MERGED FINANCIAL: Analysis and analysis by management of the financial position and results of operations. (form 10-Q)

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Reorganization of the holding company

Amalgamated Financial Corp., a Delaware public benefit corporation, was formed
on August 25, 2020 to serve as the holding company for Amalgamated Bank and is a
bank holding company registered with the Federal Reserve. On March 1, 2021 (the
"Effective Date"), the Company acquired all of the outstanding stock of
Amalgamated Bank, a New York state-chartered commercial bank in a statutory
share exchange transaction (the "Reorganization") effected under New York law
and in accordance with the terms of a Plan of Acquisition dated September 4,
2020 (the "Agreement"). Pursuant to the Reorganization, the Bank became the sole
subsidiary of the Company, the Company became the holding company for the Bank
and the stockholders of the Bank became stockholders of the Company.

In this discussion, unless the context indicates otherwise, references to "we,"
"us," and "our" refer to the Company and the Bank.
However, if the discussion relates to a period before the Effective Date, the
terms refer only to the Bank.

General

The following is a discussion of our consolidated financial condition as of
June 30, 2021, as compared to December 31, 2020, and our results of operations
for the three and six month periods ended June 30, 2021 and June 30, 2020. The
purpose of this discussion is to focus on information about our financial
condition and results of operations which is not otherwise apparent from our
consolidated financial statements and is intended to provide insight into our
results of operations and financial condition. This discussion and analysis is
best read in conjunction with our unaudited consolidated financial statements
and related notes as well as the financial and statistical data appearing
elsewhere in this report and our Annual Report on Form 10-K for the year ended
December 31, 2020 (the "2020 Annual Report"), filed with the Securities and
Exchange Commission on March 15, 2021. Historical results of operations and the
percentage relationships among any amounts included, and any trends that may
appear, may not indicate results of operations for any future periods.
In addition to historical information, this discussion includes certain
forward-looking statements regarding business matters and events and trends that
may affect our future results. For additional information regarding
forward-looking statements and our related cautionary disclosures, see the
"Cautionary Note Regarding Forward-Looking Statements" beginning on page ii of
this report.

Overview
Our business
The Company was formed on August 25, 2020 to serve as the holding company for
the Bank, which was formed in 1923 as Amalgamated Bank of New York by the
Amalgamated Clothing Workers of America, one of the country's oldest labor
unions. Although we are no longer majority union-owned, The Amalgamated Clothing
Workers of America's successor, Workers United, an affiliate of the Service
Employees International Union that represents workers in the textile,
distribution, food service and gaming industries, remains a significant
stockholder, holding approximately 40% of our equity as of June 30, 2021. As of
June 30, 2021, our total assets were $6.6 billion, our total loans, net of
deferred fees and allowance were $3.1 billion, our total deposits were $5.9
billion, and our stockholders' equity was $548.2 million. As of June 30, 2021,
our trust business held $39.2 billion in assets under custody and $16.6 billion
in assets under management.
We offer a complete suite of commercial and retail banking, investment
management and trust and custody services. Our commercial banking and trust
businesses are national in scope and we also offer a full range of products and
services to both commercial and retail customers through our three branch
offices across New York City, one branch office in Washington, D.C., one branch
office in San Francisco, one commercial office in Boston and our digital banking
platform. Our corporate divisions include Commercial Banking, Trust and
Investment Management and Consumer Banking. Our product line includes
residential mortgage loans, C&I loans, CRE loans, multifamily mortgages, and a
variety of commercial and consumer deposit products, including non-interest
bearing accounts, interest-bearing demand products, savings accounts, money
market accounts and certificates of deposit. We also offer online banking and
bill payment services, online cash management, safe deposit box rentals, debit
card and ATM card services and the availability of a nationwide network of ATMs
for our customers.
We currently offer a wide range of trust, custody and investment management
services, including asset safekeeping, corporate actions, income collections,
proxy services, account transition, asset transfers, and conversion management.
We also offer a broad range of investment products, including both index and
actively-managed funds spanning equity, fixed-income, real estate and
alternative investment strategies to meet the needs of our clients. Our products
and services are tailored to our target customer
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base that prefers a financial partner that is socially responsible,
values-oriented and committed to creating positive change in the world. These
customers include advocacy-based non-profits, social welfare organizations,
national labor unions, political organizations, foundations, socially
responsible businesses, and other for-profit companies that seek to balance
their profit-making activities with activities that benefit their other
stakeholders, as well as the members and stakeholders of these commercial
customers. Our goal is to be the go-to financial partner for people and
organizations who strive to make a meaningful impact in our society and who care
about their communities, the environment, and social justice. The Bank has
obtained B CorporationTM certification, a distinction earned after being
evaluated under rigorous standards of social and environmental performance,
accountability, and transparency. The Bank is also the largest of twelve
commercial financial institutions in the United States that are members of the
Global Alliance for Banking on Values, a network of banking leaders from around
the world committed to advancing positive change in the banking sector.

Continued impact of the COVID-19 pandemic on our business
The COVID-19 pandemic continues to create disruptions to the global economy and
financial markets and to businesses and the lives of individuals throughout the
world. The impact of the COVID-19 pandemic and its related variants is fluid and
continues to evolve, adversely affecting many of our clients. Our business,
financial condition and results of operations generally rely upon the ability of
our borrowers to repay their loans, the value of collateral underlying our
secured loans, and demand for loans and other products and services we offer,
which are highly dependent on the business environment in our primary markets
where we operate and in the United States as a whole. The unprecedented and
rapid spread of COVID-19 and its variants and their associated impacts on trade
(including supply chains and export levels), travel, employee productivity,
unemployment, consumer spending, and other economic activities have resulted and
continue to result in less economic activity, and volatility and disruption in
financial markets, and has had an adverse effect on our business, financial
condition and results of operation. In addition, due to the COVID-19 pandemic,
market interest rates have declined to and remain at historic lows. These
reductions in interest rates and the other effects of the COVID-19 pandemic have
had, and are expected to continue to have, material adverse effects on our
business, financial condition and results of operations. The ultimate extent of
the impact of the COVID-19 pandemic on our business, financial condition and
results of operations is currently uncertain and will depend on various
developments and other factors, including the effect of governmental and private
sector initiatives, the effect of the rollout of vaccinations for the virus and
its variants, whether such vaccinations will be effective against any resurgence
of the virus, including any new strains, and the ability for customers and
businesses to return to their pre-pandemic routines. In addition, it is
reasonably possible that certain significant estimates made in our financial
statements could be materially and adversely affected in the near term as a
result of these conditions.

As a result of these events, we have seen the following continuing impacts to
our business since the start of the pandemic:
Impacts on our operations

Our primary geographic markets include the metropolitan areas of New York City,
Washington, D.C., San Francisco and Boston. New York City was one of the areas
in the United States initially hardest hit by the COVID-19 pandemic. In response
to the pandemic, we took a wide range of actions to help protect our employees
and customers and to ensure the operational continuity of our business, while
continuing to provide core banking services to our consumer and commercial
clients. The majority of our employees continue to work remotely with the
exception of essential branch and facility staff. Accordingly, we had to close
or reduce hours at our branches in several locations due to the risk of
transmission of COVID-19.

As a result of the temporary closures or reduced hours at several of our
branches, we reassessed our branch network and permanently closed six branches
due to low traffic. We expect to fully serve these affected customers through
our remaining branch network and through our digital platform. We took a charge
of $8.3 million related to these branch closures in 2020. However, we expect
these closures to benefit our non-interest expenses by approximately $4.0
million annually once fully phased in over time.

As the pandemic subsides, we expect more of our employees to return to the
office. There may be risks inherent in providing safe, effective working
environments for our staff, including transport, building logistics, and working
conditions.
Impacts on our loan portfolio

The disruption in economic activity across the United States, and particularly
in New York, caused stress in the financial condition of both our consumer and
commercial clients. As a result, we established programs offering payment
deferrals for customers that needed assistance. In accordance with interagency
guidance and the CARES Act, short term deferrals granted due to the COVID-19
pandemic are not considered troubled debt restructurings ("TDRs") unless the
borrower was experiencing
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financial difficulty prior to the pandemic. The CARES Act provided temporary
relief from the accounting and reporting requirements for TDRs regarding certain
loan modifications related to COVID-19. In addition, under the terms of these
deferral agreements, the loans will not be reported as past due or as
non-accrual for the agreed upon term of the deferral, unless additional
information becomes available that indicates the loan will not perform as
expected when the deferral is complete. Interest will continue to accrue during
the deferral period. In general, the interest and principal originally due
during the deferral period will be due at the contractual end of the loan. If
the loan does not exit deferral and does not continue to pay according to
contractual terms, the loan will then be considered as any other loan that is
past due or not in agreement with contractual terms, and additional allowance
and reversal of related accrued interest will likely be required for these
loans.

As of June 30, 2021, the Company had $4.0 million in loans on payment deferral
and still accruing interest, the majority of which were residential loans, and
none were commercial loans.

No COVID-19 related loan deferrals were graded as criticized by our internal
grading system solely on the basis of the deferral request, nor was any related
additional allowance recorded. We continue to accrue interest on all COVID-19
related loan deferrals for up to six months. As of June 30, 2021, the accrued
interest balance on COVID-19 related loans where balances were still on deferral
was $4.7 million.
Other impacts on our results of operation and financial condition

In addition to the above factors, we believe the following factors may impact our profits, although we are unable to quantify the impacts at this time:

•Increased allowance related to loans that continue to be impacted by the
economy after the payment deferral periods end
•Lower net interest margin due to the Federal Reserve's decision to hold rate
targets "near zero"; and
•Lower loan originations as the credit worthiness of borrowers may be impacted
by the current economic environment

As of June 30, 2021, we had $12.9 million of goodwill. During the second quarter
of 2021, we performed our annual impairment analysis and determined no goodwill
impairment was required. However, we will continue to monitor the COVID-19
pandemic and the related economic fallout, including changes in our stock price,
the Federal Reserve's significant reduction in interest rates and other business
and market considerations, which may require us to reevaluate our goodwill
impairment analysis. Any goodwill impairment charges we incur could have a
material adverse effect on our earnings for one reporting period, but would not
impact our cash flow or regulatory capital levels.

These factors, together or in combination with other events or occurrences that
may not yet be known or anticipated, may materially and adversely affect our
business, financial condition and results of operations.
Critical and Significant Accounting Policies and Estimates

Our consolidated financial statements are prepared based on the application of
accounting policies generally accepted in the United States, or GAAP, and
conform to general practices within the banking industry. Our significant
accounting policies are more fully described in Note 1 of our audited
consolidated financial statements included in our 2020 Annual Report and our
critical accounting policies are more fully described under "Critical Accounting
Policies and Estimates" included in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our 2020 Annual Report. There
have been no significant changes to our critical and significant accounting
policies, or the estimates made pursuant to those policies as described in our
2020 Annual Report.
Results of Operations
General
Our results of operations depend substantially on net interest income, which is
the difference between interest income on interest-earning assets, consisting
primarily of interest income on loans, investment securities and other
short-term investments and interest expense on interest-bearing liabilities,
consisting primarily of interest expense on deposits and borrowings. Our results
of operations are also dependent on non-interest income, consisting primarily of
income from Trust Department fees, service charges on deposit accounts, net
gains on sales of investment securities and income from bank-owned life
insurance ("BOLI"). Other factors contributing to our results of operations
include our provisions for loan losses, income taxes, and non-interest expenses,
such as salaries and employee benefits, occupancy and depreciation expenses,
professional fees, data processing fees and other miscellaneous operating costs.
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The net result for the second quarter of 2021 amounts to $ 10.4 million, or $ 0.33 per diluted share, compared to $ 10.4 million, or $ 0.33 per diluted share, for the second quarter of 2020.

Net income for the six months ended June 30, 2021 was $22.6 million, or $0.72
per diluted share, compared to $19.9 million, or $0.64 per diluted share, for
same period in 2020. The $2.7 million increase was primarily due to a $18.4
million decrease in the provision for loan losses, partially offset by a $5.3
million decrease in net interest income, a $8.5 million decrease in non-interest
income and a $0.9 million increase in non-interest expense.

Net Interest Income
Net interest income, representing interest income less interest expense, is a
significant contributor to our revenues and earnings. We generate interest
income from interest, dividends and prepayment fees on interest-earning assets,
including loans, investment securities and other short-term investments. We
incur interest expense from interest paid on interest-bearing liabilities,
including interest-bearing deposits, FHLB advances and other borrowings. To
evaluate net interest income, we measure and monitor (i) yields on our loans and
other interest-earning assets, (ii) the costs of our deposits and other funding
sources, (iii) our net interest spread and (iv) our net interest margin. Net
interest spread is equal to the difference between rates earned on
interest-earning assets and rates paid on interest-bearing liabilities. Net
interest margin is equal to the annualized net interest income divided by
average interest-earning assets. Because non-interest-bearing sources of funds,
such as non-interest-bearing deposits and stockholders' equity, also fund
interest-earning assets, net interest margin includes the benefit of these
non-interest-bearing sources.
Changes in the market interest rates and interest rates we earn on
interest-earning assets or pay on interest-bearing liabilities, as well as the
volume and types of interest-earning assets, interest-bearing and
non-interest-bearing liabilities, are usually the largest drivers of periodic
changes in net interest spread, net interest margin and net interest income.
Three Months Ended June 30, 2021 and 2020
The following table sets forth information related to our average balance sheet,
average yields on assets, and average costs of liabilities for the periods
indicated:
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                                                                  Three Months Ended                                          Three Months Ended
                                                                     June 30, 2021                                               June 30, 2020
         (In thousands)                             Average            Income /            Yield /              Average            Income /            Yield /
                                                    Balance             Expense              Rate               Balance             Expense              Rate
           Interest earning assets:

Interest-bearing deposits in banks $ 510,473 $ 131

                 0.10  %       $   364,932          $     83             

0.09%

         Securities and FHLB stock (1)             2,447,241            13,135                 2.15  %         1,834,892            11,812          

2.59%

         Total loans, net (2)(3)                   3,162,896            30,156                 3.82  %         3,571,160            35,225          

3.97%

           Total interest earning assets           6,120,610            43,422                 2.85  %         5,770,984            47,120                 3.28  %
           Non-interest earning assets:
         Cash and due from banks                       7,545                                                      74,877
         Other assets                                266,613                                                     224,531
           Total assets                          $ 6,394,768                                                 $ 6,070,392

           Interest bearing liabilities:
         Savings, NOW and money market
         deposits                                  2,567,396          $  1,174                 0.18  %         2,313,772          $  1,755                 0.31  %
         Time deposits                               258,257               257                 0.40  %           370,969               926                 1.00  %

           Total interest bearing liabilities      2,825,653             1,431                 0.20  %         2,684,741             2,681                 0.40  %
           Non-interest bearing liabilities:
         Demand and transaction deposits           2,909,554                                                   2,746,529
         Other liabilities                           111,795                                                     151,591
           Total liabilities                       5,847,002                                                   5,582,861
           Stockholders' equity                      547,766                                                     487,531
           Total liabilities and
         stockholders' equity                    $ 6,394,768                                                 $ 6,070,392

           Net interest income / interest
         rate spread                                                  $ 41,991                 2.65  %                            $ 44,439         
       2.88  %
           Net interest earning assets / net
         interest margin                         $ 3,294,957                                   2.75  %       $ 3,086,243                                   3.10  %

         Total Cost of Deposits                                                                0.10  %                                                     0.20  %


(1) Amounts include resell agreements
(2) Amounts are net of deferred origination costs (fees) and the allowance for
loan losses and includes loans held for sale
(3) Net interest margin includes prepayment penalty income in 2Q2021 and 2Q2020
of $504,469 and $239,190 respectively

Our net interest income was $42.0 million for the second quarter of 2021,
compared to $44.4 million for the second quarter of 2020. The year-over-year
decrease of $2.4 million, or 5.5%, was primarily attributable to a decrease in
average loans of $408.3 million from the prepayment of residential and
commercial loans and a 15 basis point decrease in yield due to lower yields on
originations, partially offset by higher income on securities and lower interest
expense on deposits.

Our net interest spread was 2.65% for the three months ended June 30, 2021,
compared to 2.88% for the same period in 2020, a decrease of 23 basis points.
Our net interest margin was 2.75% for the second quarter of 2021, a decrease of
35 basis points from 3.10% in the second quarter of 2020. The accretion of the
loan mark from the loans we acquired in our New Resource Bank ("NRB")
acquisition contributed two basis points to our net interest margin in the
second quarter of 2021, compared to three basis points in the second quarter of
2020. Prepayment penalties earned through loan income contributed $0.5 million,
or three basis points, to our net interest margin in the second quarter of 2021,
compared to two basis points in the second quarter of 2020.

The return on average productive assets was 2.85% for the three months ended
June 30, 2021, compared to 3.28% for the same period in 2020, a decrease of 43 basis points. The main reason for this decline is lower yields on loans and securities due to a fall in the fed funds rate.

The average rate on interest-bearing liabilities was 0.20% for the three months
ended June 30, 2021, a decrease of 20 basis points from the same period in 2020,
which was primarily due to a decrease in the rates paid on interest-bearing
deposits. Noninterest-bearing deposits represented 51% of average deposits for
the three months ended June 30, 2021, contributing to a total cost of deposits
of 10 basis points in the second quarter of 2021.
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Six Months Ended June 30, 2021 and 2020
The following table sets forth information related to our average balance sheet,
average yields on assets, and average costs of liabilities for the periods
indicated:
                                                          Six Months Ended                                            Six Months Ended
                                                            June 30, 2021                                               June 30, 2020
(In thousands)                             Average            Income /            Yield /              Average            Income /            Yield /
                                           Balance             Expense              Rate               Balance             Expense              Rate
  Interest earning assets:
Interest-bearing deposits in banks      $   445,340          $    221                 0.10  %       $   275,107          $    479                 0.35  %
Securities and FHLB stock (1)             2,359,870            25,353                 2.17  %         1,689,870            24,434                 2.91  %

Total loans, net (2)(3)                   3,228,235            61,265                 3.83  %         3,517,799            70,837                 4.05  %
  Total interest earning assets           6,033,445            86,839                 2.90  %         5,482,776            95,750                 3.51  %
  Non-interest earning assets:
Cash and due from banks                       7,432                                                      42,208
Other assets                                272,930                                                     223,643
  Total assets                          $ 6,313,807                                                 $ 5,748,627

  Interest bearing liabilities:
Savings, NOW and money market
deposits                                  2,540,277          $  2,395                 0.19  %         2,228,509          $  4,492                 0.41  %
Time deposits                               269,063               608                 0.46  %           376,011             2,104                 1.13  %
  Total deposits                          2,809,340             3,003                 0.22  %         2,604,520             6,596                 0.51  %
Federal Home Loan Bank advances                 249                 -                 0.00  %             3,187                27                 1.70  %

  Total interest bearing liabilities      2,809,589             3,003                 0.22  %         2,607,707             6,623                 0.51  %
  Non-interest bearing liabilities:
Demand and transaction deposits           2,848,401                                                   2,523,764
Other liabilities                           110,654                                                     122,450
  Total liabilities                       5,768,644                                                   5,253,921
  Stockholders' equity                      545,163                                                     494,706
  Total liabilities and
stockholders' equity                    $ 6,313,807                                                 $ 5,748,627

  Net interest income / interest
rate spread                                                  $ 83,836                 2.68  %                            $ 89,127                 3.00  %
  Net interest earning assets / net
interest margin                         $ 3,223,856                                   2.80  %       $ 2,875,069                                   3.27  %

Total Cost of Deposits                                                                0.11  %                                                     0.26  %


(1) Amounts include resell agreements
(2) Amounts are net of deferred origination costs (fees) and the allowance for
loan losses and includes loans held for sale
(3) Net interest margin includes prepayment penalty income in June YTD 2021 and
June YTD 2020 of $1,146,356, and $1,000,758 respectively
Our net interest income was $83.8 million for the six months ended June 30,
2021, compared to $89.1 million for the same period in 2020. The year-over-year
decrease of $5.3 million, or 5.9%, was primarily attributable to a decrease in
average loans of $289.6 million and lower yields earned on interest bearing
assets. These impacts are partially offset by an increase in average securities
of
$670.0 million, and a decrease in average rates paid on deposits.

Our net interest spread was 2.68% for the six months ended June 30, 2021, compared to 3.00% for the same period in 2020, a decrease of 32 basis points. Our net interest margin was 2.80% for the half-year ended June 30, 2021, a decrease of 47 basis points compared to 3.27% for the same period in 2020.

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The yield on average earning assets was 2.90% for the six months ended June 30,
2021, compared to 3.51% for the same period in 2020, a decrease of 61 basis
points. This decrease was driven primarily by a decrease in yields on loans and
securities due to a decrease in the Federal Funds rate.

The average rate on interest-bearing liabilities, comprised almost entirely of
deposits, was 0.22% for the six months ended June 30, 2021, a decrease of 29
basis points from the same period in 2020, which was primarily due to the mix of
deposits shifting from higher cost CDs to lower cost money market deposits and a
decrease in rates paid on interest-bearing deposits. Noninterest-bearing
deposits represented 51% of average deposits for the six months ended June 30,
2021, contributing to a total cost of deposits of 11 basis points in the first
six months of 2021.

Rate-Volume Analysis
Increases and decreases in interest income and interest expense result from
changes in average balances (volume) of interest-earning assets and
interest-bearing liabilities, as well as changes in weighted average interest
rates. The table below presents the effect of volume and rate changes on
interest income and expense. Changes in volume are changes in the average
balance multiplied by the previous period's average rate. Changes in rate are
changes in the average rate multiplied by the average balance from the previous
period. The net changes attributable to the combined impact of both rate and
volume have been allocated proportionately to the changes due to volume and the
changes due to rate:
                                                                 Three Months Ended                                             Six Months Ended
                                                          June 30, 2021 over June 30, 2020                              June 30, 2021 over June 30, 2020
                                                                    Changes Due                                                   Changes Due
                                                                         To                                                            To
         (In thousands)                            Volume               Rate             Net Change              Volume               Rate             Net Change

           Interest earning assets:
         Interest-bearing deposits in banks     $       35          $      13          $        48           $       112          $    (370)         $      (258)
         Securities and FHLB stock                   3,649             (2,326)               1,323                 8,286             (7,367)                 919

         Total loans, net                           (3,887)            (1,182)              (5,069)               (5,835)            (3,737)      

(9,572)

           Total interest income                      (203)            (3,495)              (3,698)                2,563            (11,474)              (8,911)

           Interest bearing liabilities:
         Savings, NOW and money market                                   (710)                (581)                                  (2,427)              (2,097)
         deposits                                      129                                                           330
         Time deposits                                (151)              (518)                (669)                 (321)            (1,175)              (1,496)
           Total deposits                              (22)            (1,228)              (1,250)                    9             (3,602)              (3,593)
         Federal Home Loan Bank advances               (27)                27                    -                     -                (27)                 (27)

           Total borrowings                            (27)                27                    -                     -                (27)                 (27)
           Total interest expense                      (49)            (1,201)              (1,250)                    9             (3,629)       

(3,620)

Change in net interest income $ (154) $ (2,294) $ (2,448) $ 2,554 $ (7,845)

  $    (5,291)


Provision for Loan Losses

We establish an allowance for loan losses through a provision for loan losses
charged as an expense in our Consolidated Statements of Income. The provision
for loan losses is the amount of expense that, based on our judgment, is
required to maintain the allowance at an adequate level to absorb probable
incurred losses inherent in the loan portfolio at the balance sheet date and
that, in management's judgment, is appropriate under GAAP. Our determination of
the amount of the allowance and corresponding provision for loan losses
considers ongoing evaluations of the credit quality and level of credit risk
inherent in our loan portfolio, levels of nonperforming loans and charge-offs,
statistical trends and economic and other relevant factors. The allowance is
increased by provisions charged to expense and decreased by recoveries of
provisions released from expense or by actual charge-offs, net of recoveries on
prior loan charge-offs. In accordance with accounting guidance for business
combinations, we recorded all loans acquired in the NRB acquisition at their
estimated fair value at the date of acquisition with no carryover of the related
allowance.
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Three months ended June 30, 2021 and 2020

Our provision for loan losses totaled an expense of $1.7 million for the second
quarter of 2021 compared to an expense of $8.2 million for the same period in
2020. The expense in the second quarter of 2021 was primarily driven by an
increase in allowance due to an increase of specific reserves for C&I loans,
countered by net balance reductions.
Six Months Ended June 30, 2021 and 2020

Our provisions for loan losses totaled a recovery of $1.6 million for the six
months ended June 30, 2021, compared to an expense of $16.8 million for the same
period in 2020. The recovery for the six months ended June 30, 2021 was
primarily driven by a release of allowance for loan loss due to lower loan
balances, and the upgrade of one construction loan to a pass rating, countered
by an increase in allowance due to an increase of specific reserves for C&I
loans.
For a further discussion of the allowance, see "Allowance for Loan Losses"
below.
Non-Interest Income
Our non-interest income includes Trust Department fees, which consist of fees
received in connection with investment advisory and custodial management
services of investment accounts, service fees charged on deposit accounts,
income on BOLI, gain or loss on sales of securities, sales of loans, and other
real estate owned, income from equity method investments, and other income.
The following table presents our non-interest income for the periods indicated:
                                                       Three Months Ended                     Six Months Ended
                                                            June 30,                              June 30,
(In thousands)                                        2021                2020             2021              2020
Trust Department fees                           $    3,292             $ 3,980          $  7,118          $  8,066
Service charges on deposit accounts                  2,296               1,850             4,475             4,261
Bank-owned life insurance                              531               1,111             1,319             1,495
Gain (loss) on sale of investment securities
available for sale, net                                321                 486               342               985
Gain (loss) on sale of loans, net                      720                 162             1,426               297
Gain (loss) on other real estate owned, net           (407)               (283)             (407)             (306)
Equity method investments                           (1,555)              1,289            (5,237)            1,289
Other income                                           129                  76               290             1,702
   Total non-interest income                    $    5,327             $ 8,671          $  9,326          $ 17,789

Three months ended June 30, 2021 and 2020

Our non-interest income was $5.3 million for the second quarter of 2021,
compared to $8.7 million for the same period in 2020, a decrease of $3.4
million, or 39.1%. This decrease was primarily due to a loss of $1.6 million
related to equity method investments in the second quarter of 2021 compared to a
$1.3 million gain in the same period in 2020. We primarily recognized the
benefit of the tax credits in the second half of 2020, the initial year of the
equity investment. We expect minimal losses in equity method investments during
the remainder of 2021. These impacts do not include any benefits of new solar
equity investments that we may make in the future.

Trust Department fees consist of fees we receive in connection with our
investment advisory and custodial management services of investment accounts.
Our Trust Department fees were $3.3 million in the second quarter of 2021, a
decrease of $0.7 million, or 17.3%, from same period in 2020, which is primarily
attributed to the low interest rate environment and pressure on fixed income.
Our investment management business historically earned fees from a real-estate
fund that we have been winding down since 2018 and from which we no longer earn
fees beginning in 2021.

Six months ended June 30, 2021 and 2020

Our non-interest income was $9.3 million for the six months ended June 30, 2021,
compared to $17.8 million for the same period in 2020, a decrease of $8.5
million, or 47.6%. This decrease is primarily due to a loss of $5.2 million on
an equity investment in solar projects compared to a gain of $1.3 million in the
comparable period in 2020, a $1.4 million gain on the sale of a branch recorded
in other income in the prior period, and a $1.0 million decrease in Trust
Department fees primarily attributed to the low
                                       43

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interest rate environment and pressure on fixed income, partially offset by an
increase of $1.1 million in gains on the sale of residential loans, which was
volume driven, given the year over year growth in our residential loans held for
sale portfolio.

Non-Interest Expense
Non-interest expense includes compensation and employee benefits, occupancy and
depreciation expense, professional fees (including legal, accounting and other
professional services), data processing, office maintenance and depreciation,
amortization of intangible assets, advertising and promotion, and other
expenses. The following table presents non-interest expense for the periods
indicated:
                                              Three Months Ended            Six Months Ended
                                                   June 30,                     June 30,
(In thousands)                                2021           2020          2021          2020

Compensation and employee benefits, net   $   16,964      $ 17,334      $ 35,003      $ 34,792
Occupancy and depreciation                     3,352         4,241         6,853         9,747
Professional fees                              3,211         1,988         6,871         4,971

Data processing                                3,322         2,977         6,327         5,241
Office maintenance and depreciation              820           818         1,475         1,675
Amortization of intangible assets                302           342           604           685
Advertising and promotion                        628           672         1,225         1,339
Other                                            2,796         2,696         5,831         4,889
   Total non-interest expense             $   31,395      $ 31,068        64,189        63,339



Three Months Ended June 30, 2021 and 2020
Our non-interest expense for the second quarter of 2021 was $31.4 million, an
increase of $0.3 million, or 1.1%, from $31.1 million in the second quarter of
2020. The increase was primarily due to increases in data processing and
professional fees as a result of the modernization of our Trust department and
executive officer search, respectively, offset by decreases in occupancy and
depreciation due to realization of cost savings from branch closures in the
prior year.
Six Months Ended June 30, 2021 and 2020

Our non-interest expense for the six months ended June 30, 2021 was $64.2
million, an increase of $0.9 million, or 1.3%, from $63.3 million for the six
months ended June 30, 2020. The increase was primarily due to the increase in
professional fees mainly related to our holding company formation as well as
executive search, an increase in data processing driven by the modernization of
our Trust Department and increased transaction processing post COVID-19, and an
increase in other expenses, offset by a decrease in branch occupancy expense
attributed to branch closure expenses in the prior year and lower rent expense
in the current year.

Income Taxes

Three months ended June 30, 2021 and 2020

We had a provision for income tax expense of $3.8 million for the second quarter
of 2021, compared to $3.4 million for the second quarter of 2020. Our effective
tax rate for the second quarter of 2021 was 26.9%, compared to 24.9% for the
second quarter of 2020. The increase in our effective tax rate was driven by
discrete events related to new states that we elected to begin filing taxes and
an executive compensation disallowance.

Six months ended June 30, 2021 and 2020

We had a provision for income tax expense of $8.0 million for the six months
ended June 30, 2021, compared to $6.9 million for the same period in 2020. Our
effective tax rate was 26.0% for the six months ended June 30, 2021, compared to
25.6% for the same period in 2020. This was driven by the effective tax rate
increase in Q2, explained above.


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Financial condition

Balance sheet

Our total assets were $6.6 billion at June 30, 2021, compared to $6.0 billion at
December 31, 2020. The increase of $0.6 billion was driven primarily by a $508.7
million increase in cash and cash equivalents, a $415.3 million increase in
investment securities, which was partially offset by a $309.9 million decrease
in loans receivable, net.
Investment Securities
The primary goal of our securities portfolio is to maintain an available source
of liquidity and an efficient investment return on excess capital, while
maintaining a low-risk profile. We also use our securities portfolio to manage
interest rate risk, meet Community Reinvestment Act ("CRA") goals and to provide
collateral for certain types of deposits or borrowings. An Investment Committee
chaired by our Chief Financial Officer manages our investment securities
portfolio according to written investment policies approved by our Board of
Directors. Investments in our securities portfolio may change over time based on
management's objectives and market conditions.
We seek to minimize credit risk in our securities portfolio through
diversification, concentration limits, restrictions on high risk investments
(such as subordinated positions), comprehensive pre-purchase analysis and stress
testing, ongoing monitoring and by investing a significant portion of our
securities portfolio in U.S. Government sponsored entity ("GSE") obligations.
GSEs include the Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal
National Mortgage Association ("FNMA"), the Government National Mortgage
Association ("GNMA") and the Small Business Administration ("SBA"). GNMA is a
wholly-owned U.S. Government corporation whereas FHLMC and FNMA are private.
Mortgage-related securities may include mortgage pass-through certificates,
participation certificates and collateralized mortgage obligations ("CMOs"). We
invest in non-GSE securities, including PACE bonds, in order to generate higher
returns, improve portfolio diversification and reduce interest rate and
prepayment risk. With the exception of small legacy CRA investments, Trust
Preferred securities, and certain corporate bonds, all of our non-GSE securities
are senior positions that are the top of the capital structure.
Our investment securities portfolio consists of securities classified as
available for sale and held to maturity. There were no trading securities in our
investment portfolio at June 30, 2021 or at December 31, 2020. All available for
sale securities are carried at fair value and may be used for liquidity purposes
should management consider it to be in our best interest.

At June 30, 2021 and December 31, 2020, we had available for sale securities of
$1.8 billion and $1.5 billion, respectively. The $284.9 million increase was
primarily from the purchase of asset-backed securities ("ABS").
At June 30, 2021, our held to maturity securities portfolio primarily consisted
of property assessed clean energy, or PACE bonds, tax-exempt municipal
securities, GSE residential certificates and other debt. We carry these
securities at amortized cost. We had held to maturity securities of $624.8
million at June 30, 2021, and $494.4 million at December 31, 2020.
Certain securities have fair values less than amortized cost and, therefore,
contain unrealized losses. At June 30, 2021, we evaluated those securities which
had an unrealized loss for OTTI, and determined all of the decline in value to
be temporary. There were $1.1 billion of investment securities with unrealized
losses at June 30, 2021 of which none had a continuous unrealized loss position
for 12 consecutive months or longer that was greater than 5% of amortized cost.
We anticipate full recovery of amortized cost with respect to these securities
by the time that these securities mature, or sooner in the case that a more
favorable market interest rate environment causes their fair value to increase.
We do not intend to sell these securities and we believe it is more likely than
not that we will be required to sell them before full recovery of their
amortized cost basis, which may be at the time of their maturity.

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The following table is a summary of our investment portfolio, using the market value of available-for-sale securities and the amortized cost of securities held to maturity on the dates indicated.

                                                             June 30, 2021                                     December 31, 2020
   (In thousands)                                  Amount                    % of                      Amount                      % of
                                                                          Portfolio                                             Portfolio
   Available for sale:
   Mortgage-related:
   GSE residential certificates                $     10,490                        0.4  %       $          13,299                        0.7  %
   GSE residential CMOs                             380,348                       15.5  %                 366,421                       18.0  %
   GSE commercial certificates & CMO                430,611                       17.6  %                 432,614                       21.3  %
   Non-GSE residential certificates                  15,955                        0.7  %                  33,384                        1.6  %
   Non-GSE commercial certificates                   60,539                        2.5  %                  44,968                        2.2  %

   Other debt:
   U.S. Treasury                                        202                        0.0  %                     203                        0.0  %
   ABS                                              846,059                       34.5  %                 597,546                       29.3  %
   Trust preferred                                   14,126                        0.6  %                  13,773                        0.7  %
   Corporate                                         66,396                        2.7  %                  37,654                        1.9  %

       Total available for sale                   1,824,726                       74.5  %               1,539,862                       75.7  %

   Held to maturity:
   Mortgage-related:
   GSE residential certificates                $        450                        0.0  %       $             611                        0.0  %
   Non GSE commercial certificates                      191                        0.0  %                     212                        0.0  %

   Other debt:
   PACE                                             545,795                       22.3  %                 421,036                       20.7  %
   Municipal                                         75,290                        3.1  %                  67,490                        3.3  %
   Other                                              3,100                        0.1  %                   5,100                        0.3  %
       Total held to maturity                       624,826                       25.5  %                 494,449                       24.3  %

   Total securities                            $  2,449,552                      100.0  %       $       2,034,311                      100.0  %


                                       46
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The following table shows the contractual maturities and the yields of the portfolios of available-for-sale and held-to-maturity securities:

                                                                                Contractual Maturity as of June 30, 2021
                                             One Year or Less                        One to Five Years                         Five to Ten Years                         Due after Ten Years
                                     Amortized            Weighted            Amortized            Weighted             Amortized            Weighted              Amortized             Weighted
                                        Cost               Average               Cost               Average               Cost                Average                Cost                 Average
   (In thousands)                                         Yield (1)                                Yield (1)                                 Yield (1)                                   Yield (1)

Available for sale :

In connection with the mortgage:

   GSE residential certificates     $       -                   0.0  %       $       -                   0.0  %       $        -                     -  %       $     10,217                   1.9  %
   GSE residential CMOs                     -                   0.0  %               -                   0.0  %           23,047                   2.1  %            347,536                   1.6  %
   GSE commercial certificates &       14,349                   1.9  %           8,493                   2.4  %          297,308                   1.2  %            101,792                   2.1  %

Marketing director

   Non-GSE residential certificates         -                   0.0  %               -                   0.0  %                -                   0.0  %             15,880                   1.9  %
   Non-GSE commercial certificates          -                   0.0  %               -                   0.0  %                -                   0.0  %             60,474                   1.4  %

   Other debt:
    U.S. Treasury                         200                   1.7  %               -                   0.0  %                -                   0.0  %                  -                   0.0  %

   ABS                                      -                   0.0  %           8,358                   1.2  %          260,622                   1.4  %            572,113                   1.8  %
   Trust preferred                          -                   0.0  %               -                   0.0  %           14,629                   0.7  %                  -                   0.0  %
   Corporate                                -                   0.0  %          15,966                   4.8  %           49,009                   4.0  %                  -                   0.0  %

   Held to maturity:
   Mortgage-related:

   GSE residential certificates             -                   0.0  %               -                   0.0  %                -                   0.0  %                450                   3.5  %
   Non GSE commercial certificates          -                   0.0  %               -                   0.0  %                -                   0.0  %                191                   5.6  %

   Other debt:
   PACE                                     -                     -  %               -                     -  %                -                     -  %            545,795                   4.3  %
   Municipal                                -                   0.0  %               -                   0.0  %            9,329                   1.1  %             65,961                   2.1  %
   Other                                1,100                   3.4  %           2,000                   3.3  %                -                   0.0  %                  -                   0.0  %

   Total securities                 $  15,649                   2.0  %       $  34,817                   3.2  %       $  653,944                   1.5  %       $  1,720,409                   2.6  %


(1) Estimated return based on book price (amortized cost divided by par) using estimated prepayments and no change in interest rates.

The following table shows the breakdown of our asset-backed securities by sector and ratings at June 30, 2021:

                                                                                             Credit Ratings
                                                                                     Highest Rating if split rated
                                                          Expected Avg.       %                              %Not
   (In thousands)                     Amount       %      Life in Years   

% float AAA % AA% A Rated Total

   CLO Commercial & Industrial      $ 441,785     50  %        2.9            100  %  100  %   0  %    0  %    0  %  100  %
   Consumer                           172,825     20  %        4.5              0  %   22  %  11  %   67  %    0  %  100  %
   Mortgage                           134,394     20  %        2.7            100  %  100  %   0  %    0  %    0  %  100  %
   Student                             97,055     10  %        5.2             82  %   94  %   6  %    0  %    0  %  100  %
   Total Securities:                $ 846,059    100  %        3.4             77  %   83  %   3  %   14  %    0  %  100  %



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Loans

Lending-related income is the most important component of our net interest
income and is the main driver of our results of operations. Total loans, net of
deferred origination fees and allowance for loan losses, were $3.1 billion as of
June 30, 2021 compared to $3.4 billion as of December 31, 2020. Within our
commercial loan portfolio, our primary focus has been on C&I, multifamily and
CRE lending. Within our retail loan portfolio, our primary focus has been on
residential 1-4 family (1st lien) mortgages. We intend to focus any organic
growth in our loan portfolio on these lending areas as part of our strategic
plan.
In the second quarter of 2021, we purchased $33.8 million of solar loans and
$16.0 million of commercial loans that are unconditionally guaranteed by the
United States government.
The following table sets forth the composition of our loan portfolio, as of
June 30, 2021 and December 31, 2020:
   (In thousands)                                       June 30, 2021                                   December 31, 2020
                                               Amount             % of total loans               Amount               % of total loans
   Commercial portfolio:
   Commercial and industrial               $    619,037                     19.5  %       $         677,192                     19.5  %
   Multifamily mortgages                        848,651                     26.8  %                 947,177                     27.2  %
   Commercial real estate mortgages             351,707                     11.1  %                 372,736                     10.7  %
   Construction and land development             42,303                      1.3  %                  56,087                      1.6  %

mortgages

     Total commercial portfolio               1,861,698                     58.7  %               2,053,192                     59.0  %

Retail Portfolio:

   Residential real estate lending            1,085,791                     34.3  %               1,238,697                     35.5  %

   Consumer and other                           222,265                      7.0  %                 190,676                      5.5  %
     Total retail portfolio                   1,308,056                     41.3  %               1,429,373                     41.0  %
     Total loans                              3,169,754                    100.0  %               3,482,565                    100.0  %

   Net deferred loan origination costs            5,707                                               6,330
   (fees)
   Allowance for loan losses                    (38,012)                                            (41,589)
     Total loans, net                      $  3,137,449                                   $       3,447,306



Commercial loan portfolio
Our commercial loan portfolio comprised 58.7% of our total loan portfolio at
June 30, 2021 and 59.0% of our total loan portfolio at December 31, 2020. The
major categories of our commercial loan portfolio are discussed below:
C&I. Our C&I loans are generally made to small and medium-sized manufacturers
and wholesale, retail and service-based businesses to provide either working
capital or to finance major capital expenditures. The primary source of
repayment for C&I loans is generally operating cash flows of the business. We
also seek to minimize risks related to these loans by requiring such loans to be
collateralized by various business assets (including inventory, equipment and
accounts receivable). The average size of our C&I loans at June 30, 2021 by
exposure was $3.5 million with a median size of $1.0 million. We have shifted
our lending strategy to focus on developing full customer relationships
including deposits, cash management, and lending. The businesses that we focus
on are generally mission aligned with our core values, including organic and
natural products, sustainable companies, clean energy, nonprofits, and B
Corporations TM.
Our C&I loans totaled $619.0 million at June 30, 2021, which comprised 19.5% of
our total loan portfolio. During the six months ended June 30, 2021, the C&I
loan portfolio decreased by 8.6% from $677.2 million at December 31, 2020.
Multifamily. Our multifamily loans are generally used to purchase or refinance
apartment buildings of five units or more, which collateralize the loan, in
major metropolitan areas within our markets. Multifamily loans have 79% of their
exposure in New York City-our largest geographic concentration. Our multifamily
loans have been underwritten under stringent guidelines on loan-to-value and
debt service coverage ratios that are designed to mitigate credit and
concentration risk in this loan category.
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Our multifamily loans totaled $848.7 million at June 30, 2021, which comprised
26.8% of our total loan portfolio. During the six months ended June 30, 2021,
the multifamily loan portfolio decreased by 10.4% from $947.2 million at
December 31, 2020.
CRE. Our CRE loans are used to purchase or refinance office buildings, retail
centers, industrial facilities, medical facilities and mixed-used buildings.
Included in this total are 24 borrowers financing owner­occupied buildings which
account for an aggregate total of $41 million in loans as of June 30, 2021.

Our CRE loans totaled $351.7 million at June 30, 2021, which comprised 11.1% of
our total loan portfolio. During the six months ended June 30, 2021, the CRE
loan portfolio decreased by 5.6% from $372.7 million at December 31, 2020.

Retail loan portfolio
Our retail loan portfolio comprised 41.3% of our loan portfolio at June 30, 2021
and 41.0% of our loan portfolio at December 31, 2020. The major categories of
our retail loan portfolio are discussed below.

Residential real estate lending. Our residential 1-4 family mortgage loans are
residential mortgages that are primarily secured by single-family homes, which
can be owner occupied or investor owned. These loans are either originated by
our loan officers or purchased from other originators with the servicing
retained by such originators. Our residential real estate lending portfolio is
99% first mortgage loans and 1% second mortgage loans. As of June 30, 2021, 82%
of our residential 1-4 family mortgage loans were either originated by our loan
officers since 2012 or were acquired in our acquisition of NRB, 12% were
purchased from two third parties on or after July 2014, and 6% were purchased by
us from other originators before 2010. Our residential real estate lending loans
totaled $1.1 billion at June 30, 2021, which comprised 83.0% of our retail loan
portfolio and 34.3% of our total loan portfolio. In June 30, 2021, our
residential real estate lending loans decreased by 12.3% from $1.2 billion at
December 31, 2020.
Consumer and other. Our consumer and other portfolio is comprised of purchased
student loans, residential solar loans, unsecured consumer loans and overdraft
lines. Our consumer and other loans totaled $222.3 million at June 30, 2021,
which comprised 7.0% of our total loan portfolio, compared to $190.7 million, or
5.5% of our total loan portfolio, at December 31, 2020.
Maturities and Sensitivity of Loans to Changes in Interest Rates
The information in the following table is based on the contractual maturities of
individual loans, including loans that may be subject to renewal at their
contractual maturity. Renewal of these loans is subject to review and credit
approval, as well as modification of terms upon maturity. Actual repayments of
loans may differ from the maturities reflected below because borrowers have the
right to prepay obligations with or without prepayment penalties. The following
tables summarize the loan maturity distribution by type and related interest
rate characteristics at June 30, 2021 and December 31, 2020:
                                                                     After one but
                                                 One year or          within five
   (In thousands)                                    less                years              After 5 years             Total
   June 30, 2021:

Commercial portfolio:

   Commercial and industrial                    $   115,644          $   

207,039 $ 296,354 $ 619,037

   Multifamily                                      122,940              448,701                 277,010              848,651
   Commercial real estate                            61,568              253,440                  36,699              351,707
   Construction and land development                 36,296                2,781                   3,226               42,303

Retail Portfolio:

   Residential real estate lending                      447                2,033               1,083,311            1,085,791

   Consumer and other                                   529                1,517                 220,219              222,265
     Total Loans                                $   337,424          $  
915,511          $    1,916,819          $ 3,169,754



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                                                                          After one but
                                                                           within five
   (In thousands)                                                             years              After 5 years             Total
   Gross loan maturing after one year
   with:
   Fixed interest rates                                                   $   801,502          $    1,268,359          $ 2,069,861
   Floating or adjustable interest rates                                      114,009                 648,460              762,469
   Total Loans                                                            $   915,511          $    1,916,819          $ 2,832,330



                                                             After one but
                                        One year or           within five
(In thousands)                              less                 years              After 5 years             Total
December 31, 2020:
Commercial Portfolio:
Commercial and industrial              $   149,870          $    266,209          $      261,113          $   677,192
Multifamily                                127,009               496,107                 324,061              947,177
Commercial real estate                      58,124               259,664                  54,948              372,736
Construction and land development           41,293                 9,773                   5,021               56,087

Retail Portfolio:
Residential real estate lending                450                 1,834               1,236,413            1,238,697

Consumer and other                             536                 2,372                 187,768              190,676
  Total retail                         $   377,282          $  1,035,959          $    2,069,324          $ 3,482,565


                                                            After one but
                                                             within five
(In thousands)                                                  years              After 5 years             Total
Gross loan maturing after one year
with:
Fixed interest rates                                       $    870,644          $    1,360,222          $ 2,230,865
Floating or adjustable interest rates                           165,315                 709,102              874,417
Total Loans                                                $  1,035,959          $    2,069,324          $ 3,105,282



Allowance for Loan Losses
We maintain the allowance at a level we believe is sufficient to absorb probable
incurred losses in our loan portfolio given the conditions at the time.
Management determines the adequacy of the allowance based on periodic
evaluations of the loan portfolio and other factors, including end-of-period
loan levels and portfolio composition, observable trends in nonperforming loans,
our historical loan losses, known and inherent risks in the portfolio,
underwriting practices, adverse situations that may impact a borrower's ability
to repay, the estimated value and sufficiency of any underlying collateral,
credit risk grade assessments, loan impairment and economic conditions. These
evaluations are inherently subjective as they require management to make
material estimates, all of which may be susceptible to significant change. The
allowance is increased by provisions for loan losses charged to expense and
decreased by actual charge-offs, net of recoveries.
The allowance consists of specific allowances for loans that are individually
classified as impaired and general components. Impaired loans include loans
placed on nonaccrual status and TDRs. Loans are considered impaired when, based
on current information and events, it is probable that we will be unable to
collect all amounts due in accordance with the original contractual terms of the
loan agreements. When determining if we will be unable to collect all principal
and interest payments due in accordance with the original contractual terms of
the loan agreement, we consider the borrower's overall financial condition,
resources and payment record, support from guarantors, and the realized value of
any collateral. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management determines the
significance of payment delays and payment shortfalls on a case-by-case basis,
taking into consideration all of the circumstances surrounding the loan and the
borrower, including the length of the delay, the reasons for the delay, the
borrower's prior payment record, and the amount of the shortfall in relation to
the principal and interest owed.
Impaired loans are individually identified and evaluated for impairment based on
a combination of internally assigned risk ratings and a defined dollar
threshold. If a loan is impaired, a specific reserve is applied to the loan so
that the loan is reported, net, at the discounted expected future cash flows or
at the fair value of collateral if repayment is collateral dependent. Impaired
loans which
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do not meet the criteria for individual evaluation are evaluated in homogeneous
pools of loans with similar risk characteristics. In accordance with the
accounting guidance for business combinations, there was no allowance brought
forward on any of the loans we acquired in our acquisition of NRB. For purchased
non-credit impaired loans, credit discounts representing the principal losses
expected over the life of the loan are a component of the initial fair value and
the discount is accreted to interest income over the life of the loan.
Subsequent to the acquisition date, the method used to evaluate the sufficiency
of the credit discount is similar to organic loans, and if necessary, additional
reserves are recognized in the allowance. At the close of the NRB acquisition,
there were no purchase credit impaired loans. As of June 30, 2021, the remaining
Mark is $1.3 million. In addition, the ALLL includes $2.0 million
on-balance-sheet and $95,000 off-balance-sheet reserves for loan downgrades,
increases in usage of lines of credit, construction disbursements and
reclassifications of product types subsequent to the acquisition. Since the
close of the NRB acquisition, we have charged off $1.5 million of commercial
loans and as of June 30, 2021, there were $4.1 million of nonaccrual loans.
The following tables presents, by loan type, the changes in the allowance for
the periods indicated:
                                                    Three Months Ended            Six Months Ended
                                                         June 30,                     June 30,
(In thousands)                                      2021           2020          2021          2020

Balance at beginning of period                  $   36,662      $ 42,348      $ 41,589      $ 33,847
Loan charge-offs:
Commercial portfolio:
 Commercial and industrial                               -             2             -             2
 Multifamily                                             -             -         1,908             -
 Commercial real estate                                  -             -             -             -
 Construction and land development                       -             -             -             -

Retail Portfolio:

 Residential real estate lending                        60           240           201           263

 Consumer and other                                    836           487         1,176           791
   Total loan charge-offs                              896           729         3,285         1,056
Recoveries of loans previously charged-off:
Commercial portfolio:
 Commercial and industrial                               3             2           207             3
 Multifamily                                             -             -             -             -
 Commercial real estate                                  -             -             -             -
 Construction and land development                       -             -             1             -

Retail Portfolio:

 Residential real estate lending                       544           151         1,039           363

 Consumer and other                                     17            17            40            45
   Total loan recoveries                               564           170         1,287           411
Net (recoveries) charge-offs                           332           559         1,998           645
Provision for (recovery of) loan losses              1,682         8,221        (1,579)       16,808
Balance at end of period                        $   38,012      $ 50,010      $ 38,012      $ 50,010



The allowance decreased $3.6 million to $38.0 million at June 30, 2021 from
$41.6 million at December 31, 2020. The decrease was primarily due to decreases
in loan balances. At June 30, 2021, we had $70.6 million of impaired loans for
which a specific allowance of $6.3 million was made, compared to $80.5 million
of impaired loans at December 31, 2020 for which a specific allowance of $6.2
million was made. The ratio of allowance to total loans was 1.20% for June 30,
2021 and 1.19% for December 31, 2020.
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Allocation of Allowance for Loan Losses
The following table presents the allocation of the allowance and the percentage
of the total amount of loans in each loan category listed as of the dates
indicated:
                                                       At June 30, 2021                            At December 31, 2020
(In thousands)                                   Amount             % of total loans           Amount           % of total loans
Commercial Portfolio:
Commercial and industrial                  $        12,051                   19.5  %       $     9,065                   19.4  %
Multifamily                                $         5,672                   26.8  %       $    10,324                   27.2  %
Commercial real estate                     $         8,388                   11.1  %       $     6,213                   10.7  %
Construction and land development          $         1,490                    1.3  %       $     2,077                    1.6  %
Total commercial portfolio                 $        27,601                   58.7  %       $    27,679                   58.9  %

Retail Portfolio:
Residential real estate lending            $         9,785                   34.3  %       $    12,330                   35.6  %
Consumer and other                         $           626                    7.0  %       $     1,580                    5.5  %
Total retail portfolio                     $        10,411                   41.3  %       $    13,910                    5.5  %

Total allowance for loan losses            $        38,012                                 $    41,589



Nonperforming Assets
Nonperforming assets include all loans categorized as nonaccrual or
restructured, other real estate owned and other repossessed assets. The accrual
of interest on loans is discontinued, or the loan is placed on nonaccrual, when
the full collection of principal and interest is in doubt. We generally do not
accrue interest on loans that are 90 days or more past due (unless we are in the
process of collection or an extension and determine that the customer is not in
financial difficulty). When a loan is placed on nonaccrual, previously accrued
but unpaid interest is reversed and charged against interest income and future
accruals of interest are discontinued. Payments by borrowers for loans on
nonaccrual are applied to loan principal. Loans are returned to accrual status
when, in our judgment, the borrower's ability to satisfy principal and interest
obligations under the loan agreement has improved sufficiently to reasonably
assure recovery of principal and the borrower has demonstrated a sustained
period of repayment performance.
A loan is identified as a troubled debt restructuring, or TDR, when we, for
economic or legal reasons related to the borrower's financial difficulties,
grant a concession to the borrower. The concessions may be granted in various
forms, including interest rate reductions, principal forgiveness, extension of
maturity date, waiver or deferral of payments and other actions intended to
minimize potential losses. A loan that has been restructured as a TDR may not be
disclosed as a TDR in years subsequent to the restructuring if certain
conditions are met. Generally, a nonaccrual loan that is restructured remains on
nonaccrual status for a period no less than six months to demonstrate that the
borrower can meet the restructured terms. However, the borrower's performance
prior to the restructuring or other significant events at the time of
restructuring may be considered in assessing whether the borrower can meet the
new terms and may result in the loan being returned to accrual status after a
shorter performance period. If the borrower's performance under the new terms is
not reasonably assured, the loan remains classified as a nonaccrual loan.
As a result of the COVID-19 pandemic, we have experienced a significant increase
in the number of requests for temporary loan modifications. As of June 30, 2021,
we had COVID-19 related loan payment deferrals or deferral requests in process
totaling $4.0 million, of which none were in our commercial portfolio. We have
granted these borrowers short-term concessions of three to six months in the
form of payment deferrals. According to the interagency guidance and the CARES
Act, loans modified during the COVID-19 pandemic are not considered TDRs as long
as the borrower was not experiencing financial difficulty before the pandemic
and the reason for the deferral is temporary in nature and the loans are
expected to continue performing after the COVID-19 pandemic.
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The following table sets forth our nonperforming assets as of June 30, 2021 and
December 31, 2020:
(In thousands)                                                June 30, 2021          December 31, 2020
Loans 90 days past due and accruing                          $           -  

$ 1,404 Loans not accrued excluding loans held for sale and restructured loans

                                                  31,437                    40,039

Troubled debt restructured loans - nonaccrual                       20,494                    20,885
Troubled debt restructured loans - accruing                         18,683                    19,553
Other real estate owned                                                307                       306
Impaired securities                                                     59                        47
Total nonperforming assets                                   $      70,980          $         82,234

Nonaccrual loans:
 Commercial and industrial                                   $      14,561          $         12,444
 Multifamily                                                        10,266                     9,575
 Commercial real estate                                              4,066                     3,433
 Construction and land development                                       -                    11,184
  Total commercial portfolio                                        28,893                    36,636

 Residential real estate lending                                    22,320                    23,656

 Consumer and other                                                    718                       632
  Total retail portfolio                                            23,038                    24,288
 Total nonaccrual loans                                      $      51,931          $         60,924

Nonperforming assets to total assets                                  1.08  %                   1.38  %
Nonaccrual assets to total assets                                     0.80  %                   1.02  %
Nonaccrual loans to total loans                                       1.64  %                   1.75  %
Allowance for loan losses to nonaccrual loans                        73.20  %                  68.26  %



Total nonperforming assets totaled $71.0 million at June 30, 2021 compared to
$82.2 million at December 31, 2020. The decrease in nonperforming assets at
June 30, 2021 compared to December 31, 2020 was primarily driven by the payoff
of $11.2 million of non-accruing construction loans, and the decrease of $1.4
million of loans ninety days past due and accruing, partially offset by an
increase of $2.1 million of non-accruing C&I loans.
Potential problem loans are loans which management has doubts as to the ability
of the borrowers to comply with the present loan repayment terms. Potential
problem loans are performing loans and include our special mention and
substandard-accruing commercial loans and/or loans 30-89 days past due.
Potential problem loans are not included in the nonperforming assets table above
and totaled $283.1 million, or 4.3% of total assets, at June 30, 2021, as
follows: $280.2 million are commercial loans currently in workout that
management expects will be rehabilitated; $3.6 million are commercial loans that
are current on payments and are reported as 30-89 days past due, in renewal or
extension negotiations, and inclusive of workouts; $3.3 million are residential
1-4 family or retail loans, with $408 thousand at 30 days delinquent, and $2.9
million at 60 days delinquent.
Resell Agreements
As of June 30, 2021, we have entered into $141.7 million of short term
investments of resell agreements backed by government guaranteed loans, with a
weighted interest rate of 1.56%. As of December 31, 2020, we have entered into
$154.8 million of short term investments of resell agreements backed by
government guaranteed loans, with a weighted interest rate of 1.25%.
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Deferred Tax Asset
We had a deferred tax asset, net of deferred tax liabilities, of $24.3 million
at June 30, 2021 and $27.9 million at December 31, 2020. As of June 30, 2021,
our deferred tax assets were fully realizable with no valuation allowance held
against the balance. Our management concluded that it was more-likely-than-not
that the entire amount will be realized.
We will evaluate the recoverability of our net deferred tax asset on a periodic
basis and record decreases (increases) as a deferred tax provision (benefit) in
the Consolidated Statements of Income as appropriate.
Deposits
Deposits represent our primary source of funds. We are focused on growing our
core deposits through relationship-based banking with our business and consumer
clients. Total deposits were $5.9 billion at June 30, 2021, compared to $5.3
billion at December 31, 2020. We believe that our strong deposit franchise is
attributable to our mission-based strategy of developing and maintaining
relationships with our clients who share similar values and through maintaining
a high level of service.
We gather deposits through each of our three branch locations across New York
City, our one branch in Washington, D.C., our one branch in San Francisco and
through the efforts of our commercial banking team including our Boston group
which focuses nationally on business growth. Through our branch network, online,
mobile and direct banking channels, we offer a variety of deposit products
including demand deposit accounts, money market deposits, NOW accounts, savings
and certificates of deposit. We bank politically active customers, such as
campaigns, PACs, and state and national party committees, which we refer to as
political deposits. These deposits exhibit seasonality based on election cycles.
As of June 30, 2021 and December 31, 2020, we had approximately $791.3 million
and $602.8 million, respectively, in political deposits which are primarily in
demand deposits.
Maturities of time certificates of deposit and other time deposits of $100,000
or more outstanding at June 30, 2021 are summarized as follows:
            Maturities as of June 30, 2021
(In thousands)
Within three months                         $  64,544
After three but within six months              39,834
After six months but within twelve months      27,569
After twelve months                            40,425
                                            $ 172,372



Evaluation of Interest Rate Risk
Our simulation models incorporate various assumptions, which we believe are
reasonable but which may have a significant impact on results such as: (1) the
timing of changes in interest rates, (2) shifts or rotations in the yield curve,
(3) loan and securities prepayment speeds for different interest rate scenarios,
(4) interest rates and balances of indeterminate-maturity deposits for different
scenarios, and (5) new volume and yield assumptions for loans, securities and
deposits. Because of limitations inherent in any approach used to measure
interest rate risk, simulation results are not intended as a forecast of the
actual effect of a change in market interest rates on our results but rather to
better plan and execute appropriate asset-liability management strategies and
manage our interest rate risk.
Potential changes to our net interest income and economic value of equity in
hypothetical rising and declining rate scenarios calculated as of June 30, 2021
are presented in the following table. The projections assume immediate, parallel
shifts downward of the yield curve of 100 basis points and immediate, parallel
shifts upward of the yield curve of 100, 200, 300 and 400 basis points. In the
current interest rate environment, a downward shift of the yield curve of 200,
300 and 400 basis points does not provide us with meaningful results and,
therefore, is not shown.
The results of this simulation analysis are hypothetical and should not be
relied on as indicative of expected operating results. A variety of factors
might cause actual results to differ substantially from what is depicted. For
example, if the timing and magnitude of interest rate changes differ from those
projected, our net interest income might vary significantly. Non-parallel yield
curve shifts such as a flattening or steepening of the yield curve or changes in
interest rate spreads, would also cause our net
                                       54

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interest income to be different from that depicted. An increasing interest rate
environment could reduce projected net interest income if deposits and other
short-term liabilities re-price faster than expected or faster than our assets
re-price. Actual results could differ from those projected if we grow assets and
liabilities faster or slower than estimated, if we experience a net outflow of
deposit liabilities or if our mix of assets and liabilities otherwise changes.
Actual results could also differ from those projected if we experience
substantially different repayment speeds in our loan portfolio than those
assumed in the simulation model. Finally, these simulation results do not
contemplate all the actions that we may undertake in response to potential or
actual changes in interest rates, such as changes to our loan, investment,
deposit, funding or hedging strategies.

Change in market interest

   Rates as of June 30, 2021                                                

Estimated increase (decrease) of:

                                        Economic Value of                 Economic Value of                 Year 1 Net Interest                Year 1 Net Interest
   Immediate Shift                            Equity                          Equity ($)                           Income                           Income ($)
   +400 basis points                           7.9%                             77,756                             35.1%                              61,538
   +300 basis points                          12.7%                            125,588                             31.6%                              55,549
   +200 basis points                          14.2%                            140,769                             24.5%                              42,951
   +100 basis points                          10.2%                            101,172                             13.3%                              23,266
   -100 basis points                          -15.4%                          (152,102)                            -13.7%                            (23,990)


Liquidity
Liquidity refers to our ability to maintain cash flow that is adequate to fund
our operations, support asset growth, maintain reserve requirements and meet
present and future obligations of deposit withdrawals, lending obligations and
other contractual obligations through either the sale or maturity of existing
assets or by obtaining additional funding through liability management. Our
liquidity risk management policy provides the framework that we use to maintain
adequate liquidity and sources of available liquidity at levels that enable us
to meet all reasonably foreseeable short-term, long-term and strategic liquidity
demands. The Asset and Liability Management Committee is responsible for
oversight of liquidity risk management activities in accordance with the
provisions of our liquidity risk policy and applicable bank regulatory capital
and liquidity laws and regulations. Our liquidity risk management process
includes (i) ongoing analysis and monitoring of our funding requirements under
various balance sheet and economic scenarios, (ii) review and monitoring of
lenders, depositors, brokers and other liability holders to ensure appropriate
diversification of funding sources and (iii) liquidity contingency planning to
address liquidity needs in the event of unforeseen market disruption impacting a
wide range of variables. We continuously monitor our liquidity position in order
for our assets and liabilities to be managed in a manner that will meet our
immediate and long-term funding requirements. We manage our liquidity position
to meet the daily cash flow needs of customers, while maintaining an appropriate
balance between assets and liabilities to meet the return on investment
objectives of our stockholders. We also monitor our liquidity requirements in
light of interest rate trends, changes in the economy, and the scheduled
maturity and interest rate sensitivity of our securities and loan portfolios and
deposits. Liquidity management is made more complicated because different
balance sheet components are subject to varying degrees of management control.
For example, the timing of maturities of our investment portfolio is fairly
predictable and subject to a high degree of control when we make investment
decisions. Net deposit inflows and outflows, however, are far less predictable
and are not subject to the same degree of certainty.
Our liquidity position is supported by management of our liquid assets and
liabilities and access to alternative sources of funds. Our short-term and
long-term liquidity requirements are primarily to fund on-going operations,
including payment of interest on deposits and debt, extensions of credit to
borrowers and capital expenditures. These liquidity requirements are met
primarily through our deposits, FHLB advances and the principal and interest
payments we receive on loans and investment securities. Cash, interest-bearing
deposits in third-party banks, securities available for sale and maturing or
prepaying balances in our investment and loan portfolios are our most liquid
assets. Other sources of liquidity that are available to us include the sale of
loans we hold for investment, the ability to acquire additional national market
non-core deposits, borrowings through the Federal Reserve's discount window and
the issuance of debt or equity securities. We believe that the sources of
available liquidity are adequate to meet our current and reasonably foreseeable
future liquidity needs.
At June 30, 2021, our cash and equivalents, which consist of cash and amounts
due from banks and interest-bearing deposits in other financial institutions,
amounted to $547.4 million, or 8.3% of total assets, compared to $38.8 million,
or 0.6% of total assets at December 31, 2020. Our available for sale securities
at June 30, 2021 were $1.8 billion, or 27.8% of total assets, compared to $1.5
billion, or 25.8% of total assets at December 31, 2020. Investment securities
with an aggregate fair value of $99.8 million at June 30, 2021 were pledged to
secure public deposits and repurchase agreements.
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The liability portion of the balance sheet serves as our primary source of
liquidity. We plan to meet our future cash needs through the generation of
deposits. Customer deposits have historically provided a sizeable source of
relatively stable and low-cost funds. We are also a member of the FHLB, from
which we can borrow for leverage or liquidity purposes. The FHLB requires that
securities and qualifying loans be pledged to secure any advances. At June 30,
2021, we had no advances from the FHLB and a remaining credit availability of
$1.4 billion. In addition, we maintain borrowing capacity of approximately $88.4
million with the Federal Reserve's discount window that is secured by certain
securities from our portfolio which are not pledged for other purposes.
Capital Resources

Total stockholders' equity at June 30, 2021 was $548.2 million, compared to
$535.8 million at December 31, 2020, an increase of $12.4 million. The increase
was primarily driven by $22.6 million of net income, partially offset by $5.0
million of dividends and $1.5 million decrease in accumulated other
comprehensive income due to the mark to market on our securities portfolio and
$3.7 million decrease in additional paid-in capital, which was primarily driven
by $2.5 million of common stock that was purchased as part of the Company's
share repurchase program in the first half of 2021.
We are subject to various regulatory capital requirements administered by
federal banking regulators. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
federal banking regulators that, if undertaken, could have a direct material
effect on our financial statements.

Regulatory capital rules adopted in July 2013 and fully phased in as of January
1, 2019, which are referred to as the Basel III rules, impose minimum capital
requirements for bank holding companies and banks. The Basel III rules apply to
all national and state banks and savings associations regardless of size and
bank holding companies and savings and loan holding companies with consolidated
assets of more than $3 billion. In order to avoid restrictions on capital
distributions or discretionary bonus payments to executives, a covered banking
organization must maintain the fully phased in "capital conservation buffer" of
2.5% on top of its minimum risk-based capital requirements. This buffer must
consist solely of common equity Tier 1 risk-based capital, but the buffer
applies to all three measurements (common equity Tier 1 risk-based capital, Tier
1 capital and total capital). The capital conservation is equal to 2.5% of
risk-weighted assets.
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The following table presents the regulatory capital ratios of the Bank and of the Company on the dates indicated:

                                                                                           For Capital                             To Be Considered
                                                     Actual                           Adequacy Purposes(1)                         Well Capitalized
                                           Amount              Ratio               Amount               Ratio                 Amount                 Ratio
   (In thousands)
   June 30, 2021
   Consolidated:
     Total capital to risk weighted
   assets                               $ 545,308                14.68  %       $  297,095                8.00  %       $       371,369               

10.00%

Risk-weighted Class I capital

   assets                                 506,152                13.63  %          222,821                6.00  %               297,095                 

8.00%

     Tier I capital to average assets     506,152                 7.93  %          255,171                4.00  %               318,964                 

5.00%

Level 1 common equity at risk

   weighted assets                        506,152                13.63  %          167,116                4.50  %               241,390                 

6.50%

Bank:

Total capital / risk-weighted

   assets                               $ 543,621                14.64  %       $  297,095                8.00  %       $       371,369                

10.00%

Risk-weighted Class I capital

   assets                                 504,465                13.58  %          222,821                6.00  %               297,095                 

8.00%

   Tier I capital to average assets       504,465                 7.91  %          148,548                4.00  %               185,685                 

5.00%

Level 1 common equity at risk

   weighted assets                        504,465                13.58  %          167,116                4.50  %               241,390                 6.50  %

   December 31, 2020
   Bank(2):
     Total capital to risk weighted
   assets                               $ 534,684                14.25  %       $  300,199                8.00  %       $       375,249               

10.00%

Risk-weighted Class I capital

   assets                                 491,913                13.11  %          225,149                6.00  %               300,199                 

8.00%

     Tier I capital to average assets     491,913                 7.97  %          246,904                4.00  %               308,630                 

5.00%

Level 1 common equity at risk

   weighted assets                        491,913                13.11  %          168,862                4.50  %               243,912                 6.50  %


(1) Amounts are shown exclusive of the capital conservation buffer of 2.50%.
(2) As the Reorganization was formed in 2021, the prior period numbers presented
are for the Bank.
As of June 30, 2021, the Company and the Bank were categorized as "well
capitalized" under the prompt corrective action measures and met the capital
conservation buffer requirements.
Contractual Obligations
We have entered into contractual obligations in the normal course of business
that involve elements of credit risk, interest rate risk and liquidity risk. The
following table summarizes these relations as of June 30, 2021 and December 31,
2020:
      June 30, 2021
                                                              Less than 1                                                    More than 5
      (In thousands)                         Total                year              1-3 years           3-5 years               years

      Operating Leases                   $   55,460          $     5,186          $   21,297          $    20,066          $      8,911
      Purchase Obligations                   35,137                2,662               9,224                9,224                14,027
      Certificates of Deposit               252,750              147,752              87,291               16,248                 1,459
                                         $  343,347          $   155,600          $  117,812          $    45,538          $     24,397


December 31, 2020
                                                        Less than 1                                                     More than 5
(In thousands)                         Total                year              1-3 years            3-5 years               years
Operating Leases                   $   58,146          $     9,806          $    19,749          $    19,679          $      8,912
Purchase Obligations                   36,437                3,962                9,224                9,224                14,027
Certificates of Deposit               272,025              231,239               32,236                7,825                   725
                                   $  366,608          $   245,007          $    61,209          $    36,728          $     23,664



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Investment Obligations
We are party to agreements with Pace Funding Group LLC, or PFG, for the purchase
of up to $375 million of property assessed clean energy, or PACE, assessment
securities by the fourth quarter of 2021. Additionally, the Bank has an
additional obligation up to $100 million for other PACE related purchases. These
investments are to be held in the Company's held-to-maturity investment
portfolio. As of June 30, 2021, we had fulfilled $262.6 million of these
obligations. As of December 31, 2020, we had fulfilled $165.4 million of our
obligation. The PACE assessments have equal-lien priority with property taxes
and generally rank senior to first lien mortgages.


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