deposit accounts with
balances of $250,000 or more at December 31, 2023 and their annualized weighted average interest rates.
Maturity Period:
Three months or less
Over three through six months
Over six through 12 months
Over 12 months
Total
Weighted
Amount Average Rate
(Dollars in thousands)
$ 134,391
146,667
193,512
22,805
$ 497,375
3.30 %
4.21
4.73
3.69
4.14 %
29
The following table presents the deposit activity, including mortgagors’ escrow deposits, for the periods indicated.
For the year ended December 31,
2021
2022
2023
(In thousands)
Net deposits
Amortization (accretion) of premiums, net
Interest on deposits
Net increase in deposits
$ 141,264 $
714
187,941
$ 329,919 $
52,612 $ 228,766
15
(124)
20,448
47,270
99,897 $ 249,090
The following table sets forth the distribution of our average deposit accounts for the years indicated,
the percentage of total deposit portfolio, and the average interest cost of each deposit category presented. Average balances
for all years shown are derived from daily balances.
2023
Percent
of Total Average
Deposits Cost
Average
Balance
At December 31,
2022
Percent
of Total Average
Deposits Cost
Average
Balance
2021
Percent
of Total Average
Deposits Cost
Average
Balance
Savings accounts
NOW accounts
Demand accounts
Mortgagors' escrow deposits
Total
$ 121,102
1,937,974
867,667
81,015
3,007,758
1.59 %
25.99
12.43
0.74
40.75
0.43 % $ 153,605
1,976,238
3.31
1,019,090
—
0.25
80,021
3,228,954
2.16
2.21 %
26.93
14.20
0.74
44.08
0.14 % $ 157,640
2,165,762
0.78
922,741
—
77,552
0.17
3,323,695
0.49
2.45 %
30.08
15.15
0.81
48.49
0.16 %
0.25
—
0.01
0.17
(Dollars in thousands)
Money market accounts
1,754,059
25.33
3.36
2,191,768
32.38
0.87
2,059,431
36.68
0.35
Certificate of deposit accounts
Total deposits
2,091,677
$ 6,853,494
33.92
100.00 %
3.10
1,031,024
2.75 % $ 6,451,746
23.54
100.00 %
1.22
1,033,187
0.73 % $ 6,416,313
14.83
100.00 %
0.71
0.33 %
Borrowings. Although deposits are our primary source of funds, we also use borrowings as an alternative and
cost effective source of funds for lending, investing and other general purposes. The Bank is a member of, and is eligible
to obtain advances from, the FHLB-NY. Such advances generally are secured by a blanket lien against the Bank’s mortgage
portfolio and the Bank’s investment in the stock of the FHLB-NY. In addition, the Bank may pledge mortgage-backed
securities to obtain advances from the FHLB-NY. See “— Regulation — Federal Home Loan Bank System.” The
maximum amount that the FHLB-NY will advance fluctuates from time to time in accordance with the policies of the
FHLB-NY. The Bank may enter into repurchase agreements with broker-dealers and the FHLB-NY. These agreements
are recorded as financing transactions and the obligations to repurchase are reflected as a liability in our consolidated
financial statements. The Bank also has unsecured lines of credit with other commercial banks. In addition, we issued
junior subordinated debentures with a total par of $61.9 million in 2007. These junior subordinated debentures are carried
at fair value in the Consolidated Statement of Financial Condition. At December 31, 2023, the Company holds
subordinated debt with an aggregated principal balance of $190.0 million.
The Company uses interest rate swaps on borrowings to help mitigate the impact interest rate increases have on
our cost of funds. At December 31, 2023 and 2022, the Company had active interest rate swaps on borrowings totaling
$95.8 million and $391.5 million, respectively.
The average cost of borrowings was 4.34%, 2.54%, and 2.24% for the years ended December 31, 2023, 2022
and 2021, respectively. The average balances of borrowings were $776.1 million, $1,012.1 million, and $905.1 million for
the same years, respectively.
30
The following table sets forth certain information regarding our borrowings at or for the periods ended on the
dates indicated.
At or for the years ended December 31,
2022
(Dollars in thousands)
2021
2023
FHLB-NY Advances
Average balance outstanding
Maximum amount outstanding at any month end during the period
Balance outstanding at the end of period
Weighted average interest rate during the period
Weighted average interest rate at end of period
$
425,050
764,219
480,801
811,380
$
1,336,186
815,501
$
694,824
786,736
611,186
3.53 %
4.88
1.94 %
4.08
1.96 %
0.38
Other Borrowings
Average balance outstanding
Maximum amount outstanding at any month end during the period
Balance outstanding at the end of period
Weighted average interest rate during the period
Weighted average interest rate at end of period
$
351,000
456,260
360,480
$
200,769
240,483
237,472
$
210,270
449,776
204,358
5.32 %
5.30
4.98 %
5.16
3.30 %
2.61
Total Borrowings
Average balance outstanding
Maximum amount outstanding at any month end during the period
Balance outstanding at the end of period
Weighted average interest rate during the period
Weighted average interest rate at end of period
$
776,050
1,001,010
841,281
$ 1,012,149
1,572,830
1,052,973
$
905,094
1,236,512
815,544
4.34 %
5.06
2.54 %
4.32
2.24 %
0.94
Subsidiary Activities
At December 31, 2023, the Holding Company had four wholly owned subsidiaries: the Bank and the Trusts. In
addition, the Bank had two wholly owned subsidiaries: FSB Properties Inc and Flushing Service Corporation. In 2021,
Flushing Preferred Funding Corporation (“FPFC”) was dissolved.
FSB Properties Inc., which is incorporated in the State of New York, was formed in 1976 with the original
purpose of engaging in joint venture real estate equity investments. These activities were discontinued in
1986 and no joint venture property remains. FSB Properties Inc. is currently used solely to hold title to real
estate owned that is obtained via foreclosure.
Flushing Service Corporation, which is incorporated in the State of New York, was formed in 1998 to market
insurance products and mutual funds.
Flushing Preferred Funding Corporation, which was dissolved as of June 30, 2021, was incorporated in the
State of Delaware, was formed in 1997 as a real estate investment trust for the purpose of acquiring, holding
and managing real estate mortgage assets. It was available as an additional vehicle for access by the Company
to the capital markets for future opportunities.
Human Capital
On December 31, 2023, we had 549 full-time employees and 15 part-time employees. None of our employees are
represented by a collective bargaining unit, and we consider our relationship with our employees to be good. At the present
time, the Holding Company only employs certain officers of the Bank. These employees do not receive any extra
compensation as officers of the Holding Company.
Oversight & Governance. Our Board of Directors and Board committees provide oversight on certain human
capital matters, including our inclusion and diversity program and initiatives. The Board of Directors is responsible for
31
discussing, evaluating, and reviewing regular updates from management with regard to human capital matters. Our Board
of Directors is comprised of diverse cultures, ethnicity, and gender.
Learning and Development. The Company provides comprehensive learning and development programs for our
employees. We believe that investing in the growth and development of our team members is not only beneficial for them
personally, but also critical to the success of our business. To that end, we have implemented a range of training initiatives,
including on-the-job learning opportunities, online courses, in-person workshops and mentorship programs. We believe
that by supporting the growth of our team members, we are creating a stronger, more capable workforce that will drive
our organization forward for years to come.
Diversity, Equity & Inclusion. We are committed to promoting diversity, equity, and inclusion in the workplace.
We recognize that a diverse workforce with varied experiences, perspectives, and backgrounds is critical to driving
innovation, enhancing creativity, and ultimately achieving success. We pride ourselves on establishing a diverse
workforce that serves our diverse customer base in the New York City metro area. As of December 31, 2023, our multi-
cultural employee population spoke more than 20 different languages. Our inclusion and diversity program focuses on
workforce (our team members), workplace (culture, tools, and programs) and community. We have undertaken a series of
initiatives to further enhance our existing diversity and inclusion programs, including Flushing Bank Serves volunteer
program and the creation of a Diversity & Inclusion Committee. We have also broadened our focus on inclusion and
diversity by equipping and empowering our team leaders with appropriate tools and training.
Total Rewards. The Company believes that our future success largely depends upon our continued ability to
attract and retain highly skilled employees. We provide our employees with a rich total rewards program which includes:
•
•
•
•
•
•
•
•
•
•
Competitive base salaries;
Incentive bonus opportunities;
Equity ownership;
401(k) plan access;
Healthcare and other insurance programs;
Health savings and flexible spending accounts;
Paid time off;
Volunteer time off;
Family leave, and
Employee assistance program.
Omnibus Incentive Plan
The 2014 Omnibus Incentive Plan (“2014 Omnibus Plan”) became effective on May 20, 2014 after adoption by
the Board of Directors and approval by the stockholders. The 2014 Omnibus Plan authorizes the Compensation Committee
of the Company’s Board of Directors (the “Compensation Committee”) to grant a variety of equity compensation awards
as well as long-term and annual cash incentive awards. To the extent that an award under the 2014 Omnibus Plan is
cancelled, expired, forfeited, settled in cash, settled by issuance of fewer shares than the number underlying the award, or
otherwise terminated without delivery of shares to a participant in payment of the exercise price or taxes relating to an
award, the shares retained by or returned to the Company will be available for future issuance under the 2014 Omnibus
Plan. The 2014 Omnibus Plan originally covered the issuance of 1,100,000 shares, which was increased. On May 31, 2017,
stockholders approved an amendment to the 2014 Omnibus Plan authorizing an additional 672,000 shares available for
future issuance. In addition, that amendment eliminated, in the case of stock options and stock appreciation rights, the
ability to recycle shares used to satisfy the exercise price or taxes for such awards. On May 18, 2021, stockholders approved
a further amendment of the 2014 Omnibus Plan to authorize an additional 1,100,000 shares for future issuance. Including
32
the additional shares authorized from the amendments, 746,910 shares remained available for future issuance under the
2014 Omnibus Plan at December 31, 2023.
For additional information concerning this plan, see Note 11 (“Stock-Based Compensation”) of Notes to the
Consolidated Financial Statements in Item 8 of this Annual Report.
General
REGULATION
The Bank is a New York State-chartered commercial bank whose deposit accounts are insured under the Deposit
Insurance Fund (the “DIF”) of the Federal Deposit Insurance Corporation (the “FDIC”) up to applicable legal limits. The
Bank is subject to extensive regulation and supervision by the New York State Department of Financial Services
(“NYDFS”), as its chartering agency, by the FDIC, as its insurer of deposits, and to a lesser extent by the Consumer
Financial Protection Bureau (the “CFPB”), which was created under the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”). The Bank must file reports with the NYDFS and the FDIC concerning its activities
and financial condition, in addition to obtaining regulatory approvals prior to certain transactions such as mergers with, or
acquisitions of, other depository institutions. Furthermore, the Bank is periodically examined by the NYDFS and the FDIC
to assess compliance with various regulatory requirements, including safety and soundness considerations. This regulation
and supervision established a comprehensive framework of activities in which a commercial bank can engage and is
intended primarily for the protection of the FDIC insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with its supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and the establishment of adequate loan loss
allowances for regulatory purposes. Any change in such regulation, whether by the NYDFS, the FDIC, or through
legislation, could have a material adverse impact on the Company, the Bank and its operations, and the Company’s
shareholders. While the regulatory environment has entered a period of rebalancing of the post financial crisis framework,
we expect that our business will remain subject to extensive regulation and supervision.
The Company is required to file certain reports under, and otherwise comply with, the rules and regulations of
the Federal Reserve Board of Governors (the “FRB”), the FDIC, the NYDFS, and the Securities and Exchange
Commission (the “SEC”). In addition, the FRB periodically examines the Company. Certain of the regulatory requirements
applicable to the Bank and the Company are referred to below or elsewhere herein. However, such discussion is not meant
to be a complete explanation of all laws and regulations and is qualified in its entirety by reference to the actual laws and
regulations.
Basel III
The Company and the Bank are subject to a comprehensive capital framework for U.S. banking organizations
that was issued by the FDIC and FRB in July 2013 (the “Basel III Capital Rules”), subject to phase-in periods for certain
components and other provisions. Under the Basel III Capital Rules, the minimum capital ratios are:
4.5% Common Equity Tier 1 (“CET1”) to risk-weighted assets;
6.0% Tier 1 capital that is CET1 plus Additional Tier 1 capital) to risk-weighted assets;
8.0% Total Capital that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and
4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known
as the “leverage ratio”).
33
The Basel III Capital Rules also introduced a “capital conservation buffer,” composed entirely of CET1, on top
of these minimum risk-weighted asset ratios. The Bank’s capital conservation buffer currently is 4.81%. Banking
institutions with a ratio of CET1 to risk-weighted assets below the effective minimum (4.5% plus the capital conservation
buffer) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. As
of December 31, 2023, the Company and the Bank met all capital adequacy requirements under the Basel III Capital Rules.
Together with the FDIC, the Federal Reserve has issued proposed rules that would simplify the capital treatment
of certain capital deductions and adjustments, and the final phase-in period for these capital deductions and adjustments
has been indefinitely delayed. In addition, in December 2018, the federal banking agencies finalized rules that would
permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of the new
current expected credit loss accounting rule on retained earnings over a period of three years.
Economic Growth, Regulatory Relief, and Consumer Protection Act
The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”) provides
certain regulatory relief, including to community banks, which are generally characterized in the statute as banking
organizations with less than $10 billion in total consolidated assets and with limited trading activities. The Economic
Growth Act requires the federal banking agencies to develop a “community bank leverage ratio” (the ratio of a bank’s
tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A
financial institution can elect to be subject to this new definition. The federal banking agencies, including the FDIC, have
issued a rule pursuant to the Economic Growth Act to establish for institutions with assets of less than $10 billion a
“community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) of 9% that such
institutions may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel
III. The Bank has elected not to be subject to this new definition. See “FDIC Regulations – Prompt Corrective Regulatory
Action.”
The Truth in Lending Act (“TILA”) is the commonly used name for Title I of the Consumer Credit Protection
Act, passed by Congress in 1968, which is the consumer protection law specifying what information lenders must share
with borrowers before giving them a loan or line of credit. This information includes the annual percentage rate, loan
terms, and total cost of the loan. Section 101 of the Economic Growth Act amended the TILA to add a safe harbor for
"plain vanilla" mortgage loans originated by banking organizations and credit unions with less than $10 billion in total
consolidated assets under existing qualified mortgage and ability to pay rules.
Section 619 of the Dodd-Frank Act, commonly referred to as the “Volcker Rule,” generally prohibits insured
depository institutions and any company affiliated with an insured depository institution from engaging in proprietary
trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge
fund or private equity fund. Under the Economic Growth Act, community banks, (which for this purpose are generally
characterized in the statute as banking organizations with less than $10 billion in total consolidated assets with limited
trading activities), are exempt from the Volcker Rule and its proprietary trading prohibitions.
New York State Law
The Bank derives its lending, investment, and other authority primarily from the applicable provisions of New
York State Banking Law and the regulations of the NYDFS, as limited by FDIC regulations. Under these laws and
regulations, banks, including the Bank, may invest in real estate mortgages, consumer and commercial loans, certain types
of debt securities (including certain corporate debt securities, and obligations of federal, state, and local governments and
agencies), certain types of corporate equity securities, and certain other assets. The lending powers of New York State-
chartered commercial banks are not subject to percentage-of-assets or capital limitations, although there are limits
applicable to loans to individual borrowers.
The exercise by an FDIC-insured commercial bank of the lending and investment powers under New York State
Banking Law is limited by FDIC regulations and other federal laws and regulations. In particular, the applicable provisions
of New York State Banking Law and regulations governing the investment authority and activities of an FDIC-insured
34
state-chartered savings bank and commercial bank have been effectively limited by the Federal Deposit Insurance
Corporation Improvement Act of 1991 (“FDICIA”) and the FDIC regulations issued pursuant thereto.
With certain limited exceptions, a New York State-chartered commercial bank may not make loans or extend
credit for commercial, corporate, or business purposes (including lease financing) to a single borrower, or related group
of borrowers, the aggregate amount of which would exceed 15% of the bank’s net worth. An additional amount may be
loaned up to an additional 10% of the bank’s net worth, if the loan is secured by readily marketable collateral, which is
defined to include certain financial instruments, but generally does not include real estate. The Bank currently complies
with all applicable loans-to-one-borrower limitations. As of December 31, 2023, the Bank’s largest aggregate amount of
outstanding loans to one borrower was $103.2 million, all of which were performing according to their terms. See “—
General — Lending Activities.”
Under New York State Banking Law, New York State-chartered stock-form commercial banks may declare and
pay dividends out of its net profits, unless there is an impairment of capital, but approval of the NYDFS Superintendent
(the “Superintendent”) is required if the total of all dividends declared by the bank in a calendar year would exceed the
total of its net profits for that year combined with its retained net profits for the preceding two years less prior dividends
paid.
New York State Banking Law gives the Superintendent authority to issue an order to a New York State-chartered
banking institution to appear and explain an apparent violation of law, to discontinue unauthorized or unsafe practices,
and to keep prescribed books and accounts. Upon a finding by the NYDFS that any director, trustee, or officer of any
banking organization has violated any law or has continued unauthorized or unsafe practices in conducting the business of
the banking organization after having been notified by the Superintendent to discontinue such practices, such director,
trustee, or officer may be removed from office after notice and opportunity to be heard. The Superintendent also has
authority to appoint a conservator or a receiver for a savings or commercial bank under certain circumstances.
The Superintendent of the NYDFS has the authority to appoint a receiver or liquidator of any state-chartered bank
or trust company under specified circumstances, including where (i) the bank is conducting its business in an unauthorized
or unsafe manner, (ii) the bank has suspended payment of its obligations, or (iii) the bank cannot with safety and
expediency continue to do business.
The NYDFS has issued cybersecurity regulations in Part 500 of Title 23 of the New York Codes, Rules and
Regulations (“Part 500”), which cover five basic areas.
Governance: The regulation requires senior management and boards of directors to adopt a cybersecurity policy
for protecting information systems and most sensitive information. Covered companies are also required to designate a
Chief Information Security Officer (the “CISO”), who must report to the board annually.
Testing: The regulation requires the conduct of cybersecurity tests and analyses, including a “risk assessment” to
“evaluate and categorize risks,” evaluate the integrity and confidentiality of information systems and non-public
information, and develop a process to mitigate any identified risks.
Ongoing Requirements: The regulation imposes substantial day-to-day and technical requirements. Among
others, we are required to develop and/or maintain access controls for our information systems, ensure the physical security
of our computer systems, encrypt or protect personally identifiable information, perform reviews of in-house and externally
created applications, train employees, and build an audit trail system.
Vendors: The regulation also regulates third-party vendors with access to our information technology or non-
public information. We are required to develop and implement written policies and procedures to ensure the security of
our information technology systems or non-public information that can be accessed by our vendors, including identifying
the risks from third-party access, imposing minimum cybersecurity practices for vendors, and creating a due-diligence
process for evaluating those vendors.
Reports: The regulation imposes a notification process for any material cybersecurity event. Within 72 hours, a
cybersecurity event that has a “reasonable likelihood” of “materially harming” us or that must be reported to another
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government or self-regulating agency must be reported to the NYDFS. In addition, an annual compliance certification to
the NYDFS from either the board or a senior officer is required.
On November 1 2023, the NYDFS amended its cybersecurity requirements. The amendments expand the
obligations of entities regulated by NYDFS to report cybersecurity incidents and enhance their consumer data protection
and cybersecurity infrastructure.
Regulated entities are generally required to comply with the new requirements by April 29, 2024, although
certain provisions allow a longer time frame for compliance. However, the new requirements regarding reporting certain
cybersecurity incidents become effective on December 1, 2023.
U.S Patriot Act and Money Laundering
The Bank is subject to the Bank Secrecy Act (“BSA”), which incorporates several laws, including the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(the “USA PATRIOT Act”) and related regulations. The USA PATRIOT Act gives the federal government powers to
address money laundering and terrorist threats through enhanced domestic security measures, expanded surveillance
powers, increased information sharing, and broadened anti-money laundering requirements. By way of amendments to the
BSA, Title III of the USA PATRIOT Act implemented measures intended to encourage information sharing among bank
regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on
a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and
parties registered under the Commodity Exchange Act.
Among other things, Title III of the USA PATRIOT Act and the related regulations require:
Establishment of anti-money laundering compliance programs that include policies, procedures, and internal
controls; the designation of a BSA officer; a training program; and independent testing;
Filing of certain reports to Financial Crimes Enforcement Network and law enforcement that are designated
to assist in the detection and prevention of money laundering and terrorist financing activities;
Establishment of a program specifying procedures for obtaining and maintaining certain records from
customers seeking to open new accounts, including verifying the identity of customers;
In certain circumstances, compliance with enhanced due diligence policies, procedures and controls designed
to detect and report money-laundering, terrorist financing and other suspicious activity;
Monitoring account activity for suspicious transactions; and
A heightened level of review for certain high-risk customers or accounts.
The USA PATRIOT Act also includes prohibitions on correspondent accounts for foreign shell banks and requires
compliance with record keeping obligations with respect to correspondent accounts of foreign banks.
The bank regulatory agencies have increased the regulatory scrutiny of the BSA and anti-money laundering
programs maintained by financial institutions. Significant penalties and fines, as well as other supervisory orders may be
imposed on a financial institution for non-compliance with these requirements. In addition, for financial institutions
engaging in a merger transaction, federal bank regulatory agencies must consider the effectiveness of the financial
institution’s efforts to combat money laundering activities. The Bank has adopted policies and procedures to comply with
these requirements.
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FDIC Regulation
Capital Requirements. The FDIC has adopted risk-based capital guidelines to which the Bank is subject. The
guidelines establish a systematic analytical framework that makes regulatory capital requirements sensitive to differences
in risk profiles among banking organizations. The Bank is required to maintain certain levels of regulatory capital in
relation to regulatory risk-weighted assets. The ratio of such regulatory capital to regulatory risk-weighted assets is referred
to as a “risk-based capital ratio.” Risk-based capital ratios are determined by allocating assets and specified off-balance-
sheet items to risk-weighted categories ranging from 0% to 1250%, with higher levels of capital being required for the
categories perceived as representing greater risk.
These guidelines divide an institution’s capital into two tiers. The first tier (“Tier 1”) includes common equity,
retained earnings, certain non-cumulative perpetual preferred stock (excluding auction rate issues), and minority interests
in equity accounts of consolidated subsidiaries, less goodwill and other intangible assets (except mortgage servicing rights
and purchased credit card relationships subject to certain limitations). Supplementary (“Tier 2”) capital includes, among
other items, cumulative perpetual and long-term limited-life preferred stock, mandatorily convertible securities, certain
hybrid capital instruments, term subordinated debt, and the ACL, subject to certain limitations, and up to 45% of pre-tax
net unrealized gains on equity securities with readily determinable fair market values, less required deductions. See
“Prompt Corrective Regulatory Action” below.
The regulatory capital regulations of the FDIC and other federal banking agencies provide that the agencies will
take into account the exposure of an institution’s capital and economic value to changes in interest rate risk in assessing
capital adequacy. According to such agencies, applicable considerations include the quality of the institution’s interest rate
risk management process, overall financial condition, and the level of other risks at the institution for which capital is
needed. Institutions with significant interest rate risk may be required to hold additional capital. The agencies have issued
a joint policy statement providing guidance on interest rate risk management, including a discussion of the critical factors
affecting the agencies’ evaluation of interest rate risk in connection with capital adequacy. Institutions that engage in
specified amounts of trading activity may be subject to adjustments in the calculation of the risk-based capital requirement
to assure sufficient additional capital to support market risk.
Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe, for the
depository institutions under its jurisdiction, standards that relate to, among other things, internal controls; information
and audit systems; loan documentation; credit underwriting; the monitoring of interest rate risk; asset growth;
compensation; fees and benefits; and such other operational and managerial standards as the agency deems appropriate.
The federal banking agencies have adopted regulations and Interagency Guidelines Establishing Standards for Safety and
Soundness (the “Guidelines”) to implement these safety and soundness standards. The Guidelines set forth the safety and
soundness standards that the federal banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails
to meet any standard prescribed by the Guidelines, the agency may require the institution to provide it with an acceptable
plan to achieve compliance with the standard, as required by the Federal Deposit Insurance Act, as amended, (the “FDI
Act”). The regulations establish deadlines for the submission and review of such safety and soundness compliance plans.
Real Estate Lending Standards. The FDIC and the other federal banking agencies have adopted regulations that
prescribe standards for extensions of credit that are (i) secured by real estate, or (ii) made for the purpose of financing
construction or improvements on real estate. The FDIC regulations require each institution to establish and maintain
written internal real estate lending standards that are consistent with safe and sound banking practices, and appropriate to
the size of the institution and the nature and scope of its real estate lending activities. The standards also must be consistent
with accompanying FDIC guidelines. The institution’s standards establish requirements for loan portfolio diversification,
prudent underwriting (including loan-to-value limits) that are clear and measurable, loan administration procedures,
documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the
federal bank regulators’ Interagency Guidelines for Real Estate Lending Policies. Institutions are also permitted to make
a limited amount of loans that do not conform to the proposed loan-to-value limitations so long as such exceptions are
reviewed and justified appropriately. The FDIC guidelines also list a number of lending situations in which exceptions to
the loan-to-value standard are justified.
The FDIC and the FRB have also jointly issued the “Concentrations In Commercial Real Estate Lending, Sound
Risk Management Practices” (the “CRE Guidance”). The CRE Guidance, which addresses land development,
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construction, and certain multi-family loans, as well as commercial real estate loans, does not establish specific lending
limits but rather reinforces and enhances these agencies’ existing regulations and guidelines for such lending and portfolio
management. Specifically, the CRE Guidance provides that a bank has a concentration in lending if (1) total reported loans
for construction, land development, and other land represent 100% or more of total risk-based capital; or (2) total reported
loans secured by multi-family properties, non-farm non-residential properties (excluding those that are owner-occupied),
and loans for construction, land development, and other land represent 300% or more of total risk-based capital and the
bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months. If a concentration is
present, management must employ heightened risk management practices that address key elements, including board and
management oversight, strategic planning, portfolio management, development of underwriting standards, risk assessment
and monitoring through market analysis and stress testing, along with maintenance of increased capital levels as needed
to support the level of commercial real estate lending.
Dividend Limitations. The FDIC has authority to use its enforcement powers to prohibit a commercial bank from
paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice. Federal law
prohibits the payment of dividends that will result in the institution failing to meet applicable capital requirements on a
pro forma basis. The Bank is also subject to dividend declaration restrictions imposed by New York State law as previously
discussed under “New York State Law.”
Investment Activities. Since the enactment of FDICIA, all state-chartered financial institutions, including
commercial banks and their subsidiaries, have generally been limited to such activities as principal and equity investments
of the type, and in the amount, authorized for national banks. State law, FDICIA, and FDIC regulations permit certain
exceptions to these limitations. In addition, the FDIC is authorized to permit institutions to engage in state-authorized
activities or investments not permitted for national banks (other than non-subsidiary equity investments) for institutions
that meet all applicable capital requirements if it is determined that such activities or investments do not pose a significant
risk to the FDIC insurance fund. The Gramm-Leach-Bliley Act of 1999 (the “GLBA”) and FDIC regulations impose
certain quantitative and qualitative restrictions on such activities and on a bank’s dealings with a subsidiary that engages
in specified activities.
Prompt Corrective Regulatory Action. Federal law requires, among other things, that federal bank regulatory
authorities take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For
such purposes, the law establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized.
Under current FDIC regulations, a bank is deemed to be “well capitalized” if the bank has a total risk-based
capital ratio of 10% or greater, has a Tier 1 risk-based capital ratio of 8% or greater, has a common equity tier 1 capital
ratio of 6.5% or greater, has a leverage ratio of 5% or greater, and is not subject to any order or final capital directive by
the FDIC to meet and maintain a specific capital level for any capital measure. A bank may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital position if it received an unsatisfactory safety
and soundness examination rating. As of December 31, 2023, the Bank was “well-capitalized”, as applicably defined. The
Dodd-Frank Act made permanent the standard maximum amount of FDIC deposit insurance at $250,000 per depositor. In
addition, the deposits of the Bank are insured up to applicable limits by the FDIC under its Deposit Insurance Fund (“DIF”),
to which insured depository institutions are required to pay quarterly deposit insurance assessments. Under the FDIC’s
risk-based assessment system, insured institutions are assigned to one of four risk categories based upon supervisory
evaluations, regulatory capital level, and certain other factors, with less risky institutions paying lower assessments based
on the assigned risk levels. An institution’s assessment rate depends upon the category to which it is assigned and certain
other factors. Assessment rates range from 1.5 to 40 basis points of the institution’s assessment base, which is calculated
as average total assets minus average tangible equity.
Enforcement. Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged
in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable
law, regulation, rule, order, or condition imposed by the FDIC. The FDIC has extensive enforcement authority to correct
unsafe or unsound practices and violations of law or regulation. Such authority includes the issuance of cease-and-desist
orders, assessment of civil money penalties and removal of officers and directors. The FDIC may also appoint a conservator
or receiver for a non-member bank under specified circumstances, such as where (i) the bank’s assets are less than its
obligations to creditors, (ii) the bank is likely to be unable to pay its obligations or meet depositors’ demands in the normal
course of business, or (iii) a substantial dissipation of bank assets or earnings has occurred due to a violation of law of
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regulation or unsafe or unsound practices. Management does not know of any practice, condition, or violation that would
lead to termination of the deposit insurance for the Bank.
Brokered Deposits
FDIC and other regulations generally limit the ability of an insured depository institution to accept, renew or roll
over any brokered deposit unless the institution’s capital category is “well capitalized” or, with the FDIC’s approval,
“adequately capitalized.” Pursuant to the regulations the Bank, as a well-capitalized institution, may accept brokered
deposits.
Incentive Compensation Guidance
Federal banking agencies and the NYDFS have issued comprehensive guidance intended to ensure that the
incentive compensation policies of banking organizations, including bank holding companies, do not undermine the safety
and soundness of those organizations by encouraging excessive risk-taking. The incentive compensation guidance sets
expectations for banking organizations concerning their incentive compensation arrangements and related risk-
management, control and governance processes. In addition, in October 2022, the SEC finalized a rule that directs stock
exchanges to require listed companies to implement claw-back policies to recover incentive-based compensation from
current or former executive officers in the event of certain financial restatements and requires companies to disclose their
claw-back policies and their actions under those policies.
Transactions with Affiliates
Sections 23A and 23B of the Federal Reserve Act and FRB’s Regulation W generally:
Limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any
affiliate;
limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with all
affiliates; and
require that all such transactions be on terms substantially the same, or at least favorable to, the bank or
subsidiary, as those provided to a non-affiliate.
An affiliate of a bank is any company or entity which controls, is controlled by, or is under common control with
the bank. The term “covered transaction” includes the making of loans to the affiliate, the purchase of assets from the
affiliate, the issuance of a guarantee on behalf of the affiliate, the purchase of securities issued by the affiliate, and other
similar types of transactions.
A bank’s authority to extend credit to executive officers, directors and greater than 10 percent shareholders, as
well as entities controlled by such persons, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation
O promulgated thereunder by the FRB. Among other things, these loans must be made on terms (including interest rates
charged and collateral required) substantially the same as those offered to unaffiliated individuals or be made as part of a
benefit or compensation program and on terms widely available to employees and must not involve a greater than normal
risk of repayment. In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s
capital position, and specified approval procedures must be followed in making loans which exceed specified amounts.
Community Reinvestment Act
Federal Regulation. Under the Community Reinvestment Act (“CRA”), as implemented by FDIC regulations,
an institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the
credit needs of its entire community, including low- and moderate-income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions, nor does it limit an institution’s discretion to develop
the types of products and services that it believes are best suited to its particular community, consistent with the CRA.
The CRA requires the FDIC, in connection with its examinations, to assess the institution’s record of meeting the credit
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needs of its community and to take such record into account in its evaluation of certain applications by such institution.
The CRA requires public disclosure of an institution’s CRA rating and further requires the FDIC to provide a written
evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. In October 2023, the
FDIC, the Federal Reserve Board and the FDIC issued a final rule to strengthen and modernize the CRA regulations and
framework. Under the final rule, a bank with assets of at least $2 billion as of December 31 in both of its prior two calendar
years will be a “large bank” for purposes thereof. The applicable agencies will evaluate such large banks under four
performance tests: the Retail Lending Test, the Retail Services and Products Test, the Community Development Financing
Test, and the Community Development Services Test. The applicability date for most provisions in the CRA regulations
is January 1, 2026, with additional requirements to be applicable on January 1, 2027. As of the date of its most recent
CRA examination, which was conducted by the Federal Reserve Bank of New York and the NYSDFS, the Bank’s CRA
performance was rated “Outstanding”. New York law imposes a similar obligation on the Bank to serve the credit needs
of its community. New York law contains its own community invested-related provisions, which are substantially similar
to those of federal law.
New York State Regulation. The Bank is also subject to provisions of the New York State Banking Law that
impose continuing and affirmative obligations upon a banking institution organized in New York State to serve the credit
needs of its local community (the “NYCRA”). Such obligations are substantially similar to those imposed by the CRA.
The NYCRA requires the NYDFS to make a periodic written assessment of an institution’s compliance with the NYCRA,
utilizing a four-tiered rating system, and to make such assessment available to the public. The NYCRA also requires the
Superintendent to consider the NYCRA rating when reviewing an application to engage in certain transactions, including
mergers, asset purchases, and the establishment of branch offices or ATMs, and provides that such assessment may serve
as a basis for the denial of any such application.
Federal Home Loan Bank System
The Bank is a member of the FHLB-NY, one of 11 regional FHLBs comprising the FHLB system. Each regional
FHLB manages its customer relationships, while the 11 FHLBs use its combined size and strength to obtain its necessary
funding at the lowest possible cost. As a member of the FHLB-NY, the Bank is required to acquire and hold shares of
FHLB-NY capital stock. Pursuant to this requirement, as of December 31, 2023, the Bank was required to maintain $31.1
million of FHLB-NY stock.
Holding Company Regulations
The Company is subject to examination, regulation, and periodic reporting under the Bank Holding Company
Act of 1956, as amended (the “BHCA”), as administered by the FRB. The Company is required to obtain the prior approval
of the FRB to acquire all, or substantially all, of the assets of any bank or bank holding company. Prior FRB approval
would be required for the Company to acquire direct or indirect ownership or control of any voting securities of any bank
or bank holding company if, after giving effect to such acquisition, it would, directly or indirectly, own or control more
than 5% of any class of voting shares of such bank or bank holding company. In addition, before any bank acquisition can
be completed, prior approval thereof may also be required to be obtained from other agencies having supervisory
jurisdiction over the bank to be acquired, including the NYDFS.
FRB regulations generally prohibit a bank holding company from engaging in, or acquiring, direct or indirect
control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the principal
exceptions to this prohibition is for activities found by the FRB to be so closely related to banking or managing or
controlling Bank as to be a proper incident thereto. Some of the principal activities that the FRB has determined by
regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing
services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment, or financial advisor; (v) leasing
personal or real property; (vi) making investments in corporations or projects designed primarily to promote community
welfare; and (vii) acquiring a savings and loan association.
The FRB has adopted capital adequacy guidelines for bank holding companies (on a consolidated basis). The
Dodd-Frank Act required the FRB to issue consolidated regulatory capital requirements for bank holding companies that
are at least as stringent as those applicable to insured depository institutions. Such regulations eliminated the use of certain
instruments, such as cumulative preferred stock and trust preferred securities, as Tier 1 holding company capital. As of
December 31, 2023, the Company’s consolidated capital exceeded these requirements.
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Bank holding companies are generally required to give the FRB prior written notice of any purchase or
redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined
with the net consideration paid for all such purchases or redemptions during the preceding twelve months, is equal to 10%
or more of the Company’s consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines
that the proposal would constitute an unsafe or unsound practice, or would violate any law, regulation, FRB order or
directive, or any condition imposed by, or written agreement with, the FRB. The FRB has adopted an exception to this
approval requirement for well-capitalized bank holding companies that meet certain other conditions.
The FRB has issued a policy statement regarding the payment of dividends by bank holding companies. In
general, the FRB’s policies provide that dividends should be paid only out of current earnings and only if the prospective
rate of earnings retention by the bank holding company appears consistent with the organization’s capital needs, asset
quality, and overall financial condition.
The FRB’s policies include that a bank holding company should pay cash dividends only to the extent that net
income is sufficient to fund the dividends and the prospective rate of earnings retention is consistent with capital needs,
asset quality and overall financial condition. In addition, FRB guidance sets forth the supervisory expectation that bank
holding companies will inform and consult with FRB staff in advance of issuing a dividend that exceeds earnings for the
quarter and should inform the FRB and should eliminate, defer or significantly reduce dividends if (i) net income available
to stockholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund
the dividends, (ii) prospective rate of earnings retention is not consistent with the bank holding company’s capital needs
and overall current and prospective financial condition, or (iii) the bank holding company will not meet, or is in danger of
not meeting, its minimum regulatory capital adequacy ratios. Moreover, the guidance indicates that a bank holding
company should notify the FRB in advance of declaring or paying a dividend that exceeds earnings for the period (e.g.,
quarter) for which the dividend is being paid or that could result in a material adverse change to the organization’s capital
structure. FRB guidance also provides for consultation and nonobjection for material increases in the amount of a bank
holding company’s common stock dividend.
The FRB’s policies also require that a bank holding company serve as a source of financial strength to its
subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during
periods of financial stress or adversity, and by maintaining the financial flexibility and capital-raising capacity to obtain
additional resources for assisting its subsidiary banks where necessary. The Dodd-Frank Act codifies the source of
financial strength policy and requires regulations to facilitate its application. Under the prompt corrective action laws, the
ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.
These regulatory policies could affect the ability of the Company to pay dividends or otherwise engage in capital
distributions.
Under the FDI Act, a depository institution may be liable to the FDIC for losses caused to the DIF if a commonly
controlled depository institution were to fail. The Bank is commonly controlled within the meaning of that law. In 2023,
the FDIC approved a final rule to implement a special assessment to recover the loss to the DIF associated with the closures
of Silicon Valley Bank and Signature Bank, however the Bank was not subject to this special assessment due to our
uninsured deposits being below the FDIC threshold.
The status of the Company as a registered bank holding company under the BHCA does not exempt it from
certain federal and state laws and regulations applicable to corporations generally, including, without limitation, certain
provisions of the federal securities laws.
The Company, the Bank, and their respective affiliates will be affected by the monetary and fiscal policies of
various agencies of the United States Government, including the Federal Reserve System. In view of changing conditions
in the national economy and in the money markets, it is difficult for management to accurately predict future changes in
monetary policy or the effect of such changes on the business or financial condition of the Company or the Bank.
Acquisition of the Holding Company
Under the Federal Change in Bank Control Act (“CIBCA”), a notice must be submitted to the FRB if any person
(including a company), or group acting in concert, seeks to acquire 10% or more of the Company’s shares of outstanding
common stock, unless the FRB has found that the acquisition will not result in a change in control of the Company. Under
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the CIBCA, the FRB generally has 60 days within which to act on such notices, taking into consideration certain factors,
including the financial and managerial resources of the acquirer; the convenience and needs of the communities served by
the Company and the Bank; and the anti-trust effects of the acquisition. Under the BHCA, any company would be required
to obtain approval from the FRB before it may obtain “control” of the Company within the meaning of the BHCA. Control
generally is defined to mean the ownership or power to vote 25% or more of any class of voting securities of the Company
or the ability to control in any manner the election of a majority of the Company’s directors. An existing bank holding
company would, under the BHCA, be required to obtain the FRB’s approval before acquiring more than 5% of the
Company’s voting stock. In addition to the CIBCA and the BHCA, New York State Banking Law generally requires prior
approval of the New York State Banking Board before any action is taken that causes any company to acquire direct or
indirect control of a banking institution that is organized in New York.
Consumer Financial Protection Bureau
Created under the Dodd-Frank Act, and given extensive implementation and enforcement powers, the CFPB has
broad rulemaking authority for a wide range of consumer financial laws that apply to all banks, including, among other
things, the authority to prohibit “unfair, deceptive, or abusive” acts and practices. Abusive acts or practices are defined as
those that (1) materially interfere with a consumer’s ability to understand a term or condition of a consumer financial
product or service, or (2) take unreasonable advantage of a consumer’s (a) lack of financial savvy, (b) inability to protect
himself or herself in the selection or use of consumer financial products or services, or (c) reasonable reliance on a covered
entity to act in the consumer’s interests. The CFPB has the authority to investigate possible violations of federal consumer
financial law, hold hearings and commence civil litigation. The CFPB can issue cease-and-desist orders against banks and
other entities that violate consumer financial laws. The CFPB may also institute a civil action against an entity in violation
of federal consumer financial law in order to impose a civil penalty or an injunction.
Mortgage Banking and Related Consumer Protection Regulations
The retail activities of the Bank, including lending and the acceptance of deposits, are subject to a variety of
statutes and regulations designed to protect consumers. Interest and other charges collected or contracted for by the Bank
are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to federal laws
applicable to credit transactions, such as:
The federal Truth-In-Lending Act and Regulation Z issued by the FRB, governing disclosures of credit terms
to consumer borrowers;
The Home Mortgage Disclosure Act and Regulation C issued by the FRB, requiring financial institutions to
provide information to enable the public and public officials to determine whether a financial institution is
fulfilling its obligation to help meet the housing needs of the community it serves;
The Equal Credit Opportunity Act and Regulation B issued by the FRB, prohibiting discrimination on the
basis of race, creed or other prohibited factors in extending credit;
The Fair Credit Reporting Act and Regulation V issued by the FRB, governing the use and provision of
information to consumer reporting agencies;
The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection
agencies; and
The guidance of the various federal agencies charged with the responsibility of implementing such federal
laws.
Deposit operations also are subject to:
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The Truth in Savings Act and Regulation DD issued by the FRB, which requires disclosure of deposit terms
to consumers;
Regulation CC issued by the FRB, which relates to the availability of deposit funds to consumers;
The Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer
financial records and prescribes procedures for complying with administrative subpoenas of financial
records; and
The Electronic Funds Transfer Act and Regulation E issued by the FRB, which governs automatic deposits
to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of
automated teller machines and other electronic banking services.
In addition, the Bank and its subsidiaries may also be subject to certain state laws and regulations designed to
protect consumers.
Many of the foregoing laws and regulations are subject to change resulting from the provisions in the Dodd-Frank
Act, which in many cases calls for revisions to implementing regulations. In addition, oversight responsibilities of these
and other consumer protection laws and regulations will, in large measure, transfer from the Bank’s primary regulators to
the CFPB. We cannot predict the effect that being regulated by a new, additional regulatory authority focused on consumer
financial protection, or any new implementing regulations or revisions to existing regulations that may result from the
establishment of this new authority, will have on our businesses.
Data Privacy
Federal and state laws contain extensive consumer privacy protection provisions. The GLBA requires financial
institutions to periodically disclose their privacy practices and policies relating to sharing such information and enable
retail customers to opt out of the Bank’s ability to share certain information with affiliates and non-affiliates for marketing
and/or non-marketing purposes, or to contact customers with marketing offers. The GLBA also requires financial
institutions to implement a comprehensive information security program that includes administrative, technical, and
physical safeguards to ensure the security and confidentiality of customer records and information.
Cybersecurity
In 2023, the SEC adopted rules requiring registered public companies (“registrants”) to disclose material
cybersecurity incidents that they experience and to disclose on an annual basis material information regarding their
cybersecurity risk management, strategy and governance. The new rules require registrants to disclose on the new item
1.05 of Form 8-K any cybersecurity incident they determine to be material and to describe the material aspects of the
incident’s nature, scope, and timing, as well as its material impact or reasonably likely impact on the registrant. The new
rules also add Regulation S-K Item 106, which will require registrants to describe their processes, if any, for assessing,
identifying, and managing material risks from cybersecurity threats, as well as the material effects or reasonably likely
material effects of risks from cybersecurity threats and previous cybersecurity incidents. Item 106 requires registrants to
describe the board of directors’ oversight of risks from cybersecurity threats and management’s role and expertise in
assessing and managing material risks from cybersecurity threats, which description is included herein.
In addition, the Federal Reserve and the FDIC require, among other things, a banking organization to notify its
primary federal regulator within 36 hours after identifying a “computer-security incident” that the banking organization
believes in good faith could materially disrupt, degrade or impair its business or operations in a manner that would, among
other things, jeopardize the viability of its operations, result in customers being unable to access their deposit and other
accounts, result in a material loss of revenue, profit or franchise value, or pose a threat to the financial stability of the
United States. In 2023, the FDIC issued a report setting forth safety and soundness standards and a computer-security
incident notification rule under which a banking organization must notify its primary federal regulator of any significant
43
computer-security incident as soon as possible, but no later than 36 hours after determining that such an incident has
occurred.
In addition, as noted above, in November 2023 the NYDFS amended its cybersecurity requirements to expand
the obligations of entities regulated by NYDFS to report cybersecurity incidents and enhance their consumer data
protection and cybersecurity infrastructure, all within several future compliance days.
Federal Securities Laws
The Company’s common stock is registered with the SEC and listed for trading on The Nasdaq Stock Market
(“Nasdaq”). Accordingly, the Company is subject to the information, proxy solicitation, insider trading restrictions and
other requirements under the Securities Exchange Act of 1934 and the rules of Nasdaq. In accordance with Nasdaq listing
rules regarding board diversity and disclosure, the Company annually discloses certain board diversity data. In addition,
under Nasdaq listing rules, the Company is required to have, or explain why it does not have, (i) one diverse director
currently, and (ii) two diverse directors by the later of August 6, 2025, or the date it files its proxy statement for its annual
meeting of shareholders in 2025. A listed issuer may meet these diversity requirements by having two female directors or
one female director and one director who is an underrepresented minority or LGBTQ+. The Company presently meets
both these requirements.
Available Information
We are a reporting company and file annual, quarterly and current reports, proxy statements and other information
with the SEC. We make available free of charge on or through our web site at http://www.flushingbank.com our annual
reports on Form 10 K, quarterly reports on Form 10 Q, current reports on Form 8 K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the SEC. Our SEC filings are also available to the public
free of charge over the Internet at the SEC’s web site at http://www.sec.gov.
You may also read and copy any document we file at the SEC’s public reference room located at 100 F. Street,
N.E., Room 1580, Washington, D.C. 20549. You may obtain information about the operation of the public reference room
by calling the SEC at 1 800 SEC 0330. You may request copies of these documents by writing to the SEC and paying a
fee for the copying cost.
Item 1A. Risk Factors.
In addition to the other information contained in this Annual Report, the following factors and other
considerations should be considered carefully in evaluating us and our business.
Changes in Interest Rates May Impact Our Financial Condition and Results of Operations
Our primary source of income is net interest income, which is the difference between the interest income
generated by our interest-earning assets (consisting primarily of multi-family residential loans, investment property
commercial business loans and commercial real estate mortgage loans) and the interest expense paid on our interest-
bearing liabilities (consisting primarily of deposits and borrowings). The level of net interest income is primarily a function
of the average balance of our interest-earning assets and our interest-bearing liabilities, along with the spread between the
yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-
earning assets and our interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy,
competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the Federal Reserve
Board (the “FOMC”), and market interest rates. The FOMC raised the target range for the federal funds rate four times
during 2023 from a range of 4.50% to 4.75% in March to a range of 5.25% to 5.50% in July. There can be no assurances
as to any future FOMC decisions on interest rates. A significant portion of our loans have fixed interest rates (or, if
adjustable, are initially fixed for periods of five to 10 years) and longer terms than our deposits and borrowings. Our net
interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the
rates we earn on loans. Our interest rate risk has been partially mitigated by the addition of certain derivative financial
44
instruments and we believe that our current interest rate position is more neutral, with a bias toward liability sensitivity.
There can be no assurance that such derivatives will remain effective in such mitigation nor that our interest rate position
will remain as is and be appropriate in our operating environment.
As a result of our historical focus on the origination of multi-family residential mortgage loans, commercial
business loans and commercial real estate mortgage loans, most of our loans are adjustable rate, however, many adjust at
periods of five to 10 years. In addition, a large percentage of our investment securities and mortgage-backed securities
have fixed interest rates and are classified as available for sale. As is the case with many financial institutions, our
emphasis on increasing the generation of core deposits, those with no stated maturity date, has resulted in our interest-
bearing liabilities having a shorter duration than our interest-earning assets. This imbalance can create significant earnings
volatility because interest rates change over time. As interest rates increase, our cost of funds generally increases more
rapidly than the yields on a substantial portion of our interest-earning assets. In addition, the estimated fair value of our
fixed-rate assets, such as our securities portfolios, would decline (and our unrealized gains on such assets would ordinarily
decrease and unrealized losses would ordinarily increase) if interest rates increase. However, the derivative portfolio
increases in fair value as interest rates increase, partially mitigating the effects of such increases on other securities. In
line with the foregoing, we have experienced and may continue to experience an increase in the cost of interest-bearing
liabilities primarily due to raising the rates we pay on some of our deposit products to stay competitive within our market
and an increase in borrowing costs from increases in the federal funds rate.
Prevailing interest rates also affect the extent to which borrowers repay and refinance loans. In a declining interest
rate environment, the number of loan prepayments and loan refinancing may increase, as well as prepayments of mortgage-
backed securities. Call provisions associated with our investment in U.S. government agency and corporate securities may
also adversely affect yield in a declining interest rate environment. Such prepayments and calls may adversely affect the
yield of our loan and securities portfolios as we reinvest the prepaid funds in a lower interest rate environment. However,
we typically receive additional loan fees when existing loans are refinanced, which partially offset the reduced yield on
our loan portfolio resulting from prepayments. In periods of low interest rates, our level of core deposits also may decline
if depositors seek higher-yielding instruments or other investments not offered by us, which in turn may increase our cost
of funds and decrease our net interest margin to the extent alternative funding sources are utilized. An increasing interest
rate environment would tend to extend the average lives of lower yielding fixed rate mortgages and mortgage-backed
securities, which could adversely affect net interest income. Also, in an increasing interest rate environment, mortgage
loans and mortgage-backed securities may prepay at slower rates than experienced in the past, which could result in a
reduction of prepayment penalty income. Depositors tend to open longer term, higher costing certificate of deposit
accounts which could adversely affect our net interest income if rates were to subsequently decline. Additionally,
adjustable-rate mortgage loans and mortgage-backed securities generally contain interim and lifetime caps that limit the
amount the interest rate can increase or decrease at repricing dates. Significant increases in prevailing interest rates may
significantly affect demand for loans and the value of the Bank’s collateral. See “— Local Economic Conditions.
Our Lending Activities Involve Risks that May Be Exacerbated Depending on the Mix of Loan Types
At December 31, 2023, our gross loan portfolio was $6,898.3 million, of which 88.9% was loans secured by real
estate. Most of these real estate loans were secured by multi-family residential property ($2,658.2 million), commercial
real estate property ($1,958.3 million) and one-to-four family mixed-use property ($530.2 million), which combined
represented 74.6% of our loan portfolio. Our loan portfolio is concentrated in the New York City metropolitan area.
Multi-family residential, one-to-four family mixed-use property, commercial real estate mortgage loans, commercial
business loans and construction loans, are generally viewed as exposing the lender to a greater risk of loss than fully
underwritten one-to-four family residential mortgage loans and typically involve higher principal amounts per loan. Multi-
family residential, one-to-four family mixed-use property and commercial real estate mortgage loans are typically
dependent upon the successful operation of the related property, which is usually owned by a legal entity with the property
being the entity’s only asset. If the cash flow from the property is reduced, the borrower’s ability to repay the loan may
be impaired. If the borrower defaults, our only remedy may be to foreclose on the property, for which the market value
may be less than the balance due on the related mortgage loan. We attempt to mitigate this risk by generally requiring a
loan-to-value ratio of no more than 75% at a time the loan is originated, except for one-to-four family residential mortgage
loans, where we require a loan-to value ratio of no more than 80%. Repayment of construction loans is contingent upon
the successful completion and operation of the project. The repayment of commercial business loans (the increased
origination of which is part of management’s strategy), is contingent on the successful operation of the related business.
45
Changes in local economic conditions and government regulations, which are outside the control of the borrower or lender,
also could affect the value of the security for the loan or the future cash flow of the affected properties. We continually
review the composition of our mortgage loan portfolio to manage the risk in the portfolio.
Failure to Effectively Manage Our Liquidity Could Significantly Impact Our Financial Condition and Results of
Operations
Our liquidity is critical to our ability to operate our business. Our primary sources of liquidity are deposits, both
retail deposits from our branch network including our Internet Branch and brokered deposits, as well as borrowed funds,
primarily wholesale borrowing from the FHLB-NY. Additionally, we have unsecured lines of credit with other commercial
banks. Funds are also provided by the repayment and sale of securities and loans. Our ability to obtain funds are influenced
by many external factors, including but not limited to, local, regional and national economic conditions, the direction of
interest rates and competition for deposits in the markets we serve. Additionally, changes in the FHLB-NY underwriting
guidelines may limit or restrict our ability to borrow effectively. A decline in available funding caused by any of the above
factors could adversely impact our ability to originate loans, invest in securities, meet our expenses, or fulfill our
obligations such as repaying our borrowings or meeting deposit withdrawal demands.
Our Ability to Obtain Brokered Deposits as an Additional Funding Source Could be Limited
We utilize brokered deposits as an additional funding source and to assist in the management of our interest rate
risk. The Bank had $1,102.0 million or 16.2% of total deposits and $856.3 million, or 13.2% of total deposits, in brokered
deposit accounts as of December 31, 2023 and 2022, respectively. We have obtained brokered certificates of deposit when
the interest rate on these deposits is below the prevailing interest rate for non-brokered wholesale funding with similar
maturities in our market, or when obtaining them allowed us to extend the maturities of our deposits at favorable rates
compared to borrowing funds with similar maturities, or when we are seeking to extend the maturities of our funding to
assist in the management of our interest rate risk. Brokered certificates of deposit provide a large deposit for us at a lower
operating cost as compared to non-brokered certificates of deposit since we only have one account to maintain versus
several accounts with multiple maturity checks. Unlike non-brokered certificates of deposit where the deposit amount can
be withdrawn with a penalty for any reason, including increasing interest rates, a brokered certificate of deposit can only
be withdrawn in the event of the death or court declared mental incompetence of the depositor. This allows us to better
manage the maturity of our deposits and our interest rate risk. We also at times utilize brokers to obtain money market
account deposits. The rate we pay on brokered money market accounts is similar to the rate we pay on non-brokered
money market accounts, and the rate is agreed to in a contract between the Bank and the broker. These accounts are similar
to brokered certificates of deposit accounts in that we only maintain one account for the total deposit per broker, with the
broker maintaining the detailed records of each depositor. Additionally, we place a portion of our government deposits in
the IntraFi Network money market or demand product, allowing us to invest our funds in higher yielding assets without
providing collateral. As of December 31, 2023, total deposit balances include brokered deposits of money market deposits
of $96.6 million, certificates of deposits of $818.3 million, and NOW deposits of $187.1 million. As of December 31,
2022, total deposit balances include brokered deposits of money market deposits of $329.0 million, certificates of deposits
of $446.8 million, and NOW deposits of $80.5 million.
FDIC regulations limit brokered deposits. Under the regulations, well-capitalized institutions are not subject to
brokered deposit limitations, while adequately capitalized institutions are able to accept, renew or roll over brokered
deposits only with a waiver from the FDIC and subject to restrictions on the interest rate that can be paid on such deposits.
Undercapitalized institutions are not permitted to accept brokered deposits. Pursuant to the regulation, the Bank, as a well-
capitalized institution, may accept brokered deposits. Should our capital ratios decline, this could limit our ability to
replace brokered deposits when they mature. As of December 31, 2023, the Bank met or exceeded all applicable
requirements to be deemed “well-capitalized” for purposes of these regulations. However, there can be no assurance that
the Bank will continue to meet those requirements. Limitations on the Bank’s ability to accept brokered deposits for any
reason (including limitations on the amount of brokered deposits in total or as a percentage of total assets) could materially
adversely impact our funding costs and liquidity.
The maturity of brokered certificates of deposit could result in a significant funding source maturing at one time.
Should this occur, it might be difficult to replace the maturing certificates with new brokered certificates of deposit or
46
other wholesale funding. We have used brokers to obtain these deposits which results in depositors with whom we have
no other relationships since these depositors are outside of our market, and there may not be a sufficient source of new
brokered certificates of deposit at the time of maturity. In addition, upon maturity, wholesale funding could require us to
offer some of the highest interest rates in the country to retain the funding, which would negatively impact our earnings.
.
The Markets in Which We Operate Are Highly Competitive
We face intense and increasing competition both in making loans and in attracting deposits. Our market area has
a high density of financial institutions, many of which have greater financial resources, name recognition and market
presence than us, and all of which are our competitors to varying degrees. Particularly intense competition exists for
deposits and in all of the lending activities we emphasize. Our competition for loans comes principally from other
commercial banks, savings banks, savings and loan associations, mortgage banking companies, insurance companies,
finance companies and credit unions. Management anticipates that competition for mortgage loans will continue to
increase in the future. Our most direct competition for deposits historically has come from savings banks, other commercial
banks, savings and loan associations and credit unions. In addition, we face competition for deposits from products offered
by brokerage firms, insurance companies and other financial intermediaries, such as money market and other mutual funds
and annuities. Consolidation in the banking industry and the lifting of interstate banking and branching restrictions have
made it more difficult for smaller, community-oriented banks, such as us, to compete effectively with large, national,
regional and super-regional banking institutions. Our Internet Branch provides us with access to consumers in markets
outside our geographic branch locations. The internet banking arena exposes us to competition with many larger financial
institutions that have greater financial resources, name recognition and market presence than we do.
Our Results of Operations May Be Adversely Affected by Changes in National, Regional and/or Local Economic
Conditions
Our operating results are affected by national, regional and local economic and competitive conditions, including
changes in market interest rates, the strength of the local economy, government policies and actions of regulatory
authorities. Adverse economic conditions can result in borrowers defaulting on their loans or withdrawing their funds on
deposit at the Bank to meet their financial obligations. A decline in the local, regional or national economy or the New
York City metropolitan area real estate market could adversely affect our financial condition and results of operations,
including through decreased demand for loans or increased competition for good loans, increased non-performing loans
and credit losses resulting in additional provisions for credit losses and for losses on real estate owned. Many factors could
require additions to our allowance for credit losses in future periods above those currently maintained. These factors
include, but are not limited to: (1) adverse changes in economic conditions and changes in interest rates that may affect
the ability of borrowers to make payments on loans, (2) changes in the financial capacity of individual borrowers,
(3) changes in the local real estate market and the value of our loan collateral, and (4) future review and evaluation of our
loan portfolio, internally or by regulators. The amount of our allowance for credit losses at any time represents good faith
estimates that are susceptible to significant changes due to changes in appraisal values of collateral, national and local
economic conditions, prevailing interest rates and other factors. See “Business — General — Allowance for Credit
Losses” in Item 1 of this Annual Report.
These same factors could cause delinquencies to increase for the mortgages which are the collateral for the
mortgage-backed securities we hold in our investment portfolio. Combining increased delinquencies with liquidity
problems in the market could result in a decline in the market value of our investments in privately issued mortgage-backed
securities. There can be no assurance that a decline in the market value of these investments will not result in other-than-
temporary impairment charges in our financial statements.
Changes in Laws and Regulations Could Adversely Affect Our Business
From time to time, legislation, is enacted or regulations are promulgated that have the effect of increasing the
cost of doing business, limiting or expanding permissible activities or affecting the competitive balance between banks
and other financial institutions. Proposals to change the laws and regulations governing the operations and taxation of
banks and other financial institutions are frequently made in Congress, in the New York legislature and before various
bank regulatory agencies. There can be no assurance as to the impact that any laws, regulations or governmental programs
47
that may be introduced or implemented in the future will have on the financial markets and the economy, any of which
could adversely affect our business. For a discussion of regulations affecting us, see “Business — Regulation” and
“Business — Federal, State and Local Taxation” in Item 1 of this Annual Report.
Current Conditions in, and Regulation of, the Banking Industry May Have a Material Adverse Effect on Our
Results of Operations
Financial institutions have been the subject of significant legislative and regulatory changes, including the
adoption of The Dodd Frank Act, which imposes a wide variety of regulations affecting us, and may be the subject of
further significant legislation or regulation in the future, none of which is within our control. Significant new laws or
regulations or changes in, or repeals of, existing laws or regulations, including those with respect to federal and state
taxation, may cause our results of operations to differ materially. In addition, the cost and burden of compliance, over
time, have significantly increased and could adversely affect our ability to operate profitably.
The Bank faces several minimum capital requirements imposed by federal regulation. Failure to adhere to these
minimums could limit the dividends the Bank may pay, including the payment of dividends to the Company, and could
limit the annual growth of the Bank. Under the Dodd Frank Act, banks with assets greater than $100.0 billion in total
assets are required to complete stress tests, which predict capital levels under certain stress levels. See “Regulation.” The
Bank is subject to extensive supervision, regulation, and examination by the NYDFS, as its chartering agency, the FDIC,
as its insurer of deposits, and to a lesser extent the CFPB under the Dodd-Frank Act. The Company is subject to similar
regulation and oversight by the Federal Reserve Bank. Such regulations limit the manner in which the Company and Bank
conduct business, undertake new investments and activities and obtain financing. The regulatory structure also provides
the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to capital levels, the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Failure to comply with applicable laws and regulations could subject
the Company and Bank to regulatory enforcement action that could result in the assessment of significant civil money
penalties against the Company and/or the Bank.
The FDIC regulations are designed primarily for the protection of the deposit insurance fund and the Bank’s
depositors, and not to benefit the Company, the Bank, or its creditors.
The fiscal and monetary policies of the federal government and its agencies could have a material adverse effect
on the Company’s results of operations. The Federal Reserve regulates the supply of money and credit in the United
States. Changes in Federal Reserve or governmental policies are beyond the Company’s control and difficult to predict;
consequently, the impact of these changes on the Company’s activities and results of operations is also difficult to predict.
See “Changes in Interest Rates may impact our Financial Condition and Results of Operations” Risk Factor in this Form
10-K.
A Failure in or Breach of Our Operational or Security Systems or Infrastructure, or Those of Our Third Party
Vendors and Other Service Providers, Including as a Result of Cyber-attacks, Could Disrupt Our Business, Result
in the Disclosure or Misuse of Confidential or Proprietary Information, Damage Our Reputation, Increase Our
Costs and Cause Losses
We depend upon our ability to process, record, and monitor our client transactions on a continuous basis. As
client, public and regulatory expectations regarding operational and information security have increased, our operational
systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions and
breakdowns. Our business, financial, accounting and data processing systems, or other operating systems and facilities,
may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are
wholly or partially beyond our control. For example, there could be electrical or telecommunications outages; natural
disasters such as earthquakes, tornadoes, hurricanes and floods; disease pandemics; events arising from local or larger
scale political or social matters, including terrorist acts; and, as described below, cyber-attacks. Although we have business
continuity plans and other safeguards in place, our business operations may be adversely affected by significant and
widespread disruption to our physical infrastructure or operating systems that support our business and clients.
Information security risks for financial institutions have generally increased in recent years in part because of the
proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial
48
transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other
external parties. Threat actor organizations are becoming more formal and now frequently include specialized
“departments” within an organization. These “departments” may act together to sell access to interested parties, which
install malware and infiltrating data. This increases cybersecurity risk as indicators of an attack may spread across multiple
detection platforms and originate from disparate sources. Our business relies on our digital technologies, computer and
email systems, software, and networks to conduct its operations. In addition, to access our products and services, our
clients may use personal smartphones, tablet PC’s, personal computers and other devices that are beyond our control
systems. Although we have information security procedures and controls in place, our technologies, systems, and
networks, and our clients’ devices, may become the target of cyberattacks or information security breaches that could
result in the unauthorized release, gathering, monitoring, misuse, loss, or destruction of our or our clients’ confidential,
proprietary, and other information, or otherwise disrupt our or our clients’ or other third parties’ business operations. We
may be subject to increasingly more risk related to cybersecurity for our Internet Branch as we expand our suite of online
direct banking products, acquire new or outsource some of our business operations, expand our internal usage of web-
based products and applications, and otherwise attempt to keep pace with rapid technological changes in the financial
services industry.
We rely on external infrastructure, proprietary information technology and third-party systems and services to
conduct business, including customer service, marketing and sales activities, customer relationship management,
producing financial statements and technology/data centers. In addition, we store and process confidential and proprietary
business information on both company-owned and third-party and/or vendor managed systems, including cloud service
providers. We increasingly rely on the internet in order to conduct business and may be adversely impacted by outages in
critical infrastructure such as electric grids, undersea cables, satellites or other communications used by us or our third
parties. This reliance includes consumer access to the internet and communications systems due to more work taking place
outside of corporate locations. A security breach in the systems of our third-party service providers can create a gateway
for unauthorized access to our network, potentially compromising the integrity and confidentiality of our data and systems.
The failure of our or any third party’s information technology, infrastructure or other internal and external systems, for
any reason, could disrupt our operations, result in the loss of business and adversely impact our profitability. Any
compromise of the security of our or any third party’s systems that results in the disclosure of personally identifiable
customer or employee information could damage our reputation, deter customers from purchasing or using our products
and services, expose us to litigation, increase regulatory scrutiny and require us to incur significant technical, legal and
other expenses. We may also be adversely impacted by successful cyberattacks of our partners, third-party vendors and
others in our supply chain with whom we conduct business or share information.
Financial services companies are regularly targeted by cyber criminals, resulting in unauthorized access to
confidential information, theft of funds from online accounts, disruption or degradation of service or other damage. These
attacks may take a variety of forms, including web application attacks, denial of service attacks, ransomware, other
malware, and social engineering, including phishing. As automation and machine intelligence technologies progress,
attackers are adopting this technology to speed up their reconnaissance and attacks while reducing their costs. This
improved efficiency and tooling means that a lower-skilled adversary is able to perform more attacks at a higher complexity
level than in the past. Economic and political instability offers a fertile ground for adversaries to recruit new talent. This
could be either people looking for financial gains amid job losses and high inflation, politically motivated actors driven by
state conflicts or internal political unrest, or other personal reasons. In addition, the reengineering and reuse of prior attack
methodologies is made easier by advances in these technologies.
Information security incidents may also occur due to the failure to control access to, and use of, sensitive systems
or information by our workforce. Employee risk exposure remains high as cybersecurity awareness training must be
continuously refined and updated as technology advances and threat actors become increasingly more sophisticated.
Additionally, there is a potential increase in this threat due to the increase in remote work. The failure of our controls
(such as policies, procedures, security controls and monitoring, automation and backup plans) designed to prevent, or limit
the effect of, failure, inadvertent use or abuse could result in disruptions or breaches beyond our control. Although to date
we have not experienced any material losses relating to cyber-attacks or other information security breaches, there can be
no assurance that we will not suffer such losses in the future. Our risk and exposure to these matters remains heightened
because of the evolving nature of these threats. As a result, cyber security and the continued development and enhancement
of our controls, processes and practices designed to protect our systems, computers, software, data and networks from
attack, damage or unauthorized access remain a focus for us. As technology evolves, we can increase our ability to detect
and prevent cyber-attacks through automation and the implementation of security controls which leverage machine
49
learning and artificial intelligence. As threats continue to evolve, we may be required to expend additional resources to
continue to modify or enhance our protective measures or to investigate and remediate information security vulnerabilities.
Additionally, information security vulnerabilities can pose increased cyber-risk as they can be combined and chained
together more easily with machine learning technology.
Disruptions or failures in the physical infrastructure or operating systems that support our business and clients,
or cyberattacks or security breaches of the networks, systems or devices that our clients use to access our products and
services could result in significant legal and financial exposure, client attrition, regulatory fines, penalties or intervention,
reputational damage, reimbursement or other compensation costs and/or additional compliance costs, a loss of confidence
in the security of our systems, any of which may not be covered by insurance and could materially and adversely affect
our financial condition or results of operations.
Operational risks, including risks associated with Flushing Bank’s dependence on its operational systems, its
ability to maintain appropriately staffed workforces and the competence, integrity, health and safety of its employees, are
of primary concern. The legal and regulatory risks related to safeguarding personal information and the harm that could
be caused by a successful cyber-attack affecting Flushing Bank are proactively monitored and addressed according to
current regulations and bank policies. Additionally, Flushing Bank monitors and addresses risks associated with its risk
management framework and its models and estimations with monthly reports to the board of directors. Flushing Bank
coordinates these activities to ensure that potential adverse effects of failing to comply with heightened regulatory and
other standards for the oversight of the cyber and risk management programs are significantly reduced.
Changes in Cybersecurity or Privacy Regulations may Increase our Compliance Costs, Limit Our Ability to Gain
Insight from Data and Lead to Increased Scrutiny
We collect, process, store, share, disclose and use information from and about our customers, plan participants
and website and application users, including personal information and other data. Any actual or perceived failure by us to
comply with our privacy policies, privacy-related obligations to customers or third parties, data disclosure and consent
obligations or privacy or security-related legal obligations may result in governmental enforcement actions, litigation, or
public statements critical of us. Such actual or perceived failures could also cause our customers to lose trust in us, which
could have an adverse effect on our business.
Restrictions on data collection and use may limit opportunities to gain business insights useful to running our
business and offering innovative products and services.
We are subject to numerous federal, state, and international regulations regarding the privacy and security of
personal information. These laws vary widely by jurisdiction. Applicable regulations include the NYDFS 23 NYCRR Part
500 Cybersecurity Requirements for Financial Services Companies, Gramm-Leach-Bliley Title V Subtitle A- Safeguards
Rule, FDIC Part 364 Appendix B- Interagency Guidelines Establishing Information Security Standards and other
regulations. See “Regulation – Cybersecurity.” Similar legislation continues to be enacted around the world with
requirements and protections specific to data security requirements, notification requirements for data breaches, the right
to access personal data and the right to be forgotten. For example, the Federal Reserve and the FDIC require a banking
organization to notify its primary federal regulator within 36 hours after identifying a “computer-security incident” that
the banking organization believes in good faith could materially disrupt, degrade or impair its business or operations in a
manner that would, among other things, jeopardize the viability of its operations, result in customers being unable to access
their deposit and other accounts, result in a material loss of revenue, profit or franchise value, or pose a threat to the
financial stability of the United States.
We May Experience Increased Delays in Foreclosure Proceedings
Foreclosure proceedings face increasing delays. While we cannot predict the ultimate impact of any delay in
foreclosure sales, we may be subject to additional borrower and non-borrower litigation and governmental and regulatory
scrutiny related to our past and current foreclosure activities. Delays in foreclosure sales, including any delays beyond
those currently anticipated could increase the costs associated with our mortgage operations and make it more difficult for
us to prevent losses in our loan portfolio.
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Our Inability to Hire or Retain Key Personnel Could Adversely Affect Our Business
Our success depends, in large part, on our ability to retain and attract key personnel. We face intense competition
from commercial banks, savings banks, savings and loan associations, mortgage banking companies, insurance companies,
finance companies and credit unions. As a result, it could prove difficult to retain and attract key personnel. The inability
to hire or retain key personnel may result in the loss of customer relationships and may adversely affect our financial
condition or results of operations.
We Are Not Required to Pay Dividends on Our Common Stock
Holders of shares of our common stock are only entitled to receive such dividends as our Board of Directors may
declare out of funds legally available for such payments. Although we have historically declared cash dividends on our
common stock, we are not required to do so and may reduce or eliminate our common stock dividend in the future. A
reduction or elimination of our common stock dividend could adversely affect the market price of our common stock.
Our Financial Results May be Adversely Impacted by Global Climate Changes.
Atmospheric concentrations of carbon dioxide and other greenhouse gases have increased dramatically since the
industrial revolution, resulting in a gradual increase in average global temperatures and an increase in the frequency and
severity of weather patterns and natural disasters. These trends are expected to continue in the future and have the potential
to impact nearly all sectors of the economy to varying degrees. We cannot predict the long-term impacts of climate change,
but we will continue to monitor new developments in the future.
Potential impacts may include the following:
Changes in temperatures and air quality may adversely impact the health, welfare, economic and other prospects
of customers in our target markets. For example, increases in the level of pollution and airborne allergens in local
industrial areas may cause an increase in upper respiratory and cardiovascular diseases. Such impacts may
adversely change the long-term prospects for the communities we serve and the investing and banking services
these communities seek.
Climate change may impact asset prices, as well as general economic conditions. For example, rising sea levels
may lead to decreases in real estate values in at-risk areas. Additionally, government policies to slow climate
change (e.g., setting limits on carbon emissions) may have an adverse impact on sectors such as utilities,
transportation and manufacturing. Changes in asset prices may impact the value of our fixed income, real estate
and commercial mortgage investments. Although we seek to manage our investment risks by maintaining a
diversified portfolio and monitor our investments on an ongoing basis, allowing us to adjust our exposure to
sectors and/or geographical areas that face severe risks due to climate change, there can be no assurances that our
efforts will be successful.
Our Financial Results May be Adversely Impacted by ESG Requirements
Our financial and operational results could be impacted by emerging risk and changes to the regulatory landscape
in areas like environmental, social and governance (“ESG”) requirements. We closely monitor and respond to topics
related to ESG that include longer lifespans, income and wealth inequalities, environmental challenges and opportunities
to expand global access to the financial system across all segments of the population. Updated and changing regulatory
and societal environment requirements could impact financial and operational results.
We currently obtain environmental reports in connection with the underwriting of commercial real estate loans,
and typically obtain environmental reports in connection with the underwriting of multi-family loans. For all other loans,
we obtain environmental reports only if the nature of the current or, to the extent known to us, prior use of the property
securing the loan indicates a potential environmental risk. However, we may not be aware of such uses or risks in any
particular case, and, accordingly, there can be no assurance that real estate acquired by us in foreclosure is free from
environmental contamination nor we will not have any liability with respect thereto.
51
Changes and uncertainty in United States legislation, policy or regulation regarding climate risk management or
other ESG practices may result in higher regulatory and compliance costs, increased capital expenditures, and changes in
regulations may impact security asset prices, resulting in realized or unrealized losses on our investments. Physical risks
and transitional risks could increase the Company’s cost of doing business and actual or perceived failure to adequately
address ESG expectations of our various stakeholders could lead to a tarnished reputation and loss of customers and clients.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Overview
The Company maintains comprehensive information technology and cybersecurity programs which encompass
policies, procedures, assessments, monitoring, response plans, and testing to ensure technical, administrative, and physical
controls are effective.
The Bank’s Incident Response and Business Continuity Programs are inclusive of cyber resiliency, business
continuity and disaster recover strategies to help mitigate the impact of a cybersecurity incident across all business lines.
Management Role and Board Oversight
The cybersecurity programs are supervised by the Bank’s Chief Information Security Officer (“CISO”) reporting
to the Chief Risk Officer (“CRO”) and dotted line to the Chief Information Officer. The Chief Risk Officer has reporting
responsibility to the Board’s Risk and Compliance Committee while the Chief Information Officer has reporting
responsibility to the Board’s Information Technology Committee. The Risk and Compliance Committee consists of eight
directors, seven of whom are independent, while the Information Technology Committee consists of three directors, two
of whom are members of the Risk and Compliance Committee. The Company Board includes members who have expertise
in cybersecurity, fraud, and risk management. Cybersecurity risks are primarily assessed, monitored, and remediated by
the CISO who has a Ph.D. in Information Technology with a concentration in Information Assurance and experience in
the information technology and cybersecurity fields and maintains advanced cybersecurity centric certifications. The
CISO’s knowledge and experience in the cybersecurity field are key to executing our cybersecurity program. Our CISO
oversees proactive initiatives, remediation plans of known risks, compliance with regulations and standards and disaster
recovery, business continuity, and incident response efforts. Additionally, the Bank’s CRO who leads the management
risk function, has extensive experience in risk management.
The cybersecurity programs include a cross-function team of trained internal and external information security
professionals, all of whom are required to maintain industry accredited certifications. We have an Incident Response Team
chaired by our Chief Operating Officer that is comprised of executive management and designated managers, including
the CISO. The purpose of our incident response plan is to manage incidents, including information security incidents,
efficiently and effectively to minimize loss and destruction, mitigate weaknesses, restore services, notify customers, as
required by law, comply with regulatory requirement and any third-party obligations.
The CISO and CRO play a pivotal role in informing the Board of all cybersecurity risks. These positions provide
comprehensive updates to the Risk Management Committee of the Board, at least quarterly. The briefings combine a
range of updates, including the cybersecurity program, emerging risks, and risk reporting. The CISO and CRO also provide
a monthly overview of the cybersecurity landscape to the Board of Directors.
Managing Material Risks and Integrated Overall Risk Management
The Company maintains documented processes, procedures, and controls for assessing, identifying, and
managing material risks from cybersecurity threats. Cybersecurity threats are identified utilizing risk assessments,
detection tools, information gathering and performing internal, external, and third-party contracted security assessments.
52
Cybersecurity Threats
To assess and manage cybersecurity threats, the Company maintains an Incident Response Team comprised of
members from the major business areas in the Company to ensure appropriate subject matter specialists are represented.
All cybersecurity events include a determination of whether the incident has materially affected or is reasonably likely to
materially affect the Company’s business strategy, results of operations or financial condition by following implemented
processes.
The Company has not identified any cybersecurity threats that have materially affected operations or financial
position.
Oversee Third-Party Risk
The Company has processes to oversee and identify material risks from reported cybersecurity threats from any
third-party service providers or vendors. The Company’s vendor management program requires initial due diligence, on-
going monitoring, and annual recertification of third-party cybersecurity controls.
Cybersecurity Risks
Management and the Board of Directors acknowledge that technology systems, managed both by the Company
and third-party service providers, are critical to business operations and therefore require appropriate risk management.
Engagement with Third Parties on Risk Management
Cybersecurity is an integral part of the risk management program, which is supported through the use of
consultants, auditors and other third-parties who assist with reviewing and validating the effectiveness of cybersecurity
controls. Our internal audit function actively participates and engages with those managing the cybersecurity program to
validate the effectiveness of implemented safeguards. Our external audit results are reviewed and reported in our annual
filing and to the Board Audit Committee. Additionally, the Company and the Bank are regulated entities and undergo
regulatory reviews to ensure the Company and the Bank are in compliance will all appropriate standards.
Item 2. Properties.
As of December 31, 2023, the Bank conducted its business through 27 full-service offices and its Internet Branch.
The Company neither owns nor leases any property but instead uses the premises and equipment of the Bank.
Item 3. Legal Proceedings.
We are involved in various legal actions arising in the ordinary course of our business which, in the aggregate,
involve amounts which are believed by management to be immaterial to our financial condition, results of operations and
cash flows.
Item 4. Mine Safety Disclosures.
Not applicable.
53
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
The Holding Company’s Common Stock is traded on the NASDAQ Global Select Market® under the symbol
“FFIC.” As of December 31, 2023, we had approximately 814 shareholders of record, not including the number of persons
or entities holding stock in nominee or street name through various brokers and banks.
The following table sets forth information regarding the shares of common stock repurchased by us during the
quarter ended December 31, 2023:
Period
October 1 to October 31, 2023
November 1 to November 30, 2023
December 1 to December 31, 2023
Total
Maximum
Number of
Total Number of
Shares Purchased Shares That May
as Part of Publicly Yet Be Purchased
Announced Plans Under the Plans
or Programs
or Programs
Average Price
Paid per Share
Total
Number
of Shares
Purchased
— $
—
38,815
38,815 $
—
—
15.08
15.08
—
—
38,815
38,815
846,779
846,779
807,964
On July 27, 2021, the Company announced the authorization by the Board of Directors of a common stock
repurchase program, which authorizes the purchase of up to 1,000,000 shares of its common stock. This program was
completed in 2022 and on May 17, 2022, an additional 1,000,000 share authorization was announced. This program was
completed in 2023 and on May 31, 2023, an additional 1,000,000 share authorization was announced. During the years
ended December 31, 2023 and 2022, the Company repurchased 786,498 shares and 1,253,725 shares, respectively, of the
Company’s common stock at an average cost of $14.59 per share and $21.73 per share, respectively. At December 31,
2023, 807,964 shares remain to be repurchased under the current stock repurchase program. Stock will be purchased under
the current stock repurchase program from time to time, in the open market or through private transactions subject to
market conditions and at the discretion of the management of the Company. There is no expiration or maximum dollar
amount under this authorization.
The following table sets forth securities authorized for issuance under all equity compensation plans of the
Company at December 31, 2023:
(c)
Number of securities
remaining available for
future issuance under
equity compensation
(a)
(b)
Number of securities to Weighted-average
be issued upon exercise
exercise price of
of outstanding options, outstanding options, securities reflected in
warrants and rights
warrants and rights
plans (excluding
column (a)
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
— $
—
— $
—
—
—
746,910
—
746,910
54
Stock Performance Graph
The following graph shows a comparison of cumulative total stockholder return on the Company’s common stock
since December 31, 2018 with the cumulative total returns of a broad equity market index as well as comparative published
industry indices. The broad equity market index chosen was the Nasdaq Composite and the comparative published industry
indices used were the S&P U.S. MidCap Banks Index and the S&P U.S. BMI Banks - Mid-Atlantic Region Index. The
S&P U.S. BMI Banks - Mid-Atlantic Region Index was chosen for inclusion in the Company’s Stock Performance Graph
because the Company believes it provides valuable comparative information reflecting the Company’s geographic peer
group. The S&P U.S. MidCap Banks Index was chosen for inclusion in the Company’s Stock Performance Graph because
it uses a broader group of banks and therefore more closely reflects the Company’s size. The Company believes that both
geographic area and size are important factors in analyzing the Company’s performance against its peers. The graph below
reflects historical performance only, which is not indicative of possible future performance of the common stock.
The total return assumes $100 invested on December 31, 2018 and all dividends reinvested through the end of
the Company’s fiscal year ended December 31, 2023. The performance graph above is based upon closing prices on the
trading date specified.
12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23
Index
100.00 104.39
Flushing Financial Corporation
97.23
100.00 136.69 198.10 242.03 163.28 236.17
NASDAQ Composite Index
S&P U.S. MidCap Banks Index
100.00 131.89 130.44 189.83 139.58 104.07
S&P U.S. BMI Banks - Mid-Atlantic Region Index 100.00 142.19 128.53 162.33 137.10 166.23
85.49 129.36 107.48
Period Ending
Item 6. Reserved
55
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
As used in this discussion and analysis, the words “we,” “us,” “our” and the “Company” are used to refer to
Flushing Financial Corporation (the “Holding Company”) and its direct and indirect wholly owned subsidiaries, Flushing
Bank (the “Bank”), Flushing Service Corporation, FSB Properties Inc., and Flushing Preferred Funding Corporation,
which was dissolved as of June 30, 2021. Discussion and analysis of our 2022 fiscal year specifically, as well as the year-
over-year comparison of our 2022 financial performance to 2021, are located under Part II, Item 7 – Management’s
Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2022, filed with the SEC on March 14, 2023, which is available on our investor relations
website at FlushingBank.com and the SEC’s website at sec.gov.
General
We are a Delaware corporation organized in 1994. The Bank was organized in 1929 as a New York State-
chartered mutual savings bank. Today the Bank operates as a full-service New York State commercial bank. The primary
business of the Holding Company has been the operation of the Bank. The Bank owned two subsidiaries during 2023:
Flushing Service Corporation, and FSB Properties Inc. The Bank also operates an internet branch, which operates under
the brands of iGObanking® and BankPurely® (the “Internet Branch”). The Bank’s primary regulator is the New York
State Department of Financial Services, and its primary federal regulator is the Federal Deposit Insurance Corporation
(“FDIC”). The Bank’s deposits are insured to the maximum allowable amount by the FDIC.
The Holding Company also owns Flushing Financial Capital Trust II, Flushing Financial Capital Trust III, and
Flushing Financial Capital Trust IV (the “Trusts”), which are special purpose business trusts formed during 2007 to issue
a total of $60.0 million of capital securities, and $1.9 million of common securities (which are the only voting securities).
The Holding Company owns 100% of the common securities of the Trusts. The Trusts used the proceeds from the issuance
of these securities to purchase junior subordinated debentures from the Holding Company. The Trusts are not included in
our consolidated financial statements, as we would not absorb the losses of the Trusts if losses were to occur.
The following discussion of financial condition and results of operations includes the collective results of the
Holding Company and its subsidiaries (collectively, the “Company”), but reflects principally the Bank’s activities.
Management views the Company as operating as a single unit - a community bank. Therefore, segment information is not
provided.
Overview
Our principal business is attracting retail deposits from the general public and investing those deposits together
with funds generated from ongoing operations and borrowings, primarily in (1) originations and purchases of multi-family
residential properties, commercial business loans, commercial real estate mortgage loans and, to a lesser extent, one-to-
four family (focusing on mixed-use properties, which are properties that contain both residential dwelling units and
commercial units); (2) construction loans; (3) Small Business Administration (“SBA”) loans; (4) mortgage loan
surrogates such as mortgage-backed securities; and (5) U.S. government securities, corporate fixed-income securities and
other marketable securities. We also originate certain other consumer loans including overdraft lines of credit. Our results
of operations depend primarily on net interest income, which is the difference between the income earned on its interest-
earning assets and the cost of our interest-bearing liabilities. Net interest income is the result of our interest rate margin,
which is the difference between the average yield earned on interest-earning assets and the average cost of interest-bearing
liabilities, adjusted for the difference in the average balance of interest-earning assets as compared to the average balance
of interest-bearing liabilities. We also generate non-interest income from loan fees, service charges on deposit accounts,
mortgage servicing fees, and other fees, income earned on Bank Owned Life Insurance (“BOLI”), dividends on Federal
Home Bank of New York (“FHLB-NY”) stock and net gains and losses on sales of securities and loans. Our operating
expenses consist principally of employee compensation and benefits, occupancy and equipment costs, other general and
administrative expenses and income tax expense. Our results of operations can also be significantly affected by our
periodic provision for credit losses and specific provision for losses on real estate owned.
56
Management Strategy. Our strategy is to continue our focus on being an institution serving consumers, businesses,
and governmental units in our local markets. To achieve this objective, we intend to:
manage cost of funds and continue to improve funding mix;
add loans with appropriate risk adjusted returns;
manage credit risk;
increase our commitment to the multi-cultural marketplace, with a particular focus on the Asian community;
attract, retain and develop human capital; and
manage enterprise-wide risk.
There can be no assurance that we will be able to effectively implement this strategy. Our strategy is subject to
change by the Board of Directors.
Manage cost of funds and continue to improve funding mix. We have a relatively stable retail deposit base drawn
from our market area through our full-service offices. Although we seek to retain existing deposits and maintain depositor
relationships by offering quality service and competitive interest rates to our customers, we also seek to keep deposit
growth within reasonable limits and our strategic plan. In order to implement our strategic plan, we have built multi-
channel deposit gathering capabilities. In addition to our full-service branches we gather deposits through our Internet
Branch and a government banking unit. The Internet Branch currently offers savings accounts, money market accounts,
checking accounts, and certificates of deposit. This allows us to compete on a national scale without the geographical
constraints of physical locations. At December 31, 2023 and 2022, total deposits at our Internet Branch were $183.8
million and $154.6 million, respectively.
The government banking unit provides banking services to public municipalities, including counties, cities,
towns, villages, school districts, libraries, fire districts, and the various courts throughout the New York City metropolitan
area. At December 31, 2023 and 2022, total deposits in our government banking unit totaled $1,587.9 million and $1,653.3
million, respectively. Additionally, we have a business banking group which was designed specifically to develop full
business relationships thereby bringing in lower-costing checking and money market deposits. At December 31, 2023 and
2022, deposits balances in the business banking group were $410.4 million and $386.6 million, respectively. We also
obtain deposits through brokers and the IntraFi Network.
Management intends to balance its goal to maintain competitive interest rates on deposits while seeking to manage
its overall cost of funds to finance its strategies. We generally rely on our deposit base as our principal source of funding.
During 2023, we realized an increase in due to depositors (excluding escrow accounts) of $327.7 million, as certificates
of deposits increased $785.0 million and core deposits decreased $457.3 million.
We continue to focus on obtaining additional deposits from our lending customers and originating additional
loans to our deposit customers. Product offerings were expanded and are expected to be further expanded to accommodate
perceived customer demands. In addition, specific employees are assigned responsibilities of generating these additional
deposits and loans by coordinating efforts between lending and deposit gathering departments.
Add loans with appropriate risk adjusted returns. Management continues to focus on originating loans with
appropriate risk adjusted returns. During 2023, gross loans decreased by $27.4 million, or 0.4% to $6,898.3 million at
December 31, 2023, from $6,925.8 million at December 31, 2022.
57
The following table shows loan originations and purchases during 2023, and loan balances as of December 31,
2023.
Loan
Originations and
Purchases
Gross Loan Balances
December 31,
2023
Percent of
Gross Loans
Multi-family residential
Commercial real estate
One-to-four family ― mixed-use
property
One-to-four family ― residential
Construction
Small Business Administration
Commercial business and Other
Total
(Dollars in thousands)
$
232,715 $
184,382
2,658,205
1,958,252
38.53 %
28.39
20,097
6,883
34,381
2,300
337,322
818,080 $
530,243
220,213
58,673
20,205
1,452,518
6,898,309
7.69
3.19
0.85
0.29
21.06
100.00 %
$
At December 31, 2023, multi-family residential, commercial business and other loans and commercial real estate
loans, totaled 88.0% of our gross loans. We have repositioned our loan growth to reduce credit risk; however, our
concentration in these types of loans could require us to increase our provisions for credit losses and to maintain an
allowance for credit losses as a percentage of total loans in excess of the allowance currently maintained.
Manage credit risk. By adherence to our conservative underwriting standards, we have been able to minimize net
losses from non-performing loans. We incurred total net charge-offs of $10.8 million, $1.5 million and $3.1 million during
the years ended December 31, 2023, 2022 and 2021, respectively. The charge-offs in 2023 were primarily related to two
relationships that were fully charged-off. We seek to minimize losses by adhering to our defined underwriting standards,
which among other things generally require a debt service coverage ratio of at least 125% and loan to value ratio of 75%
or less. The average loan to value for the real estate dependent loan portfolio was less than 36.0% and the average loan to
value for non-performing loans collateralized by real estate was 34.1% at December 31, 2023. We seek to maintain our
loans in performing status through, among other things, disciplined collection efforts, and consistently monitoring non-
performing assets in an effort to return them to performing status. To this end, we review the quality of our loans and
report to the Loan Committee of the Board of Directors of the Bank on a monthly basis. We sold 13 delinquent loans
totaling $7.0 million, seven delinquent loans totaling $6.9 million, and 33 delinquent loans totaling $28.6 million during
the years ended December 31, 2023, 2022, and 2021, respectively. There can be no assurances that we will continue this
strategy in future periods, or if continued, we will be able to find buyers to pay adequate consideration. Non-performing
loans totaled $25.2 million and $32.4 million at December 31, 2023 and 2022, respectively. Non-performing assets as
a percentage of total assets were 0.54% and 0.63% at December 31, 2023 and 2022, respectively.
Increase Our Commitment to the Multi-Cultural Marketplace, with a Particular Focus on the Asian Community.
Our branches are all located in the New York City metropolitan area with particular concentration in the borough of
Queens. Queens is characterized with a high level of ethnic diversity. An important element of our strategy is to service
multi-ethnic consumers and businesses. We have a particular presence and concentration in Asian communities, including
in particular the Chinese and Korean populations. Both groups are noted for high levels of savings, education and
entrepreneurship. In order to service these and other important ethnic groups in our market, our staff speaks more than 20
languages. We have an Asian advisory board to help broaden our links to the community by providing guidance and
fostering awareness of our active role in the local community. As of December 31, 2023, we had nine branches which
have a particular focus on the Asian community, of which six are in the borough of Queens, one is in the borough of
Manhattan, one is in the borough of Brooklyn and one on Long Island, with deposits and loans totaling $1,286.2 million
and $759.1 million, respectively, in these locations.
Manage Enterprise-Wide Risk. We identify, measure and attempt to mitigate risks that affect, or have the potential
to affect, our business. Due to past economic crises and recent increases in government regulation, we devote significant
resources to risk management. We have a seasoned risk officer to provide executive risk leadership, and an enterprise-
wide risk management program. Several enterprise risk management analytical products are in use which include key risk
indicators. We also have had a chief information security officer even before one was required by NYDFS rulemaking.
58
Our management of enterprise-wide risk enables us to recognize and monitor risks and establish procedures to disseminate
the risk information across our organization and to our Board of Directors. The objective is to have a robust and focused
risk management process capable of identifying and mitigating emerging threats to the Bank’s safety and soundness.
Trends and Contingencies. Our operating results are significantly affected by national, regional and local
economic and competitive conditions, including changes in market interest rates, the strength of the local and regional
economy, government policies and actions of regulatory authorities. We have remained strategically focused on the
origination of multi-family residential mortgages, commercial mortgages and commercial business loans with a full
banking relationship. Because of this strategy, we were able to continue to achieve a higher yield on our mortgage portfolio
than we would have otherwise experienced.
Loan originations and purchases were $818.1 million, $1,521.9 million, and $1,254.0 million for the years ended
December 31, 2023, 2022, and 2021, respectively. While we primarily rely on originating our own loans, we purchased
$166.3 million, $275.7 million, and $262.1 million during the years ended December 31, 2023, 2022, and 2021,
respectively. We purchase loans when the loans complement our loan portfolio strategy. Loans purchased must meet our
underwriting standards when they were originated.
During the three-year period ended December 31, 2023, the allocation of our loan portfolio has remained fairly
consistent. The majority of our loans are collateralized by real estate, which comprised 88.9% of our gross loan portfolio
at December 31, 2023 compared to 88.3% at December 31, 2022 and 87.8% at December 31, 2021.
Due to depositors increased $327.7 million, $103.7 million, and $242.8 million in 2023, 2022, and 2021,
respectively. The deposit mix is significantly influenced by the current interest rate environment. Brokered deposits
represented 16.2%, 13.2%, and 9.8% of total deposits at December 31, 2023, 2022, and 2021, respectively. At
December 31, 2023, 2022, and 2021, reciprocal deposits totaled $760.3 million, $659.5 million, and $763.7 million,
respectively.
Prevailing interest rates affect the extent to which borrowers repay and refinance loans. In a declining interest
rate environment, the number of loan prepayments and loan refinancing tends to increase, as do prepayments of mortgage-
backed securities. Call provisions associated with our investments in U.S. government agency and corporate securities
may also adversely affect yield in a declining interest rate environment. Such prepayments and calls may adversely affect
the yield of our loan portfolio and mortgage-backed and other securities as we reinvest the prepaid funds in a lower interest
rate environment. However, we typically receive additional loan fees when existing loans are refinanced, which partially
offsets the reduced yield on our loan portfolio resulting from prepayments. In periods of low interest rates, our level of
core deposits also may decline if depositors seek higher-yielding instruments or other investments not offered by us, which
in turn may increase our cost of funds and decrease our net interest margin to the extent alternative funding sources, are
utilized. By contrast, an increasing interest rate environment would tend to extend the average lives of lower yielding fixed
rate mortgages and mortgage-backed securities, which could adversely affect net interest income. In addition, depositors
tend to open longer term, higher costing certificate of deposit accounts which could adversely affect our net interest income
if rates were to subsequently decline. Additionally, adjustable-rate residential mortgage loans and mortgage-backed
securities generally contain interim and lifetime caps that limit the amount the interest rate can increase at re-pricing dates.
Net interest income decreased $64.5 million or 26.5% to $179.2 million for the twelve months ended December
31, 2023 from $243.6 million for the prior year, primarily due to a decrease of 87 basis points in the net interest margin to
2.24% for the twelve months ended December 31, 2023. The decrease in the net interest margin for 2023 was primarily
due to an increase in our funding costs, partially offset by an increase in the yield of our interest-earning assets. During
2023, the cost of borrowed funds increased 180 basis points to 4.34% from 2.54% in the comparable prior period while
the cost of interest-bearing deposits increased 228 basis points to 3.15% from 0.87% for the prior year. The cost of deposits
rose as we increased the rates we pay resulting from the Federal Reverse raising rates. The increase in the yield of our
interest-earning assets was primarily due to loans originating at a rate greater than the average portfolio yield, the increase
of rates on adjustable rate loans, and repricing of loans as reset dates are met.
We are unable to predict the direction or timing of future interest rate changes. Approximately 80% of our
certificates of deposit accounts and borrowings will reprice or mature during the next year.
59
Interest Rate Risk
Asset/Liability Management. Asset/liability management involves assessing, monitoring and managing interest
rate risk. The ALCO Investment committee of the Board of Directors has primary oversight responsibility of interest rate
risk. At the management level, the ALCO committee, which consists of representatives from treasury, finance, business
units, and senior management, oversee these risks and provide reports to the ALCO Investment committee of the Board
of Directors on a regular basis. These reports quantify the potential changes in net interest income and net portfolio value
through various interest rate scenarios. The ALCO committee of the Board of Directors has established limits for changes
in interest rates both economic value of equity and income simulation analysis. Compliance with the limits is reviewed
quarterly.
Interest rate risk is the impact on earnings and capital from changes in interest rates. Interest rate risk exists
because our interest-earning assets and interest-bearing liabilities may mature or reprice at different times or by different
amounts. We assess interest rate risk by comparing the results of several income and capital simulations scenarios to the
base case with changes in interest rates, degree of change over time, speed of change, and changes in the shape of the yield
curve. These scenarios have assumptions including loan originations, investment securities purchases and sales,
prepayment rates on loans and investment securities, deposit flows, and mix and pricing decisions.
Economic Value of Equity Analysis. The Consolidated Statements of Financial Condition have been prepared in
accordance with generally accepted accounting principles in the United States of America (“GAAP”), which require the
measurement of financial position and operating results in terms of historical dollars without considering the changes in
fair value of certain investments due to changes in interest rates. Generally, the fair value of financial investments such as
loans and securities fluctuate inversely with changes in interest rates. As a result, increases in interest rates could result in
decreases in the fair value of the Company’s interest-earning assets which could adversely affect the Company’s results
of operations if such assets were sold, or, in the case of securities classified as available for sale, decreases in the
Company’s stockholders’ equity, if such securities were retained.
The Company quantifies the net portfolio value should interest rates immediately go up or down 200 basis points,
assuming the yield curves of the rate shocks will be parallel to each other. Net portfolio value is defined as the market
value of assets net of the market value of liabilities. The market value of assets and liabilities is determined using a
discounted cash flow calculation. The net portfolio value ratio is the ratio of the net portfolio value to the market value of
assets. The changes in value are measured as percentage changes from the net portfolio value at the base interest rate
scenario. The base interest rate scenario assumes interest rates at December 31, 2023 and 2022. Various estimates
regarding prepayment assumptions are made at each level of rate shock.
The following table presents the Company’s interest rate shock as of December 31:
Change in Interest Rate
-200 Basis points
-100 Basis points
Base interest rate
+100 Basis points
+200 Basis points
Net Portfolio Value (NPV)
2022
5.69 %
3.20
-
(5.80)
(11.55)
2023
(1.84) %
(0.86)
-
(3.53)
(6.65)
Net Portfolio Value Ratio
2022
12.51 %
12.47
12.33
11.85
11.35
2023
7.44 %
7.64
7.83
7.68
7.55
The reduction in the Net Portfolio Value and the Net Portfolio Value Ratio in 2023 compared to 2022 is primarily
due to the Company actively reducing its liability sensitive position by adding interest rate swaps and adding floating rate
assets.
Income Simulation Analysis. The Company manages the mix of interest-earning assets and interest-bearing
liabilities on a continuous basis to maximize return and adjust its exposure to interest rate risk.
60
The starting point for the net interest income simulation is an estimate of the next twelve months’ net interest
income assuming that both interest rates and the Company’s interest-sensitive assets and liabilities remain at period-end
levels. The report quantifies the potential changes in net interest income should interest rates go up or down 100 or 200
basis points (shocked), assuming the yield curves of the rate shocks will be parallel to each other. All changes in income
are measured as percentage changes from the projected net interest income at the base interest rate scenario. The base
interest rate scenario assumes interest rates at December 31, 2023 and 2022. Various estimates regarding prepayment
assumptions are made at each level of rate shock. There were no changes in the assumptions used in the income simulation
process for 2023 and 2022. Assumed deposit betas are higher in a rising rate environment and lower in a declining rate
environment. Prepayment penalty income is excluded from this analysis. Actual results could differ significantly from
these estimates.
The following table presents the Company’s interest rate shock as of December 31:
Change in Interest Rate
-200 Basis points
-100 Basis points
Base interest rate
+100 Basis points
+200 Basis points
Projected Percentage Change In Net Interest Income
2023
2022
(0.41)%
(0.07)
-
(2.62)
(5.42)
5.73 %
3.64
-
(7.31)
(14.61)
During 2023, the Company strategically reduced its liability sensitive interest rate position by becoming more
interest rate neutral. This was achieved by adding more interest rate hedges and floating rate assets.
Another net interest income simulation assumes that changes in interest rates change gradually in equal
increments over the twelve-month period. Prepayment penalty income is excluded from this analysis. Based on these
assumptions, net interest income would be reduced by 2.4% from a 200 basis point increase in rates over the next twelve
months and be reduced by 0.5% from a 200 basis point decrease in rates over the same period. Actual results could differ
significantly from these estimates.
At December 31, 2023, the Company had a derivative portfolio with a notional value totaling $2.5 billion
compared to $1.4 billion at December 31, 2022. This portfolio is designed to provide protection against rising interest
rates. See Note 20 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
A portion of this portfolio is comprised of forward swaps on certain short-term advances and brokered deposits
totaling $825.8 million at December 31, 2023, $775.8 million of the forward starting swaps are effective swaps at a
weighted average rate of 2.39% compared to $591.5 million at 2.41% at December 31, 2022. Of the $775.8 million
outstanding at December 31, 2023, $50.0 million at an average rate of 1.25% will mature in April 2024 and will be replaced
by forward starting swaps totaling $50.0 million at an average rate of 0.80%.
61
Analysis of Net Interest Income (Loss)
Net interest income represents the difference between income on interest-earning assets and expense on interest-
bearing liabilities. Net interest income depends upon the relative amount of interest-earning assets and interest-bearing
liabilities and the interest rate earned or paid on them.
The following table sets forth certain information relating to our Consolidated Statements of Financial Condition
and Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021, and reflects the average
yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income
or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived
from average daily balances. The yields include amortization of fees that are considered adjustments to yields.
2023
For the year ended December 31,
2022
2021
Assets
Interest-earning assets:
Mortgage loans, net (1)(2)
Other loans, net (1)(2)
Total loans, net
Taxable securities:
Mortgage-backed securities
Other securities
Total taxable securities
Tax-exempt securities: (3)
Other securities
Total tax-exempt securities
Interest-earning deposits and federal funds sold
Total interest-earning assets
Other assets
Total assets
Interest-bearing liabilities:
Deposits:
Savings accounts
NOW accounts
Money market accounts
Certificate of deposit accounts
Total due to depositors
Mortgagors' escrow accounts
Total interest-bearing deposits
Borrowings
Total interest-bearing liabilities
Non interest-bearing demand deposits
Other liabilities
Total liabilities
Equity
Total liabilities and equity
Net interest income (loss) / net interest rate
spread (4)
Net interest-earning assets / net interest margin
(5)
Ratio of interest-earning assets to interest-
bearing liabilities
Average
Balance
Interest Cost
Yield/
Average
Balance
Yield/
Interest Cost
Average
Balance
Yield/
Interest Cost
(Dollars in thousands)
$ 5,328,067 $ 267,178
88,170
355,348
1,517,282
6,845,349
5.01 % $ 5,253,104 $ 228,065
65,222
5.81
293,287
5.19
1,488,486
6,741,590
4.34 % $ 5,146,195 $ 217,580
56,751
4.38
274,331
4.35
1,498,122
6,644,317
4.23 %
3.79
4.13
442,228
485,118
927,346
11,505
24,700
36,205
1,923
1,923
8,405
401,881
66,533
66,533
184,565
8,023,793
477,771
$ 8,501,564
2.60
5.09
3.90
2.89
2.89
4.55
5.01
573,314
324,112
897,426
9,414
9,771
19,185
2,197
2,197
2,418
317,087
64,822
64,822
131,816
7,835,654
471,483
$ 8,307,137
520
64,191
58,898
64,844
188,453
202
188,655
33,670
222,325
0.43
3.31
3.36
3.10
3.19
0.25
3.15
4.34
3.29
$
121,102
1,937,974
1,754,059
2,091,677
5,904,812
81,015
5,985,827
776,050
6,761,877
867,667
196,869
7,826,413
675,151
$ 8,501,564
211
15,353
19,039
12,547
47,150
135
47,285
25,725
73,010
$ 153,605
1,976,238
2,191,768
1,031,024
5,352,635
80,021
5,432,656
1,012,149
6,444,805
1,019,090
170,500
7,634,395
672,742
$ 8,307,137
1.64
3.01
2.14
3.39
3.39
1.83
4.05
0.14
0.78
0.87
1.22
0.88
0.17
0.87
2.54
1.13
550,136
239,208
789,344
8,335
4,001
12,336
2,142
2,142
203
289,012
50,831
50,831
188,462
7,672,954
470,418
$ 8,143,372
1.52
1.67
1.56
4.21
4.21
0.11
3.77
255
5,453
7,271
7,340
20,319
5
20,324
20,269
40,593
0.16
0.25
0.35
0.71
0.38
0.01
0.37
2.24
0.63
$
157,640
2,165,762
2,059,431
1,033,187
5,416,020
77,552
5,493,572
905,094
6,398,666
922,741
173,019
7,494,426
648,946
$ 8,143,372
$ 179,556
1.72 %
$ 244,077
2.92 %
$ 248,419
3.14 %
$ 1,261,916
2.24 % $ 1,390,849
3.11 % $ 1,274,288
3.24 %
1.19 X
1.22 X
1.20 X
(1) Average balances include non-accrual loans.
(2) Loan interest income (loss) includes loan fee income (loss)(which includes net amortization of deferred fees and costs, late charges, and prepayment
penalties) of approximately $0.8 million, $7.8 million, and $10.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. In
addition, it includes net gains (losses) from fair value adjustments on hedges and swap termination fees totaling of $3.3 million, $0.8 million, and
$2.1 million for December 31, 2023, 2022, and 2021.
Interest and yields are calculated on the tax equivalent basis using statutory federal income tax rate of 21% for the years ended December 31, 2023,
2022, and 2021.
Interest rate spread represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities.
(4)
(5) Net interest margin represents net interest income (loss) before the provision for credit losses divided by average interest-earning assets.
(3)
62
Rate/Volume Analysis
The following table presents the impact of changes in interest rates and in the volume of interest-earning assets
and interest-bearing liabilities on the Company’s interest income and interest expense during the periods indicated.
Information is provided in each category with respect to (1) changes attributable to changes in volume (changes in volume
multiplied by the prior rate), (2) changes attributable to changes in rate (changes in rate multiplied by the prior volume)
and (3) the net change. The changes attributable to the combined impact of volume and rate have been allocated
proportionately to the changes due to volume and the changes due to rate.
Increase (Decrease) in Net Interest Income (Loss) for the years ended December 31,
2023 vs. 2022
Due to
2022 vs. 2021
Due to
Volume
Rate
Net
Volume
(Dollars in thousands)
Rate
Net
$
3,309 $
1,283
(2,505)
6,243
57
35,804 $
21,665
4,596
8,686
(331)
39,113 $
22,948
2,091
14,929
(274)
4,656 $
(365)
375
1,770
520
5,829 $
8,836
704
4,000
(465)
10,485
8,471
1,079
5,770
55
1,270
9,657
4,717
75,137
5,987
84,794
(80)
6,876
2,295
21,199
2,215
28,075
(54)
(303)
(4,519)
20,936
2
(7,056)
363
49,141
44,378
31,361
65
15,001
309
48,838
39,859
52,297
67
7,945
(7)
(518)
488
(15)
—
2,559
(37)
10,418
11,280
5,222
130
2,897
(44)
9,900
11,768
5,207
130
5,456
9,006
140,309
149,315
2,507
29,910
32,417
Interest-Earning Assets:
Mortgage loans, net
Other loans, net
Mortgage-backed securities
Other securities
Tax-Exempt securities
Interest-earning deposits and
federal funds sold
Total interest-earning assets
Interest-Bearing Liabilities:
Deposits:
Savings accounts
NOW accounts
Money market accounts
Certificate of deposit accounts
Mortgagors' escrow accounts
Borrowings
Total interest-bearing
liabilities
Net change in net interest income
(loss)
$
651 $ (65,172) $ (64,521) $
4,369 $
(8,711) $
(4,342)
Comparison of Operating Results for the Years Ended December 31, 2023 and 2022
General. Net income for the twelve months ended December 31, 2023 was $28.7 million, a decrease of $48.3
million, or 62.7%, compared to $76.9 million for the twelve months ended December 31, 2022. Diluted earnings per
common share were $0.96 for the twelve months ended December 31, 2023, a decrease of $1.54 per common share, or
61.6%, from $2.50 per common share for the twelve months ended December 31, 2022. The decrease in net income was
primarily due to a decline in the net interest margin which decreased 87 basis points to 2.24% for the twelve months ended
December 31, 2023 from 3.11% for the comparable prior year period. The decline in the net interest margin was driven by
the impact Federal Reserve rate increases had on our liability sensitive balance sheet as our interest-bearing liabilities
repriced quicker than our interest-earning assets. To mitigate the sensitivity and ease net interest margin compression, the
Company opportunistically sought out interest rate swaps to align with our strategic plans.
Return on average equity decreased to 4.25% for the twelve months ended December 31, 2023, from 11.44% for
the comparable prior year period. Return on average assets decreased to 0.34% for the twelve months ended December
31, 2023 from 0.93% for the comparable prior year period.
63
Interest Income. Interest income increased $84.9 million, or 26.8%, to $401.5 million for the year ended
December 31, 2023 from $316.6 million for the year ended December 31, 2022. The increase in interest income was
primarily due to an increase of 96 basis points in the yield of interest-earning assets to 5.01% for the year ended December
31, 2023 from 4.05% for the year ended December 31, 2022, coupled with an increase of $188.1 million in the average
balance of interest-earning assets to $8,023.8 million for the year ended December 31, 2023 from $7,835.7 million for
the year ended December 31, 2022. The 96 basis point increase in the yield of interest-earning assets was primarily due to
increases of 84 basis points, 176 basis points and 272 basis points in the yield of total loan, net, total securities and interest-
earning deposits and federal funds sold, respectively. These rate increases were all driven by the rising interest rate
environment experienced
loans and securities, net
recoveries/(reversals) of interest from non-accrual loans, net gains from fair value adjustments on hedges, swap termination
fees and purchase accounting adjustments, the yield on total loans, net, increased 88 basis points to 5.08% for the year
ended December 31, 2023 from 4.20% for the year ended December 31, 2022.
in 2023. Excluding prepayment penalty
income from
Interest Expense. Interest expense increased $149.3 million, or 204.5%, to $222.3 million for the year ended
December 31, 2023 from $73.0 million for the year ended December 31, 2022. The increase in interest expense was
primarily due to an increase of 216 basis points in the average cost of interest-bearing liabilities to 3.29% for the year
ended December 31, 2023 from 1.13% for the year ended December 31, 2022, coupled with an increase of $317.1 million
in the average balance of interest-bearing liabilities to $6,761.9 million for the twelve months ended December 31, 2023
from $6,444.8 million for the comparable prior year period. Rising rates have driven the increase in our cost of funds as
the Federal Reserve increased rates by 100 basis points between December 31, 2022 and December 31, 2023.
Net Interest Income. Net interest income for the year ended December 31, 2023 totaled $179.2 million, a decrease
of $64.5 million, or 26.5%, from $243.6 million for the year ended December 31, 2022. The decrease in net interest income
was primarily due to a decrease of 120 basis points in the net interest spread to 1.72% for the twelve months ended
December 31, 2023 from 2.92% for the comparable prior year period. The net interest margin decreased 87 basis points to
2.24% for the year ended December 31, 2023 from 3.11% for the year ended December 31, 2022. Included in net interest
income was prepayment penalty income and net recoveries/(reversals) loans and securities totaling $2.3 million and $6.4
million for the years ended December 31, 2023 and 2022, respectively, net gains (losses) from fair value adjustments on
hedges totaling $0.4 million and $0.8 million for the years ended December 31, 2023 and 2022, respectively, swap
termination fees totaling $3.0 million and none for the years ended December 31, 2023 and 2022, respectively, and
purchase accounting income of $1.5 million and $2.5 million for the years ended December 31, 2023 and 2022,
respectively. Excluding all of these items, the net interest margin for the year ended December 31, 2023 was 2.15%, a
decrease of 84 basis points, from 2.99% for the year ended December 31, 2022.
Provision (Benefit) for Credit Losses. Provision for credit losses was $10.5 million for the year ended December
31, 2023, compared to $5.1 million during the comparable prior year period. The provision recorded in 2023 was driven
by fully reserving for two non-accrual business loans and increasing reserves for the elevated risk presented by the current
rate environment to adjustable-rate loan’s debt coverage ratios. The provision recorded in 2022 was primarily due to loan
growth, increased reserves on specific credits, coupled with the ongoing environmental uncertainty resulting from high
and rising inflation including increasing interest rates. During the year ended December 31, 2023, non performing loans
decreased $7.2 million to $25.2 million from $32.4 million at December 31, 2022. During the year ended December 31,
2023, the Bank recorded net charge-offs totaling $10.8 million compared to $1.5 million recorded in the comparable prior
year period. The average loan-to-value ratio for our non-performing assets collateralized by real estate was 51.7% at
December 31, 2023. The Bank continues to maintain conservative underwriting standards.
Non-Interest Income. Non-interest income for the twelve months ended December 31, 2023 was $22.6 million,
an increase of $12.6 million, or 126.0%, from $10.0 million for the twelve months ended December 31, 2022. Non-interest
income increased primarily due to the Company deciding to sell low yielding securities recognizing a loss of $10.9 million
in 2022.
Non-Interest Expense. Non-interest expense was $151.4 million for the year ended December 31, 2023, an
increase of $7.7 million, or 5.4%, from $143.7 million for the year ended December 31, 2022. The increase in non-interest
expense was primarily due to increases in salaries and employee benefits, FDIC insurance premiums and other operating
expenses.
64
Income Tax Provisions. Income tax expense for the year ended December 31, 2023 decreased $16.7 million, or
60.0%, to $11.2 million, compared to $27.9 million for the year ended December 31, 2022. The decrease was primarily
due to the decline in income before income taxes. The effective tax rate was 28.0% for the year ended December 31, 2023
compared to 26.6% in the prior year.
Liquidity, Regulatory Capital and Capital Resources
Liquidity and Capital Resources. Liquidity is the ability to economically meet current and future financial
obligations. The Company’s primary objectives in terms of managing liquidity is to maintain the ability to originate and
purchase loans, repay borrowings as they mature, satisfy financial obligations that arise in the normal course of business
and meet our customer’s deposit withdrawal needs. Our primary sources of funds are deposits, borrowings, principal and
interest payments on loans, mortgage-backed and other securities, and proceeds from sales of securities and loans. Deposit
flows and mortgage prepayments, however, are greatly influenced by general interest rates, economic conditions and
competition. The Company has other sources of liquidity, including unsecured overnight lines of credit, brokered deposits
and other types of borrowings.
Liquidity management is both a short and long-term function of business management. During 2023, funds were
provided by the Company’s operating and financing activities, which were used to fund our investing activities. Our most
liquid assets are cash and cash equivalents, which include cash and due from banks, overnight interest-earning deposits
and federal funds sold with original maturities of 90 days or less. The level of these assets is dependent on our operating,
financing, lending and investing activities during any given period. At December 31, 2023, cash and cash equivalents
totaled $172.2 million, an increase of $20.4 million from December 31, 2022. We also held marketable securities available
for sale with a market value of $874.8 million at December 31, 2023. A portion of our cash and cash equivalents is
restricted cash held as collateral for interest rate swaps. At December 31, 2023 and 2022, restricted cash totaled $47.9
million and $67.0 million, respectively. At December 31, 2023 and 2022, cash (including restricted cash) held in excess
of Federal Deposit Insurance Corporation (“FDIC”) deposit insurance limits at other commercial banks totaling $61.2
million, and $73.9 million, respectively.
At December 31, 2023, the Bank was able to borrow up to $3,808.6 million from the FHLB-NY in Federal Home
Loan Bank advances and letters of credit. As of December 31, 2023, the Bank had $1,599.5 million outstanding in
combined balances of FHLB-NY advances and letters of credit. At December 31, 2023, the Bank also has unsecured lines
of credit with other commercial banks totaling $1,103.0 million, with $25.0 million outstanding. In addition, the Holding
Company has subordinated debentures with a principal balance totaling $190.0 million and junior subordinated debentures
with a face amount of $61.9 million and a carrying amount of $47.9 million. See Note 9 (“Borrowed Funds”) of Notes to
the Consolidated Financial Statements, Management believes its available sources of funds are sufficient to fund current
operations.
At December 31, 2023, we had commitments to extend credit (principally real estate mortgage loans) and lines
of credit (principally business lines of credit and home equity lines of credit) totaling $47.1 million and $440.3 million,
respectively. Since generally all of the loan commitments are expected to be drawn upon, the total loan commitments
approximate future cash requirements, whereas the amounts of lines of credit may not be indicative of our future cash
requirements. The loan commitments generally expire in 90 days, while construction loan lines of credit mature within 18
months and home equity loan lines of credit mature within 10 years. We use the same credit policies in making
commitments and conditional obligations as we do for on-balance-sheet instruments. See Note 16 (“Commitment and
Contingencies”) in Notes to the Consolidated Financial Statements.
Our total interest expense and non-interest expense in 2023 were $222.3 million and $151.4 million, respectively.
We maintain three postretirement defined benefit plans for our employees: a noncontributory defined benefit
pension plan which was frozen as of September 30, 2006, a contributory medical plan, and a noncontributory life insurance
plan. The life insurance plan was amended to discontinue providing life insurance benefits to future retirees after January
1, 2010 and the medical plan was frozen to employees hired after January 1, 2011. We also maintain a noncontributory
defined benefit plan for certain of our non-employee directors, which was frozen as of January 1, 2004. The employee
pension plan is the only plan that we have funded. During 2023, we incurred cash expenditures of $0.1 million for each of
65
the medical and life insurance plans and the non-employee director plan. We did not make a contribution to the employee
pension plan in 2023. We expect to pay similar amounts for these plans in 2024. See Note 12 (“Pension and Other
Postretirement Benefit Plan”) of Notes to the Consolidated Financial Statements.
The amounts reported in our financial statements are obtained from reports prepared by independent actuaries
and are based on significant assumptions. The most significant assumption is the discount rate used to determine the
accumulated postretirement benefit obligation (“APBO”) for these plans. The APBO is the present value of projected
benefits that employees and retirees have earned to date. The discount rate is a single rate at which the liabilities of the
plans are discounted into today’s dollars and could be effectively settled or eliminated. The discount rate used is based on
the FTSE Pension Discount Curve and reflects a rate that could be earned on bonds over a similar period that we anticipate
the plans’ liabilities will be paid. An increase in the discount rate would reduce the APBO, while a reduction in the discount
rate would increase the APBO. During the past several years, when interest rates have been at historically low levels, the
discount rate used for our plans has declined from 7.25% for 2001, to 4.73% for 2023. This decline in the discount rate
has resulted in an increase in our APBO.
The Company’s actuaries use several other assumptions that could have a significant impact on our APBO and
periodic expense for these plans. These assumptions include, but are not limited to, expected rate of return on plan assets,
future increases in medical and life insurance premiums, turnover rates of employees, and life expectancy. The accounting
standards for postretirement plans involve mechanisms that serve to limit the volatility of earnings by allowing changes in
the value of plan assets and benefit obligations to be amortized over time when actual results differ from the assumptions
used, there are changes in the assumptions used, or there are plan amendments. At December 31, 2023, our employee
pension plan had an unrecognized loss of $4.0 million. The medical and life insurance plan and non-employee director
plan had unrecognized gains of $2.3 million and $1.2 million, respectively.
The change in the discount rate is the only significant change made to the assumptions used for these plans for
each of the three years ended December 31, 2023. During the years ended December 31, 2023, 2022, and 2021, the actual
(loss) return on the employee pension plan assets was approximately 15%, (658%), and (154%), respectively, of the
assumed return used to determine the periodic pension expense for that respective year.
The market value of the assets of our employee pension plan is $19.2 million at December 31, 2023, which is
$2.2 million more than the projected benefit obligation. We do not anticipate a change in the market value of these assets
which would have a significant effect on liquidity, capital resources, or results of operations.
At the time of the Bank’s conversion from a federally chartered mutual savings bank to a federally chartered
stock savings bank, the Bank was required by its primary regulator to establish a liquidation account which is reduced as
and to the extent that eligible account holders reduce their qualifying deposits. The balance of the liquidation account at
December 31, 2023 was $0.3 million. In the unlikely event of a complete liquidation of the Bank, each eligible account
holder will be entitled to receive a distribution from the liquidation account. The Bank is not permitted to declare or pay a
dividend or to repurchase any of its capital stock if the effect would be to cause the Bank’s regulatory capital to be reduced
below the amount required for the liquidation account but approval of the NYDFS Superintendent (the “Superintendent”)
is required if the total of all dividends declared by the Bank in a calendar year would exceed the total of its net profits for
that year combined with its retained net profits for the preceding two years less prior dividends paid. The amount of
dividends the Holding Company can declare and pay is generally limited to its net profits for the preceding year less
dividends paid during that period. In addition, dividends paid by the Holding Company would be prohibited if the effect
thereof would cause the Holding Company’s capital to be reduced below applicable minimum capital requirements.
We have significant obligations that arise in the normal course of business. We finance our assets with deposits
and borrowings. We also use borrowings to manage our interest-rate risk. We have the means to refinance these borrowings
as they mature or are called through our financing arrangements with the FHLB-NY and access to unsecured lines of credit
with other commercial banks. See Note 8 (“Deposits”) and Note 9 (“Borrowed Funds”) in Notes to the Consolidated
Financial Statements. At December 31, 2023, we had borrowings obligations of $841.3 million of which $318.6 million
represents our current obligations within one year, including borrowing callable within one year. At December 31, 2023,
we had deposit obligations of $6,815.3 million of which $6,714.6 million represents our current obligations within one
year.
66
At December 31, 2023, the Bank had 27 branches, which were all leased. In addition, we lease our executive
offices. We currently outsource our data processing, loan servicing and check processing functions. We believe that this
is the most cost effective method for obtaining these services. These arrangements are usually volume dependent and have
varying terms. The contracts for these services usually include annual increases based on the increase in the consumer
price index. At December 31, 2023, we had operating lease and purchasing obligations totaling $57.6 million.
We currently provide a non-qualified deferred compensation plan for officers who have achieved the designated
level and completed one year of service. However, certain officers who have not reached the designated level but were
already participants remain eligible to participate in the Plan. In addition to the amounts deferred by the officers, we match
50% of their contributions, generally up to a maximum of 5% of the officer’s salary. These plans generally require the
deferred balance to be credited with earnings at a rate earned by certain mutual funds. At December 31, 2023, we had
deferred compensation plan obligations of $23.3 million. This expense is provided in the Consolidated Statements of
Income, and the liability has been provided in the Consolidated Statements of Financial Condition.
Regulatory Capital Position. Under applicable regulatory capital regulations, the Bank and the Company are
required to comply with each of four separate capital adequacy standards: leverage capital, common equity Tier I risk-
based capital, Tier I risk-based capital and total risk-based capital. Such classifications are used by the FDIC and other
bank regulatory agencies to determine matters ranging from each institution’s quarterly FDIC deposit insurance premium
assessments, to approvals of applications authorizing institutions to grow their asset size or otherwise expand business
activities. At December 31, 2023 and 2022, the Bank and the Company exceeded each of their four regulatory capital
requirements. See Note 14 (“Regulatory Capital”) of Notes to the Consolidated Financial Statements.
Critical Accounting Estimates
The preparation of our consolidated financial statement in accordance with generally accepted accounting
principles in the United States requires us to make estimates, judgments and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses. Actual results may differ materially from these estimates and changes in
assumptions could have a significant effect on the consolidated financial statements. Our critical accounting policies that
require us to make significant judgments or estimates are described below. For more information on these critical
accounting policies and other significant accounting policies, see the Note 2 (“Summary of Significant Accounting Policies
– Use of Estimates”) in the Notes to the Consolidated Financial Statements.
The Company’s accounting policies are integral to understanding the results of operations and statement of
financial condition. These policies are described in the Notes to the Consolidated Financial Statements. Several of these
policies require management’s judgment to determine the value of the Company’s assets and liabilities. The Company has
established detailed written policies and control procedures to ensure consistent application of these policies. The
Company has identified four accounting policies that require significant management valuation judgment: the allowance
for credit losses, fair value of financial instruments, goodwill impairment and income taxes.
Allowance for Credit Losses. An allowance for credit losses (“ACL”) is an estimate that is deducted from the
amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the
financial assets. The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects
management’s assessment of the credit quality of the financial assets. Management estimates the allowance balance using
relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and
supportable forecasts. The factors are both quantitative and qualitative in nature including, but not limited to, historical
losses, economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio
mix, and internal loan processes Judgment is required to determine how many years of historical loss experience are to be
included when reviewing historical loss experience. A full credit cycle must be used, or loss estimates may be inaccurate.
This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more
information becomes available.
The quantitative allowance is calculated using a number of inputs and assumptions. The results of this process,
support management’s assessment as to the adequacy of the ACL at each balance sheet date.
In determining the allowance for credit losses, assumptions are input for economic forecasts, baseline loss rates,
prepayment rates, utilization rates for off-balance sheet commitments, and forecast and reversion periods. The allowance
67
for credit losses is estimated utilizing internal and external data, information derived from historical events, current
conditions, and economic forecasts. Historically observed credit loss experience adjusted for prepayment and macro-
economic variables, provide the basis for the estimation of quantitatively modeled expected credit losses.
The Company includes quantitative factors in the allowance model which include (1) amortized costs, (2)
collective and individual loan evaluations, (3) contractual terms, (4) prepayments, (5) basis for credit loss estimates, (6)
recoveries, (7) reasonable and supportable forecast assumptions, and (8) off balance sheet commitments.
Notwithstanding the judgment required in assessing the components of the ACL, the Company believes that the
ACL is adequate to cover losses inherent in the loan portfolio. The policy has been applied on a consistent basis for all
periods presented in the Consolidated Financial Statements. In calculating the ACL, the Company specifies both the
reasonable and supportable forecast and reversion periods in three economic conditions (expansion, transition,
contraction). When calculating the ACL estimate for December 31, 2023 and 2022, the reasonable and supportable forecast
was for a period of two quarters and the reversion period was four quarters. See Notes 2 (“Summary of Significant
Accounting Policies”) and 3 (“Loans and Allowance for Credit Losses”) of Notes to the Consolidated Financial
Statements.
Fair Value of Financial Instruments. The Company carries certain financial assets and financial liabilities at fair
value under the fair value option. Fair value is considered the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date.
The securities portfolio also consists of mortgage-backed and other securities for which the fair value election
was not selected. These securities are classified as available for sale or held-to-maturity. Securities classified as available
for sale are carried at fair value in the Consolidated Statements of Financial Condition, with changes in fair value recorded
in accumulated other comprehensive loss. Securities held-to-maturity are carried at their amortized cost in the Consolidated
Statements of Financial Condition.
Financial assets and financial liabilities reported at fair value are required to be measured based on the following
alternatives: (1) quoted prices in active markets for identical financial instruments (Level 1), (2) significant other
observable inputs (Level 2), or (3) significant unobservable inputs (Level 3). Judgment is required in selecting the
appropriate level to be used to determine fair value. The majority of investments classified as available for sale and held-
to-maturity, were measured using Level 2 inputs, which require judgment to determine the fair value. The trust preferred
securities held in the investment portfolio, and the Company’s junior subordinated debentures, were measured using Level
3 inputs due to the inactive market for these securities. The significant unobservable inputs used in the fair value
measurement of the Company’s trust preferred securities and junior subordinated debentures valued under Level 3 at
December 31, 2023 and 2022, are the effective yields used in the cash flow models. Significant increases or decreases in
the effective yield in isolation would result in a significantly lower or higher fair value measurement. See Notes 2
(“Summary of Significant Accounting Policies”), 6 (“Securities”) and 19 (“Fair Value of Financial Instruments”) of
Notes to the Consolidated Financial Statements.
Goodwill Impairment. Goodwill is presumed to have an indefinite life and is tested for impairment, rather than
amortized, on at least an annual basis. For the purpose of goodwill impairment testing, management has concluded that
Company has one reporting unit. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment
of goodwill.
Quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for
measurement, when available. Other acceptable valuation methods include an asset approach, which determines a fair
value based upon the value of assets net of liabilities, an income approach, which determines fair value using one or more
methods that convert anticipated economic benefits into a present single amount, and a market approach, which determines
a fair value based on the similar businesses that have been sold.
At December 31, 2023, the fair value of our reporting unit is derived using a combination of an asset approach,
and an income approach. These valuation techniques consider several other factors beyond our market capitalization, such
as the estimated future cash flows of our reporting unit, the discount rate used to present value such cash flows and the
market multiples of comparable companies. Changes to input assumptions used in the analysis could result in materially
different evaluations of goodwill impairment. We monitor goodwill for potential impairment triggers on a quarterly basis.
68
At December 31, 2023, the fair value of the reporting unit exceeded its carrying value by $79.1 million, or 11.8%.
Given the inherent uncertainties resulting from local, regional and global macroeconomic conditions including Federal
Reserve interest rate policy decisions actual results may differ from management’s current estimates and could have an
adverse impact on one or more of the assumptions used in our quantitative model prepared for the reporting unit, which
could result in impairment charges in subsequent periods. See Note 2 (“Summary of Significant Accounting Policies”) of
Notes to Consolidated Financial Statements.
Income Taxes. The Company estimates its income taxes payable based on the amounts it expects to owe to the
various taxing authorizes (i.e., federal, state and local). In estimating income taxes, management assesses the relative
merits and risks of the tax treatment of transactions, taking into account statutory, judicial and regulatory guidance in the
context of the Company’s tax position. Management also relies on tax opinions, recent audits, and historical experience.
The Company also recognizes deferred tax assets and liabilities for the future tax consequences of differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A
valuation allowance is required for deferred tax assets that the Company estimates are more likely than not to be
unrealizable, based on evidence available at the time the estimate is made. These estimates can be affected by changes to
tax laws, statutory tax rates, and future income levels. See Notes 2 (“Summary of Significant Accounting Policies”) and
10 (“Income Taxes”) of Notes to Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
This information is contained in the section captioned “Interest Rate Risk” under Item. 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations and in Notes 19 (“Fair Value of Financial
Instruments”) and 20 (“Derivative Financial Instruments”) of the Notes to Consolidated Financial Statements in Item 8 of
this Annual Report.
69
Item 8. Financial Statements and Supplementary Data.
FLUSHING FINANCIAL CORPORATION
Consolidated Statements of Financial Condition
Assets
Cash and due from banks, (restricted cash of $47,945, and $66,345, respectively)
Securities held-to-maturity, net of allowance of $1,087 and $1,100, respectively (assets pledged of $4,595
and $4,550, respectively; fair value of $65,755 and $62,550, respectively)
Securities available for sale, at fair value (assets pledged of $195,444 and $172,235, respectively; $13,359
and $13,023 at fair value pursuant to the fair value option, respectively)
Loans, net of fees and costs
Less: Allowance for credit losses
Net loans
Interest and dividends receivable
Bank premises and equipment, net
Federal Home Loan Bank of New York stock, at cost
Bank owned life insurance
Goodwill
Core deposit intangibles
Right of use asset
Other assets
Total assets
Liabilities
Due to depositors:
Non-interest bearing
Interest-bearing
Total Due to depositors
Mortgagors' escrow deposits
Borrowed funds:
Federal Home Loan Bank advances and other borrowings
Subordinated debentures
Junior subordinated debentures, at fair value
Total borrowed funds
Operating lease liability
Other liabilities
Total liabilities
Commitments and contingencies (Note 16)
Stockholders' Equity
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)
Common stock ($0.01 par value; 100,000,000 shares authorized; 34,087,623 shares issued; 28,865,810
shares and 29,476,391 shares outstanding, respectively)
Additional paid-in capital
Treasury stock, at average cost (5,221,813 shares and 4,611,232 shares, respectively)
Retained earnings
Accumulated other comprehensive loss, net of taxes
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$
December 31,
2023
December 31,
2022
(Dollars in thousands, except per share data)
$
$
$
172,157
72,923
874,753
6,906,950
(40,161)
6,866,789
59,018
21,273
31,066
213,518
17,636
1,537
39,557
167,009
8,537,236
847,416
5,917,463
6,764,879
50,382
605,801
187,630
47,850
841,281
40,822
170,035
7,867,399
—
341
264,534
(106,070)
549,683
(38,651)
669,837
151,754
73,711
735,357
6,934,769
(40,442)
6,894,327
45,048
21,750
45,842
213,131
17,636
2,017
43,289
179,084
8,422,946
921,238
5,515,945
6,437,183
48,159
815,501
186,965
50,507
1,052,973
46,125
161,349
7,745,789
—
341
264,332
(98,535)
547,507
(36,488)
677,157
$
8,537,236
$
8,422,946
The accompanying notes are an integral part of these consolidated financial statements.
70
FLUSHING FINANCIAL CORPORATION
Consolidated Statements of Income
Interest and dividend income
Interest and fees on loans
Interest and dividends on securities:
Interest
Dividends
Other interest income
Total interest and dividend income
Interest expense
Deposits
Other interest expense
Total interest expense
Net interest income
Provision (benefit) for credit losses
Net interest income after provision (benefit) for credit losses
Non-interest income
Banking services fee income
Net gain (loss) on sale of loans
Net gain (loss) on disposition of assets
Net gain (loss) on sale of securities
Net gain (loss) from fair value adjustments
Federal Home Loan Bank of New York stock dividends
Life insurance proceeds
Bank owned life insurance
Other income
Total non-interest income (loss)
Non-interest expense
Salaries and employee benefits
Occupancy and equipment
Professional services
FDIC deposit insurance
Data processing
Depreciation and amortization of bank premises and equipment
Other real estate owned / foreclosure expense
Other operating expenses
Total non-interest expense
Income before income taxes
Provision for income taxes
Federal
State and local
Total provision for income taxes
Net income
Basic earnings per common share
Diluted earnings per common share
For the year ended December 31,
2022
2021
2023
$
355,348
$
293,287 $
274,331
37,598
126
8,405
401,477
188,655
33,670
222,325
179,152
10,518
168,634
8,651
108
—
—
2,573
2,513
1,281
4,573
2,889
22,588
85,957
14,396
9,569
3,994
5,976
5,965
605
24,927
151,389
39,833
7,585
3,584
11,169
28,664
0.96
0.96
$
$
$
20,861
60
2,418
316,626
47,285
25,725
73,010
243,616
5,081
238,535
5,122
119
104
(10,948)
5,728
2,000
1,822
4,487
1,575
10,009
84,374
14,606
9,207
2,258
5,595
5,930
294
21,428
143,692
104,852
17,569
10,338
27,907
76,945 $
2.50 $
2.50 $
13,999
29
203
288,562
20,324
20,269
40,593
247,969
(4,944)
252,913
5,965
335
621
113
(12,995)
2,097
—
4,044
3,507
3,687
88,310
14,002
7,439
2,951
7,044
6,425
323
20,828
147,322
109,278
20,078
7,407
27,485
81,793
2.59
2.59
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
71
FLUSHING FINANCIAL CORPORATION
Consolidated Statements of Comprehensive Income
2023
For the years ended December 31,
2022
(in thousands)
2021
Net income
Other comprehensive income (loss), net of tax:
Amortization of actuarial (gains) losses, net of taxes of $123, $7, and ($159), respectively.
Amortization of prior service credits, net of taxes of $0, $8, and $27, respectively.
Unrecognized actuarial gains (losses), net of taxes of ($75), ($487), and ($109), respectively.
Change in net unrealized gains (losses) on securities available for sale, net of taxes of ($4,451),
$28,900, and $3,455, respectively.
Reclassification adjustment for net (gains) losses included in net income, net of taxes of $0,
($3,401) and $35, respectively.
Net unrealized gains (losses) on cashflow hedges, net of taxes of $4,762, ($12,081) and
($7,216), respectively.
Change in fair value of liabilities related to instrument-specific credit risk, net of taxes of ($74),
$386 and ($237), respectively.
Other comprehensive income (loss), net of tax:
Comprehensive net income (loss)
$
28,664 $
76,945 $
81,793
(276)
—
170
(17)
(19)
1,043
341
(58)
319
8,362
(64,381)
(7,484)
—
7,547
(78)
(10,584)
26,786
16,115
165
(2,163)
26,501 $
(763)
(29,804)
47,141 $
427
9,582
91,375
$
The accompanying notes are an integral part of these consolidated financial statements.
72
FLUSHING FINANCIAL CORPORATION
Consolidated Statements of Changes in Stockholders’ Equity
Shares
Outstanding
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated Other
Comprehensive Loss
Total
(Dollars in thousands, except per share data)
Balance at December 31, 2020
30,775,854 $
341
$
261,533
$
(69,400)
$
442,789
$
(16,266)
$
618,997
Net income (loss)
Award of shares released from Employee
Benefit Trust
Vesting of restricted stock unit awards
Stock-based compensation expense
Purchase of treasury shares
Repurchase of shares to satisfy tax obligation
Dividends on common stock ($0.84 per
share)
Other comprehensive income (loss), net of
tax
—
—
261,628
—
(436,619)
(74,510)
—
—
Balance at December 31, 2021
30,526,353 $
Net income (loss)
Award of shares released from Employee
Benefit Trust
Vesting of restricted stock unit awards
Stock-based compensation expense
Purchase of treasury shares
Repurchase of shares to satisfy tax obligation
Dividends on common stock ($0.88 per
share)
Other comprehensive income (loss), net of
tax
—
—
303,636
—
(1,253,725)
(99,873)
—
—
Balance at December 31, 2022
29,476,391 $
Net income (loss)
Vesting of restricted stock unit awards
Stock-based compensation expense
Purchase of treasury shares
Repurchase of shares to satisfy tax obligation
Dividends on common stock ($0.88 per
share)
Other comprehensive income (loss), net of
tax
—
263,918
—
(786,498)
(88,001)
—
—
—
—
—
—
—
—
—
—
—
81,793
321
(5,308)
6,829
—
—
—
5,477
—
(9,988)
(1,382)
—
(169)
—
—
—
—
—
(26,524)
—
—
—
—
—
—
—
81,793
321
—
6,829
(9,988)
(1,382)
(26,524)
—
341
$
—
263,375
$
—
(75,293)
$
—
497,889
$
9,582
(6,684)
$
9,582
679,628
—
—
—
—
—
—
—
—
287
(6,137)
6,807
—
—
—
—
—
6,433
—
(27,246)
(2,429)
76,945
—
(296)
—
—
—
—
(27,031)
—
—
—
—
—
—
—
76,945
287
—
6,807
(27,246)
(2,429)
(27,031)
—
341
$
—
264,332
$
—
(98,535)
$
—
547,507
$
(29,804)
(36,488)
$
(29,804)
677,157
—
—
—
—
—
—
—
—
(5,402)
5,604
—
—
—
—
—
5,630
—
(11,473)
(1,692)
—
—
28,664
(228)
—
—
—
(26,260)
—
—
—
—
—
—
28,664
—
5,604
(11,473)
(1,692)
(26,260)
—
(2,163)
(2,163)
Balance at December 31, 2023
28,865,810 $
341 $
264,534 $
(106,070) $
549,683
$
(38,651) $
669,837
The accompanying notes are an integral part of these consolidated financial statements.
73
FLUSHING FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
Operating Activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Provision (benefit) for credit losses
Depreciation and amortization of premises and equipment
Net (loss) gain on sales of loans
Net amortization (accretion) of premiums and discounts
Net (loss) gain from disposition of assets
Net loss (gain) from sale of securities
Deferred income tax provision (benefit)
Net (gain) loss from fair value adjustments
Net (gain) loss from fair value adjustments of hedges
Gain from life insurance proceeds
Income from bank owned life insurance
Stock-based compensation expense
Deferred compensation
Amortization of core deposit intangibles
(Increase) decrease in other assets
Increase (decrease) in other liabilities
Net cash provided by (used in) operating activities
Investing Activities
Purchases of premises and equipment
Purchases of Federal Home Loan Bank New York stock
Redemptions of Federal Home Loan Bank New York stock
Purchases of securities held-to-maturity
Proceeds from prepayments of securities held-to-maturity
Purchases of securities available for sale
Proceeds from sales and calls of securities available for sale
Proceeds from maturities and prepayments of securities available for
sale
Purchases of bank owned life insurance
Proceeds from bank owned life insurance
Change in cash collateral
Net repayments (originations) of loans
Purchases of loans
Proceeds from sale of loans
Net cash provided by (used in) investing activities
2023
For the year ended December 31,
2022
(In thousands)
2021
$
28,664 $
76,945 $
81,793
10,518
5,965
(108)
498
—
—
3,721
(2,573)
(371)
(1,281)
(4,573)
5,604
(4,210)
480
(19,308)
11,559
34,585
(5,488)
(122,102)
136,878
—
794
(187,442)
—
57,493
—
3,068
(18,400)
198,240
(166,344)
9,042
(94,261)
5,081
5,930
(119)
1,139
(104)
10,948
144
(5,728)
(775)
(1,822)
(4,487)
6,807
(5,365)
545
11,775
(15,159)
85,755
(4,342)
(146,446)
136,541
(16,475)
387
(224,940)
73,276
96,861
—
3,945
66,345
(93,262)
(275,701)
31,993
(351,818)
(4,944)
6,425
(335)
(987)
(621)
(113)
(1,725)
12,995
(2,079)
—
(4,044)
6,829
(4,002)
610
563
(1,767)
88,598
(3,680)
(7,065)
14,567
-
-
(538,350)
64,613
330,701
(25,000)
—
—
290,890
(262,091)
28,632
(106,783)
Continued
The accompanying notes are an integral part of these consolidated financial statements.
74
FLUSHING FINANCIAL CORPORATION
Consolidated Statements of Cash Flows (continued)
Financing Activities
Net increase (decrease) in noninterest-bearing deposits
Net increase (decrease) in interest-bearing deposits
Net increase (decrease) in mortgagors' escrow deposits
Net (repayments) proceeds from short-term borrowed funds
Proceeds from long-term borrowing
Repayment of long-term borrowings
Purchase of treasury shares and repurchase of shares to satisfy tax obligations
Cash dividends paid
$
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Cash, cash equivalents, and restricted cash, end of period
Supplemental Cash Flow Disclosure
Interest paid
Income taxes paid
$
$
For the year ended December 31,
2023
2022
2021
(In thousands)
(73,822) $
400,804
2,223
(605,750)
661,050
(265,001)
(13,165)
(26,260)
80,079
20,403
151,754
172,157 $
(46,383) $ 188,949
3,974
200,019
6,291
(3,754)
—
235,000
63,603 122,843
(55,685) (341,643)
(11,370)
(29,675)
(26,524)
(27,031)
(57,480)
336,094
70,031
(75,665)
81,723 157,388
81,723
151,754 $
214,610 $
6,269
63,680 $
32,411
40,564
28,225
The accompanying notes are an integral part of these consolidated financial statements.
75
FLUSHING FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
1. Nature of Operations
Flushing Financial Corporation (the “Holding Company”), a Delaware business corporation, is the bank holding
company of its wholly-owned subsidiary Flushing Bank (the “Bank”). The Holding Company and its direct and indirect
wholly-owned subsidiaries, including the Bank, Flushing Service Corporation (“FSC”), FSB Properties Inc.
(“Properties”), and Flushing Preferred Funding Corporation (“FPFC”), which was dissolved as of June 30, 2021, and are
collectively herein referred to as the “Company.”
The Company’s principal business is attracting deposits from public entities and the general public, while
investing those deposits together with funds generated from ongoing operations and borrowings, primarily in (1)
originations and purchases of multi-family residential properties, commercial business loans, commercial real estate
mortgage loans and, to a lesser extent, one-to-four family (focusing on mixed-use properties, which are properties that
contain both residential dwelling units and commercial units); (2) construction loans, primarily for residential properties;
(3) Small Business Administration (“SBA”) loans and other small business loans; (4) mortgage loan surrogates such as
mortgage-backed securities; and (5) U.S. government securities, corporate fixed-income securities and other marketable
securities. The Bank also originates certain other consumer loans including overdraft lines of credit. The Bank primarily
conducts its business through twenty-seven full-service banking offices, ten of which are located in Queens County, four
in Nassau County, four in Suffolk County, six in Kings County (Brooklyn), and three in New York County (Manhattan),
New York. The Bank also operates an internet branch, which operates under the brands of iGObanking® and BankPurely®
(the “Internet Branch”), offering checking, savings, money market and certificates of deposit accounts.
2. Summary of Significant Accounting Policies
The accounting and reporting policies of the Company follow accounting principles generally accepted in the
United States of America (“GAAP”) and general practices within the banking industry. The policies which materially
affect the determination of the Company’s financial position, results of operations and cash flows are summarized below.
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of the Holding Company and the
following direct and indirect wholly-owned subsidiaries of the Holding Company: the Bank, FPFC, FSC, and Properties.
FPFC, which was dissolved as of June 30, 2021, was a real estate investment trust formed to hold a portion of the Bank’s
mortgage loans to facilitate access to capital markets. FSC was formed to market insurance products and mutual funds.
Properties is currently used to hold title to real estate owned acquired via foreclosure. Amounts held in a rabbi trust for
certain non-qualified deferred compensation plans are included in the consolidated financial statements. All intercompany
transactions and accounts are eliminated in consolidation.
The Holding Company also owns Flushing Financial Capital Trust II, Flushing Financial Capital Trust III, and
Flushing Financial Capital Trust IV (the “Trusts”), which are special purpose business trusts formed to issue a total of
$60.0 million of capital securities and $1.9 million of common securities (which are the only voting securities). The
Holding Company owns 100% of the common securities of the Trusts. The Trusts used the proceeds from the issuance of
these securities to purchase junior subordinated debentures from the Holding Company. The Trusts are not included in our
consolidated financial statements as we would not absorb the losses of the Trusts if losses were to occur. See Note 9,
“Borrowed Funds,” of the Notes to the Consolidated Financial Statements for additional information regarding these trusts.
Use of Estimates:
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Estimates
76
that are particularly susceptible to change in the near term are used in connection with the determination of the allowance
for credit losses, the evaluation of goodwill for impairment, the review of the need for a valuation allowance of the
Company’s deferred tax assets and the fair value of financial instruments.
Cash and Cash Equivalents:
For the purpose of reporting cash flows, the Company defines cash and due from banks, overnight interest-earning
deposits and federal funds sold with original maturities of 90 days or less as cash and cash equivalents. Included in cash
and cash equivalents at December 31, 2023 and 2022, were $145.3 million and $121.9 million, respectively, in interest-
earning deposits in other financial institutions, primarily comprised of restricted cash held as collateral for interest rate
swaps and funds due from the Federal Reserve Bank of New York and the Federal Home Loan Bank of New York (“FHLB-
NY”). The restricted cash totaled $47.9 million and $66.3. million at December 31, 2023 and 2022, respectively.
Securities:
Securities are classified as held-to-maturity when management intends to hold the securities until maturity. Held-
to-maturity securities are stated at amortized cost, adjusted for unamortized purchase premiums and discounts and an
allowance for credit losses. Securities are classified as available for sale when management intends to hold the securities
for an indefinite period of time or when the securities may be utilized for tactical asset/liability purposes and may be sold
from time to time to effectively manage interest rate exposure and resultant prepayment risk and liquidity needs.
Unrealized gains and losses on securities available for sale are excluded from earnings and reported as part of accumulated
other comprehensive income/loss, net of taxes. Premiums and discounts are amortized or accreted, respectively, using the
level-yield method. Realized gains and losses on the sales of securities are determined using the specific identification
method.
The Company has made a policy election to exclude accrued interest from amortized cost basis of debt securities.
Accrued interest receivable for debt securities is reported in “Interest and dividends receivable” on the Consolidated
Statements of Financial Condition. The accrual of income on securities is generally discontinued when certain factors,
such as contractual delinquency of 90 days or more, indicate reasonable doubt as to the timely collectability of such
income. Uncollected interest previously recognized on non-accrual securities is reversed from interest income at the time
the security is placed on non-accrual status.
The Company’s estimate of expected credit losses for held-to-maturity debt securities is based on historical information,
current conditions and a reasonable and supportable forecast. At December 31, 2023, and 2022 the Company’s portfolio
was made up of four securities: two which were structured similar to a commercial owner occupied loan, and modeled for
credit losses similar to commercial business loans secured by real estate; the third was under forbearance and was
individually evaluated for allowance for credit loss; and the fourth was issued and guaranteed by Fannie Mae, which is a
government sponsored enterprise that has a credit rating and perceived credit risk comparable to the U.S. government.
Accordingly, the Company assumes a zero loss expectation from the Fannie Mae security. The Company had an allowance
for credit losses for held-to-maturity securities totaling $1.1 million at December 31, 2023 and 2022.
The Company reviewed each available for sale debt security that had an unrealized loss at December 31, 2023
and December 31, 2022. The Company does not have the intent to sell these securities and it is more likely than not the
Company will not be required to sell the securities before recovery of the securities’ amortized cost basis. If the Company
evaluates any decline in the fair value is due to credit loss factors and this valuation indicates that a credit loss exists, then
the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of
security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss
exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than
the amortized cost basis.
The Company recorded tax exempt interest income totaling $1.5 million and $1.7 million for the years ended
December 31, 2023 and 2022, respectively.
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Goodwill:
Goodwill represents the excess purchase price over the value assigned to tangible and identifiable intangible
assets and liabilities assumed of business acquired. Goodwill is presumed to have an indefinite life and is tested annually
for impairment, or more frequently when certain conditions are met. If the fair value of the reporting unit is greater than
the carrying value, no further evaluation is required. If the fair value of the reporting unit is less than the carrying value,
further evaluation would be required to compare the fair value of the reporting unit to the carrying value and determine if
impairment is required.
Quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for
measurement, when available. Other acceptable valuation methods include an asset approach, which determines a fair
value based upon the value of assets net of liabilities, an income approach, which determines fair value using one or more
methods that convert anticipated economic benefits into a present single amount, and a market approach, which determines
a fair value based on the similar businesses that have been sold.
At December 31, 2023, the net book value of our reporting unit exceeded market capitalization, however the fair
value of our reporting unit is not driven solely by the market price of our stock. As described above, fair value of our
reporting unit is derived using a combination of an asset approach and income approach. These valuation techniques
consider several other factors beyond our market capitalization, such as the estimated future cash flows of our reporting
unit, the discount rate used to present value such cash flows and the market multiples of comparable companies. Changes
to input assumptions used in the analysis could result in materially different evaluations of goodwill impairment. We
qualitatively assess whether the carrying value of our reporting unit exceeds fair value. If this quantitative assessment
determines that it is more likely than not that the carrying value exceeds fair value, further qualitative evaluation for
impairment would be required to compare the fair value of the reporting unit to the carrying value and determine if
impairment is required.
In performing the goodwill impairment testing, the Company has identified a single reporting unit. The Company
performed the quantitative assessment in reviewing the carrying value of goodwill as of December 31, 2023 and 2022, and
the qualitative assessment as of December 31, 2021, concluding that there was no goodwill impairment in any period. At
December 31, 2023 and 2022, the carrying amount of goodwill totaled $17.6 million at each period. The identification of
additional reporting units, the use of other valuation techniques and/or changes to input assumptions used in the analysis
could result in materially different evaluations of goodwill impairment.
Loans:
Loans are reported at their outstanding principal balance net of any unearned income, charge-offs, deferred loan
fees and costs on originated loans, certain market value adjustments related to hedging and unamortized premiums or
discounts on purchased loans. Loan fees and certain loan origination costs are deferred. Net loan origination costs and
premiums or discounts on loans purchased are amortized into interest income over the contractual life of the loans using
the level-yield method. Prepayment penalties received on loans which pay in full prior to their scheduled maturity are
included in interest income in the period they are collected.
Interest on loans is recognized on an accrual basis. The Company has made a policy election to exclude accrued
interest from the amortized cost basis of loans. Accrued interest receivable for loans totaled $45.0 million and $34.5 million
at December 31, 2023 and 2022, respectively and was reported in “Interest and dividends receivable” on the Consolidated
Statements of Financial Condition. The accrual of income on loans is generally discontinued when certain factors, such as
contractual delinquency of 90 days or more, indicate reasonable doubt as to the timely collectability of such income.
Uncollected interest previously recognized on non-accrual loans is reversed from interest income at the time the loan is
placed on non-accrual status. A non-accrual loan can be returned to accrual status when contractual delinquency returns
to less than 90 days delinquent. Payments received on non-accrual loans that do not bring the loan to less than 90 days
delinquent are recorded on a cash basis. Payments can also be applied first as a reduction of principal until all principal is
recovered and then subsequently to interest, if in management’s opinion, it is evident that recovery of all principal due is
likely to occur.
The Company recognizes a loan as non-performing when the borrower has demonstrated the inability to bring
the loan current, or due to other circumstances which, in management’s opinion, indicate the borrower will be unable to
78
bring the loan current within a reasonable time. All loans classified as non-performing, which includes all loans past due
90 days or more, are classified as non-accrual unless the loan is well secured and there is, in our opinion, compelling
evidence the borrower will bring the loan current in the immediate future. Prior to a real estate secured loan becoming 90
days delinquent, an updated appraisal is ordered and/or an internal evaluation is prepared.
The Company may purchase loans to supplement originations. Loan purchases are evaluated at the time of
purchase to determine the appropriate accounting treatment. Performing loans purchased at a premium/discount are
recorded at the purchase price with the premium/discount being amortized/accreted into interest income over the life of
the loan. All loans purchased during the years ended December 31, 2023 and 2022 were performing loans that did not
display credit deterioration from origination at the time of purchase. The Company purchased loans totaling $166.3 million,
$275.7 million, and $262.1 million during the years ended December 31, 2023, 2022, and 2021. The Company has
implemented a strategy of selling certain delinquent and non-performing loans. Once the Company has decided to sell a
loan, the sale usually closes in a short period of time, generally within the same quarter. Loans designated held for sale are
reclassified from loans held for investment to loans held for sale. At the time of transfer, any ACL is reversed and the
loans are transferred at the new amortized cost basis and accounted for at the lower of amortized cost or fair value. Write-
downs of loans transferred from held for investment to held for sale are recorded as charge-offs at the time of transfer.
Subsequent lower of cost or fair value adjustments are recognized in non-interest income as a valuation allowance
adjustment. Terms of sale include cash due upon the closing of the sale, no contingencies or recourse to the Company and
servicing is released to the buyer. Additionally, at times the Company may sell participating interests in performing loans.
Allowance for Credit Losses:
The Allowance for credit losses (“ACL”) is an estimate that is deducted from the amortized cost basis of the
financial asset to present the net carrying value at the amount expected to be collected on the financial assets. Financial
assets are charged off against that ACL when management believes that the balance is uncollectable based on quarterly
analysis of credit risk. Additionally, certain off-balance sheet commitments are subject to the same estimate of credit
losses.
The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects
management’s assessment of the credit quality of the loan portfolio. Management estimates the allowance balance using
relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and
supportable forecasts. The factors are both quantitative and qualitative in nature including, but not limited to, historical
losses, economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio
mix, and internal loan processes. Accrued interest receivable is excluded from our financial assets that are carried on an
amortized cost basis.
The quantitative allowance is calculated using a number of inputs and assumptions. The results of this process,
support management’s assessment as to the adequacy of the ACL at each balance sheet date.
The process for calculating the allowance for credit losses begins with our historical losses by portfolio segment.
The losses are then adjusted to incorporate current conditions and reasonable and supportable forecast to develop the
quantitative component of the allowance for credit losses.
The Bank has established an Asset Classification Committee which carefully evaluates loans which are past due
90 days and/or are classified. The Asset Classification Committee thoroughly assesses the condition and circumstances
surrounding each loan meeting the criteria. The Bank also has a Delinquency Committee that evaluates loans meeting
specific criteria. The Bank’s loan policy requires loans to be placed into non-accrual status once the loan becomes 90 days
delinquent unless there is compelling evidence the borrower will bring the loan current in the immediate future.
For the quantitative measurement, the Company’s portfolio consists of mortgage loans secured by real estate
(both commercial and retail) and commercial business loans, which are primarily commercial business term loans and line
of credit. Based on the Company’s evaluation of the loan portfolio, listed below are the pools that were established as a
baseline level of segmentation with their primary risk factor. The Company confirms this data remains relevant in absence
of changes to the composition of the portfolio.
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The mortgage portfolio is a substantial component of the Company’s portfolio and it is a focus of the Company’s
lending strategy, primarily focusing on multi-family and commercial real estate. While the mortgage portfolio consists of
real-estate secured loans, the source of repayment and types of properties securing these loans varies and thus the Company
first considered these differences as follows:
One-to-four family residential – These loans are secured by residential properties for which the primary source
of repayment is the income generated by the residential borrower. Delinquency status is considered a risk factor in this
pool.
One-to-four family mixed use property – These loans are secured by residential properties for which the
primary source of repayment is the income generated by the property. Unlike the one-to-four residential credits, properties
securing mixed use loans include a commercial space component. Delinquency status is considered a risk factor in this
pool.
Multi-family residential – These loans are secured by multi-unit residential buildings for which the primary
source of repayment is the income generated by the property. Properties securing multi-family loans have five or more
residential units and thus a greater number of cash flow streams compared to one-to-four mixed use loans. Delinquency
status and risk rating are considered risk factors in this pool.
Commercial real estate – These loans are secured by properties for commercial use for which the primary source
of repayment is the income generated by the property. Delinquency status, risk rating and collateral type are considered
risk factors in this pool.
Construction – These loans are provided to fund construction projects for both residential and commercial
properties. These loans are inherently different from all others as they represent “work in progress” and expose the
Company to risk from non-completion and less recovery value should the sponsor of an unfinished property default.
Delinquency status and risk rating are considered risk factors in this pool.
Relative to the commercial business portfolio, the Company considered the following categories as a baseline for
evaluation:
Commercial Business – These loans are not typically secured by real estate. The primary source of repayment
is cash flows from operations of the borrower’s business. Within this category are SBA credits and equipment finance
credits. Delinquency status, risk rating and industry are considered risk factors in this pool.
Commercial Business secured by real estate – These loans are secured by properties used by the borrower for
commercial use where the primary source of repayment is expected to be the income generated by the borrower’s business
use of the property. The Company recognizes in circumstances where the borrower is not performing, the real estate
collateral would be the source of repayment. The Company considers these credits to be less risky than commercial
business loans, however, riskier than commercial real estate loans. Delinquency status, risk rating and industry are
considered risk factors in this pool.
Overdrafts – These are unsecured consumer lines of credits and are an immaterial component of the Company’s
portfolio.
For the qualitative measurement, the Company aggregated the portfolio segments according to three business
units: business banking, residential and commercial real estate. Management evaluates nine qualitative risk factors to
determine if the risk is captured elsewhere in the ACL process. If not captured elsewhere, the Company has identified
specific risk factors to evaluate and incorporate into its Qualitative Framework. Some risk factors include time to maturity,
origination loan-to-value, loan type composition, the value of underlying collateral, changes in policies and procedures for
lending strategies and underwriting standards, collection and recovery practices, internal credit review, changes in
personnel, loan debt coverage ratios, divergence between the levels of NYC and national unemployment, divergence
between the NYC GDP and national GDP, industry concentrations and riskiness and large borrower concentrations.
80
The Company may modify loans to enable a borrower experiencing financial difficulties to continue making
payments when it is deemed to be in the Company’s best long-term interest. This modification may include reducing the
interest rate or amount of the monthly payment for a specified period of time, after which the interest rate and repayment
terms revert to the original terms of the loan, any other-than-insignificant payment delay, principal forgiveness or any
combination of these types of modifications.
Loans Held for Sale:
Loans held for sale are carried at the lower of cost or estimated fair value. At December 31, 2023 and 2022, there
were no loans classified as held for sale.
Bank Owned Life Insurance:
Bank owned life insurance (“BOLI”) represents life insurance on the lives of certain current and past employees
who have provided positive consent allowing the Company to be the beneficiary of such policies. BOLI is carried in the
Consolidated Statements of Financial Condition at its cash surrender value. Increases in the cash value of the policies, as
well as proceeds received, are recorded in other non-interest income, and are not subject to income taxes. During 2023 and
2022, the Company did not purchase any additional BOLI.
Other Real Estate Owned:
Other Real Estate Owned (“OREO”) consists of property acquired through foreclosure. At the time of foreclosure
these properties are acquired at fair value and subsequently carried at the lower of cost or fair value, less estimated selling
costs. The fair value is based on appraised value through a current appraisal, or at times through an internal review,
additionally adjusted by the estimated costs to sell the property. This determination is made on an individual asset basis.
If the fair value of a property is less than the carrying amount of the loan, the difference is recognized as a charge to the
ACL. Further decreases to the estimated value will be recorded directly to the Consolidated Statements of Income. At
December 31, 2023 and 2022, we did not hold any OREO.
Bank Premises and Equipment:
Bank premises and equipment are stated at cost, less depreciation accumulated on a straight-line basis over the
estimated useful lives of the related assets, recorded in Depreciation and amortization of bank premises and equipment in
the Consolidated Statements of Income. For equipment and furniture the useful life is between 3 to 10 years.
As of December 31, 2023 and 2022, the Bank leased all branches and its executive offices. Leasehold
improvements are amortized on a straight-line basis over the term of the related leases or the lives of the assets, whichever
is shorter. Maintenance, repairs and minor improvements are charged to non-interest expense in the period incurred.
Federal Home Loan Bank Stock:
The FHLB-NY has assigned to the Company a mandated membership stock ownership requirement, based on its
asset size. In addition, for all borrowing activity, the Company is required to purchase shares of FHLB-NY non-marketable
capital stock at par. Such shares are redeemed by FHLB-NY at par with reductions in the Company’s borrowing levels.
The Company carries its investment in FHLB-NY stock at historical cost. The Company periodically reviews its FHLB-
NY stock to determine if impairment exists. At December 31, 2023, the Company considered among other things the
earnings performance, credit rating and asset quality of the FHLB-NY. Based on this review, the Company did not consider
the value of our investment in FHLB-NY stock to be impaired at December 31, 2023 and 2022.
Income Taxes:
Deferred income tax assets and liabilities are determined using the asset and liability (or balance sheet) method.
Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences
between book and tax basis of the various balance sheet assets and liabilities. A deferred tax liability is recognized on all
taxable temporary differences and a deferred tax asset is recognized on all deductible temporary differences and operating
81
losses and tax credit carry-forwards. A valuation allowance is recognized to reduce the potential deferred tax asset, if it is
“more likely than not” that all or some portion of that potential deferred tax asset will not be realized. Uncertain tax
positions that meet the more likely than not recognition threshold are measured to determine the amount to recognize. An
uncertain tax position is measured at the amount that management believes has a greater than 50% likelihood of realization
upon settlement. The Company must also take into account changes in tax laws or rates when valuing the deferred income
tax amounts it carries on its Consolidated Statements of Financial Condition. The Company recognizes interest and
penalties on income taxes in income tax expense.
Stock Compensation Plans:
The Company accounts for its stock-based compensation using a fair-value-based measurement method for share-
based payment transactions with employees and directors. The Company measures the cost of employee and directors
services received in exchange for an award of an equity instrument based on the grant date fair value of the award. That
cost is recognized over the period during which the employee and directors are required to provide services in exchange
for the award. The requisite service period is usually the vesting period, as such according to the terms of these awards,
which generally provide for vesting upon retirement, the cost for these awards are fully recognized at the earlier of the
retirement eligibility date or vesting date. Forfeitures are recorded in the period they occur.
Benefit Plans:
The Company sponsors a 401(k), and profit sharing plan for its employees. The Company also sponsors
postretirement health care and life insurance benefits plans for its employees, a non-qualified deferred compensation plan
for certain senior officers, and a non-qualified pension plan for its outside directors. The qualified pension plan was frozen
in 2006, no longer allowing additional participants or accruals from that point forward.
The Company recognizes the funded status of a benefit plan – measured as the difference between plan assets at
fair value and the benefit obligation – in the Consolidated Statements of Financial Condition, with the unrecognized credits
and charges recognized, net of taxes, as a component of accumulated other comprehensive income (loss). These credits or
charges arose as a result of gains or losses and prior service costs or credits that arose during prior periods but were not
recognized as components of net periodic benefit cost.
Treasury Stock:
The Company records treasury stock at cost. Treasury stock is reissued at average cost.
Derivatives:
The Company’s derivative instruments are carried at fair value in the Company’s financial statements as part of
Other assets for derivatives with positive fair values and Other liabilities for derivatives with negative fair values. The
accounting for changes in the fair value of a derivative instrument is dependent upon whether or not it qualifies and has
been designated as a hedge for accounting purposes, and further, by the type of hedging relationship.
To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the
exposure being hedged. In addition, for a derivative to be designated as a hedge, the risk management objective and strategy
must be documented. Hedge documentation must identify the derivative hedging instrument, the asset or liability or
forecasted transaction and type of risk to be hedged, and how the effectiveness of the derivative is assessed prospectively
and retrospectively. The extent to which a derivative has been, and is expected to continue to be, effective at offsetting
changes in the fair value of the hedged item must be assessed at least quarterly. If it is determined that a derivative is not
highly effective at hedging the designated exposure, hedge accounting is discontinued. For cash flow hedges, the changes
in the fair value of the derivative are recorded as a component of accumulated other comprehensive income or loss, net of
tax, and subsequently reclassified into earnings when the hedged transaction effects earnings. For fair value hedges, the
gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, is
recognized in earnings on the same line as the hedged item. Changes in the fair value of derivatives are disclosed in the
82
Consolidated Statements of Cash Flows within operating activities in the line item Net (gain) loss from fair value
adjustments on hedges. At December 31, 2023, our cash flow hedges have a maximum remaining term of 40 months.
For non-portfolio layer method fair value hedges, the hedge basis (the amount of the change in fair value) is added
to (or subtracted from) the carrying amount of the hedged item. For portfolio layer method hedges, the hedge basis does
not adjust the carrying value of the hedged item and is instead maintained on a closed portfolio basis. These basis
adjustments would be allocated to the amortized cost of specific loans or available for sale securities within the pools if
either of the hedges were de-designated.
Leases:
The Company determines whether an arrangement contains a lease at inception. An arrangement contains a lease
if it implicitly or explicitly identifies an asset to be used and conveys the right to control the use of the identified asset in
exchange for consideration. As a lessee, we recognize operating right-of-use (“ROU”) leases in Right of use asset and
operating lease liabilities in Operating lease liability on the Consolidated Statements of Financial Condition.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized upon
commencement of the lease based on the present value of the lease payments over the lease term. As most of the
Company’s leases do not provide an implicit interest rate, we generally use the Company’s incremental borrowing rate
based on the estimated rate of interest for fully collateralized and fully amortizing borrowings over a similar term of the
lease payments at commencement date to determine the present value of lease payments. When readily determinable, we
use the implicit rate. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably
certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the
lease term.
The Company has elected the short-term lease recognition exemption such that the Company will not recognize
Right of use assets (“ROU”) or lease liabilities for leases with a term of less than 12 months from the commencement date.
The Company’s operating lease expense for building and equipment rental totaled $8.7 million, $8.5 million, and $8.6
million and was recorded in Occupancy and equipment on the Consolidated Statements of Income for the years ended
December 31, 2023, 2022, and 2021 respectively. The Company’s operating lease expense for vehicles totaled $0.1 million
and was recorded in Other Operating Expenses on the Consolidated Statements of Income for each of the years ended
December 31, 2023, 2022, and 2021, respectively.
The Company has agreements that qualify as a short-term leases with expense totaling $0.2 million for each of
the years ended December 31, 2023, 2022 and 2021, included in Professional services on the Consolidated Statements of
Income. The Company’s variable lease payments, which include insurance and real estate tax expenses was recorded in
Occupancy and equipment on the Consolidated Statements of Income and totaled $1.1 million at the year ended December
31, 2023, and 2021 and $1.0 million for the year ended December 31, 2022.
Certain leases have escalation clauses for operating expenses and real estate taxes. The Company’s non-
cancelable operating lease agreements expire through 2036.
Comprehensive Income:
Comprehensive net income (loss) consists of net income (loss) and other comprehensive income (loss). Other
comprehensive income (loss) includes (i) unrealized gains and losses on securities available for sale and reclassification
adjustments for realized gains and losses on securities available for sale; (ii) unrealized gains and losses on derivatives in
cash flow hedge relationships and reclassifications of deferred gains and losses when the hedge item impacts earnings;
(iii) adjustments to net periodic pension costs; and (iv) changes in the fair value of instrument-specific credit risk from the
Company’s liabilities carried at fair value pursuant to the fair value option.
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Segment Reporting:
Management views the Company as operating as a single unit, a community bank. Therefore, segment
information is not provided.
Advertising Expense:
Costs associated with advertising are expensed as incurred. The Company recorded advertising expenses of $2.1
million, $3.1 million, and $2.5 million for the years ended December 31, 2023, 2022, and 2021, respectively, recorded in
the Professional services in the Consolidated Statements of Income.
Earnings per Common Share:
Basic earnings per common share are computed by dividing net income (loss) available to common shareholders
by the total weighted average number of common shares outstanding, which includes unvested participating securities.
Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether
paid or unpaid) are participating securities and as such are included in the calculation of earnings per share. The Company’s
unvested restricted stock unit awards are considered participating securities. Therefore, weighted average common shares
outstanding used for computing basic earnings per common share includes common shares outstanding plus unvested
restricted stock unit awards. The computation of diluted earnings per share includes the additional dilutive effect of stock
options outstanding and other common stock equivalents during the period using the treasury stock method. Common
stock equivalents that are anti-dilutive are not included in the computation of diluted earnings per common share. The
numerator for calculating basic and diluted earnings per common share is net income available to common shareholders.
Earnings per common share have been computed based on the following, for the years ended December 31:
Net income (loss), as reported
Divided by:
2023
2022
(In thousands, except per share data)
$ 28,664
$ 76,945
$ 81,793
2021
Total weighted average common shares outstanding
and common stock equivalents
29,925
30,823
31,550
Basic earnings per common share
Diluted earnings per common share
Dividend Payout ratio
$
$
$
0.96
0.96
$
91.7 %
$
2.50
2.50
$
35.2 %
2.59
2.59
32.4 %
There were no options that were anti-dilutive for the years ended December 31, 2023, 2022, and 2021.
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3. Loans and Allowance for Credit Losses
The composition of loans is as follows at December 31:
Multi-family residential
Commercial real estate
One-to-four family ― mixed-use property
One-to-four family ― residential
Construction
Small Business Administration
Commercial business and other
Net unamortized premiums and unearned loan fees
Total loans, net of fees and costs excluding portfolio layer basis
adjustments
Unallocated portfolio layer basis adjustments (1)
Total loans, net of fees and costs
2023
2022
(In thousands)
$ 2,658,205 $ 2,601,384
1,913,040
1,958,252
554,314
530,243
241,246
220,213
70,951
58,673
23,275
20,205
1,521,548
1,452,518
9,011
9,590
6,907,899
(949)
6,934,769
—
$ 6,906,950 $ 6,934,769
(1) This amount represents portfolio layer method basis adjustments related to loans hedged in a closed portfolio. Under GAAP portfolio layer
method basis adjustments are not allocated to individual loans, however, the amounts impact the net loan balance. These basis adjustments
would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See Note 20 (“Derivative
Financial Instruments”) of the Notes to the Consolidated Financial Statements.
The majority of our loan portfolio is invested in multi-family residential, commercial real estate and commercial
business and other loans, which totaled 88.3% and 87.2% of our gross loans at December 31, 2023 and 2022, respectively.
Our concentration in these types of loans increases the overall level of credit risk inherent in our loan portfolio. The greater
risk associated with these types of loans could require us to increase our allowance and provision for credit losses and to
maintain an ACL as a percentage of total loans in excess of the allowance currently maintained. In addition to our loan
portfolio, at December 31, 2023, we were servicing $46.7 million of loans for others.
Loans secured by multi-family residential property and commercial real estate generally involve a greater degree
of risk than residential mortgage loans and generally carry larger loan balances. The increased credit risk is the result of
several factors, including the concentration of principal in a smaller number of loans and borrowers, the effects of general
economic conditions on income producing properties and the increased difficulty in evaluating and monitoring these types
of loans. Furthermore, the repayments of loans secured by these types of properties are typically dependent upon the
successful operation of the related property, which is usually owned by a legal entity with the property being the entity’s
only asset. If the cash flow from the property is reduced, the borrower’s ability to repay the loan may be impaired. If the
borrower defaults, our only remedy may be to foreclose on the property, for which the market value may be less than the
balance due on the related mortgage loan.
Loans secured by commercial business and other loans involve a greater degree of risk for the same reasons as
for multi-family residential and commercial real estate loans with the added risk that many of the loans are not secured by
improved properties.
To minimize the risks involved in the origination of multi-family residential, commercial real estate and
commercial business and other loans, the Company adheres to defined underwriting standards, which include reviewing
the expected net operating income generated by the real estate collateral securing the loan, the age and condition of the
collateral, the financial resources and income level of the borrower and the borrower’s experience in owning or managing
similar properties. We typically require debt service coverage of at least 125% of the monthly loan payment. We generally
originate these loans up to a maximum of 75% of the appraised value or the purchase price of the property, whichever is
less. Any loan with a final loan-to-value ratio in excess of 75% must be approved by the Bank’s Board of Directors or the
Loan Committee as an exception to policy. We generally rely on the income generated by the property as the primary
means by which the loan is repaid. However, personal guarantees may be obtained for additional security from these
85
borrowers. Additionally, for commercial business and other loans which are not secured by improved properties, the Bank
will secure these loans with business assets, including accounts receivables, inventory and real estate and generally require
personal guarantees.
The Company may modify loans to enable a borrower experiencing financial difficulties to continue making
payments when it is deemed to be in the Company’s best long-term interest. When modifying a loan, an assessment of
whether a borrower is experiencing financial difficulty is made on the date of modification. This modification may include
reducing the loan interest rate, extending the loan term, any other-than-insignificant payment delay, principal forgiveness
or any combination of these types of modifications. When such modifications are performed, a change to the allowance
for credit losses is generally not required as the methodologies used to estimate the allowance already capture the effect
of borrowers experiencing financial difficulty. On December 31, 2023, there were no commitments to lend additional
funds to borrowers who have received a loan modification as a result of financial difficulty.
The following tables show loan modifications made to borrowers experiencing financial difficulty during the
periods indicated:
(Dollars in thousands)
Loan Modifications Made to
Borrowers Experiencing Financial
Difficulty
For the year ended December 31, 2023
Term Extension
Number
Amortized
Cost Basis
% of Total Class
of Financing
Receivable
Financial Effect
Commercial business and other
Total
3 $
3 $
1,734
1,734
Two loans extended Maturity to
June 2025 (20 months). One
loan extended Maturity to
August 2024 (10 months).
0.1 %
(Dollars in thousands)
Loan Modifications Made to
Borrowers Experiencing Financial
Difficulty
Number
Amortized
Cost Basis
% of Total Class
of Financing
Receivable
For the year ended December 31, 2023
Other-than-insignificant Payment Delay
Small Business Administration
Total
1 $
1 $
1,488
1,488
7.3 %
Financial Effect
Provided twelve months
payment deferral to be collected
at maturity.
The following table shows the payment status of borrowers experiencing financial difficulty and for which a
modification has occurred at December 31, 2023:
Payment Status of Borrowers Experiencing Financial Difficulty (Amortized Cost Basis)
(In thousands)
Small Business Administration $
Commercial business and
other
Total
$
Current
30-89 Days Past
Due
90+ Days Past Due
Total Modified
— $
1,734
1,734 $
— $
—
— $
1,488 $
—
1,488 $
1,488
1,734
3,222
86
The following tables show loans modified and classified as TDR under legacy GAAP during the periods
indicated:
(Dollars in thousands)
For the year ended December 31, 2022
Number
Balance
Modification description
Small Business Administration
1 $
271
Commercial business and other
Total
5
6 $
8,204
8,475
Loan amortization
extension.
One loan received a
below market interest
rate and four loans had
an amortization
extension
(Dollars in thousands)
Commercial business and other
Total
For the year ended December 31, 2021
Number
Balance
Modification description
3 $
3 $
702
702
Loan amortization
extension.
The recorded investment of the loans modified and classified as TDR, presented in the tables above, were
unchanged as there was no principal forgiven in these modifications.
The following table shows our recorded investment for loans classified as TDR under legacy GAAP at amortized
cost that are performing according to their restructured terms at the periods indicated:
(Dollars in thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Small Business Administration
Commercial business and other
Total performing
December 31, 2022
Number
of contracts
Amortized
Cost
6
1
4
1
1
3
16
$
$
1,673
7,572
1,222
253
242
855
11,817
The following tables show our recorded investment for loans classified as TDR under legacy GAAP at amortized
cost that are not performing according to their restructured terms at the periods indicated.
(Dollars in thousands)
Commercial business and other
Total troubled debt restructurings that subsequently defaulted
December 31, 2022
Number
of contracts
Amortized
Cost
2
2
$
$
3,263
3,263
The Company did not have any loans classified as TDR at amortized cost that were not performing according to
their restructured terms at December 31, 2021.
During the years ended December 31, 2022 and 2021 there were no defaults of TDR loans within 12 months of
their modification date.
87
The following tables show our non-accrual loans at amortized cost with no related allowance and interest income
recognized for loans ninety days or more past due and still accruing for periods shown below:
At or for the year ended December 31, 2023
Non-
accrual
amortized
cost
beginning
of the
reporting
period
Non-
accrual
amortized
cost end of
the
reporting
period
Non-
accrual
with no
related
Interest
income
(loss)
3,547 $
254
1,045
3,953
950
20,193
29,942 $
3,640 $
—
1,005
4,670
2,576
11,768
23,659 $
allowance
3,640 $
—
1,005
4,670
2,576
3,242
15,133 $
recognized
2 $
—
3
3
—
17
25 $
At or for the year ended December 31, 2022
Non-
accrual
amortized
cost
beginning
of the
reporting
period
Non-
accrual
amortized
cost end of
the
reporting
period
Non-
accrual
with no
related
Interest
income
(loss)
2,652 $
640
1,582
7,483
952
—
1,945
15,254 $
3,547 $
254
1,045
3,953
950
—
20,193
29,942 $
allowance
3,547 $
254
1,045
3,953
950
—
3,291
13,040 $
recognized
— $
—
—
—
—
—
171
171 $
Loans
ninety days
or more
past due
and still
accruing
1,463
—
—
—
—
—
1,463
Loans
ninety days
or more
past due
and still
accruing
—
—
—
—
—
2,600
—
2,600
(In thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Small Business Administration
Commercial business and other
Total
$
$
(In thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property (1)
One-to-four family - residential
Small Business Administration
Construction
Commercial business and other (1)
Total
$
$
(1)
Included in the above analysis are non-accrual performing TDR under legacy GAAP one-to-four family – mixed-use property totaling $0.3
million at December 31, 2022. Commercial business and other contains a non-accrual performing TDR totaling less than $0.1 million at
December 31, 2022.
The following is a summary of interest foregone on non-accrual loans for the years ended December 31:
(In thousands)
Interest income (loss) that would have been recognized had the loans
performed in accordance with their original terms
Less: Interest income (loss) included in the results of operations
Total foregone interest
2023
2022
2021
$
$
1,995 $
25
1,970 $
2,309 $
746
1,563 $
1,691
620
1,071
88
The following tables show the aging of the amortized cost basis in past-due loans at the period indicated by class
of loan at:
(In thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Construction
Small Business Administration
Commercial business and other
Total
60 - 89
Days Past
Due
At December 31, 2023
Greater
than 90
Days
Total
Past Due Current
Total Loans
(1)
539 $ 5,103 $ 8,364 $ 2,653,862 $ 2,662,226
1,959,624
533,084
221,519
58,261
20,345
1,452,840
$ 14,655 $ 2,823 $ 20,939 $ 38,417 $ 6,869,482 $ 6,907,899
1,950,435
530,247
215,134
58,261
17,769
1,443,774
1,099
124
—
—
—
1,061
9,189
2,837
6,385
—
2,576
9,066
—
1,005
4,670
—
2,576
7,585
30 - 59
Days Past
Due
$ 2,722 $
8,090
1,708
1,715
—
—
420
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $0.9 million related to loans hedged in a closed pool at December
31, 2023. See Note 20 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
At December 31, 2022
(In thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Construction
Small Business Administration
Commercial business and other
Total
30 - 59
Days Past
Due
60 - 89
Days Past
Due
Greater
than 90
Days
Total
Past Due Current
Total Loans
$ 1,475 $ 1,787 $ 3,547 $ 6,809 $ 2,598,363 $ 2,605,172
1,914,898
557,295
242,480
70,824
23,193
1,520,907
$ 18,456 $ 1,803 $ 22,425 $ 42,684 $ 6,892,085 $ 6,934,769
1,912,083
552,777
235,793
68,224
21,914
1,502,931
2,815
4,518
6,687
2,600
1,279
17,976
254
797
3,953
2,600
950
10,324
2,561
3,721
2,734
—
329
7,636
—
—
—
—
—
16
The following tables show the activity in the allowance for credit losses for the periods indicated:
For the year ended December 31, 2023
(In thousands)
Beginning balance
Charge-offs
Recoveries
Provision (benefit)
Ending balance
(In thousands)
Beginning balance
Charge-offs
Recoveries
Provision (benefit)
Ending balance
Multi-family Commercial family - mixed-
residential
real estate
use property
One-to-four
One-to-four
family -
residential
Commercial
Construction Small Business business and
Administration
loans
$
$
9,552 $
—
2
819
10,373 $
8,184 $
(8)
—
489
8,665 $
1,875 $
—
1
(266)
1,610 $
901 $
(23)
52
(262)
668 $
261 $
—
—
(103)
158 $
2,198 $
(7)
248
(813)
1,626 $
Total
other
17,471 $ 40,442
(11,119) (11,157)
345
10,667 10,531
17,061 $ 40,161
42
Multi-family Commercial family - mixed-
residential
real estate
use property
One-to-four
For the year ended December 31, 2022
One-to-four
family -
residential
loans
Construction Small Business
Commercial
business and
Taxi
Administration medallion
1,209 $
(1,053)
47
1,995
2,198 $
— $
—
447
(447)
— $
186 $
—
—
75
261 $
Total
other
17,858 $ 37,135
(3,348)
(2,067)
1,813
1,237
4,842
443
17,471 $ 40,442
$
$
8,185 $
(208)
77
1,498
9,552 $
7,158 $
—
—
1,026
8,184 $
1,755 $
—
—
120
1,875 $
784 $
(20)
5
132
901 $
89
(In thousands)
Beginning balance
Charge-offs
Recoveries
Provision (benefit)
Ending balance
$
residential
Multi-family Commercial
real estate
8,327
$
(64)
—
(1,105)
7,158
6,557
(43)
10
1,661
8,185
$
$
One-to-four
family - mixed-
use property
One-to-four
family -
residential
$
$
1,986 $
(33)
133
(331)
1,755 $
869 $
—
157
(242)
784 $
Construction Small Business Taxi
loans
Administration medallion
2,251 $
497 $
—
—
(311)
186 $
— $
— (2,758)
1,457
34
1,301
(1,076)
— $
1,209 $
Total
Commercial
business and
other
24,666 $ 45,153
(2,236) (5,134)
2,015
(4,796) (4,899)
17,858 $ 37,135
224
For the year ended December 31, 2021
In accordance with our policy and the current regulatory guidelines, we designate loans as “Special Mention,”
which are considered “Criticized Loans,” and “Substandard,” “Doubtful,” or “Loss,” which are considered “Classified
Loans”. If a loan does not fall within one of the previous mentioned categories and management believes weakness is
evident then we designate the loan as “Watch”, all other loans would be considered “Pass.” Loans that are non-accrual are
designated as Substandard, Doubtful, or Loss. These loan designations are updated quarterly. We designate a loan as
Substandard when a well-defined weakness is identified that may jeopardize the orderly liquidation of the debt. We
designate a loan Doubtful when it displays the inherent weakness of a Substandard loan with the added provision that
collection of the debt in full, on the basis of existing facts, is highly improbable. We designate a loan as Loss if it is deemed
the debtor is incapable of repayment. The Company does not hold any loans designated as Loss, as loans that are designated
as Loss are charged to the Allowance for Credit Losses. We designate a loan as Special Mention if the asset does not
warrant classification within one of the other classifications, but contains a potential weakness that deserves closer
attention.
The provision recorded in 2023 was primarily driven by fully reserving for two non-accrual business and
increasing reserves for the elevated risk presented by the current rate environment to adjustable-rate loan’s debt coverage
ratios. The provision recorded in 2022 was primarily due to loan growth, increased reserves on specific credits, coupled
with the ongoing economic uncertainty resulting from high and rising inflation including increasing interest rates. The
benefit recorded in 2021 was primarily due to improving economic conditions. The Company specifies both the reasonable
and supportable forecast and reversion periods in three economic conditions (expansion, transition, contraction). During
2023 and 2022, the Company’s reasonable and supportable forecast and reversion period was two quarters and four
quarters, respectively.
90
The following tables summarize the risk category of mortgage and commercial business loans by loan portfolio segments
and class of loans by year of origination for the periods indicated:
2022
2021
2020
2019
Prior
Revolving Loans
Amortized Cost
Basis
Revolving Loans
converted to
term loans
Total
December 31, 2023
465,069 $ 276,483 $ 215,561 $ 300,822 $ 1,099,271 $
870
—
—
1,935
—
—
465,939 $ 277,203 $ 217,496 $ 300,822 $ 1,141,217 $
34,899
1,193
5,854
720
—
—
—
—
—
322,446 $ 175,045 $ 147,871 $ 216,964 $
862,641 $
—
—
1,415
—
—
—
9,239
—
322,446 $ 176,460 $ 147,871 $ 226,203 $
— $
— $
— $
— $
43,579 $ 41,604 $ 30,984 $ 60,308 $
—
—
—
—
—
—
—
—
—
233
720
—
43,579 $ 41,604 $ 30,984 $ 61,261 $
23,197 $
507
—
—
23,704 $
— $
270
—
—
8,451 $ 16,482 $ 36,779 $
—
—
—
8,721 $ 16,482 $ 38,340 $
— $
1,561
—
—
— $
— $
23,484
1,099
887,224 $
8 $
326,246 $
4,777
564
1,217
332,804 $
102,293 $
695
—
5,737
108,725 $
23 $
5,209 $
—
—
—
5,209 $
— $
—
—
— $
— $
— $
—
—
—
— $
7,424 $
—
—
—
7,424 $
— $
3 $
3 $
5,793 $
5,793 $
— $
— $
—
— $
— $
— $
46,656 $
46,656 $
3,283 $
—
—
—
3,283 $
— $
2,883 $
—
—
1,627
4,510 $
— $
3,443 $
—
—
—
3,443 $
— $
606 $
47
—
—
653 $
— $
116,452 $ 53,315 $ 31,637 $ 30,913 $
9,792
—
2,399
—
3,822
—
4,158
—
2,426
—
—
—
14,483
25
93
—
128,643 $ 61,295 $ 34,063 $ 45,514 $
28 $
1,675 $
— $
— $
2,121 $
2,847
348
1,156
6,472 $
7 $
53,289 $
18,495
—
12,906
—
84,690 $
10 $
176,825 $ 130,608 $ 106,545 $ 38,846 $
311
—
—
—
—
—
586
14,892
177,136 $ 130,608 $ 106,545 $ 54,324 $
139,025 $
51,759
1,002
191,786 $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
133 $
133 $
99 $
— $
—
—
—
— $
— $
244,143 $
8,582
495
2,982
3,903
260,105 $
9,267 $
— $
—
—
— $
89 $
89 $
— $
— $ 2,616,755
38,424
—
1,193
—
5,854
—
— $ 2,662,226
— $ 1,924,387
34,138
—
—
1,099
— $ 1,959,624
8
— $
— $
—
—
—
— $
525,573
5,010
1,284
1,217
533,084
10,067 $
1,130
169
468
11,834 $
— $
210,982
4,163
169
6,205
221,519
23
— $
— $
58,261
58,261
— $
—
—
—
— $
— $
14,320
2,894
348
2,783
20,345
7
— $
—
—
—
—
— $
— $
645,489
57,942
520
37,180
4,365
745,496
11,020
— $
—
—
— $
628,842
62,386
15,894
707,122
— $
— $
— $
222
222
99
$
2023
$
$
—
—
$ 22,852 $
$ 199,420 $
$ 254,340 $
$ 199,420 $
— $
$
6,289 $
—
—
—
6,289 $
— $
—
—
—
$ 254,340 $
—
—
—
$ 22,852 $
(In thousands)
Multi-family Residential
Pass
Watch
Special Mention
Substandard
Total Multi-family Residential
Commercial Real Estate
Pass
Watch
Special Mention
Total Commercial Real Estate
Gross charge-offs
1-4 Family Mixed-Use Property
Pass
Watch
Special Mention
Substandard
Total 1-4 Family Mixed-Use Property
1-4 Family Residential
Pass
Watch
Special Mention
Substandard
Total 1-4 Family Residential
Gross charge-offs
Construction
Pass
Total Construction
Small Business Administration
Pass
Watch
Special Mention
Substandard
Total Small Business Administration
Gross charge-offs
Commercial Business
Pass
Watch
Special Mention
Substandard
Doubtful
Total Commercial Business
Gross charge-offs
Commercial Business - Secured by RE
Pass
9,730
Watch
Special Mention
—
Total Commercial Business - Secured by RE $ 46,723 $
Other
Pass
Total Other
Gross charge-offs
Total by Loan Type
Total Pass
Total Watch
Total Special Mention
Total Substandard
Total Doubtful
342
—
14,642
462
$ 131,186 $
40 $
$
1,984 $
—
—
—
1,984 $
— $
10,072
—
14,642
462
— $
— $
— $
5,809 $
5,809 $
$ 115,740 $
$ 36,993 $
$
$
$
$
$
$
$
$
Total Loans (1)
Total Gross charge-offs
$ 668,603 $ 1,164,733 $ 706,194 $ 556,884 $ 727,117 $ 2,753,051 $
147 $
$
1,675 $
— $
28 $
— $
40 $
$ 643,427 $ 1,150,854 $ 694,182 $ 552,523 $ 685,238 $ 2,585,019 $
11,480
—
2,399
—
6,227
—
5,785
—
4,361
—
—
—
26,149
15,637
93
—
136,956
4,206
26,870
—
303,521 $
8,582
495
2,982
3,903
319,483 $
9,267 $
10,067 $ 6,624,831
204,957
1,130
20,507
169
53,239
468
4,365
—
11,834 $ 6,907,899
11,157
— $
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $0.9 million related to loans hedged in a closed pool at December
31, 2023. See Note 20 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
91
2022
2021
2020
2019
2018
Prior
Revolving Loans Revolving Loans
Amortized Cost
Basis
converted to
term loans
Total
December 31, 2022
(In thousands)
1-4 Family Residential
Pass
Watch
Special Mention
Substandard
Total 1-4 Family Residential
1-4 Family Mixed-Use
Pass
Watch
Special Mention
Substandard
Total 1-4 Family Mixed-Use
Commercial Real Estate
Pass
Watch
Special Mention
Substandard
Total Commercial Real Estate
Construction
Pass
Watch
Special Mention
Substandard
Total Construction
Multi-family
Pass
Watch
Special Mention
Substandard
Total Multi-family
Commercial Business - Secured by
RE
Pass
Watch
Special Mention
Substandard
Total Commercial Business -
Secured by RE
Commercial Business
Pass
Watch
Special Mention
Substandard
Doubtful
Total Commercial Business
Small Business Administration
Pass
Watch
Special Mention
Substandard
Total Small Business
Administration
Other
Pass
Total Other
Total by Loan Type
Total Pass
Total Watch
Total Special Mention
Total Substandard
Total Doubtful
Total Loans
$
$
$
$
24,207 $ 8,697 $ 18,657 $ 41,820 $ 24,962 $
—
—
—
24,207 $ 8,983 $ 18,657 $ 42,554 $ 24,962 $
—
—
—
286
—
—
734
—
—
—
—
—
44,988 $ 43,157 $ 32,663 $ 63,973 $ 64,904 $
885
—
—
44,988 $ 43,157 $ 33,548 $ 64,706 $ 64,904 $
—
—
—
733
—
—
—
—
—
—
—
—
$ 328,284 $ 181,881 $ 152,526 $ 230,995 $ 240,622 $
1,971
—
—
1,579
—
—
—
—
—
10,597
—
—
6,801
—
—
$ 330,255 $ 183,460 $ 152,526 $ 241,592 $ 247,423 $
$
$
1,984 $ 17,555 $ 14,385 $
—
—
—
1,984 $ 17,555 $ 14,385 $
—
—
—
—
—
—
— $
—
—
—
—
— $ 6,450 $
6,450
—
—
$ 482,600 $ 287,889 $ 225,106 $ 312,681 $ 393,590 $
913
—
—
—
—
—
1,454
—
—
—
—
—
3,770
446
2,898
$ 483,513 $ 287,889 $ 226,560 $ 312,681 $ 400,704 $
$ 182,805 $ 139,748 $ 109,292 $ 40,175 $ 66,436 $
—
—
2,853
—
—
—
629
—
—
28,217
15,208
—
421
—
—
$ 185,658 $ 139,748 $ 109,921 $ 83,600 $ 66,857 $
$ 172,011 $ 88,081 $ 41,998 $ 41,125 $ 35,555 $
2,708
—
91
—
2,918
2,445
—
—
—
4,743
—
—
20,926
35
31
—
14,420
1,773
284
—
$ 174,810 $ 93,444 $ 46,741 $ 62,117 $ 52,032 $
94,270 $
2,419
—
3,861
100,550 $
297,053 $
7,246
719
974
305,992 $
744,503 $
10,836
4,041
262
759,642 $
— $
—
—
2,600
2,600 $
869,566 $
14,439
2,286
1,419
887,710 $
89,663 $
55,500
—
—
145,163 $
56,281 $
17,823
416
1,782
—
76,302 $
$
$
$
$
3,352 $ 5,646 $
—
—
—
—
—
—
4,304 $
—
—
—
654 $ 1,292 $
51
—
—
2,025
—
—
1,766 $
2,872
39
1,192
3,352 $ 5,646 $
4,304 $
705 $ 3,317 $
5,869 $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
43 $
43 $
$ 1,240,231 $ 772,654 $ 598,931 $ 731,423 $ 827,361 $ 2,153,145 $
5,592
—
2,944
—
4,783
2,445
—
—
2,968
4,743
—
—
61,258
15,243
31
—
33,887
2,219
3,182
—
111,135
7,501
12,090
—
$ 1,248,767 $ 779,882 $ 606,642 $ 807,955 $ 866,649 $ 2,283,871 $
8,007 $
63
—
—
8,070 $
13,190 $
863
—
444
14,497 $
233,810
4,365
—
4,305
242,480
— $
—
—
—
— $
— $
—
—
—
— $
27,850 $
—
—
—
27,850 $
6,115 $
—
—
—
6,115 $
— $
—
—
—
— $
265,624 $
1,690
—
7,030
10,042
284,386 $
— $
—
—
—
— $
85 $
85 $
— $
—
—
—
— $
546,738
8,864
719
974
557,295
— $ 1,878,811
31,784
—
—
4,041
262
—
— $ 1,914,898
— $
—
—
—
— $
61,774
6,450
—
2,600
70,824
— $ 2,577,547
20,576
—
—
2,732
4,317
—
— $ 2,605,172
— $
—
—
—
628,119
84,767
15,208
2,853
— $
730,947
— $
—
—
—
—
— $
700,675
60,485
9,412
9,218
10,042
789,832
— $
—
—
—
17,014
4,948
39
1,192
— $
23,193
— $
— $
128
128
307,681 $
1,753
—
7,030
10,042
326,506 $
13,190 $ 6,644,616
222,239
32,151
25,721
10,042
14,497 $ 6,934,769
863
—
444
—
Included within net loans as of December 31, 2023 and 2022, was $4.8 million and $5.2 million, respectively, of
consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in
process according to local requirements of the applicable jurisdiction.
92
The following table presents types of collateral-dependent loans by class of loan which were individually evaluated for
impairment:
December 31, 2023
December 31, 2022
Collateral Type
(In thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Small Business Administration
Commercial business and other
Total
Real Estate
$
3,640 $
—
1,005
4,670
—
—
9,315 $
Business Assets Real Estate Business Assets
—
—
—
—
950
17,340
18,290
— $
—
—
—
2,576
11,768
14,344 $
3,547 $
254
1,045
3,953
—
2,853
11,652 $
$
For collateral dependent loans, the Company has adopted the practical expedient to measure the ACL based on
the fair value of collateral. The ACL is calculated on an individual loan basis based on the shortfall between the fair value
of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the
collateral exceeds the amortized cost, no allowance is required.
Off-Balance Sheet Credit Losses
Also included within scope of the current expected credit losses (“CECL”) standard are off-balance sheet loan
commitments, which includes the unfunded portion of committed lines of credit and commitments “in-process”.
Commitments “in‐process” reflect loans not on the Company’s books but rather negotiated loan / line of credit terms and
rates that the Company has offered to customers and is committed to honoring. In reference to “in‐process” credits, the
Company defines an unfunded commitment as a credit that has been offered to and accepted by a borrower, which has not
closed and by which the obligation is not unconditionally cancellable.
The Company estimates expected credit losses over the contractual period in which the Company is exposed to
credit risk through a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the
Company. The allowance for credit losses on off-balance sheet exposures is adjusted as a provision for credit loss expense.
The Company uses similar assumptions and risk factors that are developed for collectively evaluated financing receivables.
This estimates includes consideration of the likelihood that funding will occur and an estimate of expected credit losses
on commitments to be funded over its estimated life.
At December 31, 2023 and 2022, allowance for off-balance-sheet credit losses was $1.1 million and $1.0 million,
respectively, which is included in the “Other liabilities” on the Consolidated Statements of Financial Condition. During
the year ended December 31, 2023, 2022 and 2021 the Company has $0.1 million, ($0.2) million and ($0.6) million,
respectively, in credit loss (benefit) provision for off-balance-sheet items, which are included in “Other operating
expenses” on the Consolidated Statements of Income.
The following table presents the activity in the allowance for off balance sheet credit losses:
Balance at beginning of period
Provision (benefit)
Allowance for Off-Balance Sheet - Credit losses
$
$
4. Loans held for sale
2023
For the year ended December 31,
2022
(In thousands)
1,209
(239)
970
970
132
1,102
$
$
$
$
2021
1,815
(606)
1,209
At December 31, 2023 and 2022, the Company did not have any loans held for sale.
93
The Company has implemented a strategy of selling certain delinquent and non-performing loans. Once the
Company has decided to sell a loan, the sale usually closes in a short period of time, generally within the same quarter.
Loans designated held for sale are reclassified from loans held for investment to loans held for sale. Terms of sale include
cash due upon the closing of the sale, no contingencies or recourse to the Company and servicing is released to the buyer.
Additionally, at times the Company may sell participating interests in performing loans.
The following tables show loans sold during the period indicated:
(Dollars in thousands)
Performing loans
Commercial
Total
Delinquent and non-performing loans
Multi-family residential
Commercial
One-to-four family - mixed-use property
Total
(Dollars in thousands)
Performing loans
Multi-family residential
Commercial
Total
Delinquent and non-performing loans
Multi-family residential
Commercial
One-to-four family - mixed-use property
Total
(Dollars in thousands)
Delinquent and non-performing loans
Multi-family residential
Commercial
One-to-four family - mixed-use property
Total
5. Other Real Estate Owned
Loans sold
Proceeds
Net charge-offs Net gain
For the year ended December 31, 2023
2 $
2 $
2,000 $
2,000 $
— $
— $
7 $
3 $
3
13 $
3,622 $
1,867 $
1,553
7,042 $
— $
(8) $
—
(8) $
—
—
69
—
39
108
Loans sold
Proceeds
Net charge-offs Net gain
For the year ended December 31, 2022
5 $
1
6 $
20,818 $
4,312
25,130 $
2 $
3 $
2
7 $
646 $
5,690 $
527
6,863 $
— $
—
— $
— $
— $
—
— $
—
—
—
14
100
5
119
Loans sold
Proceeds
Net charge-offs Net gain
For the year ended December 31, 2021
13 $
4
16
33 $
14,269 $
7,380
6,983
28,632 $
(43) $
(64)
(14)
(121) $
112
104
119
335
The Company did not have any OREO during 2023, 2022 and 2021.
94
6. Securities
The following table summarizes the Company’s portfolio of securities held-to-maturity at December 31, 2023:
Amortized
Cost
Fair Value Gains
(In thousands)
Gross
Gross
Unrecognized Unrecognized
Losses
Municipals
Total municipals
FNMA
Total mortgage-backed securities
Total before allowance for credit losses
$ 66,155 $ 58,697 $
66,155
58,697
7,855
7,855
7,058
7,058
74,010 $ 65,755 $
—
—
—
—
—
$
$
(7,458)
(7,458)
(797)
(797)
(8,255)
Allowance for credit losses
Total
(1,087)
$ 72,923
The following table summarizes the Company’s portfolio of securities held-to-maturity at December 31, 2022:
Amortized
Cost
Gross
Gross
Unrecognized Unrecognized
Losses
Fair Value Gains
(In thousands)
Municipals
Total municipals
FNMA
Total mortgage-backed securities
Total before allowance for credit losses
$ 66,936 $ 55,561 $
66,936
55,561
7,875
7,875
6,989
6,989
74,811 $ 62,550 $
—
—
—
—
—
$
(11,375)
(11,375)
(886)
(886)
(12,261)
$
Allowance for credit losses
Total
(1,100)
$ 73,711
95
The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2023:
Amortized
Gross
Unrealized
Cost
Fair Value Gains
(In thousands)
Gross
Unrealized
Losses
$
U.S. government agencies
Corporate
Mutual funds
Collateralized loan obligations
Other
Total other securities
REMIC and CMO
GNMA
FNMA
FHLMC
Total mortgage-backed securities
Total Securities excluding portfolio layer adjustments
Unallocated portfolio layer basis adjustments (1)
Total securities available for sale
$
82,548 $
173,184
11,660
269,600
1,437
538,429
160,165
12,402
155,995
89,427
417,989
956,418
(2,254)
954,164 $
81,734 $
155,449
11,660
270,129
1,437
520,409
133,574
10,665
135,074
75,031
354,344
874,753
n/a
874,753 $
123 $
—
—
1,215
—
1,338
—
3
14
—
17
1,355
—
1,355 $
(937)
(17,735)
—
(686)
—
(19,358)
(26,591)
(1,740)
(20,935)
(14,396)
(63,662)
(83,020)
(2,254)
(80,766)
(1) Represents the amount of portfolio layer method basis adjustments related to available for sale (“AFS”) securities hedged in a closed portfolio. Under
GAAP portfolio layer method basis adjustments are not allocated to individual securities, however, the amounts impact the unrealized gains or losses for
the individual securities being hedged. See Note 20 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2022:
Amortized
Gross
Gross
Unrealized Unrealized
Cost
Fair Value Gains
Losses
(In thousands)
$
U.S. government agencies
Corporate
Mutual funds
Collateralized loan obligations
Other
Total other securities
REMIC and CMO
GNMA
FNMA
FHLMC
Total mortgage-backed securities
Total securities available for sale
$
83,720 $
146,430
11,211
129,684
1,516
372,561
175,712
9,193
172,690
96,725
454,320
826,881 $
81,103 $
131,766
11,211
125,478
1,516
351,074
148,414
7,317
148,265
80,287
384,283
735,357 $
2 $
—
—
—
—
2
—
3
—
—
3
5 $
(2,619)
(14,664)
—
(4,206)
—
(21,489)
(27,298)
(1,879)
(24,425)
(16,438)
(70,040)
(91,529)
The corporate securities held by the Company at December 31, 2023 and 2022 are issued by U.S. banking
institutions. The CMOs held by the Company at December 31, 2023 and 2022 are either fully guaranteed or issued by a
government sponsored enterprise.
96
The following tables detail the amortized cost and fair value of the Company’s securities classified as held-to-
maturity and available for sale at December 31, 2023, by contractual maturity. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay obligations with or without call or
prepayment penalties.
Securities held-to-maturity:
Due after ten years
Total other securities
Mortgage-backed securities
Allowance for credit losses
Total securities held-to-maturity
Securities available for sale:
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total other securities
Mutual funds
Mortgage-backed securities
Amortized
$
Cost
Fair Value
(In thousands)
66,155 $
66,155
7,855
74,010
58,697
58,697
7,058
65,755
(1,087)
72,923 $
n/a
65,755
$
Amortized
Cost
Fair Value
$
(In thousands)
59,485
59,979 $
99,599
105,056
209,728
222,684
139,937
139,050
508,749
526,769
11,660
11,660
417,989
354,344
956,418 $ 874,753
Total securities available for sale (1)
$
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $2.3 million related to AFS securities hedged in a closed pool at
December 31, 2023. See Note 20 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
97
The following tables show the Company’s securities with gross unrealized losses and their fair value, aggregated
by category and length of time that individual securities have been in a continuous unrealized loss position:
Held-to-maturity securities
Municipals
Total other securities
FNMA
Total mortgage-backed securities
At December 31, 2023
Total
Unrealized
Less than 12 months
12 months or more
Unrealized
Unrealized
Count
Fair Value Losses
Fair Value Losses
(Dollars in thousands)
Fair Value Losses
3
3
1
1
$
58,697
58,697
$
(7,458)
(7,458)
$
7,058
7,058
(797)
(797)
$
—
—
—
—
—
—
—
—
$
58,697
58,697
$
(7,458)
(7,458)
7,058
7,058
(797)
(797)
Total
4
$
65,755
$
(8,255)
$
—
$
—
$
65,755
$
(8,255)
Available for sale securities (1)
U.S. government agencies
Corporate
CLO
Total other securities
REMIC and CMO
GNMA
FNMA
FHLMC
Total mortgage-backed securities
Total
8
26
17
51
$
74,517
155,449
120,609
350,575
$
(937)
(17,735)
(686)
(19,358)
$
46
7
44
18
115
166
133,312
10,466
133,394
75,031
352,203
$ 702,778
(26,591)
(1,740)
(20,935)
(14,396)
(63,662)
$ (83,020)
$
2,517
25,428
—
27,945
—
3,867
2,044
—
5,911
33,856
$
(7)
(1,318)
—
(1,325)
$
72,000
130,021
120,609
322,630
$
(930)
(16,417)
(686)
(18,033)
—
(34)
(1)
—
(35)
(1,360)
133,312
6,599
131,350
75,031
346,292
$ 668,922
(26,591)
(1,706)
(20,934)
(14,396)
(63,627)
(81,660)
$
$
(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $2.3 million related to AFS securities hedged in a closed pool at
December 31, 2023. See Note 20 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
At December 31, 2022
Total
Unrealized
Less than 12 months
12 months or more
Unrealized
Unrealized
Count
Fair Value Losses
Fair Value Losses
Fair Value Losses
(Dollars in thousands)
Held-to-maturity securities
Municipals
Total other securities
FNMA
Total mortgage-backed securities
3
3
1
1
$
55,561
55,561
$ (11,375)
(11,375)
$
55,561
55,561
$ (11,375)
(11,375)
$
6,989
6,989
(886)
(886)
6,989
6,989
(886)
(886)
$
—
—
—
—
Total
4
$
62,550
$ (12,261)
$
62,550
$ (12,261)
$
—
$
—
—
—
—
—
Available for sale securities
U.S. government agencies
Corporate
CLO
Total other securities
REMIC and CMO
GNMA
FNMA
FHLMC
Total mortgage-backed securities
Total
7
20
19
46
$
77,856
131,766
125,478
335,100
$
(2,619)
(14,664)
(4,206)
(21,489)
$
77,059
45,447
95,518
218,024
$
(2,517)
(3,553)
(2,916)
(8,986)
$
797
86,319
29,960
117,076
$
(102)
(11,111)
(1,290)
(12,503)
47
8
47
18
120
166
148,120
7,133
148,229
80,287
383,769
$ 718,869
(27,298)
(1,879)
(24,425)
(16,438)
(70,040)
$ (91,529)
40,911
64
38,296
24,838
104,109
$ 322,133
(3,457)
—
(3,871)
(2,397)
(9,725)
$ (18,711)
107,209
7,069
109,933
55,449
279,660
$ 396,736
(23,841)
(1,879)
(20,554)
(14,041)
(60,315)
(72,818)
$
98
The Company reviewed each available for sale debt security that had an unrealized loss at December 31, 2023
and December 31, 2022. The Company does not have the intent to sell these securities and it is more likely than not the
Company will not be required to sell the securities before recovery of the securities’ amortized cost basis. This conclusion
is based upon considering the Company’s cash and working capital requirements and contractual and regulatory
obligations, none of which the Company believes would cause the sale of the securities. All of these securities are rated
investment grade or above and have a long history of no credit losses. It is not anticipated that these securities would be
settled at a price that is less than the amortized cost of the Company’s investment.
In determining the risk of loss for available for sale securities, the Company considered that mortgage-backed
securities are either fully guaranteed or issued by a government sponsored enterprise, which has a credit rating and
perceived credit risk comparable to U.S. government, the tranche of the purchased collateralized loan obligations (“CLO”)
and the issuer of Corporate securities are global systematically important banks. Each of these securities is performing
according to its terms and, in the opinion of management, will continue to perform according to its terms. Based on this
review, management believes that the unrealized losses have resulted from other factors not deemed credit-related and no
allowance for credit loss was recorded.
The Company reviewed each held-to-maturity security at December 31, 2023 and 2022 as part of its quarterly
ACL process, resulting in an allowance for credit losses of $1.1 million at both December 31, 2023 and 2022.
Accrued interest receivable on held-to-maturity debt securities totaled $0.1 million at both December 31, 2023
and 2022 and is excluded from the estimate of credit losses. Accrued interest receivable on available-for-sale debt securities
totaled $7.1 million and $3.7 million at December 31, 2023 and 2022 respectively.
The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity:
For the year ended December 31,
2022
2021
2023
Beginning balance
Provision (benefit)
Allowance for credit losses
$
$
1,100
(13)
1,087
$
$
862
238
1,100
$
$
907
(45)
862
The Company did not have any allowance for credit losses for available for sale securities for the year ended
December 31, 2023 and 2022.
The Company sold available for sale securities with carrying values at the time of sale totaling $84.2 million, and
$45.0 million during the years ended December 31, 2022, and 2021, respectively. The Company did not sell any available
for sale securities during the year ended December 31, 2023. The Company purchased mortgage-backed available for sale
securities totaling $5.4 million, $56.6 million, and $340.8 million during the years ended December 31, 2023, 2022, and
2021, respectively.
The following table represents the gross gains and gross losses realized from the sale of securities available for
sale for the periods indicated:
2023
For the year ended December 31,
2022
(In thousands)
2021
Gross gains from the sale of securities
Gross losses from the sale of securities
Net gain (loss) from the sale of securities
$
$
—
—
—
$
$
—
(10,948)
(10,948)
$
$
123
(10)
113
99
Included in “Other assets” within our Consolidated Statements of Financial Condition are amounts held in a rabbi
trust for certain non-qualified deferred compensation plans totaling $26.5 million and $24.3 million at December 31, 2023
and 2022, respectively.
7. Bank Premises and Equipment, net
Bank premises and equipment are as follows at December 31:
Leasehold improvements
Equipment and furniture
Total
Less: Accumulated depreciation and amortization
Bank premises and equipment, net
8. Deposits
2023
2022
(In thousands)
50,976 $
34,285
85,261
63,988
21,273 $
46,992
32,793
79,785
58,035
21,750
$
$
Total deposits at the periods shown and the weighted average rate on deposits at December 31, 2023, are as
follows:
Interest-bearing deposits:
Certificate of deposit accounts
Savings accounts
Money market accounts
NOW accounts
Total interest-bearing deposits
Non-interest bearing demand deposits
Total due to depositors
Mortgagors' escrow deposits
Total deposits
Weighted
Average
December 31, December 31, Rate
2023
2022
(Dollars in thousands)
2023 (1)
$
$
2,311,290 $
108,605
1,726,404
1,771,164
5,917,463
847,416
6,764,879
50,382
6,815,261 $
1,526,338
143,641
2,099,776
1,746,190
5,515,945
921,238
6,437,183
48,159
6,485,342
4.51 %
0.45
3.91
3.58
0.25
(1) The weighted average rate does not reflect the benefit of interest rate swaps.
The aggregate amount of time deposits with denominations of $250,000 or more (excluding brokered deposits
issued in $1,000 amounts under a master certificate of deposit) was $497.4 million and $377.4 million at December 31,
2023 and 2022, respectively. The aggregate amount of brokered deposits was $1,102.0 million and $856.3 million at
December 31, 2023 and 2022, respectively.
At December 31, 2023 and 2022, reciprocal deposits totaled $760.3 million and $659.5 million, respectively.
Government deposits are collateralized by either securities, letters of credit issued by FHLB-NY or are placed in
the IntraFi Network which arranges for placement of funds into certificate of deposit accounts, demand accounts or money
market accounts issued by other member banks of the network in increments of less than $250,000 to ensure that both
principal and interest are eligible for full FDIC deposit insurance. The letters of credit are collateralized by mortgage loans
pledged by the Company.
At December 31, 2023, government deposits totaled $1,587.9 million, of which $642.6 million were IntraFi
Network deposits and $945.3 million were collateralized by $177.0 million in securities and $1,118.7 million of letters of
credit. At December 31, 2022, government deposits totaled $1,653.3 million, of which $604.8 million were IntraFi
100
Network deposits and $1,048.5 million were collateralized by $155.7 million in securities and $1,073.7 million of letters
of credit.
Interest expense on deposits is summarized as follows for the years ended December 31:
2023
2022
(In thousands)
2021
Certificate of deposit accounts
Savings accounts
Money market accounts
NOW accounts
Total due to depositors
Mortgagors' escrow deposits
Total interest expense on deposits
$ 64,844 $ 12,547 $
7,340
255
7,271
5,453
20,319
5
$ 188,655 $ 47,285 $ 20,324
520
58,898
64,191
188,453
202
211
19,039
15,353
47,150
135
Scheduled remaining maturities of certificate of deposit accounts are summarized as follows for the years ended
December 31:
2023
2022
(In thousands)
$ 2,210,586 $
859,546
599,809
64,353
1,025
298
1,307
$ 2,311,290 $ 1,526,338
89,816
2,115
4,733
2,898
1,142
Within 12 months
More than 12 months to 24 months
More than 24 months to 36 months
More than 36 months to 48 months
More than 48 months to 60 months
More than 60 months
Total certificate of deposit accounts
101
9. Borrowed Funds
Borrowed funds are summarized as follows at December 31:
2023
Weighted
Average
Amount Rate
Amount
(Dollars in thousands)
2022
Weighted
Average
Rate
FHLB-NY advances - fixed rate:
Due in 2023
Due in 2024
Due in 2025
Due in 2026
Due in 2027
Due in 2028
Total FHLB-NY advances
Other Borrowings:
Due in 2024
Subordinated debentures
Due in 2031
Due in 2032
Total Subordinated debentures
$
—
145,750
14,675
108,244
185,017
27,115
480,801
—
5.53
4.90
4.71
4.63
3.83
4.88
$
815,501
—
—
—
—
—
815,501
4.08
—
—
—
—
—
4.08
125,000
4.99
—
—
123,700
63,930
187,630
3.51
6.52
4.53
123,285
63,680
186,965
3.52
6.54
4.55
Junior subordinated debentures - adjustable rate due in 2037
47,850
9.14
50,507
7.44
Total borrowings
FHLB-NY Advances
$ 841,281
5.06 % $ 1,052,973
4.32 %
The FHLB-NY advances are fixed rate borrowings with no call provisions. The borrowings original terms range
from one week to five years.
At December 31, 2023, the Company has borrowing availability totaling $3,808.6 million from the FHLB-NY in
Federal Home Loan Bank advances and letters of credit. At December 31, 2023, we pledged real estate loans totaling $5.4
billion as collateral. As of December 31, 2023, the Company had $1,599.5 million outstanding in combined balances of
FHLB-NY advances and letters of credit.
Other Borrowings
At December 31, 2023, the Company also has unsecured lines of credit with other commercial banks totaling
$1,103.0 million, with $25.0 million outstanding. Additionally, at December 31, 2023 the Company had a secured
borrowing totaling $100.0 million with the Federal Reserve.
Subordinated Debentures
Subordinated debt totaled $187.6 million at December 31, 2023, which included $2.4 million of unamortized debt
issuance costs. These costs are being amortized to interest expense using the level yield method through the first call date
of the subordinated debt.
102
The following table shows the terms of the subordinated debt issued by the Holding Company which is
outstanding at December 31, 2023:
(Dollars in thousands)
Amount
Issue Date
Initial Rate
First Reset Date
First Call Date
Holding Type
Spread over 3-month SOFR
Maturity Date
$
August 24, 2022
65,000 $
125,000
November 22, 2021
6.000 %
3.125 %
September 1, 2027
September 1, 2027
Variable
December 1, 2026
December 1, 2026
Variable
3.130 %
2.035 %
September 1, 2032
December 1, 2031
The subordinated debentures issued by the Company may not be redeemed prior to their respective first call dates,
except that the Company may redeem the subordinated debentures at any time, at its option, in whole but not in part,
subject to obtaining any required regulatory approvals, if (i) a change or prospective change in law occurs that could
prevent the Company from deducting interest payable on the subordinated debt for U.S. federal income tax purposes, (ii) a
subsequent event occurs that precludes the subordinated debt from being recognized as Tier 2 capital for regulatory capital
purposes, or (iii) the Company is required to register as an investment company under the Investment Company Act of
1940, as amended, in each case, at a redemption price equal to 100% of the principal amount of the subordinated debt plus
any accrued and unpaid interest through, but excluding, the redemption date.
Junior Subordinated Debentures
The Holding Company has three trusts formed under the laws of the State of Delaware for the purpose of issuing
capital and common securities, and investing the proceeds thereof in junior subordinated debentures of the Holding
Company. Each of these trusts issued $20.6 million of securities which had a fixed-rate for the first five years, after which
they reset quarterly based on a spread over 3-month Secured Overnight Financing Rate (“SOFR”). The securities were
first callable at par after five years, and pay cumulative dividends. The Holding Company has guaranteed the payment of
these trusts’ obligations under their capital securities. The terms of the junior subordinated debentures are the same as
those of the capital securities issued by the trusts. The junior subordinated debentures issued by the Holding Company are
carried at fair value in the consolidated financial statements.
The table below shows the terms of the securities issued by the trusts which is outstanding at December 31, 2023.
Issue Date
Initial Rate
First Reset Date
Spread over 3-month SOFR
Spread Adjustment
Maturity Date
Flushing Financial Flushing Financial Flushing Financial
Capital Trust III
Capital Trust II
Capital Trust IV
June 20, 2007
June 21, 2007
July 3, 2007
7.14 %
6.89 %
6.85 %
September 1, 2012
June 15, 2012
July 30, 2012
1.41 %
0.26 %
1.44 %
0.26 %
1.42 %
0.26 %
September 1, 2037 September 15, 2037
July 30, 2037
The consolidated financial statements do not include the securities issued by the trusts, but rather include the
junior subordinated debentures of the Holding Company. The interest rate on junior subordinated debt was adjusted in
2023 with the cessation of the publication of 3-month LIBOR to 3-month CME Term SOFR adjusted for relevant spread
adjustment.
10. Income Taxes
The Company and its subsidiaries are subject to income tax within U.S. federal, New York, New York City, and
various other state and local jurisdictions. The Company is undergoing examinations of New York City income tax returns
for years ending December 31, 2015 through 2017 and New York State income tax returns for years ending December 31,
2017 through 2019. The New York State examination of tax years 2015 through 2016 was closed in 2022. The Company
103
remains subject to examination for its federal and various other states income tax returns for the years ending on or after
December 31, 2020.
Income tax provisions are summarized as follows for the years ended December 31:
Federal:
Current
Deferred
Total federal tax provision
State and Local:
Current
Deferred
Total state and local tax provision
Total provision for income taxes
2023
2022
(In thousands)
2021
$
4,904 $ 17,565 $ 21,206
(1,128)
2,681
20,078
7,585
4
17,569
2,544
1,040
3,584
8,004
(597)
7,407
$ 11,169 $ 27,907 $ 27,485
10,198
140
10,338
The income tax provision in the Consolidated Statements of Income has been provided at effective rates of 28.0%,
26.6%, and 25.2% for the years ended December 31, 2023, 2022, and 2021, respectively. The effective rates differ from
the statutory federal income tax rate as follows for the years ended December 31:
Taxes at federal statutory rate
Increase (reduction) in taxes resulting
from:
State and local income tax, net of
Federal income tax benefit
Tax exempt income, net
Other
Taxes at effective rate
2023
2022
(Dollars in thousands)
2021
$
8,365
21.0 % $ 22,019
21.0 % $ 22,948
21.0 %
2,831
(1,079)
1,052
$ 11,169
8,167
7.1
(2,083)
(2.7)
2.6
(196)
28.0 % $ 27,907
6,865
7.8
(1,150)
(2.0)
(0.2)
(1,178)
26.6 % $ 27,485
6.3
(1.0)
(1.1)
25.2 %
104
The components of the net deferred tax assets are as follows at December 31:
Deferred tax assets:
Allowance for credit losses on loans
Net unrealized losses on securities available for sale*
Operating lease liabilities
Accrued compensation
Stock based compensation
Depreciation
Derivative adjustments
Pension and post-retirement benefits
Other allowances
Acquisition fair value marks
Net operating losses
Net unrealized losses on pension and post-retirement benefits*
Other
Deferred tax assets
Deferred tax liabilities:
Right of use assets
Net unrealized gains on cash flow hedges*
Deferred loan fees, net
Fair value adjustments
Net unrealized gains on entity specific fair value*
Other
Deferred tax liabilities
$
2023
2022
(In thousands)
$
12,475
24,667
12,680
7,882
3,140
2,711
445
2,044
3,609
637
491
172
1,482
72,435
12,287
6,667
3,819
3,110
747
660
27,290
12,528
28,418
14,289
8,709
3,171
2,462
2,030
2,126
1,185
960
257
124
989
77,248
13,410
11,429
3,930
2,314
672
24
31,779
Net deferred tax asset included in other assets
$
45,145
$
45,469
*Represents the amount of deferred taxes recorded in accumulated other comprehensive loss.
At December 31, 2023, after considering all available positive and negative evidence, management concluded
that a valuation allowance against deferred tax assets was not necessary because it is more likely than not that these tax
benefits will be fully realized in future periods. While management continues to evaluate the need for a valuation
allowance prospectively, it is not expected that a valuation allowance will be required based upon projected profitability.
At December 31, 2023 and 2022, the Company had no material unrecognized tax benefits or accrued interest
and penalties recorded. The Company does not expect the total amount of unrecognized tax benefits to significantly
increase within the next twelve months.
105
11. Stock-Based Compensation
For the years ended December 31, 2023, 2022, and 2021, the Company’s net income, as reported, includes $5.3
million, $6.2 million, and $7.9 million, respectively, of stock-based compensation costs as recorded in salaries and
employee benefits on the Consolidated Statements of Income, including the benefit or expense of phantom stock awards,
and $1.5 million, $1.6 million, and $2.0 million, respectively, of income tax benefits related to the stock-based
compensation plans.
The 2014 Omnibus Incentive Plan (“2014 Omnibus Plan”) became effective on May 20, 2014 after adoption by
the Board of Directors and approval by the stockholders. The 2014 Omnibus Plan authorizes the issuance of 1,100,000
shares. To the extent that an award under the 2014 Omnibus Plan is cancelled, expired, forfeited, settled in cash, settled
by issuance of fewer shares than the number underlying the award, or otherwise terminated without delivery of shares to
a participant in payment of the exercise price or taxes relating to an award, the shares retained by or returned to the
Company will be available for future issuance under the 2014 Omnibus Plan. On May 31, 2017, stockholders approved an
amendment to the 2014 Omnibus Plan (the “Amendment”) authorizing an additional 672,000 shares available for future
issuance. In addition, to increasing the number of shares for future grants, the Amendment eliminated, in the case of stock
options and SARs, the ability to recycle shares used to satisfy the exercise price or taxes for such awards. On May 18,
2021, stockholders approved an additional 1,100,000 shares available for future issuance. Including the additional shares
authorized from the Amendment, 746,910 shares were available for future issuance under the 2014 Omnibus Plan at
December 31, 2023. To fund restricted stock unit awards or option exercises, shares are issued from treasury stock, if
available; otherwise, new shares are issued. Options, stock appreciation rights, restricted stock, restricted stock units and
other stock-based awards granted under the 2014 Omnibus Plan are generally subject to a minimum vesting period of three
years with stock options having a 10-year maximum contractual term. Other awards do not have a contractual term of
expiration. The Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) is
authorized to grant awards that vest upon a participant’s retirement. These amounts are included in stock-based
compensation expense at the time of the participant’s retirement eligibility.
The Company has a long-term incentive compensation program for certain Company executive officers that
includes grants of performance-based restricted stock units (“PRSUs”) in addition to time-based restricted stock units
(“RSU”). Under the terms of the PRSU Agreement, the number of PRSUs that may be earned depends on the extent to
which performance goals for the award are achieved over a three-year performance period, as determined by the
Compensation Committee of the Board. The number of PRSUs that may be earned ranges from 0% to 150% of the target
award, with no PRSUs earned for below threshold-level performance, 50% of PRSUs earned for threshold-level
performance, 100% of PRSUs earned for target-level performance, and 150% of PRSUs earned for maximum-level
performance. As of December 31, 2023, PRSU’s granted in 2023 are being accrued at target, PRSU’s granted in 2022 are
being accrued at below target and PRSU’s granted in 2021 are accrued at above target. The different levels of accrual are
commensurate with the projected Company’s performance for the respective grant.
The Company uses the fair value of the common stock on the date of award to measure compensation cost for
restricted stock unit awards. Compensation cost is recognized over the vesting period of the award using the straight-line
method. There were 235,850, 212,811, and 238,985 RSU's granted for the years ended December 31, 2023, 2022, and
2021, respectively, and 79,050, 63,250, and 94,185 PRSU’s granted for the year ended December 31, 2023, 2022 and
2021, respectively.
106
The following table summarizes the Company’s RSU and PRSU awards under the 2014 Omnibus Plan for
the year ended December 31, 2023:
RSU Awards
PRSU Awards
Weighted-Average
Grant-Date
Fair Value
Weighted-Average
Grant-Date
Fair Value
Shares
Shares
Non-vested at
December 31, 2022
Granted
Vested
Forfeited
Non-vested at
December 31, 2023
Vested but unissued at
December 31, 2023
275,588 $
235,850
(228,292)
(2,985)
22.30
19.84
21.19
22.15
68,800 $
79,050
(70,280)
—
280,161 $
21.14
77,570 $
20.90
19.99
20.79
—
20.08
259,003 $
20.79 127,290 $
20.08
As of December 31, 2023, there was $4.1 million of total unrecognized compensation cost related to RSU and
PRSU awards granted under the 2014 Omnibus Plan. That cost is expected to be recognized over a weighted-average
period of 2.6 years. The total fair value of awards vested for the years ended December 31, 2023, 2022, and 2021 were
$5.8 million, $7.6 million, and $5.9 million, respectively. The vested but unissued RSU awards consist of awards made to
employees and directors who are eligible for retirement. The vested but unissued PRSU awards consist of awards made to
employees who are eligible for retirement. According to the terms of these awards, which provide for vesting upon
retirement, these employees and directors have no risk of forfeiture. These shares will be issued at the original contractual
vesting and settlement dates.
Phantom Stock Plan: The Company maintains a non-qualified phantom stock plan as a supplement to its profit
sharing plan for officers who have achieved the designated level and completed one year of service. Awards are made
under this plan on certain compensation not eligible for contributions made under the profit sharing plan, due to the terms
of the profit sharing plan and the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Employees
receive awards under this plan proportionate to the amount they would have received under the profit sharing plan, but for
limits imposed by the profit sharing plan and the Internal Revenue Code. The awards are made as cash awards, and then
converted to common stock equivalents (phantom shares) at the then current fair value of the Company’s common stock.
Dividends are credited to each employee’s account in the form of additional phantom shares each time the Company pays
a dividend on its common stock. In the event of a change of control (as defined in this plan), an employee’s interest is
converted to a fixed dollar amount and deemed to be invested in the same manner as their interest in the Bank’s non-
qualified deferred compensation plan. Employees vest under this plan 20% per year for the first 5 years of employment
and are 100% vested thereafter. Employees also become 100% vested upon a change of control. Employees receive their
vested interest in this plan in the form of a cash lump sum payment or installments, as elected by the employee, after
termination of employment. The Company adjusts its liability under this plan to the fair value of the shares at the end of
each period.
The following table summarizes the Company’s Phantom Stock Plan at or for the year ended December 31, 2023:
Fair Value
Shares
158,410 $
23,665
(1,228)
180,847 $
180,847 $
Weighted-
Average Fair
Value
19.38
$
$
17.38
16.95
16.48
16.48
Phantom Stock Plan
Outstanding at December 31, 2022
Granted
Distributions
Outstanding at December 31, 2023
Vested at December 31, 2023
107
The Company recorded stock-based compensation (benefit) expense for the phantom stock plan of ($0.3) million,
($0.6) million, and $1.1 million for the years ended December 31, 2023, 2022, and 2021, respectively. The total fair value
of distributions from the phantom stock plan were $21,000, $23,000, and $52,000 for the years ended December 31, 2023,
2022 and 2021, respectively.
12. Pension and Other Postretirement Benefit Plans
The amounts recognized in accumulated other comprehensive loss, on a pre-tax basis, consist of the following,
as of December 31:
Net Actuarial
(Gain) Loss
2022
2021
2023
2023
Prior Service
Cost (Credit)
2022
(In thousands)
2021
2023
Total
2022
2021
$
3,978 $
3,944 $
1,414 $
— $
— $
— $
3,978 $
3,944 $
1,414
(2,268)
(1,158)
(2,512)
(1,034)
$
552 $
398 $
932
(440)
1,906 $
—
—
— $
—
—
— $
(27)
—
(27) $
(2,268)
(1,158)
(2,512)
(1,034)
552 $
398 $
905
(440)
1,879
Employee Retirement Plan
Other Postretirement Benefit
Plans
Outside Directors Plan
Total
Employee Retirement Plan:
The Company has a funded noncontributory defined benefit retirement plan covering substantially all of its
salaried employees who were hired before September 1, 2005 (the “Retirement Plan”). The benefits are based on years of
service and the employee’s compensation during the three consecutive years out of the final ten years of service, which
was completed prior to September 30, 2006, the date the Retirement Plan was frozen, that produces the highest average.
The Bank’s funding policy is to contribute annually the amount recommended by the Retirement Plan’s actuary. At
December 31, 2023 and 2022, the Bank's Retirement Plan is invested 100% in fixed income funds. The Company did not
make a contribution to the Retirement Plan during the years ended December 31, 2023, 2022, and 2021. Net pension
(benefit) expense is recorded in salaries and employee benefits on the Consolidated Statements of Income. The Company
uses a December 31 measurement date for the Retirement Plan.
The following table sets forth, for the Retirement Plan, the change in benefit obligation and assets, and for the
Company, the amounts recognized in the Consolidated Statements of Financial Condition at December 31:
Change in benefit obligation:
Projected benefit obligation at beginning of year
Interest cost
Actuarial (gain) loss
Benefits paid
Projected benefit obligation at end of year
Change in plan assets:
Market value of assets at beginning of year
Actual return on plan assets
Benefits paid
Market value of plan assets at end of year
2023
2022
(In thousands)
$
17,172 $
812
199
(1,151)
17,032
22,109
553
(4,243)
(1,247)
17,172
19,065
1,306
(1,151)
19,220
26,059
(5,747)
(1,247)
19,065
Accrued pension asset included in other assets
$
2,188 $
1,893
108
Assumptions used to determine the Retirement Plan’s benefit obligations are as follows at December 31:
Weighted average discount rate
Rate of increase in future compensation levels
2023
2022
4.73 %
n/a
4.93 %
n/a
The mortality assumptions for 2023 and 2022 were based on the Pri-2012 Total Dataset with Scale MP-2021.
The components of the net pension (benefit) expense for the Retirement Plan are as follows for the years ended
December 31:
Interest cost
Amortization of unrecognized (gain) loss
Expected return on plan assets
Net pension (benefit) expense
Current year actuarial (gain) loss
Amortization of actuarial (gains) losses
Total recognized in other comprehensive (income) loss
Total recognized in net pension (benefit) expense and other comprehensive
(income) loss
2023
2022
(in thousands)
2021
$
812 $
—
(1,109)
(297)
553 $
5
(1,031)
(473)
512
488
(1,096)
(96)
34
—
34
2,535
(5)
2,530
127
(488)
(361)
$
(263) $
2,057 $
(457)
Assumptions used to develop periodic pension cost for the Retirement Plan for the years ended December 31:
Weighted average discount rate
Rate of increase in future compensation levels
Expected long-term rate of return on assets
2023
2022
2021
4.93 %
n/a
4.75 %
2.58 %
n/a
4.25 %
2.18 %
n/a
4.75 %
The following benefit payments are expected to be paid by the Retirement Plan for the years ending December 31:
2024
2025
2026
2027
2028
2029-2033
Future Benefit
Payments
(In thousands)
1,247
$
1,238
1,237
1,239
1,232
6,052
The long-term rate of return on assets assumption was set based on historical returns earned by fixed income
securities, adjusted to reflect expectations of future returns as applied to the plan’s target allocation of asset classes. Fixed
income securities were assumed to earn real rates of return in the ranges of 3-5%. When these overall return expectations
are applied to the plans target allocation, the result is an expected rate return of 4.75% for 2023.
The Retirement Plan’s weighted average asset allocations by asset category at December 31:
Debt securities
2023
2022
100 %
100 %
At December 31, 2023, Plan assets are invested in a diversified mix of fixed income funds.
109
The long-term investment objectives are to maintain plan assets at a level that will sufficiently cover long-term
obligations and to generate a return on plan assets that will meet or exceed the rate at which long-term obligations will
grow. Adjustments to this mix are made periodically based on current capital market conditions and plan funding levels.
Performance of the investment fund managers is monitored on an ongoing basis using modern portfolio risk analysis and
appropriate index benchmarks.
The Company does not expect to make a contribution to the Retirement Plan in 2024.
The following table sets forth the Retirement Plan’s assets at the periods indicated:
Pooled Separate Accounts
Long duration bond fund (a)
Long corporate bond fund (b)
Prudential short term (c)
Mutual Fund
Investment grade bond fund (d)
Total
At December 31,
2022
2023
(In thousands)
$
4,842 $
3,907
363
4,596
3,754
262
10,108
10,453
$ 19,220 $ 19,065
a. Comprised of fixed income securities with durations of longer than six years that seek to maximize total return
consistent with the preservation of capital and prudent investment management.
b. Comprised of corporate bonds with an average duration within 0.25 years of the benchmark and its average credit
quality is no lower than BBB. The fund seeks to outperform the Bloomberg Barclays Long Corporate Bond Index.
c. Comprised of money market instruments with an emphasis on safety and liquidity.
d. Comprised of high quality corporate bonds diversified broadly across industries, issuers and regions. The funds
primary benchmark is the Bloomberg Barclays U.S. Credit Index.
The fair value of the mutual fund is determined daily using quoted market prices in an open market (level 1). The
fair value of the pooled separate accounts is determined by the investment manager and is based on the value of the
underlying assets held at December 31, 2023 and 2022. These are measured at net asset value under the practical expedient
with future redemption dates.
The fair values of the Plan’s investments in pooled separate accounts are calculated each business day. All
investments can be redeemed on a daily basis without restriction. The investments in pooled separate accounts, which are
valued at net asset value, have not been classified in the fair value hierarchy in accordance with Accounting Standards
Update (“ASU”) No. 2015-07 “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share
(or Its Equivalent)”.
110
Other Postretirement Benefit Plans:
The Company sponsors two unfunded postretirement benefit plans (the “Postretirement Plans”) that cover all
retirees hired prior to January 1, 2011, who were full-time permanent employees with at least five years of service, and
their spouses. Effective January 1, 2011, the Postretirement Plans are no longer available for new hires. One plan provides
medical benefits through a 50% cost sharing arrangement. Effective January 1, 2000, the spouses of future retirees were
required to pay 100% of the premiums for their coverage. The other plan provides life insurance benefits and is
noncontributory. Effective January 1, 2010, life insurance benefits are not available for future retirees. Under these
programs, eligible retirees receive lifetime medical and life insurance coverage for themselves and lifetime medical
coverage for their spouses. Net postretirement (benefit) expense is recorded in salaries and employee benefits on the
Consolidated Statements of Income. The Company reserves the right to amend or terminate these plans at its discretion.
Comprehensive medical plan benefits equal the lesser of the normal plan benefit or the total amount not paid by
Medicare. Life insurance benefits for retirees are based on annual compensation and age at retirement. As of December 31,
2023, the Company has not funded these plans. The Company used a December 31 measurement date for these plans.
The following table sets forth, for the Postretirement Plans, the change in benefit obligation and assets, and for
the Company, the amounts recognized in the Consolidated Statements of Financial Condition at December 31:
Change in benefit obligation:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Projected benefit obligation at end of year
Change in plan assets:
Market value of assets at beginning of year
Employer contributions
Benefits paid
Market value of plan assets at end of year
2023
2022
(In thousands)
$
7,851 $ 10,853
269
277
(3,444)
(104)
7,851
158
381
6
(124)
8,272
—
124
(124)
—
—
104
(104)
—
Accrued pension cost included in other liabilities
$
8,272 $
7,851
Assumptions used in determining the actuarial present value of the accumulated postretirement benefit obligations
at December 31 are as follows:
Discount rate
Rate of increase in health care costs
Initial
Ultimate (year 2090)
Annual rate of salary increase for life insurance
2023
2022
4.73 %
4.93 %
7.50 %
4.54 %
n/a
7.50 %
4.44 %
n/a
111
The mortality assumptions for 2023 and 2022 were based on the Pri-2012 with Scale MP-2021.
The resulting net periodic postretirement expense consisted of the following components for the years ended
December 31:
Service cost
Interest cost
Amortization of unrecognized (gain) loss
Amortization of past service credit
Net postretirement benefit expense
Current year actuarial gain (loss)
Amortization of actuarial (gain) loss
Amortization of prior service credit
Total recognized in other comprehensive income (loss)
Total recognized in net postretirement (benefit) expense and
other comprehensive income (loss)
2023
2022
(In thousands)
2021
$ 158 $
381
(238)
—
301
269 $ 293
233
277
30
—
(85)
(27)
471
519
6
238
—
244
(3,444)
—
27
(3,417)
(370)
(31)
85
(316)
$ 545 $ (2,898) $ 155
Assumptions used to develop periodic postretirement expense for the Postretirement Plans for the years ended
December 31:
Rate of return on plan assets
Discount rate
Rate of increase in health care costs
Initial
Ultimate (year 2090)
Annual rate of salary increase for life insurance
2023 2022 2021
n/a
4.93 %
n/a
n/a
2.58 % 2.18 %
7.50 %
4.44 %
n/a
7.50 % 7.50 %
5.00 % 5.00 %
n/a
n/a
The following benefit payments under the Postretirement Plan, which reflect expected future service, are expected
to be paid for the years ending December 31:
2024
2025
2026
2027
2028
2029-2033
Defined Contribution Plans:
Future Benefit
$
Payments
(In thousands)
255
297
347
399
414
2,751
The Bank maintains a tax qualified 401(k) plan which covers substantially all salaried employees who have
completed one year of service. Currently, annual matching contributions under the Bank’s 401(k) plan equal 50% of the
employee’s contributions, up to a maximum of 3% of the employee’s base salary. In addition, the 401(k) plan includes the
Defined Contribution Retirement Plan (“DCRP”), under which the Bank contributes an amount equal to 4% of an
employee’s eligible compensation as defined in the plan, and the Profit Sharing Plan (“PSP”) under, which at the discretion
of the Company’s Board of Directors, a contribution is made. Employees hired after December 31, 2019 are not eligible
to receive DCRP and PSP contributions. Contributions for the DCRP and PSP are made in the form of Company common
stock at or after the end of each year. Annual contributions under these plans are subject to the limits imposed under the
112
Internal Revenue Code. Contributions by the Company into the 401(k) plan vest 20% per year over the employee’s first
five years of service. Contributions to these plans are 100% vested upon a change of control (as defined in the applicable
plan). Compensation expense recorded by the Company for these plans amounted to $3.4 million, $4.7 million, and $7.4
million for the years ended December 31, 2023, 2022, and 2021, respectively.
The Bank provides a non-qualified deferred compensation plan as an incentive for officers who have achieved
the designated level and completed one year of service. In addition to the amounts deferred by the officers, the Bank
matches 50% of their contributions, generally up to a maximum of 5% of the officers’ base salary. Matching contributions
under this plan vest 20% per year for five years. The non-qualified deferred compensation plan assets are held in a rabbi
trust totaling $18.9 million and $16.4 million at December 31, 2023 and 2022, respectively. Contributions become 100%
vested upon a change of control (as defined in the plan). Compensation expense recorded by the Company for this plan
amounted to $0.5 million for each of the years 2023, 2022 and 2021.
Outside Director Retirement Plan:
The Bank has an unfunded noncontributory defined benefit Outside Director Retirement Plan (the “Directors’
Plan”), which provides benefits to each non-employee director who became a non-employee director before January 1,
2004. Upon termination an eligible director will be paid an annual retirement benefit equal to $48,000. Such benefit will
be paid in equal monthly installments for 120 months. In the event of a termination of Board service due to a change of
control, an eligible non-employee director will receive a cash lump sum payment equal to 120 months of benefit. In the
event of the director’s death, the surviving spouse will receive the equivalent benefit. No benefits will be payable to a
director who is removed for cause. The Holding Company has guaranteed the payment of benefits under the Directors’
Plan, for this reason the Bank has assets held in a rabbi trust totaling $2.0 million and $1.9 million at December 31, 2023
and 2022, respectively. Net pension (benefit) expense is recorded in other operating expense on the Consolidated
Statements of Income. The Bank uses a December 31 measurement date for the Directors’ Plan.
The following table sets forth, for the Directors’ Plan, the change in benefit obligation and assets, and for the
Company, the amounts recognized in the Consolidated Statements of Financial Condition at December 31:
Change in benefit obligation:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Projected benefit obligation at end of year
Change in plan assets:
Market value of assets at beginning of year
Employer contributions
Benefits paid
Market value of plan assets at end of year
2023
2022
(In thousands)
$
1,302 $
8
59
(285)
(68)
1,016
2,010
11
48
(623)
(144)
1,302
—
68
(68)
—
—
144
(144)
—
Accrued pension cost included in other liabilities
$
1,016 $
1,302
113
The components of the net pension expense for the Directors’ Plan are as follows for the years ended
December 31:
Service cost
Interest cost
Amortization of unrecognized (gain) loss
Net pension expense (income)
2023
2022
(In thousands)
2021
$
8 $
59
(161)
(94)
11 $
48
(29)
30
16
46
(18)
44
Current actuarial (gain) loss
Amortization of actuarial gain (loss)
Total recognized in other comprehensive income (loss)
Total recognized in net pension (benefit) expense and other
comprehensive income (loss)
(285)
161
(124)
(623)
29
(594)
(184)
18
(166)
$ (218) $ (564) $ (122)
Assumptions used to determine benefit obligations and periodic pension expense for the Directors’ Plan for
the years ended December 31:
Weighted average discount rate for the benefit obligation
Weighted average discount rate for periodic pension benefit expense
Rate of increase in future compensation levels
2023
2022
2021
4.73 %
4.93 %
n/a
4.93 %
2.58 %
n/a
2.58 %
2.18 %
n/a
The following benefit payments under the Directors’ Plan, which reflect expected future service, are expected to
be paid for the years ending December 31:
2024
2025
2026
2027
2028
2029 - 2033
13. Stockholders’ Equity
Dividend Restrictions on the Bank:
Future Benefit
$
Payments
(In thousands)
124
96
96
96
96
444
In connection with the Bank’s conversion from mutual to stock form in November 1995, a special liquidation
account was established at the time of conversion, in accordance with the requirements of its primary regulator, which was
equal to its capital as of June 30, 1995. The liquidation account is reduced as and to the extent that eligible account holders
have reduced their qualifying deposits. Subsequent increases in deposits do not restore an eligible account holder’s interest
in the liquidation account. In the event of a complete liquidation of the Bank, each eligible account holder will be entitled
to receive a distribution from the liquidation account in an amount proportionate to the current adjusted qualifying balances
for accounts then held. As of December 31, 2023 and 2022, the Bank’s liquidation account was $0.3 million and was
presented within retained earnings.
In addition to the restriction described above, New York State and Federal banking regulations place certain
restrictions on dividends paid by the Bank to the Holding Company. The total amount of dividends which may be paid at
any date is generally limited to the net income of the Bank for the current year and prior two years, less any dividends
114
previously paid from those earnings. As of December 31, 2023, the Bank had $29.7 million in retained earnings available
to distribute to the Holding Company in the form of cash dividends.
In addition, dividends paid by the Bank to the Holding Company would be prohibited if the effect thereof would
cause the Bank’s capital to be reduced below applicable minimum capital requirements.
The amount of dividends the Holding Company can declare and pay is generally limited to its net profits for the
preceding year less dividends paid during that period. In addition, dividends paid by the Holding Company would be
prohibited if the effect thereof would cause the Holding Company’s capital to be reduced below applicable minimum
capital requirements.
Treasury Stock Transactions:
The Holding Company repurchased 786,498 common shares at an average cost of $14.59 and 1,253,725 common
shares at an average cost of $21.73 during the years ended December 31, 2023 and 2022, respectively. At December 31,
2023, 807,964 shares remained subject to repurchase under the authorized stock repurchase program. Stock will be
purchased under the authorized stock repurchase program from time to time, in the open market or through private
transactions, subject to market conditions and at the discretion of the management of the Company. There is no expiration
or maximum dollar amount under this authorization.
Accumulated Other Comprehensive Loss:
The following are changes in accumulated other comprehensive loss by component, net of tax, for the years
ended:
December 31, 2023
Unrealized Gains Unrealized Gains
(Losses) on
Available for Sale
Securities
(Losses) on
Cash flow
Hedges
Fair Value
Defined Benefit Option Elected
Pension Items on Liabilities Total
(In thousands)
Beginning balance, net of tax
$
(63,106) $
25,380 $
(275) $
1,513 $ (36,488)
Other comprehensive income (loss) before
reclassifications, net of tax
Amounts reclassified from accumulated other
comprehensive income (loss), net of tax
Net current period other comprehensive income (loss), net of
tax
Ending balance, net of tax
$
8,362
6,943
—
(17,527)
170
(276)
165
15,640
—
(17,803)
8,362
(54,744) $
(10,584)
14,796 $
(106)
(381) $
165
(2,163)
1,678 $ (38,651)
115
December 31, 2022
Unrealized Gains Unrealized Gains
(Losses) on
Available for Sale
Securities
(Losses) on
Cash flow
Hedges
Fair Value
Defined Benefit Option Elected
Pension Items on Liabilities Total
(In thousands)
Beginning balance, net of tax
$
(6,272) $
(1,406) $
(1,282) $
2,276 $ (6,684)
Other comprehensive
income (loss) before
reclassifications, net of tax
Amounts reclassified from
accumulated other
comprehensive income
(loss), net of tax
Net current period other
comprehensive income (loss),
net of tax
Ending balance, net of tax
$
(64,381)
23,812
1,043
(763)
(40,289)
7,547
2,974
(36)
—
10,485
(56,834)
(63,106) $
26,786
25,380 $
1,007
(275) $
(763)
(29,804)
1,513 $ (36,488)
December 31, 2021
Unrealized Gains Unrealized Gains
(Losses) on
Available for Sale
Securities
(Losses) on
Cash flow
Hedges
Fair Value
Defined Benefit Option Elected
Pension Items on Liabilities Total
(In thousands)
Beginning balance, net of tax
$
1,290 $
(17,521) $
(1,884) $
1,849 $ (16,266)
Other comprehensive
income (loss) before
reclassifications, net of tax
Amounts reclassified from
accumulated other
comprehensive income
(loss), net of tax
Net current period other
comprehensive income (loss),
net of tax
Ending balance, net of tax
(7,484)
8,819
319
427
2,081
(78)
7,296
283
—
7,501
$
(7,562)
(6,272) $
16,115
(1,406) $
602
(1,282) $
427
9,582
2,276 $ (6,684)
116
The following tables set forth significant amounts reclassified out of accumulated other comprehensive loss by
component for the periods indicated:
Details about Accumulated Other
Comprehensive Income (Loss)
Components
For the year ended December 31, 2023
Amounts Reclassified from
Accumulated Other Comprehensive
Income (Loss)
(In thousands)
Affected Line Item in the
Statement
Where Net Income (Loss) is
Presented
Cash flow hedges:
Interest rate swaps benefit (expense) $
Amortization of defined benefit
pension items:
Actuarial losses benefit (expense)
$
$
$
25,424 Interest expense
(7,897) Provision for income taxes
17,527
399 (1) Other operating expense
(123) Provision for income taxes
276
For the year ended December 31, 2022
Details about Accumulated Other
Affected Line Item in the Statement
Comprehensive Income (Loss) Components Comprehensive Income (Loss) Where Net Income (Loss) is Presented
(In thousands)
Amounts Reclassified from
Accumulated Other
Unrealized gains (losses) on available for
sale securities:
Cash flow hedges:
Interest rate swaps benefit (expense)
Amortization of defined benefit pension
items:
Actuarial losses benefit (expense)
Prior service credits benefit (expense)
$
$
$
$
$
$
(10,948) Net gain (loss) on sale of securities
3,401 Provision for income taxes
(7,547)
(4,341)
Interest expense
1,367 Provision for income taxes
(2,974)
24 (1) Other operating expense
27 (1) Other operating expense
51 Total before tax
(15) Provision for income taxes
36
117
Details about Accumulated Other
Comprehensive Income (Loss) Components
Affected Line Item in the Statement
Where Net Income (Loss) is
Presented
For the year ended December 31, 2021
Amounts Reclassified from
Accumulated Other
Comprehensive Income
(Loss)
(In thousands)
Unrealized gains (losses) on available for sale
securities:
Cash flow hedges:
Interest rate swaps benefit (expense)
Amortization of defined benefit pension
items:
Actuarial losses benefit (expense)
Prior service credits benefit (expense)
$
$
$
$
$
$
113 Net gain (loss) on sale of securities
(35) Provision for income taxes
78
(10,623)
Interest expense
3,327 Provision for income taxes
(7,296)
(500)(1) Other operating expenses
85 (1) Other operating expenses
(415) Total before tax
132 Provision for income taxes
(283)
(1) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 12 (“Pension and
Other Postretirement Benefit Plans”) for additional information.
14. Regulatory Capital
Under current capital regulations, the Bank is required to comply with four separate capital adequacy standards.
As of December 31, 2023, the Bank continued to be categorized as “well-capitalized” under the prompt corrective action
regulations and continued to exceed all regulatory capital requirements. The Bank is also required to comply with a Capital
Conservation Buffer (“CCB”). The CCB is designed to establish a capital range above minimum capital requirements and
impose constraints on dividends, share buybacks and discretionary bonus payments when capital levels fall below
prescribed levels. The minimum CCB is 2.5%. The CCB for the Bank at December 31, 2023 and 2022 was 4.81% and
6.37%, respectively.
118
Set forth below is a summary of the Bank’s compliance with banking regulatory capital standards.
Tier I (leverage) capital:
Capital level
Requirement to be well-capitalized
Excess
Common Equity Tier I risk-based capital:
Capital level
Requirement to be well-capitalized
Excess
Tier I risk-based capital:
Capital level
Requirement to be well-capitalized
Excess
Total risk-based capital:
Capital level
Requirement to be well-capitalized
Excess
December 31, 2023
December 31, 2022
Percent of
Percent of
Amount
Assets
Amount
Assets
$
$
$
$
825,104
435,792
389,312
825,104
438,878
386,226
825,104
540,157
284,947
864,999
675,196
189,803
(Dollars in thousands)
9.47 % $
5.00
4.47
915,628
433,667
481,961
12.22 % $
6.50
5.72
915,628
431,734
483,894
12.22 % $
8.00
4.22
915,628
531,365
384,263
12.81 % $
10.00
2.81
954,457
664,206
290,251
10.56 %
5.00
5.56
13.79 %
6.50
7.29
13.79 %
8.00
5.79
14.37 %
10.00
4.37
The Holding Company is subject to the same regulatory capital requirements as the Bank. As of December 31,
2023, the Holding Company continues to be categorized as “well-capitalized” under the prompt corrective action
regulations and continues to exceed all regulatory capital requirements. The CCB for the Holding Company at
December 31, 2023 and 2022 was 4.93% and 5.25%, respectively.
Set forth below is a summary of the Holding Company’s compliance with banking regulatory capital standards.
Tier I (leverage) capital:
Capital level
Requirement to be well-capitalized
Excess
Common Equity Tier I risk-based capital:
Capital level
Requirement to be well-capitalized
Excess
Tier I risk-based capital:
Capital level
Requirement to be well-capitalized
Excess
Total risk-based capital:
Capital level
Requirement to be well-capitalized
Excess
December 31, 2023
December 31, 2022
Percent of
Percent of
Amount
Assets
Amount
Assets
$
$
$
$
737,732
435,748
301,984
691,754
438,770
252,984
737,732
540,024
197,708
967,627
675,030
292,597
(Dollars in thousands)
8.47 % $
5.00
3.47
746,880
433,607
313,273
10.25 % $
6.50
3.75
698,258
431,635
266,623
10.93 % $
8.00
2.93
746,880
531,243
215,637
14.33 % $
10.00
4.33
975,709
664,054
311,655
8.61 %
5.00
3.61
10.52 %
6.50
4.02
11.25 %
8.00
3.25
14.69 %
10.00
4.69
119
15. Leases
The Company has 31 operating leases for branches (including headquarters) and office spaces, 7 operating leases
for vehicles, and one operating lease for equipment. Our leases have remaining lease terms ranging from less than six
months to approximately 12 years, none of which has a renewal option reasonably certain of exercise, which has been
reflected in the Company’s calculation of lease term.
The Company has elected the short-term lease recognition exemption such that the Company will not recognize
ROU assets or lease liabilities for leases with a term of less than 12 months from the commencement date. The Company
has five agreements in 2023 and two agreements in 2022 that qualified as short-term leases.
Certain leases have escalation clauses for operating expenses and real estate taxes. The Company’s non-
cancelable Operating lease agreements expire through 2036.
Supplemental balance sheet information related to leases was as follows:
(Dollars in thousands)
Operating lease ROU assets
Operating lease liabilities
December 31, 2023 December 31, 2022
$
$
39,557 $
43,289
40,822 $
46,125
Weighted-average remaining lease term-operating leases
Weighted average discount rate-operating leases
6.1 years
3.2%
6.6 years
2.9%
120
The components of lease expense and cash flow information related to leases were as follows:
(In thousands)
Lease Cost
Operating lease cost
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
Line Item Presented
$
Occupancy and equipment
Other operating expenses
Professional services,
Occupancy and equipment
and Other operating expenses
Occupancy and equipment
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Right-of-use assets obtained in exchange
for new operating lease liabilities
For the year ended December 31,
2022
2023
2021
$
8,737
89
8,510
93
212
1,128
10,166
$
193
999
9,795
$
8,609
80
164
1,065
9,918
10,429
$
9,459
$
12,811
3,866
$
1,208 $
6,570
$
$
$
The Company’s minimum annual rental payments at December 31, 2023 for Bank facilities due under non-cancelable
leases are as follows:
Years ended December 31:
2024
2025
2026
2027
2028
Thereafter
Total minimum payments required
Less: implied interest
Total lease obligations
16. Commitments and Contingencies
Commitments:
Minimum Rental
(In thousands)
$
$
9,065
9,244
8,363
4,286
4,035
10,109
45,102
(4,280)
40,822
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers. These financial instruments include commitments to extend credit and lines of
credit. The instruments involve, to varying degrees, elements of credit and market risks in excess of the amount recognized
in the consolidated financial statements.
The Company’s exposure to credit loss in the event of nonperformance by the counterparty to the financial
instrument for loan commitments and lines of credit is represented by the contractual amounts of these instruments.
121
Commitments to extend credit (principally real estate mortgage loans) and lines of credit (principally business
lines of credit and home equity lines of credit) amounted to $47.1 million and $440.3 million, respectively, at December 31,
2023. Included in these commitments were $8.1 million of fixed-rate commitments at a weighted average rate of 7.40%
and $479.2 million of adjustable-rate commitments with a weighted average rate of 8.17%, as of December 31, 2023.
Since generally all loan commitments are expected to be drawn upon, the total loan commitments approximate future cash
requirements, whereas the amounts of lines of credit may not be indicative of the Company’s future cash requirements.
The loan commitments generally expire in 90 days, while construction loan lines of credit mature within eighteen months
and home equity lines of credit mature within ten years. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are legally binding agreements to lend to a customer as long as there is no violation
of any condition established in the contract. Commitments generally have fixed expiration dates and require payment of a
fee. The Company evaluates each customer’s creditworthiness on a case-by-case basis. Collateral held consists primarily
of real estate.
The Bank collateralized a portion of its deposits with letters of credit issued by FHLB-NY. At December 31,
2023 and 2022, there were $1,118.7 million and $1,073.7 million, respectively, of letters of credit outstanding. The letters
of credit are collateralized by mortgage loans pledged by the Bank.
The Company has purchase obligations running through 2026 totaling $12.5 million and $18.9 million as of
December 31, 2023 and 2022, respectively, which are primarily related to contracts with data processing, loan servicing
and check processing services provided by third-party vendors. During the years ended December 31, 2023 and 2022, the
Company purchased $6.5 million and $6.2 million, respectively, of services provided by third-party vendors.
The Company’s future non-cancelable purchase obligations, which were not recognized in our consolidated
balance sheet as of December 31, 2023, are as follows:
Year ended December 31:
2024
2025
2026
Total
$
$
(In thousands)
6,637
3,417
2,494
12,548
The Trusts issued capital securities with a par value of $61.9 million in June and July 2007. The Holding
Company has guaranteed the payment of the Trusts’ obligations under these capital securities.
Contingencies:
The Company is a defendant in various lawsuits. Management of the Company, after consultation with outside
legal counsel, believes that the resolution of these various matters will not result in any material adverse effect on the
Company’s consolidated financial condition, results of operations or cash flows.
17. Concentration of Credit Risk
The Company’s lending is concentrated in the New York City metropolitan area. The Company evaluates each
customer’s creditworthiness on a case-by-case basis under the Company’s established underwriting policies. The collateral
obtained by the Company generally consists of first liens on one-to-four family residential, multi-family residential, and
commercial real estate. The largest amount the Bank could lend to one borrower was approximately $123.8 million and
$137.3 million at December 31, 2023 and 2022, respectively. The Bank’s largest aggregate amount of outstanding loans
to one borrower was $103.2 million, and $109.4 million at December 31, 2023 and 2022, respectively, all of which were
performing according to their terms.
122
18. Related Party Transactions
Certain directors, senior officers, and their related parties, including their immediate families and companies in
which they are principal owners, were deposit customers of the Bank. At December 31, 2023 and 2022, there were no
outstanding loans to any related party. Deposits of related parties totaled $4.9 million and $7.7 million at December 31,
2023 and 2022, respectively.
19. Fair Value of Financial Instruments
The Company carries certain financial assets and financial liabilities at fair value in accordance with GAAP which
defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. GAAP permits entities to choose to measure many financial instruments and
certain other items at fair value. The Company did not purchase or sell any financial assets or liabilities under the fair
value option during the years ended December 31, 2023 and 2022.
Management selected the fair value option for certain investment securities, and certain borrowed funds as the
yield, at the time of election, on the financial assets was below-market, while the rate on the financial liabilities was above-
market rate. Management also considered the average duration of these instruments, which, for investment securities, was
longer than the average for the portfolio of securities, and, for borrowings, primarily represented the longer-term
borrowings of the Company. Choosing these instruments for the fair value option adjusted the carrying value of these
financial assets and financial liabilities to their current fair value, and more closely aligned the financial performance of
the Company with the economic value of these financial instruments. Management believed that electing the fair value
option for these financial assets and financial liabilities allows them to better react to changes in interest rates. At the time
of election, Management did not elect the fair value option for investment securities and borrowings with shorter duration,
adjustable-rates, and yields that approximated the then current market rate, as management believed that these financial
assets and financial liabilities approximated their economic value.
The following table presents the financial assets and financial liabilities reported at fair value under the fair value
option at December 31, 2023 and 2022, and the changes in fair value included in the Consolidated Statement of Income –
Net gain (loss) from fair value adjustments:
Description
(In thousands)
Mortgage-backed securities
Other securities
Borrowed funds
Net gain (loss) from fair value adjustments (1)
Fair Value
Fair Value
Measurements at Measurements at
December 31, 2023 December 31, 2022
Changes in Fair Values For Items Measured at Fair Value
Pursuant to Election of the Fair Value Option
For the year ended December 31,
2022
2021
2023
$
$
262
13,097
47,850
$
295
12,728
50,507
$
6
81
2,486
2,573
$
$
(27) $
(1,639)
7,394
5,728 $
(5)
36
(14,004)
(13,973)
(1) The net gain (loss) from fair value adjustments presented in the above table does not include net gains (losses) of $1.0 million from the change in
fair value of derivative instruments during the years ended December 31, 2021. There were no gains or (losses) from changes in the fair value of
derivative instruments for the years ended December 31, 2023 and 2022.
Included in the fair value of the financial assets and financial liabilities selected for the fair value option is the
accrued interest receivable or payable for the related instrument. The Company reports as interest income or interest
expense in the Consolidated Statement of Income, the interest receivable or payable on the financial instruments selected
for the fair value option at their respective contractual rates.
The borrowed funds have a contractual principal amount of $61.9 million at December 31, 2023 and 2022. The
fair value of borrowed funds includes accrued interest payable of $0.4 million at December 31, 2023 and 2022.
123
The Company generally holds its earning assets, other than securities available for sale, to maturity and settles its
liabilities at maturity. However, fair value estimates are made at a specific point in time and are based on relevant market
information. These estimates do not reflect any premium or discount that could result from offering for sale at one time
the Company’s entire holdings of a particular instrument. Accordingly, as assumptions change, such as interest rates and
prepayments, fair value estimates change and these amounts may not necessarily be realized in an immediate sale.
Disclosure of fair value does not require fair value information for items that do not meet the definition of a
financial instrument or certain other financial instruments specifically excluded from its requirements. These items include
core deposit intangibles and other customer relationships, premises and equipment, leases, income taxes and equity.
Further, fair value disclosure does not attempt to value future income or business. These items may be material
and accordingly, the fair value information presented does not purport to represent, nor should it be construed to represent,
the underlying “market” or franchise value of the Company.
Financial assets and financial liabilities reported at fair value are required to be measured based on either:
(1) quoted prices in active markets for identical financial instruments (Level 1); (2) significant other observable inputs
(Level 2); or (3) significant unobservable inputs (Level 3).
A description of the methods and significant assumptions utilized in estimating the fair value of the Company’s
assets and liabilities that are carried at fair value on a recurring basis are as follows:
Level 1 – where quoted market prices are available in an active market. At December 31, 2023 and 2022, Level
1 included one mutual fund.
Level 2 – when quoted market prices are not available, fair value is estimated using quoted market prices for
similar financial instruments and adjusted for differences between the quoted instrument and the instrument being valued.
Fair value can also be estimated by using pricing models, or discounted cash flows. Pricing models primarily use market-
based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates,
equity or debt prices and credit spreads. In addition to observable market information, models also incorporate maturity
and cash flow assumptions. At December 31, 2023 and 2022, Level 2 included mortgage related securities, corporate debt,
municipals and interest rate swaps.
Level 3 – when there is limited activity or less transparency around inputs to the valuation, financial instruments
are classified as Level 3. At December 31, 2023 and 2022, Level 3 included trust preferred securities owned and junior
subordinated debentures issued by the Company.
The methods described above may produce fair values that may not be indicative of net realizable value or
reflective of future fair values. While the Company believes its valuation methods are appropriate and consistent with
those of other market participants, the use of different methodologies, assumptions and models to determine fair value of
certain financial instruments could produce different estimates of fair value at the reporting date.
124
The following table sets forth the Company’s assets and liabilities that are carried at fair value on a recurring
basis, including those reported at fair value under the fair value option, and the level that was used to determine their fair
value, at December 31:
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
2023
2022
Significant Other
Observable Inputs
(Level 2)
2023
2022
Significant Other
Unobservable Inputs
(Level 3)
2023
2022
Total carried at fair value
on a recurring basis
2022
2023
(In thousands)
$
— $
— $ 354,344 $ 384,283 $
— $
11,660
—
11,211
—
507,312
69,013
338,347
74,586
1,437
—
— $ 354,344 $ 384,283
351,074
74,586
520,409
69,013
1,516
—
Assets:
Securities available for sale:
Mortgage-backed securities
Other securities
Interest rate swaps
Total assets
$
11,660 $
11,211 $ 930,669 $ 797,216 $
1,437 $
1,516 $ 943,766 $ 809,943
Liabilities:
Borrowings
Interest rate swaps
$
— $
—
— $
—
— $
— $
28,401
18,407
47,850 $
—
50,507 $
—
47,850 $
28,401
50,507
18,407
Total liabilities
$
— $
— $
28,401 $
18,407 $
47,850 $
50,507 $
76,251 $
68,914
The following tables set forth the Company’s assets and liabilities that are carried at fair value on a recurring
basis, classified within Level 3 of the valuation hierarchy for the periods indicated:
Beginning balance
Net gain (loss) from fair value adjustment of financial
assets (1)
Net (gain) loss from fair value adjustment of financial
liabilities (1)
Increase (decrease) in accrued interest
Change in unrealized (gains) losses included in other
comprehensive loss
Ending balance
Changes in unrealized gains (losses) held at period end
For the year ended
December 31, 2023
December 31, 2022
Trust preferred
securities
Junior subordinated
debentures
Trust preferred
securities
Junior subordinated
debentures
$
1,516
$
(In thousands)
50,507
$
1,695
$
56,472
(81)
—
2
—
(2,486)
68
$
$
—
1,437
—
$
$
(239)
47,850
2,425
$
$
(187)
—
8
—
1,516
—
$
$
—
(7,393)
280
1,148
50,507
2,186
(1) Presented in the Consolidated Statement of Income under Net loss from fair value adjustments.
125
The following tables present the qualitative information about recurring Level 3 fair value of financial instruments
and the fair value measurements at the periods indicated:
Assets:
Fair Value
Valuation Technique
December 31, 2023
Unobservable Input
(Dollars in thousands)
Range
Weighted Average
Trust preferred securities
$
1,437 Discounted cash flows Spread over 3-month SOFR
4.4 %
n/a
Liabilities:
Junior subordinated debentures
$
47,850 Discounted cash flows Spread over 3-month SOFR
4.4 %
n/a
Assets:
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted Average
(Dollars in thousands)
December 31, 2022
Trust preferred securities
$
1,516 Discounted cash flows Spread over 3-month Libor
3.6 %
n/a
Liabilities:
Junior subordinated debentures
$
50,507 Discounted cash flows Spread over 3-month Libor
3.6 %
n/a
The significant unobservable inputs used in the fair value measurement of the Company’s trust preferred
securities and junior subordinated debentures valued under Level 3 at December 31, 2023 and 2022, are the effective yields
used in the cash flow models. Significant increases or decreases in the effective yield in isolation would result in a
significantly lower or higher fair value measurement.
The following table sets forth the Company’s assets that are carried at fair value on a non-recurring basis, and the
level that was used to determine their fair value, at December 31:
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
2023
2022
Significant Other
Observable Inputs
(Level 2)
Significant Other
Unobservable Inputs
(Level 3)
Total carried at fair value
on a non-recurring basis
2023
2022
2023
2022
2023
2022
(In thousands)
Assets:
Certain delinquent loans
$
— $
— $
— $
— $
5,279 $ 18,330 $
5,279 $ 18,330
Total assets
$
— $
— $
— $
— $
5,279 $ 18,330 $
5,279 $ 18,330
The following tables present the qualitative information about non-recurring Level 3 fair value measurements of
financial instruments at the periods indicated:
Fair Value Valuation Technique
At December 31, 2023
Unobservable Input
(Dollars in thousands)
Range
Weighted Average
Assets:
Certain delinquent loans $
1,105 Sales approach
Adjustment to sales comparison value
Reduction for planned expedited disposal
-16.9% to -6.0 %
n/a
Certain delinquent loans $
4,174
Discounted Cash
flow
Discount Rate
4.3% to 13.5 %
Probability of Default
30.0% to 46.0 %
-11.5%
15.0 %
12.7 %
33.5 %
126
Fair Value Valuation Technique
At December 31, 2022
Unobservable Input
(Dollars in thousands)
Range
Weighted Average
Assets:
Certain delinquent loans $ 18,189 Sales approach
Adjustment to sales comparison value
-20.0% to 0.0 %
Reduction for planned expedited disposal 10.0% to 15.0 %
Certain delinquent loans
flow
$
141 Discounted Cash
Discount Rate
Probability of Default
n/a
n/a
-1.3%
13.6 %
4.3 %
35.0 %
The weighted average for unobservable inputs for collateral-dependent loans is based on the relative fair value of
the loans.
The Company did not have any liabilities that were carried at fair value on a non-recurring basis at December 31,
2023 and 2022.
The methods and assumptions used to estimate fair value at December 31, 2023 and 2022 are as follows:
Securities:
The fair values of securities are contained in Note 6 (“Securities”) of Notes to the Consolidated Financial
Statements. Fair value is based upon quoted market prices, where available. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar securities and adjusted for differences between the quoted
instrument and the instrument being valued. When there is limited activity or less transparency around inputs to the
valuation, securities are valued using discounted cash flows.
Certain Delinquent Loans:
For certain delinquent loans, fair value is generally estimated by discounting management’s estimate of future
cash flows with a discount rate commensurate with the risk associated with such assets or, for collateral dependent loans,
85% of the appraised or internally estimated value of the property.
Other Real Estate Owned and Other Repossessed Assets:
The fair value for OREO is based on appraised value through a current appraisal, or sometimes through an internal
review, additionally adjusted by the estimated costs to sell the property. The fair value for other repossessed assets are
based upon the most recently reported arm’s length sales transaction. When there is no recent sale activity, the fair value
is calculated using capitalization rates.
Junior Subordinated Debentures:
The fair value of the junior subordinated debentures was developed using a credit spread based on the
subordinated debt issued by the Company adjusting for differences in the junior subordinated debt’s credit rating, liquidity
and time to maturity. The unrealized net gain/loss attributable to changes in our own credit risk was determined by
adjusting the fair value as determined in the proceeding sentence by the average rate of default on debt instruments with a
similar debt rating as our junior subordinated debentures, with the difference from the original calculation and this
calculation resulting in the instrument-specific unrealized gain/loss.
127
Interest Rate Swaps:
The fair value of interest rate swaps is based upon broker quotes.
The following tables set forth the carrying amounts and fair values of selected financial instruments based on the
assumptions described above used by the Company in estimating fair value at the periods indicated:
Assets:
Cash and due from banks
Securities held-to-maturity
Mortgage-backed securities
Other securities
Securities available for sale
Mortgage-backed securities
Other securities
Loans
FHLB-NY stock
Accrued interest receivable
Interest rate swaps
Liabilities:
Deposits
Borrowed Funds
Accrued interest payable
Interest rate swaps
Assets:
Cash and due from banks
Securities held-to-maturity
Mortgage-backed securities
Other securities
Securities available for sale
Mortgage-backed securities
Other securities
Loans
FHLB-NY stock
Accrued interest receivable
Interest rate swaps
Liabilities:
Deposits
Borrowed Funds
Accrued interest payable
Interest rate swaps
Carrying
Amount
Fair
Value
December 31, 2023
Level 1
(In thousands)
Level 2
Level 3
$
172,157
$
172,157
$
172,157
$
—
$
—
7,855
65,068
7,058
58,697
354,344
520,409
6,906,950
31,066
59,018
69,013
354,344
520,409
6,512,841
31,066
59,018
69,013
—
—
—
11,660
—
—
—
—
7,058
—
354,344
507,312
—
31,066
59,018
69,013
—
58,697
—
1,437
6,512,841
—
—
—
$
6,815,261
841,281
12,111
28,401
$
6,778,657
801,156
12,111
28,401
$
4,503,971
—
—
—
$
2,274,686
753,306
12,111
28,401
$
—
47,850
—
—
Carrying
Amount
Fair
Value
December 31, 2022
Level 1
(In thousands)
Level 2
Level 3
$
151,754
$
151,754
$
151,754
$
—
$
—
7,875
65,836
6,989
55,561
384,283
351,074
6,934,769
45,842
45,048
74,856
384,283
351,074
6,651,795
45,842
45,048
74,856
—
—
—
11,211
—
—
—
—
6,989
—
384,283
338,347
—
45,842
45,048
74,856
—
55,561
—
1,516
6,651,795
—
—
—
$
6,485,342
1,052,973
10,034
18,407
$
6,453,978
1,027,370
10,034
18,407
$
4,959,004
—
—
—
$
1,494,974
976,863
10,034
18,407
$
—
50,507
—
—
128
20. Derivative Financial Instruments
At December 31, 2023 and 2022, the Company’s derivative financial instruments consist of interest rate swaps.
The Company’s interest rate swaps are used for three purposes: 1) to mitigate the Company’s exposure to rising interest
rates on certain fixed rate loans and securities totaling $902.5 million and $273.6 million at December 31, 2023 and
December 31, 2022, respectively; 2) to facilitate risk management strategies for our loan customers with $721.0 million
of swaps outstanding, which include $360.5 million with customers and $360.5 million with bank counterparties at
December 31, 2023 and $221.2 million of swaps outstanding, which include $110.6 million with customers and $110.6
million with bank counterparties at December 31, 2022; and 3) to mitigate exposure to rising interest rates on certain short-
term advances, brokered deposits and municipal deposits totaling $826.8 million and $871.5 million at December 31, 2023
and December 31, 2022, respectively.
At December 31, 2023, the Company has outstanding portfolio layer hedges on a closed portfolio of AFS
securities with a notional amount of $200.0 million and a closed portfolio of loans with a notional amount of
$500.0 million.
At December 31, 2023 and 2022, we held derivatives designated as cash flow hedges, fair value hedges and
certain derivatives not designated as hedges.
At December 31, 2023 and 2022, derivatives with a combined notional amount of $722.0 million and $221.2
million, respectively, were not designated as hedges. At December 31, 2023 and 2022, derivatives with a combined
notional amount of $902.5 million and $273.6 million were designated as fair value hedges. At December 31, 2023 and
2022, derivatives with a combined notional amount of $825.8 million and $871.5 million, respectively, were designated
as cash flow hedges.
For cash flow hedges, the changes in the fair value of the derivative are reported in accumulated other
comprehensive income (loss), net of tax. Amounts in accumulated other comprehensive income (loss) are reclassified into
earnings in the same period during which the hedged forecasted transaction effects earnings. During the years ended
December 31, 2023 and 2022, $25.4 million and $0.3 million in reduced expense, respectively was reclassified from
accumulated other comprehensive income (loss) to interest expense. The estimated amount to be reclassified in next 12
months out of accumulated other comprehensive income (loss) into earnings is $19.7 million. During the years ended
December 31, 2023 and 2021, the Company did not terminate any cash flow hedges. During the year ended December 31,
2022, the Company terminated 4 cash flow hedges with a combined notional value of $170.8 million, resulting in a net
gain of $6.0 million. This income is being amortized over the remaining original terms of the cash flow hedges resulting
in income recognized totaling $4.7 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively,
which is recorded in deposits and other interest expense in the Consolidated Statements of Income.
Changes in the fair value of interest rate swaps not designated as hedges are reflected in “Net gain (loss) from
fair value adjustments” in the Consolidated Statements of Income.
129
The following table sets forth information regarding the Company’s derivative financial instruments at the periods
indicated:
December 31, 2023
Cash flow hedges:
Assets
Liabilities
Notional
Amount
Fair Value (1)
Notional
Amount
Fair Value (1)
(In thousands)
Interest rate swaps (borrowings and deposits)
$
555,000
$
21,973
$
270,750
$
Fair value hedges:
Interest rate swaps (loans and securities)
702,540
21,068
200,000
Non hedge:
Interest rate swaps (loans and deposits)
Total
December 31, 2022
Cash flow hedges:
Interest rate swaps (borrowings and deposits)
Fair value hedges:
Interest rate swaps (loans)
Non hedge:
Interest rate swaps (loans)
Total
$
$
$
361,486
1,619,026
$
25,972
69,013
$
360,486
831,236
$
700,750
$
31,716
$
170,750
$
273,607
24,673
-
110,598
1,084,955
$
18,197
74,586
$
110,598
281,348
$
18,197
18,407
1,076
1,354
25,971
28,401
210
-
(1) Derivatives in a positive position are recorded as “Other assets” and derivatives in a negative position are recorded as “Other liabilities” in the
Consolidated Statements of Financial Condition.
The following table presents information regarding the Company’s fair value hedged items for the periods
indicated:
Line Item in the Consolidated Statement
of Financial Condition in Which
the Hedged Item Is Included
Carrying Amount of the
Hedged
Assets/(Liabilities)
Cumulative Amount
of the Fair Hedging Adjustment
Included in the Carrying Amount of
the Hedged
Assets/(Liabilities)
(In thousands)
Loans
Multi-family residential
Commercial real estate
Total
Portfolio Layer
Loans held for Investment (1)
Securities available for sale (2)
Total
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
$
$
$
$
81,471
110,666
192,137
2,590,087
283,195
2,873,282
$
$
$
$
82,613
167,353
249,966
—
—
—
$
$
$
$
(9,078)
(8,301)
(17,379)
(949)
(2,254)
(3,203)
$
$
$
$
(10,480)
(15,442)
(25,922)
—
—
—
(1) Carrying amount represents the amortized cost. At December 31, 2023, the amortized cost of the portfolio layer method closed portfolio was $2.6
billion, of which $500 million was designated as hedged. The cumulative amount of basis adjustments was $0.9 million.
(2) Carrying amount represents the fair value. December 31, 2023, the fair value of the portfolio layer method closed portfolio was $283.2 million, of
which $200 million was designated as hedged. The cumulative amount of basis adjustments was $2.3 million.
130
The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income for
the periods indicated:
(In thousands)
Financial Derivatives:
Affected Line Item in the Statements
Where Net Income is Presented
For the years ended
December 31,
2022
2021
2023
Interest rate swaps - non hedge
Other interest expense
$
— $
— $
(305)
Interest rate swaps - non hedge
Net gain (loss) from fair value adjustments
—
—
978
Interest rate swaps - fair value hedge (loans)
Interest and fees on loans
15,909
96
(3,481)
Interest rate swaps - fair value hedge (securities)
Interest and dividends on securities
2,912
—
—
Interest rate swaps - non hedge (municipal deposit)
Interest expense - Deposits
3
—
Interest rate swaps - cash flow hedge (short-term advances)
Other interest expense
5,312
(2,218)
—
-
(10,554)
Interest rate swaps - cash flow hedge (brokered deposits)
Total net income (expense) from the effects of derivative
instruments
Interest expense - Deposits
20,112
2,504
(139)
$ 44,248 $
382 $ (13,501)
The Company’s interest rate swaps are subject to master netting arrangements between the Company and its three
designated counterparties. The Company has not made a policy election to offset its derivative positions. The interest rate
swaps with borrowers are cross collateralized with the underlying loan and, therefore, there is no posted collateral. Interest
rate swap agreements with third-party counterparties contain provisions that require the Company to post collateral if the
derivative exposure exceeds a threshold amount and receive collateral for agreements in a net asset position.
The following tables present the effect of the master netting arrangements on the presentation of the derivative
assets and liabilities in the Consolidated Statements of Condition as of the dates indicated:
Gross Amounts
Recognized
Offset in Statement of Presented in Statement of
Financial Condition
Financial Condition
Financial
Instruments
Cash
Collateral
Net Amount
Gross Amount
Net Amount
(In thousands)
December 31, 2023
Assets:
Interest rate swaps $
69,013
$
—
$
69,013 $
— $
(48,505) $
20,508
Liabilities:
Interest rate swaps
28,401
—
28,401
—
—
28,401
December 31, 2022
Assets:
Interest rate swaps $
74,586
$
—
$
74,586 $
— $
(72,185) $
2,401
Liabilities:
Interest rate swaps
18,407
—
18,407
—
—
18,407
131
21. New Authoritative Accounting Pronouncements
Accounting Standards: Adopted in 2023
In March 2022, FASB issued ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled
Debt Restructurings and Vintage Disclosures” (Topic 326), which replaces the recognition and measurement guidance
elated to TDRs for creditors that have adopted ASC Topic 326 (commonly referred to as “CECL”) with the recognition
and measurement guidance contained in Accounting Standards Codification (“ASC”) 310-20, to determine whether a
modification results in a new loan or a continuation of an existing loan. This ASU also enhances disclosures about loan
modifications for borrowers who are experiencing financial difficulty. The guidance also requires public business entities
to present gross write-offs by year of origination in their vintage disclosures. The amendments in this ASU were applied
on a prospective basis. The ASU was adopted on January 1, 2023 prospectively, without material impact on our business
operations or to our consolidated financial statements.
In March 2022, the FASB issued ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging –
Portfolio Layer Method”, which expanded the current last-of-layer method to allow multiple hedged layers of a single
closed portfolio and allow hedge accounting to be achieved using different types of derivatives and layering techniques,
including the use of amortizing swaps with clarification that such a trade would be viewed as being a single layer. Under
this expanded scope, both prepayable and nonrepayable financial assets may be included in a single closed portfolio hedge.
This update also provides clarifications to breach requirements and disclosures. As a result of these changes, the last-of-
layer method has been renamed the portfolio layer method. No cumulative-effect adjustment to the opening balance of
retained earnings was required upon adoption of these amendments. The Company did not have any portfolio layer or last-
of- layer hedges prior to the first quarter of 2023. The amendments related to disclosures were applied on a prospective
basis. The ASU was adopted in the first quarter of 2023 – see Notes 3 (“Loans and Allowance for Credit Losses”), 6
(“Securities”), and 20 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements for more
information regarding the impact to our consolidated financial statements.
Accounting Standards: Pending Adoption
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income
Tax Disclosures”. This ASU requires that public business entities on an annual basis (1) disclose specific categories in
the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The
ASU requires all entities disclose on an annual basis (1) the amount of income taxes paid, disaggregated by federal, state
and foreign taxes and (2) the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes
paid is equal or greater than 5 percent of total income taxes paid. The ASU also requires that all entities disclose (1)
income (loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic or
foreign and (2) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state and
foreign. This ASU is effective for public business entities for annual periods beginning after December 15, 2024. We do
not expect adoption of this ASU to have a material effect on our consolidated financial statements.
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures”. This ASU enhances disclosures about significant segment expenses. The key
amendments include: (1) require that a public entity disclose on an annual an interim basis, significant segment expenses
that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of
segment profit or loss, (2) require that a public entity disclose, on an annual and interim basis, an amount for other segment
items by reportable segment and a description of its composition, (3) require that a public entity provide all annual
disclosures about a reportable segment's profit or loss currently required by GAAP in interim periods as well, (4) clarify
that if CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding
how to allocate resources, an entity may report one or more of those additional measures of segment profit, (5) require that
a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure
of segment profit or loss in assessing segment performance and deciding how to allocate resources and (6) require that a
public entity that has a single reportable segment provide all the disclosures required by the amendments in the ASU and
all existing segment disclosures. This ASU is effective for public entities for fiscal years beginning after December 15,
2023, and interim periods within fiscal years beginning after December 15, 2024. As we have one reportable segment, the
requirements of this standard for such entities will apply beginning with the Company's annual report ending December
31, 2024. We do not expect adoption of this ASU to have a material effect on our consolidated financial statements.
132
22. Parent Company Only Financial Information
Earnings of the Bank are recognized by the Holding Company using the equity method of accounting.
Accordingly, earnings of the Bank are recorded as increases in the Holding Company’s investment, any dividends would
reduce the Holding Company’s investment in the Bank, and any changes in the Bank’s unrealized gain or loss on securities
available for sale, net of taxes, would increase or decrease, respectively, the Holding Company’s investment in the Bank.
The condensed financial statements for the Holding Company are presented below:
Condensed Statements of Financial Condition
Assets:
Cash and due from banks
Securities available for sale:
Other securities
Investment in Bank
Goodwill
Other assets
Total assets
Liabilities:
Subordinated debentures
Junior subordinated debentures, at fair value
Other liabilities
Total liabilities
Stockholders' Equity:
Common stock
Additional paid-in capital
Treasury stock, at average cost (5,221,813 shares and 4,611,232, respectively)
Retained earnings
Accumulated other comprehensive loss, net of taxes
Total equity
Total liabilities and equity
December 31, December 31,
2022
2023
(Dollars in thousands)
$
103,919 $
22,723
1,437
799,324
2,185
5,395
912,260 $
1,516
890,828
2,185
3,681
920,933
187,630 $
47,850
6,943
242,423
186,965
50,507
6,304
243,776
$
$
341
264,534
(106,070)
549,683
(38,651)
669,837
341
264,332
(98,535)
547,507
(36,488)
677,157
$
912,260 $
920,933
Condensed Statements of Income (Loss)
Dividends from the Bank
Interest income
Interest expense
Net gain (loss) from fair value adjustments
Other operating expenses
Income (loss) before taxes and equity (deficit) in undistributed earnings of
subsidiary
Income tax benefit
Income (loss) before equity (deficit) in undistributed earnings of subsidiary
Equity (deficit) in undistributed earnings of the Bank
Net income (loss)
Other comprehensive income (loss), net of tax
Comprehensive net income (loss)
133
For the years ended December 31,
2021
2023
2022
(In thousands)
$ 125,000 $
767
(12,668)
2,405
(2,483)
50,000 $
468
(7,771)
7,207
(1,645)
5,000
145
(6,215)
(13,604)
(1,844)
113,021
4,816
117,837
(89,173)
28,664
(2,163)
26,501 $
48,259
2,684
50,943
26,002
76,945
(29,804)
(16,518)
5,403
(11,115)
92,908
81,793
9,582
91,375
$
47,141 $
Condensed Statements of Cash Flows
Operating activities:
Net income (loss)
Adjustments to reconcile net income to net cash provided by operating
activities:
(Equity) deficit in undistributed earnings of the Bank
Deferred income tax provision (benefit)
Net gain (loss) from fair value adjustments
Stock-based compensation expense
Net change in operating assets and liabilities
Net cash provided by (used in) operating activities
Investing activities:
Investment in Bank
Net cash provided by (used in) investing activities
Financing activities:
Proceeds from long-term borrowings
Repayment of long-term borrowings
Purchase of treasury stock
Cash dividends paid
Net cash provided by (used in) financing activities
2023
For the years ended December 31,
2022
(In thousands)
2021
$
28,664 $
76,945 $
81,793
89,173
774
(2,405)
5,604
(1,189)
120,621
(26,002)
2,111
(7,207)
6,807
(2,866)
49,788
(92,908)
(3,939)
13,604
6,829
2,927
8,306
—
—
(50,000)
(50,000)
(15,000)
(15,000)
—
—
(13,165)
(26,260)
(39,425)
63,603
—
(29,675)
(27,031)
6,897
122,843
(90,250)
(11,370)
(26,524)
(5,301)
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
81,196
22,723
103,919 $
6,685
16,038
22,723 $
(11,995)
28,033
16,038
$
134
23. Quarterly Financial Data (unaudited)
Selected unaudited quarterly financial data for the fiscal years ended December 31, 2023 and 2022 is presented
below:
4th
3rd
2023
2nd
(In thousands, except per share data)
4th
1st
3rd
2022
2nd
1st
Quarterly operating data:
Interest income
Interest expense
Net interest income
Provision (benefit) for loan
losses
Other operating income (loss)
Other operating expense
Income before income tax
expense
Income tax expense
Net income
Basic earnings per common
share
Diluted earnings per common
share
Dividends per common share
Average common shares
outstanding for:
Basic earnings per share
Diluted earnings per share
$ 108,763 $ 104,036 $ 96,561 $ 92,117 $ 89,270
35,069
54,201
59,609
44,427
46,855
45,262
53,183
43,378
62,678
46,085
$ 81,745 $ 74,291 $ 71,320
7,841
20,539
63,479
61,206
9,561
64,730
998
7,402
40,735
596
3,309
36,388
1,416
5,020
35,110
7,508
6,857
39,156
(12)
(7,652)
33,742
2,145
8,995
35,634
1,590
7,353
35,522
1,358
1,313
38,794
11,754
3,655
8,099 $
12,819
10,752
2,917
2,570
7,835 $ 8,686 $ 4,044 $ 10,249
5,455
1,411
11,872
3,186
$
32,422
8,980
24,640
6,421
$ 23,442 $ 25,035 $ 18,219
34,971
9,936
$
0.27 $
0.26 $
0.29 $
0.13 $
0.34
$
$
0.27 $
0.22 $
0.26 $
0.22 $
0.29 $
0.22 $
0.13 $
0.22 $
0.34
0.22
$
$
$
0.76 $
0.81 $
0.58
0.76 $
0.22 $
0.81 $
0.22 $
0.58
0.22
29,650
29,650
29,703
29,703
30,090
30,090
30,265
30,265
30,420
30,420
30,695
30,695
30,937
30,937
31,254
31,254
As previously disclosed on Form 8-K filed on January 26, 2024, the Company’s consolidated financial statements
and ratios for the three month period ended March 31, 2023, the three and six month periods ended June 30, 2023 and the
three and nine month periods ended September 30, 2023, were in need of restatement to correct the accounting treatment
of employee retention credits (“ERCs”), which were incorrectly recognized as income during such periods. On February
12, 2024 the Company filed 10-Q/A’s for the quarterly periods ended March 31, 2023, June 30, 2023 and September 30,
2023, to correct the previously reported treatment of ERCs. The change impacted net income by a decrease of $1.1 million
for the period ended March 31, 2023, an increase of $0.1 million and a decrease of $1.1 million, respectively, for the three
and six month periods ended June 30, 2023, and a decrease of $1.6 million and $2.6 million, respectively, for the three
and nine month periods ended September 30, 2023. The table above reflects the corrected financial results.
135
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
Flushing Financial Corporation
Uniondale, New York
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial condition of Flushing Financial
Corporation (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income,
comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2023, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) and our report dated March 15, 2024 expressed an adverse opinion
thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates
to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses
As described in Notes 2 and 4 to the Company’s consolidated financial statements, the Company had a gross loan
portfolio of $6.9 billion and related allowance for credit losses of $40.2 million at December 31, 2023. The allowance for
credit losses consists of quantitative and qualitative components. The Company considers historical loss experience,
136
current economic and business conditions, as well as reasonable and supportable forecasts to develop the quantitative
component. This quantitative component is then adjusted for qualitative risk factors. These components involve significant
assumptions that require a high degree of management’s judgement.
We identified management’s significant assumptions used to develop the quantitative component of the
allowance, specifically the reasonable and supportable forecast period and the reversion to historical loss period; and the
assumptions around the determination of the qualitative risk factors, as a critical audit matter. Auditing these assumptions
involved especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to
address these matters, including the extent of specialized skill and knowledge needed.
The primary procedures we performed to address this critical audit matter included:
Testing the design and operating effectiveness of controls relating to determination of reasonable and supportable
forecast period, and the reversion to historical loss period, as well as assumptions around the determination of
qualitative risk factors.
Testing the completeness and accuracy of the data used in determining the qualitative risk factors and the
relevance and reliability of the data used in determining the reasonable and supportable forecast period by
comparing the data to internally developed and third-party sources, and other audit evidence gathered.
Assessing the reasonableness of the qualitative risk factors using corroborating and contradictory source data to
challenge management’s qualitative risk factors.
Utilizing personnel with specialized knowledge and skills assisting in: (i) assessing the reasonableness of the
established forecast and reversion period ranges, (ii) evaluating the appropriateness of economic cycle and (iii)
assessing reasonableness of reasonable and supportable forecast period and the reversion to historical loss period
assumptions used to develop the quantitative credit loss component.
/S/ BDO USA, P.C.
We have served as the Company’s auditor since 2015.
New York, New York
March 15, 2024
137
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Flushing Financial Corporation
Uniondale, New York
Opinion on Internal Control over Financial Reporting
We have audited Flushing Financial Corporation’s (the “Company’s”) internal control over financial reporting as
of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the
Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31,
2023, based on the COSO criteria.
We do not express an opinion or any other form of assurance on management’s statements referring to any
corrective actions taken by the Company after the date of management’s assessment.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the consolidated statements of financial condition of the Company as of December 31, 2023
and 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and
cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated
March 15, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A,
Management’s Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. A material weakness regarding management’s failure to
design and maintain controls over the probability assessment associated with the recognition of income related to employee
retention credits has been identified and described in management’s assessment. This material weakness was considered
in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 financial statements, and this
report does not affect our report dated March 15, 2024 on those financial statements.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
138
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
/S/ BDO USA, P.C.
New York, New York
March 15, 2024
139
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
The Company carried out, under the supervision and with the participation of the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this Annual Report. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of December 31, 2023, the design and operation of these
disclosure controls and procedures were not effective.
As The Company previously disclosed that as of December 31, 2023, the Company’s disclosure controls and
procedures were not effective to provide reasonable assurance that information required to be disclosed in the reports that
it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in applicable rules and forms, and that such information is accumulated and communicated to management to
allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting,
and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2023.
Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities
Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and
principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Management performed an assessment of the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2023 based upon criteria in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”). Based on this
assessment, management concluded that the Company’s internal control over financial reporting was not effective as of
December 31, 2023 based on those criteria issued by COSO.
Although the Company had engaged an independent national tax credit advisory firm that had advised the
Company that it qualified for certain Employee Retention Credits (“ERCs”) in the course of preparing its consolidated
financial statements for the fiscal year ended December 31, 2023, the Company determined that it could no longer rely on
such advice and was not able to treat the ultimate realization of the ERCs as “probable” under GAAP.
140
Management determined that the foregoing constituted a material weakness in the Company’s internal control
over financial reporting. Actions taken to remediate the material weakness included the preparation of a technical
accounting memorandum for any material unusual transactions including careful evaluation of any probability assessments
or other areas of judgment involved, such as the ERCs, to determine the correct accounting treatment for such transactions.
Due to such actions, management has concluded that the material weakness was remediated subsequent to December 31,
2023. The material weakness had resulted in a restatement of the Company’s previously filed consolidated financial
statements as of and for each of the quarterly periods ended March 31, June 30, and September 30, 2023.
BDO USA, P.C., the Company’s independent registered public accounting firm that audited the Company’s
consolidated financial statements included in this Annual Report on Form 10-K, has issued a report on the effectiveness
of the Company’s internal control over financial reporting as of December 31, 2023, as stated in its report.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Other than the disclosures below, information regarding the directors and executive officers of the Company
appears in the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held May 29, 2024 (“Proxy
Statement”) under the captions “Board Nominees,” “Continuing Directors,” “Executive Officers Who Are Not Directors”
and “Meeting and Committees of the Board of Directors – Audit Committee” and is incorporated herein by this reference.
Information regarding Section 16(a) beneficial ownership appears in the Company’s Proxy Statement under the caption
“Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by this reference.
Code of Ethics. The Company has adopted a Code of Business Conduct and Ethics that applies to all of its
the Company’s website at:
directors, officers and employees. This code
https://s28.q4cdn.com/653305835/files/doc_downloads/governance/Code_of_Business_Conduct_Ethics.pdf.
is publicly available on
Any substantive amendments to the code and any grant of a waiver from a provision of the code requiring
disclosure under applicable SEC or NASDAQ rules will be disclosed in a report on Form 8-K.
Audit Committee Financial Expert. The Board of Directors of the Company has determined that Louis C. Grassi,
the Chairman of the Audit Committee, is an “audit committee financial expert” as defined under Item 401(h) of Regulation
S-K, and that he is independent as defined under applicable NASDAQ listing standards. Mr. Grassi is a certified public
accountant and a certified fraud examiner.
Item 11. Executive Compensation.
Information regarding executive compensation appears in the Proxy Statement under the caption “Executive
Compensation” and is incorporated herein by this reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information regarding security ownership of certain beneficial owners appears in the Proxy Statement under the
caption “Stock Ownership of Certain Beneficial Owners” and is incorporated herein by this reference.
141
Information regarding security ownership of management appears in the Proxy Statement under the caption
“Stock Ownership of Management” and is incorporated herein by this reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information regarding certain relationships and related transactions and directors independence appears in the
Proxy Statement under the captions “Compensation Committee Interlocks and Insider Participation” and “Related Party
Transactions” and is incorporated herein by this reference.
Item 14. Principal Accounting Fees and Services.
Information regarding fees paid to the Company’s independent auditor appears in the Proxy Statement under the
caption “Schedule of Fees to Independent Auditors” and is hereby incorporated by this reference.
Item 15. Exhibits, Financial Statement Schedules.
(a) 1. Financial Statements
PART IV
The following financial statements are included in Item 8 of this Annual Report and are incorporated herein by
this reference:
Consolidated Statements of Financial Condition at December 31, 2023 and 2022
Consolidated Statements of Income for each of the three years in the period ended December 31, 2023
Consolidated Statements of Comprehensive Income for each of the three years in the period ended
December 31, 2023
Consolidated Statements of Changes in Stockholders’ Equity for each of the three years in the period ended
December 31, 2023
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2023
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm (BDO USA, P.C.; New York, New York;
PCAOB ID 243)
2. Financial Statement Schedules
Financial Statement Schedules have been omitted because they are not applicable or the required information is
shown in the Consolidated Financial Statements or Notes thereto included in Item 8 of this Annual Report and are
incorporated herein by this reference.
142
3. Exhibits Required by Securities and Exchange Commission Regulation S-K
Exhibit
Number
Description
3.1 P
Certificate of Incorporation of Flushing Financial Corporation (Incorporated by reference to Exhibits filed
3.2
3.3
3.4
4.1
4.2
4.3
with the Registration Statement on Form S-1 filed September 1, 1995, Registration No. 33-96488)
Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (Incorporated
by reference to Exhibit 4.2 filed with Form S-8 filed May 31, 2002)
Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (Incorporated
by reference to Exhibit 3.3 filed with Form 10-K for the year ended December 31, 2011)
Amended and Restated By-Laws of Flushing Financial Corporation (Incorporated by reference to Exhibit
3.6 filed with Form 10-Q for the quarter ended June 30, 2014)
Indenture, dated November 22, 2021, between Flushing Financial Corporation and Wilmington Trust,
National Association, as trustee (Incorporated by reference to Exhibit 4.1 filed with Form 8-K filed
November 22, 2021)
First Supplemental Indenture, dated November 22, 2021, between Flushing Financial Corporation and
Wilmington Trust, National Association, as trustee (Incorporated by reference to Exhibit 4.2 filed with
Form 8-K filed November 22, 2021)
Second Supplemental Indenture, dated August 24, 2022, between Flushing Financial Corporation and
Wilmington Trust, National Association, as trustee (Incorporated by reference to Exhibit 4.2 filed with
Form 8-K filed August 24, 2022)
4.4
Description of Securities (Incorporated by reference to Exhibit 4.3 filed with Form 10-K for the year
ended December 31, 2019)
10.1*
10.2*
10.3*
Form of Amended and Restated Employment Agreement between Flushing Bank and Certain Officers
(Incorporated by reference to Exhibit 10.5 filed with Form 10-Q for the quarter ended June 30, 2013)
Form of Amended and Restated Employment Agreement between Flushing Financial Corporation and
Certain Officers (Incorporated by reference to Exhibit 10.6 filed with Form 10-Q for the quarter ended
June 30, 2013)
Amended and Restated Employment Agreement between Flushing Financial Corporation and John R.
Buran (Incorporated by reference to Exhibit 10.2 filed with Form 10-Q for the quarter ended June 30,
2013)
10.4*
Amended and Restated Employment Agreement between Flushing Bank and John R. Buran (Incorporated
by reference to Exhibit 10.1 filed with Form 10-Q for the quarter ended June 30, 2013)
10.5*
Amended and Restated Employment Agreement between Flushing Financial Corporation and Maria A.
Grasso (Incorporated by reference to Exhibit 10.4 filed with Form 10-Q for the quarter ended June 30,
2013)
10.6*
Amended and Restated Employment Agreement between Flushing Bank and Maria A. Grasso
10.7*
10.8*
10.9*
(Incorporated by reference to Exhibit 10.3 filed with Form 10-Q for the quarter ended June 30, 2013)
Employment Agreement between Flushing Financial Corporation and Susan K. Cullen (Incorporated by
reference to Exhibit 10.1 filed with Form 10-Q for the quarter ended March 31, 2016)
Flushing Bank Specified Officer Change in Control Severance Policy (as Amended Effective January 1,
2016) (Incorporated by reference to Exhibit 10.7 filed with Form 10-K for the year ended December 31,
2015)
Employee Severance Compensation Plan for Vice Presidents and Assistant Vice Presidents of Flushing
Bank (Effective as of January 1, 2016) (Incorporated by reference to Exhibit 10.8 filed with Form 10-K
for the year ended December 31, 2015)
10.10*
Amended and Restated Outside Director Retirement Plan (Incorporated by reference to Exhibit 10.10(a)
filed with Form 10-Q for the quarter ended March 31, 2006)
10.11*
Amended and Restated Flushing Bank Outside Director Deferred Compensation Plan (Incorporated by
reference to Exhibit 10.6(d) filed with Form 10-Q for the quarter ended September 30, 2000)
10.12*
Form of Indemnity Agreement among Flushing Bank, Flushing Financial Corporation, and each Director
(Incorporated by reference to Exhibit 10.8(a) filed with Form 10-Q for the quarter ended September 30,
1996)
143
10.13*
Form of Indemnity Agreement among Flushing Bank, Flushing Financial Corporation, and Certain
Officers (Incorporated by reference to Exhibit 10.8(b) filed with Form 10-Q for the quarter ended
September 30, 1996)
10.14* P
Guarantee by Flushing Financial Corporation (Incorporated by reference to Exhibits filed with the
Registration Statement on Form S-1 filed September 1, 1995, Registration No. 33-96488)
10.15*
Form of Outside Director Restricted Stock Unit Award Letter (Incorporated by reference to Exhibit 10.21
filed with Form 10-K for the year ended December 31, 2015)
10.16*
Form of Employee Restricted Stock Unit Grant Letter Agreement (Incorporated by reference to Exhibit
10.24 filed with Form 10-K for the year ended December 31, 2015)
10.17*
Annual Incentive Plan for Executives and Senior Officers (Incorporated by reference to Exhibit 10.17
filed with Form 10-K for the year ended December 31, 2022)
10.18
Lease agreement between Flushing Bank and Rexcorp Plaza SPE LLC (Incorporated by reference to
Exhibit 10.1 filed with Form 10-Q for the quarter ended June 30, 2014)
10.19*
Flushing Financial Corporation 2014 Omnibus Incentive Plan (Incorporating amendments through
May 18, 2021) (Incorporated by reference to Exhibit 10.1 filed with Form 10-Q for the quarter ended June
30, 2021)
10.20*
Form of Employee Performance Restricted Stock Unit Award Letter (pre-2023) (Incorporated by
reference to Exhibit 10.27 filed with Form 10-K for the year ended December 31, 2018)
10.21*
Form of Director Restricted Stock Unit Award Letter With One Year Vesting (Incorporated by reference
to Exhibit 10.28 filed with Form 10-K for the year ended December 31, 2018)
10.22*
Flushing Bank Supplemental Savings Incentive Plan, Amended and Restated as of November 1, 2018
(Incorporated by reference to Exhibit 10.29 filed with Form 10-K for the year ended December 31, 2018)
10.23*
Employment Agreement between Flushing Financial Corporation and Thomas M. Buonaiuto
(Incorporated by reference to Exhibit 10.1 filed with Form 8-K filed October 28, 2019)
10.24*
Consulting Agreement between Flushing Bank and Douglas C. Manditch (Incorporated by reference to
Exhibit 10.2 filed with Form 8-K filed October 28, 2019)
10.25*
Form of Employee Additional Performance Restricted Stock Unit Award Letter (Incorporated by
reference to Exhibit 10.25 filed with Form 10-K for the year ended December 31, 2022)
10.26*
Form of Employee Performance Restricted Stock Unit Award Letter (Incorporated by reference to Exhibit
10.26 filed with Form 10-K for the year ended December 31, 2022)
10.27*
Form of Employee Additional Restricted Stock Unit Award Letter (Incorporated by reference to Exhibit
10.27 filed with Form 10-K for the year ended December 31, 2022)
21.1
23.1
31.1
Subsidiaries information incorporated herein by reference to Part I – Subsidiary Activities
Consent of Independent Registered Public Accounting Firm (filed herewith)
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer
(filed herewith)
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer
(filed herewith)
32.1
Certification Pursuant to 18 U.S.C, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 by the Chief Executive Officer (furnished herewith)
32.2
Certification Pursuant to 18 U.S.C, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 by the Chief Financial Officer (furnished herewith)
Flushing Financial Corporation Incentive-Based Compensation Clawback Policy (filed herewith)
Inline XBRL Instance Document (filed herewith)
Inline XBRL Taxonomy Extension Schema Document (filed herewith)
Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)
Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)
Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith)
Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)
97.1
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document
Indicates compensatory plan or arrangement.
*
† Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Flushing Financial hereby undertakes to
furnish supplemental copies of any of the omitted schedules upon request by the U.S. Securities and Exchange
Commission.
144
P Indicates a filing submitted in paper.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the Company has duly
caused this report, to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on
March 15, 2024.
FLUSHING FINANCIAL CORPORATION
By /S/JOHN R. BURAN
John R. Buran
President and CEO
POWER OF ATTORNEY
We, the undersigned directors and officers of Flushing Financial Corporation (the “Company”) hereby severally
constitute and appoint John R. Buran and Susan K. Cullen as our true and lawful attorneys and agents, each acting alone
and with full power of substitution and re-substitution, to do any and all things in our names in the capacities indicated
below which said John R. Buran or Susan K. Cullen may deem necessary or advisable to enable the Company to comply
with the Securities Exchange Act of 1934, and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this report on Form 10-K, or amendment thereto, including specifically, but not limited
to, power and authority to sign for us in our names in the capacities indicated below the report on this report on Form 10-K,
or amendment thereto; and we hereby approve, ratify and confirm all that said John R. Buran or Susan K. Cullen shall do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K, has been signed
by the following persons in the capacities and on the dates indicated.
Signature
Title
Director, President (Principal Executive
Officer)
Date
March 15, 2024
/S/JOHN R. BURAN
John R. Buran
/S/ALFRED A. DELLIBOVI
Alfred A. DelliBovi
/S/SUSAN K. CULLEN
Susan K. Cullen
/S/ JAMES D. BENNETT
James D. Bennett
/S/STEVEN J. D’IORIO
Steven J. D’Iorio
/S/LOUIS C. GRASSI
Louis C. Grassi
/S/SAM S. HAN
Sam S. Han
/S/JOHN J. MCCABE
John J. McCabe
Director, Chairman
March 15, 2024
Treasurer (Principal Financial and
Accounting Officer)
Director
Director
Director
Director
Director
145
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
/S/DONNA M. O’BRIEN
Donna M. O’Brien
/S/MICHAEL A. AZARIAN
Michael A. Azarian
/S/CAREN C. YOH
Caren C. Yoh
/S/DOUGLAS C. MANDITCH
Douglas C. Manditch
Director
Director
Director
Director
March 15, 2024
March 15, 2024
March 15, 2024
March 15, 2024
146
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Corporate Information
Executive and Senior Management
John R. Buran
President,
Chief Executive Officer
Astrid Burrowes
Executive Vice President,
Chief Accounting Officer
Theodoros Kalogiannis
Senior Vice President,
Director of Portfolio Management
Michael Bingold
Senior Executive Vice President,
Chief Retail & Client Development Officer
Ruth E. Filiberto
Executive Vice President,
Director of Human Resources
Allen M. Brewer
Senior Executive Vice President,
Chief Information Officer
Thomas M. Buonaiuto
Senior Executive Vice President,
Chief of Staff & Deposit Channel Executive
Susan K. Cullen
Senior Executive Vice President,
Treasurer & Chief Financial Officer
Maria A. Grasso
Senior Executive Vice President,
Chief Operating Officer &
Corporate Secretary
Francis W. Korzekwinski
Senior Executive Vice President,
Chief of Real Estate Lending
Douglas J. McClintock
Senior Executive Vice President,
General Counsel
Barbara A. Beckmann
Executive Vice President,
Director of Operations
Vincent E. Giovinco
Executive Vice President,
Director of Commercial
Real Estate Lending
James P. Jacovatos
Executive Vice President,
Real Estate Credit Center Manager
Alan Jin
Executive Vice President,
Director of Residential &
Mixed-Use Lending
Theresa Kelly
Executive Vice President,
Director of Business Banking
Gary P. Liotta
Executive Vice President,
Chief Risk Officer
Rosina Manzi
Executive Vice President,
Chief Audit Officer
Patricia Mezeul
Executive Vice President,
Director of Government Banking
Douglas Liang
Senior Vice President,
Chief Investment Officer
Yan Nuriyev
Senior Vice President,
Chief Technology Officer
Joanne Orelli
Senior Vice President,
Loan Servicing Collections &
Foreclosure Manager
Albert H. Savastano
Senior Vice President,
Director of Investor Relations
Patricia Tiffany
Senior Vice President,
Director of Marketing
Richard White
Senior Vice President,
Chief Information Security Officer
Ling Xu
Senior Vice President,
Director of Retail Banking
Board of Directors
Alfred A. DelliBovi
Chairman of the Board
Retired President & CEO of the
Federal Home Loan Bank of New York
John R. Buran
President & Chief Executive Officer
Michael A. Azarian
Retired Managing Director
Citigroup
James D. Bennett
Attorney in Nassau County, New York
Shareholder Information
Annual Meeting
The Annual Meeting of Shareholders of
Flushing Financial Corporation will be
held at 1:00 p.m., May 29, 2024. The
meeting will be hosted virtually at
www.virtualshareholdermeeting.com/
FFIC2024.
On April 18, 2024, a Notice of Internet
Availability was mailed or electronically
delivered to shareholders containing
instructions on how to access our
proxy materials.
Steven J. D’Iorio
Executive Managing Director
Cushman & Wakefield
John J. McCabe
Retired Chief Equity Strategist
Shay Assets Management
Louis C. Grassi
Managing Partner & Chief Executive
Officer of Grassi & Co.
Donna M. O’Brien
President
Strategic Visions in Healthcare, LLC
Sam S. Han
Founder & President
The Korean Channel, Inc.
Caren C. Yoh
President, CPA
Accounting Firm
Douglas C. Manditch
Former Chairman & Chief Executive
Officer of Empire Bancorp, Inc.
Stock Listing
NASDAQ Global Select MarketSM
Symbol: FFIC
Transfer Agent and Registrar
Computershare Trust Company NA
P.O. Box 30170
College Station, TX 77842-3170
800-426-5523
www.Computershare.com
Shareholder Relations
Susan K. Cullen
718-961-5400
Independent Registered
Public Accounting Firm
BDO USA, LLP
100 Park Avenue
New York, NY 10017
212-885-8000
Legal Counsel
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, NY 10004
212-837-6000
Queens
ASTORIA
31-16 30th Avenue
BAYSIDE
61-14 Springfield Boulevard
213-03 Northern Boulevard*
ELMHURST
85-15 Queens Boulevard*
FLUSHING
147-42 Northern Boulevard*
164-20 Northern Boulevard*
44-43 Kissena Boulevard*
136-41 Roosevelt Avenue*
FOREST HILLS
107-11 Continental Avenue
JAMAICA
89-12 Sutphin Boulevard
*Asian market branch
Brooklyn
AVENUE J
1402 Avenue J
BAY RIDGE
7102 Third Avenue
Manhattan
CHINATOWN
183 Canal Street*
PARK AVENUE
99 Park Avenue
Long Island
GARDEN CITY
1122 Franklin Avenue
HAUPPAUGE
160 Adams Avenue
BENSONHURST
8616 21st Avenue, Unit 1C*
PARK AVENUE SOUTH
225 Park Avenue South
HICKSVILLE
268 North Broadway*
BOROUGH PARK
4616 13th Avenue
MONTAGUE
186 Montague Street
WILLIAMSBURG
217 Havemeyer Street
ISLANDIA
1707 Veterans Memorial Highway
NEW HYDE PARK
697-B Hillside Avenue
PORT JEFFERSON STATION
4747 Nesconset Highway
SHIRLEY
1044 William Floyd Parkway
UNIONDALE
260E RXR Plaza
Flushing Bank 220 RXR Plaza, Uniondale, NY 11556
718-961-5400 FlushingBank.com
© 2024 Flushing Financial Corporation. All rights reserved. BRANR0224
Annual Report Design by Curran & Connors, Inc.