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What changed in FLUSHING FINANCIAL CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FLUSHING FINANCIAL CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+426 added−468 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-14)

Top changes in FLUSHING FINANCIAL CORP's 2023 10-K

426 paragraphs added · 468 removed · 341 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

187 edited+46 added−56 removed212 unchanged
Biggest changeSee “— Regulation.” The following table sets forth the composition of our loan portfolio at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ 2018 ​ ​ ​ ​ Percent ​ ​ ​ Percent ​ ​ ​ Percent ​ ​ ​ Percent ​ ​ ​ Percent ​ Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total ​ ​ (Dollars in thousands) Mortgage Loans: ​ ​ ​ ​ ​ ​ ​ Multi-family residential ​ $ 2,601,384 37.57 % $ 2,517,026 37.94 % $ 2,533,952 37.81 % $ 2,238,591 38.88 % $ 2,269,048 41.00 % Commercial real estate ​ 1,913,040 27.62 ​ 1,775,629 26.77 ​ 1,754,754 26.18 ​ 1,582,008 27.48 ​ 1,542,547 27.86 ​ One-to-four family - mixed-use property ​ 554,314 8.00 ​ 571,795 8.62 ​ 602,981 9.00 ​ 592,471 10.29 ​ 577,741 10.44 ​ One-to-four family - residential ​ 241,246 3.48 ​ 276,571 4.17 ​ 253,262 3.78 ​ 196,879 3.42 ​ 198,848 3.59 ​ Construction ​ 70,951 1.02 ​ 59,761 0.90 ​ ​ 83,322 1.24 ​ 67,754 1.18 ​ 50,600 0.91 ​ Gross mortgage loans ​ 5,380,935 77.69 ​ 5,200,782 78.40 ​ 5,228,271 78.01 ​ 4,677,703 81.25 ​ 4,638,784 83.80 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-mortgage loans: ​ ​ ​ ​ ​ ​ Small Business Administration ​ 23,275 0.34 ​ 93,811 1.41 ​ 167,376 2.50 ​ 14,445 0.25 ​ 15,210 0.27 ​ Taxi medallion ​ — — ​ — — ​ 2,757 0.04 ​ 3,309 0.06 ​ 4,539 0.08 ​ Commercial business and other ​ 1,521,548 21.97 ​ 1,339,273 20.19 ​ 1,303,225 19.45 ​ 1,061,478 18.44 ​ 877,763 15.85 ​ Gross non-mortgage loans ​ 1,544,823 22.31 ​ 1,433,084 21.60 ​ 1,473,358 21.99 ​ 1,079,232 18.75 ​ 897,512 16.20 ​ Gross loans ​ 6,925,758 100.00 % 6,633,866 100.00 % 6,701,629 100.00 % 5,756,935 100.00 % 5,536,296 100.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unearned loan fees and deferred costs, net ​ 9,011 ​ ​ 4,239 ​ ​ ​ 3,045 ​ ​ 15,271 ​ ​ 15,188 ​ Less: Allowance for credit losses ​ (40,442) ​ ​ (37,135) ​ ​ ​ (45,153) ​ ​ (21,751) ​ ​ (20,945) ​ Loans, net ​ $ 6,894,327 ​ ​ ​ $ 6,600,970 ​ ​ ​ $ 6,659,521 ​ ​ ​ $ 5,750,455 ​ $ 5,530,539 ​ 4 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the years ended December 31, (In thousands) 2022 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage Loans ​ ​ ​ At beginning of period ​ $ 5,200,782 ​ $ 5,228,271 ​ $ 4,677,703 Mortgage loans originated: ​ ​ ​ Multi-family residential ​ 474,409 ​ 246,964 ​ 207,101 Commercial real estate ​ 308,455 ​ 140,948 ​ 157,592 One-to-four family mixed-use property ​ 37,598 ​ 41,110 ​ 35,131 One-to-four family residential ​ 25,059 ​ 13,009 ​ 22,509 Construction ​ 28,732 ​ 26,375 ​ 12,059 Total mortgage loans originated ​ 874,253 ​ 468,406 ​ 434,392 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans purchased: ​ ​ ​ Multi-family residential ​ — ​ — ​ 5,628 Commercial real estate ​ — ​ 27,534 ​ 34,260 One-to-four family residential ​ — ​ 57,952 ​ — Construction ​ 2,860 ​ 11,749 ​ 9,800 Total mortgage loans purchased ​ 2,860 ​ 97,235 ​ 49,688 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisition of Empire loans: ​ ​ ​ Multi-family residential ​ — ​ — ​ 287,239 Commercial real estate ​ — ​ — ​ 81,349 One-to-four family mixed-use property ​ — ​ — ​ 25,151 One-to-four family residential ​ — ​ — ​ 54,437 Construction ​ — ​ — ​ 12,912 Total mortgage loans acquired ​ — ​ — ​ 461,088 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less: ​ ​ ​ Principal reductions ​ 665,377 ​ 565,606 ​ 394,099 Mortgage loan sales ​ 31,355 ​ 27,384 ​ 498 Charge-offs ​ 228 ​ 140 ​ 3 At end of period ​ $ 5,380,935 ​ $ 5,200,782 ​ $ 5,228,271 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-mortgage loans ​ ​ ​ At beginning of period ​ $ 1,433,084 ​ $ 1,473,358 ​ $ 1,079,232 Loans originated: ​ ​ ​ Small Business Administration ​ 3,461 ​ 143,363 ​ 112,352 Commercial business ​ 364,177 ​ 375,508 ​ 254,121 Other ​ 4,402 ​ 4,594 ​ 9,960 Total other loans originated ​ 372,040 ​ 523,465 ​ 376,433 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-mortgage loans purchased: ​ ​ ​ Commercial business ​ 272,841 ​ 164,856 ​ 143,601 Total non-mortgage loans purchased ​ 272,841 ​ 164,856 ​ 143,601 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisition of Empire loans: ​ ​ ​ Small Business Administration ​ ​ — ​ ​ — ​ ​ 62,778 Commercial business ​ ​ — ​ ​ — ​ ​ 161,495 Other ​ — ​ — ​ 43 Total non-mortgage loans acquired ​ — ​ — ​ 224,316 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less: ​ ​ ​ Non-mortgage loan sales ​ ​ 300 ​ ​ — ​ ​ 6,876 Principal reductions ​ 530,750 ​ 723,601 ​ 339,346 Charge-offs ​ 2,092 ​ 4,994 ​ 4,002 At end of period ​ $ 1,544,823 ​ $ 1,433,084 ​ $ 1,473,358 ​ ​ ​ ​ ​ 5 Table of Contents Loan Maturity and Repricing.
Biggest changeSee “— Regulation.” ​ The following table sets forth the composition of our loan portfolio at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ ​ ​ ​ Percent ​ ​ ​ Percent ​ ​ ​ Percent ​ ​ ​ Percent ​ ​ ​ Percent ​ Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total ​ ​ (Dollars in thousands) Mortgage Loans: ​ ​ ​ ​ ​ ​ ​ Multi-family residential ​ $ 2,658,205 38.53 % $ 2,601,384 37.57 % $ 2,517,026 37.94 % $ 2,533,952 37.81 % $ 2,238,591 38.88 % Commercial real estate (1) ​ 1,958,252 28.39 ​ 1,913,040 27.62 ​ 1,775,629 26.77 ​ 1,754,754 26.18 ​ 1,582,008 27.48 ​ One-to-four family - mixed-use property ​ 530,243 7.69 ​ 554,314 8.00 ​ 571,795 8.62 ​ 602,981 9.00 ​ 592,471 10.29 ​ One-to-four family - residential ​ 220,213 3.19 ​ 241,246 3.48 ​ 276,571 4.17 ​ 253,262 3.78 ​ 196,879 3.42 ​ Construction ​ 58,673 0.85 ​ 70,951 1.02 ​ 59,761 0.90 ​ ​ 83,322 1.24 ​ 67,754 1.18 ​ Gross mortgage loans ​ 5,425,586 78.65 ​ 5,380,935 77.69 ​ 5,200,782 78.40 ​ 5,228,271 78.01 ​ 4,677,703 81.25 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial business loans: ​ ​ ​ ​ ​ ​ Small Business Administration ​ 20,205 0.29 ​ 23,275 0.34 ​ 93,811 1.41 ​ 167,376 2.50 ​ 14,445 0.25 ​ Taxi medallion ​ — — ​ — — ​ — — ​ 2,757 0.04 ​ 3,309 0.06 ​ Commercial business and other ​ 1,452,518 21.06 ​ 1,521,548 21.97 ​ 1,339,273 20.19 ​ 1,303,225 19.45 ​ 1,061,478 18.44 ​ Gross commercial business loans ​ 1,472,723 21.35 ​ 1,544,823 22.31 ​ 1,433,084 21.60 ​ 1,473,358 21.99 ​ 1,079,232 18.75 ​ Gross loans ​ 6,898,309 100.00 % 6,925,758 100.00 % 6,633,866 100.00 % 6,701,629 100.00 % 5,756,935 100.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unearned loan fees and deferred costs, net ​ ​ 9,590 ​ ​ 9,011 ​ ​ 4,239 ​ ​ ​ 3,045 ​ ​ 15,271 ​ Unallocated portfolio layer basis adjustments (2) ​ (949) ​ ​ — ​ ​ — ​ ​ ​ — ​ ​ — ​ Less: Allowance for credit losses ​ (40,161) ​ ​ (40,442) ​ ​ (37,135) ​ ​ ​ (45,153) ​ ​ (21,751) ​ Loans, net ​ $ 6,866,789 ​ ​ ​ $ 6,894,327 ​ ​ ​ $ 6,600,970 ​ ​ ​ $ 6,659,521 ​ $ 5,750,455 ​ (1) Balance consists almost exclusively of investor commercial real estate (non-owner occupied).
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.
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.
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.
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.
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.
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.
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 Loan Committee and/or the Director’s Loan Committee.
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.
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 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.
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.
For one-to-four family mortgage loans in excess of $750,000 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 Loan Committee and the Director’s Loan 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.
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 these requirements. ​ Available Information We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC.
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.
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 Loan Committee approval. One-to-four family mortgage loans in excess of $5.0 million may require Director’s inspection.
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.
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. Classified Assets.
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 portfolios, 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.
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.
Loan proposals in excess of $5.0 million up to and including $25.0 million that are approved by Management Loan 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.
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.
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 Loan Committee for final approval and then to the Director’s Loan Committee and/or Board of Directors for ratification.
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.
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 Loan Committee or the Director’s Loan Committee.
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.
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”) under federal securities laws. In addition, the FRB periodically examines the Company.
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.
Commercial business loans and SBA loans in excess of $2.5 million up to $5.0 million must be approved by the Management Loan 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.
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.
Such loans in excess of $2.0 million up to and including $5.0 million require the same officer approvals, approval of the Management Loan Committee, and ratification of the Director’s Loan Committee or the Bank Board of Directors.
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.
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 Loan Committee.
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.
The Board of Directors reviews the investment policy on an annual basis and investment activity monthly. ​ 20 Table of Contents 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.
The Board of Directors reviews the investment policy on an annual basis and investment activity monthly. ​ 22 Table of Contents 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.
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, 2022, our multi-cultural employee population spoke more than 20 different languages.
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.
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. ​ 32 Table of Contents 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.
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.
We aggressively market our Other Real Estate Owned (“OREO”) properties. At December 31, 2022 and 2021, 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, 2022, and 2021, we did not foreclose any real estate property.
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.
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 109 banks and thrifts in the counties in which we have branch locations.
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.
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 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.
Deposit operations also are subject to: ● 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.
Deposit operations also are subject to: 42 Table of Contents ● 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.
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, and/or changing the loan to interest only payments for a limited time period.
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.
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 33 Table of Contents total of its net profits for that year combined with its retained net profits for the preceding two years less prior dividends paid.
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.
We have not in the past, nor do we currently, originate ARM loans that provide for negative amortization. The majority 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.
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 adjustable “home equity lines of 8 Table of Contents 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.
These adjustable “home equity lines of 9 Table of Contents 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.
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, 2022, the Bank was a “well-capitalized” bank, as applicably defined.
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.
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, 10 Table of Contents Manager, Underwriter or Junior Underwriter in the Residential Mortgage Loan Department (collectively, “Loan Officers”), and ratification by the Management Loan Committee.
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.
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 regulation or unsafe or unsound practices.
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 38 Table of Contents regulation or unsafe or unsound practices.
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. 13 Table of Contents The following table shows our non-performing assets at the dates indicated.
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 Table of Contents The following table shows our non-performing assets at the dates indicated.
We incurred total net charge-offs of $1.5 million and $3.1 million during the years ended December 31, 2022 and 2021, respectively. The Company recorded a provision (benefit) for credit losses on loans totaling $4.8 million and ($4.9) million for the years ended December 31, 2022 and 2021, respectively.
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.
To the extent that an award under the 2014 Omnibus Plan is 29 Table of Contents 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.
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.
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. Loan Approval Procedures and Authority.
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.
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 December 31, 2022, and 2021.
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.
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. ​ 40 Table of Contents 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.
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.
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- 35 Table of Contents 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.
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.
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, 37 Table of Contents “adequately capitalized.” Pursuant to the regulations the Bank, as a well-capitalized institution, may accept brokered deposits.
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.
The Bank owned two subsidiaries during 2022: 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 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®.
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 enable borrowers to bring their loans current, generally within six to nine months.
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 Table of Contents enable borrowers to bring their loans current, generally within six to nine months.
In particular, the applicable provisions of New York State Banking Law and regulations governing the investment authority and activities of an FDIC-insured 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.
In particular, the applicable provisions of New York State Banking Law and regulations governing the investment authority and activities of an FDIC-insured 34 Table of Contents 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.
Under 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 41 Table of Contents 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.
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.
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.
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 $3.3 million, $0.8 million, and $4.2 million in fixed-rate residential mortgages in 2022, 2021, and 2020, respectively.
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.
The GLBA requires financial institutions to periodically disclose their privacy practices and policies relating to sharing such information and enable 41 Table of Contents 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 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.
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. Loan Extensions, Renewals, Modifications and Restructuring .
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 Table of Contents Loan Extensions, Renewals, Modifications and Restructuring.
The Board of Directors is responsible for 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.
The Board of Directors is responsible for 31 Table of Contents 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.
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 government or self-regulating agency must be reported to the NYDFS.
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 35 Table of Contents government or self-regulating agency must be reported to the NYDFS.
Included within net loans as of December 31, 2022 and 2021, was a recorded investment of $5.2 million and $8.7 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.
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.
At December 31, 2022, there were no loans in excess of the maximum dollar amount of loans to one borrower that the Bank was authorized to make.
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.
The Bank must file reports with the NYDFS, the FDIC, and the CFPB concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other depository institutions.
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.
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 TDR.
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”).
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 2022 of $103.7 million, primarily due to growth in our certificate of deposits, partially offset by a decline in core deposits.
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.
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. ​ 42 Table of Contents
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. ​
Total securities had an aggregate market value that approximated 1.2 times the amount of our equity as of December 31, 2022. 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.
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.
While we are unable to predict the direction of future interest rate changes, if interest rates would rise during 2023, the result could be an increase in our cost of deposits, which could reduce our net interest margin.
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.
The FRB has adopted an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions. 39 Table of Contents The FRB has issued a policy statement regarding the payment of dividends by bank holding companies.
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.
If a concentration is 36 Table of Contents 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.
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 .
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. The vast majority of our mortgage loans are secured by properties located within our market area.
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.
The CRA requires the FDIC, in connection with its examinations, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution.
The CRA requires the FDIC, in connection with its examinations, to assess the institution’s record of meeting the credit 39 Table of Contents needs of its community and to take such record into account in its evaluation of certain applications by such institution.
The CRE Guidance, which addresses land development, 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.
The CRE Guidance, which addresses land development, 37 Table of Contents 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.
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 $13.0 million and $14.6 million at December 31, 2022, and 2021, respectively. Unrealized gains and losses for investments carried under the fair value option are included in our Consolidated Statements of Income.
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.
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.
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.
Mortgage loans are primarily multi-family, commercial and one-to-four family mixed-use properties, which represent 73.2% 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.
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.
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 $21.7 million, $70.2 million, and $18.3 million during 2022, 2021, and 2020, respectively.
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.
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 $392.0 million, $188.7 million, and $173.6 million during 2022, 2021, and 2020, respectively.
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.
Our market share of deposits, as of June 30, 2022, in these counties was 0.30% of the total deposits of these FDIC insured competing financial institutions, and we are the 25th largest financial institution. 1 In addition, we compete with credit unions, the stock market and mutual funds for customers’ funds.
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.
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 $21.9 million, $26.0 million, and $25.2 million of fixed-rate one-to-four family mixed-use property mortgage loans in 2022, 2021, and 2020, respectively.
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.
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, 2022, the outstanding principal balance of our non-performing loans was 36.0% of the estimated current value of the supporting collateral, after considering the charge-offs that have been recorded.
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.
In addition, effective April 2022, the Federal Reserve and the FDIC issued a rule that, among other things, requires a banking organization to notify its primary federal regulators 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 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.
At December 31, 2022 and 2021, total deposits at our Internet Branch were $154.6 million and $188.0 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 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.
The servicers are required to submit monthly reports on their collection efforts on delinquent loans. At December 31, 2022 and 2021, we held $460.0 million and $653.4 million, respectively, of loans that were serviced by others. Asset Quality Loan Collection .
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 .
In addition, under new Nasdaq listing rules, the Company will be required to have, or explain why it does not have, (i) one diverse director by the later of August 6, 2023, or the date it files its proxy statement for its annual meeting shareholders in 2023, 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.
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.
The following table shows the maturity of our total loan portfolio at December 31, 2022.
The following table shows the maturity of our total loan portfolio at December 31, 2023.
Residential mortgage loans were $241.2 million, or 3.48% of gross loans, at December 31, 2022. 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.
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.
During the years ended December 31, 2022, 2021, and 2020, the amounts of additional interest income that would have been recorded on non-accrual loans, had they been current, totaled $1.6 million, $1.1 million, and $1.4 million, respectively.
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.
Generally, unsecured consumer loans are limited to amounts of $5,000 or less for terms of up to five years. We originated and purchased $4.4 million, $4.6 million, and $10.0 million of other loans during 2022, 2021, and 2020, respectively.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeHowever, 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.
Biggest changeHowever, 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 Table of Contents 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.
We have obtained brokered certificates of deposit when the interest rate on these deposits is below the prevailing interest rate for non-brokered certificates of deposit 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, when we are seeking to extend the maturities of our funding to assist in the management of our interest rate risk.
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.
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 mobile devices that are beyond our control systems.
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.
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, 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).
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).
There can be no assurance as to the impact that any laws, regulations or governmental programs 46 Table of Contents 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.
There can be no assurance as to the impact that any laws, regulations or governmental programs 47 Table of Contents 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.
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, the majority of our loans are adjustable rate, however, many adjust at periods of five to 10 years.
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.
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 48 Table of Contents learning and artificial intelligence.
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 Table of Contents learning and artificial intelligence.
Although we have information security procedures and controls in place, our technologies, systems, networks and our clients’ devices may become the target of cyber-attacks 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.
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.
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. 51 Table of Contents Item 1B. Unresolved Staff Comments. None. ​
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. ​
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 mortgage loans and mortgage-backed securities generally contain interim and 43 Table of Contents lifetime caps that limit the amount the interest rate can increase or decrease at repricing dates.
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.
In addition, upon maturity, brokers could require us to offer some of the highest interest rates in the country to retain these deposits, 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.
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.
The FDIC has promulgated regulations implementing limitations on 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.
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.
Limitations on the Bank’s ability to accept brokered deposits for any reason (including regulatory limitations on the amount of brokered deposits in total or as a percentage of total assets) in the future could materially adversely impact our funding costs and liquidity. 45 Table of Contents The maturity of brokered certificates of deposit could result in a significant funding source maturing at one time.
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.
Information security risks for financial institutions such as ours 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 47 Table of Contents financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties.
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 Table of Contents transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties.
At December 31, 2022, 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.
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.
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 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.
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.
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.
In one such recent development applicable to us, effective April 2022, the Federal Reserve and the FDIC issued a rule that, among other things, requires a banking organization to notify its primary federal regulators 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.
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.
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 49 Table of Contents scrutiny related to our past and current foreclosure activities.
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.
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.
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.
See “— Local Economic Conditions. ​ Our Lending Activities Involve Risks that May Be Exacerbated Depending on the Mix of Loan Types At December 31, 2022, our gross loan portfolio was $6,925.8 million, of which 77.7% was mortgage loans secured by real estate.
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.
Similar legislation is being 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.
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.
This imbalance can create significant earnings volatility because interest rates change over time and during the first quarter of 2022 were at historical low levels. As interest rates increase, our cost of funds increases more rapidly than the yields on a substantial portion of 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.
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.
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.
The majority of these real estate loans were secured by multi-family residential property ($2,601.4 million), commercial real estate property ($1,913.0 million) and one-to-four family mixed-use property ($554.3 million), which combined represent 73.2% of our loan portfolio. Our loan portfolio is concentrated in the New York City metropolitan area.
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.
Should this occur, it might be difficult to replace the maturing certificates with new brokered certificates of deposit.
Should this occur, it might be difficult to replace the maturing certificates with new brokered certificates of deposit or 46 Table of Contents other wholesale funding.
The Company is subject to similar regulations 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.
Such regulations limit the manner in which the Company and Bank conduct business, undertake new investments and activities and obtain financing.
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.
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.
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.
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.
The Bank had $856.3 million or 13.2% of total deposits and $626.3 million, or 9.8% of total deposits, in brokered deposit accounts at December 31, 2022 and 2021, respectively.
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 may be subject to increasingly more risk related to cyber security 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.
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.
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, all as occurred in 2022 and could continue to occur in 2023.
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.
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.
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. 50 Table of Contents ​ 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.
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 $80.4 million. For December 31, 2021, total deposit balances include brokered deposits of money market deposits of $251.1 million, certificates of deposits of $196.2 million, and NOW deposits of $178.9 million.
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.
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.
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.
Privacy regulations with a significant impact on our operations include the NYDFS 23 NYCRR Part 500 Cybersecurity Requirements for Financial Services Companies, Gramm-Leach-Bliley Title V Subtitle A- Safeguards Rule, and FDIC Part 364 Appendix B- Interagency Guidelines Establishing Information Security Standards.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.” At the New York State level, the Bank is subject to extensive supervision, regulation and examination by the New York State Department of Financial Services (“NYDFS”) and the FDIC.
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.
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.
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 Table of Contents 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.
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.
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.
The FOMC raised the target range for the federal funds rate seven times during 2022 from a range of 0.25% to 0.50% in March to a range of 4.25% to 4.50% in December.
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.
Threat actor organizations are becoming more formal and now frequently include specialized “departments” within an organization. These include access specialists, lateral movement specialists, and initial access brokers. These functions combine together to sell the access to interested parties, and the parties purchasing the access are installing malware and infiltrating data.
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.
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The FOMC raised the target range for the federal funds rate an additional 25 basis points in February of 2023 to 4.50% to 4.75%, and it is currently expected that during the remainder of 2023 the FOMC may increase the target range for federal funds rate several more times.
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Our interest rate risk has been partially mitigated by the addition of certain derivative financial 44 Table of Contents instruments and we believe that our current interest rate position is more neutral, with a bias toward liability sensitivity.
Removed
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 is exacerbated in the short term by the fact that approximately 67% of our certificates of deposit accounts and borrowings will reprice or mature during the next year.
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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.
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However, the derivative portfolio increases in fair value as interest rates increase, partially mitigating the effects of the securities portfolio.
Added
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.
Removed
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.
Added
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.
Removed
COVID-19 and Other Adverse External Events ​ The Coronavirus Disease 2019 ("COVID-19") pandemic adversely affected, and may continue to adversely affect, us, our customers, employees and third-party service providers.
Added
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.
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During 2022 most employees of the Company worked three days in the office and two days remotely from home, and in the last quarter of 2022 these employees worked four days in the office and one day remotely.
Added
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.
Removed
The extent to which the COVID-19 pandemic will continue to adversely affect us will depend on future developments that are uncertain and cannot be predicted with certainty and many of which are outside of our control.
Added
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.
Removed
These future developments may include the continued scope and duration of the COVID-19 pandemic, the emergence of new variants of COVID-19, the possibility of future resurgences of the COVID-19 pandemic, the continued effectiveness of the Company’s business continuity plan including work-from-home arrangements and staffing at branches and certain other facilities, the direct and indirect impact of the COVID-19 pandemic on the Company’s customers, employees, third-party service providers, as well as on other market participants, actions taken, or that may yet be taken, by governmental authorities and other third parties in response to the COVID-19 pandemic. ​ The financial markets have rebounded from the significant declines that occurred earlier in the pandemic and global economic conditions improved in 2021.
Added
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.
Removed
However, the financial markets declined substantially in 2022 as the FOMC raised interest rates substantially to respond to high inflation (see above), many of the circumstances that arose or became more pronounced after the onset of the COVID-19 pandemic persisted.
Added
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.
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Those circumstances include: ​ ● volatility in financial and capital markets, interest rates and exchange rates; ● heightened cybersecurity, information security, and operational risks as cybercriminals attempt to profit from the disruption resulting from the pandemic given increased online and remote activity, including as a result of work-from-home arrangements, all of which could disrupt our business; ● decreased demands for our products and services. ​ The continuing impact of the COVID-19 pandemic, military conflicts such as Russia’s invasion of Ukraine, terrorism and other detrimental or destabilizing global and national events on general economic and market conditions, consumer and corporate spending and investment and borrowing patterns, there is a risk that adverse conditions could occur.
Removed
These adverse conditions include, but are not limited to, increased cyber attacks; supply chain disruptions; higher inflation; decreased demand for the our products and services or those of our borrowers, which could increase credit risk; 44 Table of Contents challenges related to maintaining sufficient qualified personnel due to labor shortages, talent attrition, willingness to return to work; and disruptions to business operations at the Company and at counterparties, vendors and other service providers.
Removed
Even after such events fully subside, the U.S. economy may experience a prolonged economic slowdown or recession, and we anticipate that our operations would be materially and adversely affected by a prolonged economic slowdown or recession.
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To the extent that pandemics, acts of war, or terrorism and other detrimental external events adversely affect our business, financial condition, liquidity, capital, loans, asset quality or results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section of this Form 10-K. ​ 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.
Removed
This increases cyber risk as indicators of an attack may be spread across multiple detection platforms and coming from distributed sources. As noted above, our operations rely on the secure processing, transmission, and storage of confidential information in our computer systems and networks.
Removed
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.
Removed
In addition, in 2017, the NYDFS established comprehensive cybersecurity requirements for financial services companies, including us, and the NYDFS has proposed additional changes to such regulations. See Regulation – New York State Law.
Removed
We are subject to numerous federal, state, and international regulations regarding the privacy and security of personal information. These laws vary widely by jurisdiction.
Removed
Further, in November 2022, the NYDFS released proposed amendments to Part 500 that covered entities would be required to notify the NYDFS within 72 hours of (i) any cybersecurity event that has a reasonable likelihood of disrupting or degrading any part of a company’s normal operations, (ii) any unauthorized access to a privileged account or deployment of ransomware within a material part of the company’s information systems, and (iii) any cybersecurity event at a third party service provider that affects a covered entity In addition covered entities would be required to notify the NYDFS within 24 hours of an extortion payment made in connection with a cybersecurity event involving the covered entity.
Removed
Also, within 90 days of a cybersecurity event, covered entities would be required to provide information requested by the NYDFS regarding the investigation of the cybersecurity event and would have a continuing obligation to update and supplement the information provided.
Removed
These and other changes in cybersecurity and privacy regulations or the enactment of new regulations may increase our compliance costs and failure to comply with these regulations may lead to reputational damage, fines or civil damages and increased regulatory scrutiny . We May Experience Increased Delays in Foreclosure Proceedings Foreclosure proceedings face increasing delays.
Removed
There is Uncertainty Surrounding the Elimination of LIBOR and the Proposed Transition to SOFR or Other Adjustable or Reference Rate Formulas In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (“LIBOR”).
Removed
Consequently, LIBOR and other inter-bank offered rates around the world are undergoing a transition to other reference rates.
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In March 2021, the Financial Conduct Authority announced that LIBOR would no longer be published on a representative basis after December 31, 2021, with the exception of the most commonly used tenors of U.S. dollar LIBOR, which will no longer be published on a representative basis after June 30, 2023.
Removed
There is still uncertainty around how quickly different alternative rates will develop sufficient liquidity and industry-wide usage, or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments. The U.S.
Removed
Federal Reserve, based on the recommendations of the New York Federal Reserve’s Alternative Reference Rate Committee (comprised of major derivative market participants and their regulators), began publishing in April 2018 a Secured Overnight Financing Rate (“SOFR”), which is intended to replace U.S. dollar LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U.S.
Removed
Treasury securities. Proposals for alternative reference rates have also been announced or have already begun publication. Markets are developing in response to these new rates. We have undertaken an enterprise-wide effort to address the transition to minimize the potential for adverse impacts.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. At December 31, 2022, the Bank conducted its business through 25 full-service offices and its Internet Branch. The Holding Company neither owns nor leases any property but instead uses the premises and equipment of the Bank. ​
Biggest changeItem 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

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 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. ​ PART II
Biggest changeItem 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 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis program was completed in 2022 and on May 17, 2022, an additional 1,000,000 share authorization was announced. During the years ended December 31, 2022 and 2021, the Company repurchased 1,253,725 shares and 436,619 shares, respectively, of the Company’s common stock at an average cost of $21.73 per share and $22.88 per share, respectively.
Biggest changeDuring 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.
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, 2017 and all dividends reinvested through the end of the Company’s fiscal year ended December 31, 2022.
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 Holding Company’s Common Stock is traded on the NASDAQ Global Select Market ® under the symbol “FFIC.” As of December 31, 2022, we had approximately 846 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, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Number of ​ ​ Total ​ ​ ​ ​ Shares Purchased ​ Shares That May ​ ​ Number ​ ​ ​ ​ as Part of Publicly ​ Yet Be Purchased ​ ​ of Shares ​ Average Price ​ Announced Plans ​ Under the Plans Period ​ Purchased ​ Paid per Share ​ or Programs ​ or Programs October 1 to October 31, 2022 ​ 45,800 ​ $ 19.96 ​ 45,800 ​ 923,524 November 1 to November 30, 2022 ​ 164,062 ​ ​ 20.38 ​ 164,062 ​ 759,462 December 1 to December 31, 2022 ​ 165,000 ​ ​ 20.00 ​ 165,000 ​ 594,462 Total 374,862 ​ $ 20.16 374,862 ​ ​ 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.
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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Number of ​ ​ Total ​ ​ ​ ​ Shares Purchased ​ Shares That May ​ ​ Number ​ ​ ​ ​ as Part of Publicly ​ Yet Be Purchased ​ ​ of Shares ​ Average Price ​ Announced Plans ​ Under the Plans Period ​ Purchased ​ Paid per Share ​ or Programs ​ or Programs October 1 to October 31, 2023 ​ — ​ $ — ​ — ​ 846,779 November 1 to November 30, 2023 ​ — ​ ​ — ​ — ​ 846,779 December 1 to December 31, 2023 ​ 38,815 ​ ​ 15.08 ​ 38,815 ​ 807,964 Total 38,815 ​ $ 15.08 38,815 ​ ​ 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.
There is no expiration or maximum dollar amount under this authorization. 52 Table of Contents The following table sets forth securities authorized for issuance under all equity compensation plans of the Company at December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (c) ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ ​ ​ ​ ​ ​ remaining available for ​ ​ (a) ​ (b) ​ future issuance under ​ ​ Number of securities to ​ Weighted-average ​ equity compensation ​ ​ be issued upon exercise ​ exercise price of ​ plans (excluding ​ ​ of outstanding options, ​ outstanding options, ​ securities reflected in ​ ​ warrants and rights ​ warrants and rights ​ column (a) ​ ​ ​ ​ ​ ​ ​ ​ Equity compensation plans approved by security holders — ​ $ — 968,657 ​ ​ ​ ​ ​ ​ ​ ​ Equity compensation plans not approved by security holders — ​ — — ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ $ — 968,657 ​ 53 Table of Contents Stock Performance Graph The following graph shows a comparison of cumulative total stockholder return on the Company’s common stock since December 31, 2017 with the cumulative total returns of a broad equity market index as well as comparative published industry indices.
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 ​ ​ (a) ​ (b) ​ future issuance under ​ ​ Number of securities to ​ Weighted-average ​ equity compensation ​ ​ be issued upon exercise ​ exercise price of ​ plans (excluding ​ ​ of outstanding options, ​ outstanding options, ​ securities reflected in ​ ​ warrants and rights ​ warrants and rights ​ column (a) ​ ​ ​ ​ ​ ​ ​ ​ Equity compensation plans approved by security holders — ​ $ — 746,910 ​ ​ ​ ​ ​ ​ ​ ​ Equity compensation plans not approved by security holders — ​ — — ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ $ — 746,910 ​ 54 Table of Contents 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.
At December 31, 2022, 594,462 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.
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 performance graph above is based upon closing prices on the trading date specified. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Flushing Financial Corporation 100.00 80.78 84.32 69.06 104.50 86.82 NASDAQ Composite Index 100.00 97.16 132.81 192.47 235.15 158.65 S&P U.S.
The performance graph above is based upon closing prices on the trading date specified. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Flushing Financial Corporation 100.00 ​ 104.39 ​ 85.49 ​ 129.36 ​ 107.48 ​ 97.23 NASDAQ Composite Index 100.00 ​ 136.69 ​ 198.10 ​ 242.03 ​ 163.28 ​ 236.17 S&P U.S.
Removed
MidCap Banks Index 100.00 79.88 105.36 104.19 151.64 111.50 S&P U.S. BMI Banks - Mid-Atlantic Region Index 100.00 85.44 121.49 109.82 138.70 117.14 ​ ​ ​ 54 Table of Contents Item 6. Reserved ​ ​
Added
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.
Added
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 ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

100 edited+28 added−34 removed58 unchanged
Biggest changeThe yields include amortization of fees that are considered adjustments to yields. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ ​ ​ Balance Interest Cost Balance Interest Cost Balance Interest Cost ​ ​ (Dollars in thousands) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans, net (1)(2) ​ $ 5,253,104 ​ $ 228,065 ​ 4.34 % $ 5,146,195 ​ $ 217,580 4.23 % $ 4,798,232 ​ $ 202,722 4.22 % Other loans, net (1)(2) ​ 1,488,486 ​ 65,222 ​ 4.38 ​ 1,498,122 ​ 56,751 3.79 ​ 1,207,715 ​ 45,431 3.76 ​ Total loans, net ​ 6,741,590 ​ 293,287 ​ 4.35 ​ 6,644,317 ​ 274,331 4.13 ​ 6,005,947 ​ 248,153 4.13 ​ Taxable securities: ​ ​ ​ ​ ​ ​ ​ ​ Mortgage-backed securities ​ 573,314 ​ 9,414 ​ 1.64 ​ 550,136 ​ 8,335 1.52 ​ 450,065 ​ 8,730 1.94 ​ Other securities ​ 324,112 ​ 9,771 ​ 3.01 ​ 239,208 ​ 4,001 1.67 ​ 249,533 ​ 5,178 2.08 ​ Total taxable securities ​ 897,426 ​ 19,185 ​ 2.14 ​ 789,344 ​ 12,336 1.56 ​ 699,598 ​ 13,908 1.99 ​ Tax-exempt securities: (3) ​ ​ ​ ​ ​ ​ ​ ​ Other securities ​ 64,822 ​ 2,197 ​ 3.39 ​ 50,831 ​ 2,142 4.21 ​ 56,530 ​ 2,419 4.28 ​ Total tax-exempt securities ​ 64,822 ​ 2,197 ​ 3.39 ​ 50,831 ​ 2,142 4.21 ​ 56,530 ​ 2,419 4.28 ​ Interest-earning deposits and federal funds sold ​ 131,816 ​ 2,418 ​ 1.83 ​ 188,462 ​ 203 0.11 ​ 100,723 ​ 355 0.35 ​ Total interest-earning assets ​ 7,835,654 ​ 317,087 ​ 4.05 ​ 7,672,954 ​ 289,012 3.77 ​ 6,862,798 ​ 264,835 3.86 ​ Other assets ​ 471,483 ​ ​ ​ ​ ​ 470,418 ​ ​ ​ 413,224 ​ ​ ​ Total assets ​ $ 8,307,137 ​ ​ ​ ​ ​ ​ ​ $ 8,143,372 ​ ​ ​ ​ $ 7,276,022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Deposits: ​ ​ ​ ​ ​ ​ ​ ​ Savings accounts ​ $ 153,605 ​ 211 ​ 0.14 ​ $ 157,640 ​ 255 0.16 ​ $ 176,443 ​ 495 0.28 ​ NOW accounts ​ 1,976,238 ​ 15,353 ​ 0.78 ​ 2,165,762 ​ 5,453 0.25 ​ 1,603,402 ​ 9,309 0.58 ​ Money market accounts ​ 2,191,768 ​ 19,039 ​ 0.87 ​ 2,059,431 ​ 7,271 0.35 ​ 1,561,496 ​ 14,368 0.92 ​ Certificate of deposit accounts ​ 1,031,024 ​ 12,547 ​ 1.22 ​ 1,033,187 ​ 7,340 0.71 ​ 1,167,865 ​ 18,096 1.55 ​ Total due to depositors ​ 5,352,635 ​ 47,150 ​ 0.88 ​ 5,416,020 ​ 20,319 0.38 ​ 4,509,206 ​ 42,268 0.94 ​ Mortgagors' escrow accounts ​ 80,021 ​ 135 ​ 0.17 ​ 77,552 ​ 5 0.01 ​ 70,829 ​ 44 0.06 ​ Total interest-bearing deposits ​ 5,432,656 ​ 47,285 ​ 0.87 ​ 5,493,572 ​ 20,324 0.37 ​ 4,580,035 ​ 42,312 0.92 ​ Borrowings ​ 1,012,149 ​ 25,725 ​ 2.54 ​ 905,094 ​ 20,269 2.24 ​ 1,361,559 ​ 26,816 1.97 ​ Total interest-bearing liabilities ​ 6,444,805 ​ 73,010 ​ 1.13 ​ 6,398,666 ​ 40,593 0.63 ​ 5,941,594 ​ 69,128 1.16 ​ Non interest-bearing demand deposits ​ 1,019,090 ​ ​ ​ ​ ​ 922,741 ​ ​ ​ 583,235 ​ ​ ​ Other liabilities ​ 170,500 ​ ​ ​ ​ ​ 173,019 ​ ​ ​ 171,126 ​ ​ ​ Total liabilities ​ 7,634,395 ​ ​ ​ ​ ​ 7,494,426 ​ ​ ​ 6,695,955 ​ ​ ​ Equity ​ 672,742 ​ ​ ​ ​ ​ 648,946 ​ ​ ​ 580,067 ​ ​ ​ Total liabilities and equity ​ $ 8,307,137 ​ ​ ​ ​ ​ ​ ​ $ 8,143,372 ​ ​ ​ ​ $ 7,276,022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income / net interest rate spread (4) ​ ​ ​ ​ $ 244,077 ​ 2.92 % ​ ​ ​ $ 248,419 ​ 3.14 % ​ ​ $ 195,707 ​ 2.70 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest-earning assets / net interest margin (5) ​ $ 1,390,849 ​ ​ ​ ​ 3.11 % $ 1,274,288 ​ ​ ​ 3.24 % $ 921,204 ​ ​ ​ 2.85 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of interest-earning assets to interest-bearing liabilities ​ ​ ​ ​ ​ 1.22 X ​ ​ ​ 1.20 X ​ ​ ​ 1.16 X (1) Average balances include non-accrual loans.
Biggest changeThe yields include amortization of fees that are considered adjustments to yields. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ ​ ​ Balance Interest Cost Balance Interest Cost Balance Interest Cost ​ ​ (Dollars in thousands) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ Mortgage loans, net (1)(2) ​ $ 5,328,067 ​ $ 267,178 5.01 % $ 5,253,104 ​ $ 228,065 4.34 % $ 5,146,195 ​ $ 217,580 4.23 % Other loans, net (1)(2) ​ 1,517,282 ​ 88,170 5.81 ​ 1,488,486 ​ 65,222 4.38 ​ 1,498,122 ​ 56,751 3.79 ​ Total loans, net ​ 6,845,349 ​ 355,348 5.19 ​ 6,741,590 ​ 293,287 4.35 ​ 6,644,317 ​ 274,331 4.13 ​ Taxable securities: ​ ​ ​ ​ ​ ​ ​ Mortgage-backed securities ​ 442,228 ​ 11,505 2.60 ​ 573,314 ​ 9,414 1.64 ​ 550,136 ​ 8,335 1.52 ​ Other securities ​ 485,118 ​ 24,700 5.09 ​ 324,112 ​ 9,771 3.01 ​ 239,208 ​ 4,001 1.67 ​ Total taxable securities ​ 927,346 ​ 36,205 3.90 ​ 897,426 ​ 19,185 2.14 ​ 789,344 ​ 12,336 1.56 ​ Tax-exempt securities: (3) ​ ​ ​ ​ ​ ​ ​ Other securities ​ 66,533 ​ 1,923 2.89 ​ 64,822 ​ 2,197 3.39 ​ 50,831 ​ 2,142 4.21 ​ Total tax-exempt securities ​ 66,533 ​ 1,923 2.89 ​ 64,822 ​ 2,197 3.39 ​ 50,831 ​ 2,142 4.21 ​ Interest-earning deposits and federal funds sold ​ 184,565 ​ 8,405 4.55 ​ 131,816 ​ 2,418 1.83 ​ 188,462 ​ 203 0.11 ​ Total interest-earning assets ​ 8,023,793 ​ 401,881 5.01 ​ 7,835,654 ​ 317,087 4.05 ​ 7,672,954 ​ 289,012 3.77 ​ Other assets ​ 477,771 ​ ​ ​ ​ 471,483 ​ ​ ​ ​ 470,418 ​ ​ ​ Total assets ​ $ 8,501,564 ​ ​ ​ ​ ​ ​ $ 8,307,137 ​ ​ ​ ​ ​ ​ $ 8,143,372 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings accounts ​ $ 121,102 ​ 520 ​ 0.43 ​ $ 153,605 ​ 211 ​ 0.14 ​ $ 157,640 ​ 255 0.16 ​ NOW accounts ​ 1,937,974 ​ 64,191 ​ 3.31 ​ 1,976,238 ​ 15,353 ​ 0.78 ​ 2,165,762 ​ 5,453 0.25 ​ Money market accounts ​ 1,754,059 ​ 58,898 ​ 3.36 ​ 2,191,768 ​ 19,039 ​ 0.87 ​ 2,059,431 ​ 7,271 0.35 ​ Certificate of deposit accounts ​ 2,091,677 ​ 64,844 ​ 3.10 ​ 1,031,024 ​ 12,547 ​ 1.22 ​ 1,033,187 ​ 7,340 0.71 ​ Total due to depositors ​ 5,904,812 ​ 188,453 ​ 3.19 ​ 5,352,635 ​ 47,150 ​ 0.88 ​ 5,416,020 ​ 20,319 0.38 ​ Mortgagors' escrow accounts ​ 81,015 ​ 202 ​ 0.25 ​ 80,021 ​ 135 ​ 0.17 ​ 77,552 ​ 5 0.01 ​ Total interest-bearing deposits ​ 5,985,827 ​ 188,655 ​ 3.15 ​ 5,432,656 ​ 47,285 ​ 0.87 ​ 5,493,572 ​ 20,324 0.37 ​ Borrowings ​ 776,050 ​ 33,670 ​ 4.34 ​ 1,012,149 ​ 25,725 ​ 2.54 ​ 905,094 ​ 20,269 2.24 ​ Total interest-bearing liabilities ​ 6,761,877 ​ 222,325 ​ 3.29 ​ 6,444,805 ​ 73,010 ​ 1.13 ​ 6,398,666 ​ 40,593 0.63 ​ Non interest-bearing demand deposits ​ 867,667 ​ ​ ​ ​ ​ 1,019,090 ​ ​ ​ ​ ​ 922,741 ​ ​ ​ Other liabilities ​ 196,869 ​ ​ ​ ​ ​ 170,500 ​ ​ ​ ​ ​ 173,019 ​ ​ ​ Total liabilities ​ 7,826,413 ​ ​ ​ ​ ​ 7,634,395 ​ ​ ​ 7,494,426 ​ ​ ​ Equity ​ 675,151 ​ ​ ​ ​ ​ 672,742 ​ ​ ​ 648,946 ​ ​ ​ Total liabilities and equity ​ $ 8,501,564 ​ ​ ​ ​ ​ ​ $ 8,307,137 ​ ​ ​ ​ $ 8,143,372 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income (loss) / net interest rate spread (4) ​ ​ ​ ​ $ 179,556 ​ 1.72 % ​ ​ ​ $ 244,077 ​ 2.92 % ​ ​ $ 248,419 ​ 3.14 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest-earning assets / net interest margin (5) ​ $ 1,261,916 ​ ​ ​ 2.24 % $ 1,390,849 ​ ​ ​ 3.11 % $ 1,274,288 ​ ​ ​ 3.24 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of interest-earning assets to interest-bearing liabilities ​ ​ ​ ​ ​ 1.19 X ​ ​ ​ 1.22 X ​ ​ ​ 1.20 X (1) Average balances include non-accrual loans.
These policies are described in the Notes to 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.
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.
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.
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.
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, 2022 and 2021, the Bank and the Company exceeded each of their four regulatory capital requirements.
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.
The Bank owned two subsidiaries during 2022: 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 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”).
Our operating expenses consist principally of employee compensation and benefits, occupancy and equipment costs, other general and 55 Table of Contents 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. Management Strategy.
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 Table of Contents Management Strategy.
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 2022, funds were provided by the Company’s operating and financing activities, which were used to fund our investing activities.
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.
Discussion and analysis of our 2021 fiscal year specifically, as well as the year-over-year comparison of our 2021 financial performance to 2020, 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, 2021, filed with the SEC on March 7, 2022, which is available on our investor relations website at FlushingBank.com and the SEC’s website at sec.gov.
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.
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, 2022, 2021, and 2020, and reflects the average yield on assets and average cost of liabilities for the periods indicated.
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.
For more information on these critical accounting policies and other significant accounting policies, see the Note titled “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.
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.
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, 2022 and 2021, are the effective yields used in the cash flow models.
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.
We seek to minimize losses by adhering to our defined underwriting standards, which among other things generally requires a debt service coverage ratio of at least 125% and loan to value ratio of 75% or less.
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.
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 67 Table of Contents Company has one reporting unit. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment of goodwill.
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.
(5) Net interest margin represents net interest income before the provision for credit losses divided by average interest-earning assets. 61 Table of Contents 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.
(5) Net interest margin represents net interest income (loss) before the provision for credit losses divided by average interest-earning assets. 62 Table of Contents 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.
The base interest rate scenario assumes interest rates at December 31, 2022 and 2021. Various estimates regarding prepayment assumptions are made at each level of rate shock.
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.
At December 31, 2022 and 2021, deposits balances in the business banking group were $386.6 million and $540.4 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.
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.
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 $1,521.9 million, $1,254.0 million, and $1,004.1 million for the years ended December 31, 2022, 2021, and 2020, respectively.
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 $275.7 million, $262.1 million, and $193.3 million during the years ended December 31, 2022, 2021, and 2020, respectively. We purchase loans when the loans complement our loan portfolio strategy. Loans purchased must meet our underwriting standards when they were originated.
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.
We sold seven delinquent loans totaling $6.9 million, 33 delinquent loans totaling $28.6 million, and two delinquent loans totaling $0.6 million during the years ended December 31, 2022, 2021, and 2020, 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.
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.
Generally, the fair value of financial investments such as loans and securities fluctuates inversely with changes in interest rates.
Generally, the fair value of financial investments such as loans and securities fluctuate inversely with changes in interest rates.
During the years ended December 31, 2022, 2021, and 2020, the actual (loss) return on the employee pension plan assets was approximately (658%), (154%), and 311%, respectively, of the assumed return used to determine the periodic pension expense for that respective year.
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 $19.1 million at December 31, 2022, which is $1.9 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.
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.
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.
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. 58 Table of Contents Trends and Contingencies.
Actual results could differ significantly from these estimates. At December 31, 2022, the Company had a derivative portfolio with a notional value totaling $1.4 billion. This portfolio is designed to provide protection against rising interest rates. See Note 21 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.
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.
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, 2022, we had operating lease and purchasing obligations totaling $70.1 million.
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.
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, 2022, we had deferred compensation plan obligations of $25.8 million.
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.
At December 31, 2022 and 2021, total deposits at our Internet Branch were $154.6 million and $188.0 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 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.
(2) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $7.8 million, $10.6 million, and $2.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.
(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.
At December 31, 2022 and 2021, total deposits in our government banking unit totaled $1,653.3 million and $1,618.8 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, 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.
The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects management’s 66 Table of Contents 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 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.
At December 31, 2022, our employee pension plan had an unrecognized loss of $3.9 million. The medical and life insurance plan and non-employee director plan had unrecognized gains of $2.5 million and $1.0 million, respectively.
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.
(See Note 15 (“Regulatory Capital”) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report.) 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.
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.
The average loan to value for the real estate dependent loan portfolio was less than 37% and the average loan to value for non-performing loans collateralized by real estate was 36.0% at December 31, 2022.
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 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. Enhance earnings power by improving scalability and efficiency.
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.
To achieve this objective, we intend to: ● manage cost of funds and continue to improve funding mix; ● add loans with appropriate risk adjusted returns; ● enhance earnings power by improving scalability and efficiency; ● manage credit risk; ● remain well capitalized; ● 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.
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.
During the twelve months ended December 31, 2022, the Bank recorded net charge-offs totaling $1.5 million compared to $3.1 million recorded in the comparable prior year period. The average loan-to-value ratio for our non-performing assets collateralized by real estate was 52.3% at December 31, 2022. The Bank continues to maintain conservative underwriting standards. Non-Interest Income.
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.
See Notes 2 (“Summary of Significant Accounting Policies”) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report. 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).
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).
At December 31, 2022, the Bank also has unsecured lines of credit with other commercial banks totaling $1,108.0 million, with none 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 $50.5 million.
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.
Upon completion of the merger, the liquidation account was assumed by the Bank. The balance of the liquidation account at December 31, 2022 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 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 employee pension plan is the only plan that we have funded. During 2022, we incurred cash expenditures of $0.1 million for each of the medical and life insurance plans and the non-employee director plan. We did not make a contribution to the employee pension plan in 2022. We expect to pay similar amounts for these plans in 2023.
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 Table of Contents 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.
A portion of this portfolio is comprised of forward swaps on certain short-term advances and brokered deposits totaling $871.5 million. At December 31, 2022, $591.5 million of the forward swaps are effective swaps at a weighted average rate of 2.41%.
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.
The net interest margin decreased 13 basis points to 3.11% for the year ended December 31, 2022 from 3.24% for the year ended December 31, 2021.
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.
Excluding all of these items, the net interest margin for the year ended December 31, 2022 was 2.99%, a decrease of 9 basis points, from to 3.08% for the year ended December 31, 2021. Provision (Benefit) for Credit Losses .
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 .
At December 31, 2022, the Bank was able to borrow up to $3,800.1 million from the FHLB-NY in Federal Home Loan Bank advances and letters of credit. As of December 31, 2022, the Bank had $1,889.2 million outstanding in combined balances of FHLB-NY advances and letters of credit.
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.
See Notes 2 (“Summary of Significant Accounting Policies”) and 4 (“Loans and Allowance for Credit Losses”) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report. Fair Value of Financial Instruments. The Company carries certain financial assets and financial liabilities at fair value under the fair value option.
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.
Included in net interest income was prepayment penalty and net recovered interest income from loans and securities totaling $6.4 million and $6.7 million for the years ended December 31, 2022 and 2021, respectively, net gains from fair value adjustments on qualifying hedges totaling $0.8 million and $2.1 million for the years ended December 31, 2022 and 2021, respectively, and purchase accounting income adjustments of $2.5 million and $3.0 million for the years ended December 31, 2022 and 2021, respectively.
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.
At December 31, 2022, we had deposit obligations of $6,485.3 million of which $5,818.6 million represents our current obligations within one year. At December 31, 2022, the Bank had 25 branches, which were all leased. In addition, we lease our executive offices. We currently outsource our data processing, loan servicing and check processing functions.
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 Table of Contents 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.
Significant increases or decreases in the effective yield in isolation would results in a significantly lower or higher fair value measurement. See Notes 2 (“Summary of Significant Accounting Policies”), 7 (“Securities”) and 20 (“Fair Value of Financial Instruments”) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report. Goodwill Impairment.
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.
Excluding prepayment penalty income from loans and securities, net recoveries/(reversals) of interest from non-accrual loans, net gains (losses) from fair value adjustments on qualifying hedges, and purchase accounting adjustments, the yield on total loans, net, increased 25 basis points to 4.20% for the year ended December 31, 2022 from 3.95% for the year ended December 31, 2021. Interest Expense .
Excluding prepayment penalty income from 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.
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 4.93% for 2022.
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.
We generally rely on our deposit base as our principal source of funding. During 2022, we realized an increase in due to depositors (excluding escrow accounts) of $103.7 million, as certificates of deposits increased $579.8 million and core deposits decreased $476.1 million.
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.
The decrease in net interest income was primarily due to a 22 basis point decrease in the net interest spread to 2.92% for the twelve months ended December 31, 2022 from 3.14% for the comparable prior year period.
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 discount rate used is based on the FTSE Pension Discount Curve (formerly the Citigroup Pension Liability Index) and reflects a rate that could be earned on bonds over a similar period that we anticipate the plans’ liabilities will be paid.
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.
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 provided to absorb probable estimated losses inherent in the loan portfolio.
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.
The Holding Company is subject to the same regulatory restrictions on the declaration of dividends as the Bank. 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 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.
The decrease in the net interest margin for 2022 was primarily due to an increase in our funding costs, partially offset by an increase in the yield of our interest-earning assets. The increase in the yield of our interest earning assets was primarily due to loans being both originated and repriced at higher rates.
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.
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.
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.
(See Note 13 (“Pension and Other Postretirement Benefit Plan”) of Notes to Consolidated Financial Statements in Item 8 of this Annual Report.) The amounts reported in our financial statements are obtained from reports prepared by independent actuaries and are based on significant assumptions.
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.
As of December 31, 2022, we had seven branches which have a particular focus on the Asian community, of which five are in the borough of Queens, one is in the borough of Manhattan and one on Long Island, with deposits and loans totaling $1,072.4 million and $800.6 million, respectively, in these locations. Manage Enterprise-Wide Risk.
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.
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.
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.
Net income for the twelve months ended December 31, 2022 was $76.9 million, a decrease of $4.8 million, or 5.9%, compared to $81.8 million for the twelve months ended December 31, 2021.
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.
Provision for credit losses was $5.1 million for the year ended December 31, 2022, compared to a benefit for credit losses of $4.9 million during the prior year. 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 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.
As described above, fair value of our reporting unit is derived using a combination of an asset approach, an income approach and a market approach.
At December 31, 2023, the fair value of our reporting unit is derived using a combination of an asset approach, and an income approach.
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.
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.
The increase in interest income was primarily due to an increase of $162.7 million in the average balance of interest-earning assets to $7,835.7 million for the year ended December 31, 2022 from $7,673.0 million for the year ended December 31, 2021 and an increase of 28 basis points in the yield of interest-earning assets to 4.05% for the year ended December 31, 2022 from 3.77% for the year ended December 31, 2021.
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 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 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.
See Notes 2 (“Summary of Significant Accounting Policies”) and 11 (“Income Taxes”) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report.
See Notes 2 (“Summary of Significant Accounting Policies”) and 10 (“Income Taxes”) of Notes to Consolidated Financial Statements.
The change in the discount rate, the pension plan’s mortality table and the reduction in medical premiums are the only significant changes made to the assumptions used for these plans for each of the three years ended December 31, 2022.
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.
Net interest income for the year ended December 31, 2022 totaled $243.6 million, a decrease of $4.4 million, or 1.8%, from $248.0 million for the year ended December 31, 2021.
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.
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 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.
At December 31, 2022, cash and cash equivalents totaled $151.8 million, an increase of $70.0 million from December 31, 2021. We also held marketable securities available for sale with a market value of $735.4 million at December 31, 2022.
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.
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.
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.
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 for the years ended December 31, ​ ​ 2022 vs. 2021 ​ 2021 vs. 2020 ​ ​ Due to ​ ​ ​ ​ Due to ​ ​ ​ ​ Volume Rate Net Volume Rate Net ​ ​ (Dollars in thousands) Interest-Earning Assets: ​ ​ ​ ​ ​ ​ Mortgage loans, net ​ $ 4,656 ​ $ 5,829 ​ $ 10,485 ​ $ 14,388 ​ $ 470 ​ $ 14,858 Other loans, net ​ (365) ​ 8,836 ​ 8,471 ​ 10,957 ​ 363 ​ 11,320 Mortgage-backed securities ​ 375 ​ 704 ​ 1,079 ​ 1,715 ​ (2,110) ​ (395) Other securities ​ 1,770 ​ 4,000 ​ 5,770 ​ (204) ​ (973) ​ (1,177) Tax-Exempt securities ​ ​ 520 ​ ​ (465) ​ ​ 55 ​ ​ (238) ​ ​ (39) ​ ​ (277) Interest-earning deposits and federal funds sold ​ (80) ​ 2,295 ​ 2,215 ​ 186 ​ (338) ​ (152) Total interest-earning assets ​ 6,876 ​ 21,199 ​ 28,075 ​ 26,804 ​ (2,627) ​ 24,177 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Bearing Liabilities: ​ ​ ​ ​ ​ ​ Deposits: ​ ​ ​ ​ ​ ​ Savings accounts ​ (7) ​ (37) ​ (44) ​ (48) ​ (192) ​ (240) NOW accounts ​ (518) ​ 10,418 ​ 9,900 ​ 2,565 ​ (6,421) ​ (3,856) Money market accounts ​ 488 ​ 11,280 ​ 11,768 ​ 3,637 ​ (10,734) ​ (7,097) Certificate of deposit accounts ​ (15) ​ 5,222 ​ 5,207 ​ (1,888) ​ (8,868) ​ (10,756) Mortgagors' escrow accounts ​ — ​ 130 ​ 130 ​ 3 ​ (42) ​ (39) Borrowings ​ 2,559 ​ 2,897 ​ 5,456 ​ (9,866) ​ 3,319 ​ (6,547) Total interest-bearing liabilities ​ 2,507 ​ 29,910 ​ 32,417 ​ (5,597) ​ (22,938) ​ (28,535) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net change in net interest income ​ $ 4,369 ​ $ (8,711) ​ $ (4,342) ​ $ 32,401 ​ $ 20,311 ​ $ 52,712 ​ Comparison of Operating Results for the Years Ended December 31, 2022 and 2021 General .
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 ​ 2022 vs. 2021 ​ ​ Due to ​ ​ ​ ​ Due to ​ ​ ​ ​ Volume Rate Net Volume Rate Net ​ ​ (Dollars in thousands) Interest-Earning Assets: ​ ​ ​ ​ ​ ​ Mortgage loans, net ​ $ 3,309 ​ $ 35,804 ​ $ 39,113 ​ $ 4,656 ​ $ 5,829 ​ $ 10,485 Other loans, net ​ 1,283 ​ 21,665 ​ 22,948 ​ (365) ​ 8,836 ​ 8,471 Mortgage-backed securities ​ (2,505) ​ 4,596 ​ 2,091 ​ 375 ​ 704 ​ 1,079 Other securities ​ 6,243 ​ 8,686 ​ 14,929 ​ 1,770 ​ 4,000 ​ 5,770 Tax-Exempt securities ​ ​ 57 ​ ​ (331) ​ ​ (274) ​ ​ 520 ​ ​ (465) ​ ​ 55 Interest-earning deposits and federal funds sold ​ 1,270 ​ 4,717 ​ 5,987 ​ (80) ​ 2,295 ​ 2,215 Total interest-earning assets ​ 9,657 ​ 75,137 ​ 84,794 ​ 6,876 ​ 21,199 ​ 28,075 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Bearing Liabilities: ​ ​ ​ ​ ​ ​ Deposits: ​ ​ ​ ​ ​ ​ Savings accounts ​ (54) ​ 363 ​ 309 ​ (7) ​ (37) ​ (44) NOW accounts ​ (303) ​ 49,141 ​ 48,838 ​ (518) ​ 10,418 ​ 9,900 Money market accounts ​ (4,519) ​ 44,378 ​ 39,859 ​ 488 ​ 11,280 ​ 11,768 Certificate of deposit accounts ​ 20,936 ​ 31,361 ​ 52,297 ​ (15) ​ 5,222 ​ 5,207 Mortgagors' escrow accounts ​ 2 ​ 65 ​ 67 ​ — ​ 130 ​ 130 Borrowings ​ (7,056) ​ 15,001 ​ 7,945 ​ 2,559 ​ 2,897 ​ 5,456 Total interest-bearing liabilities ​ 9,006 ​ 140,309 ​ 149,315 ​ 2,507 ​ 29,910 ​ 32,417 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 .
By adherence to our conservative underwriting standards, we have been able to minimize net losses from non-performing loans. We recorded net charge-offs of $1.5 million for the year ended December 31, 2022, compared to net charge-offs of $3.1 million for the year ended December 31, 2021.
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.
Interest expense increased $32.4 million, or 79.9%, to $73.0 million for the year ended December 31, 2022 from $40.6 million for the year ended December 31, 2021.
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.
During 2022, the cost of borrowed funds increased 30 basis points to 2.54% from 2.24% in the comparable prior period while the cost of interest-bearing deposits increased 50 basis points to 0.87% from 0.37% for the prior year.
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.
In addition, it includes net gains (losses) from fair value adjustments in qualifying hedges of $0.8 million, $2.1 million, and $(1.2) million for December 31, 2022, 2021, and 2020. (3) Interest and yields are calculated on the tax equivalent basis using statutory federal income tax rate of 21% for the years ended December 31, 2022, 2021, and 2020.
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.
The increase in interest expense was primarily due to an increase of 50 basis points in the average cost of interest-bearing liabilities to 1.13% for the year ended December 31, 2022 from 0.63% for the year ended December 31, 2021.
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.
The following table presents the Company’s interest rate shock compared to Net Interest Income as of December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ Projected Percentage Change In ​ ​ Net Interest Income ​ Change in Interest Rate 2022 ​ 2021 ​ -200 Basis points (1) 5.73 % — % -100 Basis points 3.64 ​ 0.41 ​ Base interest rate - ​ — ​ +100 Basis points (7.31) ​ (7.49) ​ +200 Basis points (14.61) ​ (15.01) ​ (1) For 2021 the -200 basis points scenario was not calculated.
The following table presents the Company’s interest rate shock as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ Projected Percentage Change In Net Interest Income Change in Interest Rate ​ 2023 ​ 2022 -200 Basis points ​ (0.41) % ​ 5.73 % -100 Basis points ​ (0.07) ​ ​ 3.64 ​ Base interest rate ​ - ​ ​ - ​ +100 Basis points ​ (2.62) ​ ​ (7.31) ​ +200 Basis points ​ (5.42) ​ ​ (14.61) ​ ​ During 2023, the Company strategically reduced its liability sensitive interest rate position by becoming more interest rate neutral.
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 8.6% from a 200 basis point increase in rates over the next twelve months.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations and in Notes 20 (“Fair Value of Financial Instruments”) and 21 (“Derivative Financial Instruments”) of the Notes to Consolidated Financial Statements in Item 8 of this Annual Report. 68 Table of Contents
Biggest changeManagement’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 Table of Contents

Other FFIC 10-K year-over-year comparisons