# Amalgamated Financial Corp. (AMAL) FY 2021 MD&A Verbatim Item 7 Management's Discussion and Analysis from Amalgamated Financial Corp.'s 10-K for fiscal year 2021. SEC filing source: https://www.sec.gov/Archives/edgar/data/1823608/000182360822000044/amal-20211231.htm Accession: 0001823608-22-000044 Filing date: 2022-03-11 Report date: 2021-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/AMAL/ All MD&A years: /company/AMAL/mda/ Next year: /company/AMAL/mda/fy2022/ (FY 2022) Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operations. General The following is a discussion of our consolidated financial condition as of December 31, 2021, as compared to December 31, 2020, and our results of operations for the years ended December 31, 2021, December 31, 2020, and December 31, 2019. 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 consolidated financial statements and related notes as well as the financial and statistical data appearing elsewhere in this report. 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. The comparison of our financial results for the year ended December 31, 2020 to those for the years ended December 31, 2019 and December 31, 2018 is included in our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 15, 2021. 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. 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 of our Reorganization, the terms refer only to the Bank. Overview Our business Amalgamated Financial Corp., a Delaware public benefit corporation 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. On March 1, 2021 (the “Effective Date”), the Company acquired all of the outstanding stock of the Bank and the Bank became the sole subsidiary of the Company. Although we are no longer majority union-owned, The Amalgamated Clothing Workers of America’s successor, Workers United, an affiliate of the Service Employees International Union that represents workers in the textile, distribution, food service and gaming industries, remains a significant stockholder, holding approximately 41% of our equity as of December 31, 2021. As of December 31, 2021, our total assets were $7.1 billion, our total loans, net of deferred fees and allowance were $3.3 billion, our total deposits were $6.4 billion, and our stockholders' equity was $563.9 million. As of December 31, 2021, our trust business held $40.2 billion in assets under custody and $17.3 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 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 52 organizations, foundations, socially responsible businesses, and other for-profit companies that seek to ensure their profit-making activities align for the benefit of all their stakeholders. In 2021, we introduced ResponsiFunds which is a suite of ESG impact products designed to align our clients' investment growth goals with their organizational values. 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 growth of our business is fundamental to our social mission and how we deliver impact and value for our stakeholders. The Company has obtained B CorporationTM certification, a distinction earned after being evaluated under rigorous standards of social and environmental performance, accountability, and transparency. The Company 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. Over the course of 2021, we were recognized for our leadership on the global stage for our work on climate change with governance positions in the United Nations convened Net Zero Banking Alliance and the Global Partnership for Carbon Accounting Financials and an advisory role for the Glasgow Finance Alliance for Net Zero. Subordinated Debt Issuance On November 8, 2021, the Company completed a public offering of $85.0 million of aggregated principal amount of 3.250% Fixed-to-Floating Rate subordinated notes due 2031. The subordinated notes will mature on November 15, 2031. We intend to use the net proceeds from this offering for general business purposes, including ongoing working capital needs. 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 in, 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 operations. In addition, due to the COVID-19 pandemic, market interest rates have declined to and remain at historic lows, despite the increase in market interest rates that the economy is beginning to experience. 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 another 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 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. 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. 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, a benefit to our non-interest expenses of approximately $4.0 million was recognized during 2021. 53 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 were not considered troubled debt restructurings (“TDRs”) unless the borrower was experiencing 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. Other impacts on our results of operation and financial condition In addition to the factors above, we believe the following factors may impact our earnings, though 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 funds rate remaining near zero despite the Federal Reserve's indication that it will be raising the target for the federal funds rate •Lower loan originations as the credit worthiness of borrowers may be impacted by the current economic environment •Turnover due to the "great resignation" resulting in additional expenses to replace talent As of December 31, 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 impact, 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 Accounting Estimates Our consolidated financial statements are prepared based on the application of accounting policies generally accepted in the United States, or GAAP, the most significant of which are described in Note 1 of our audited consolidated financial statements, starting on page 87 of this report. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. In particular, management has identified accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements. Management has presented the application of these policies to the Audit Committee of our Board of Directors. The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 of our consolidated financial statements, which begin on page 87 of this report. Allowance for loan losses We maintain an allowance for loan and lease losses (“allowance”) at a level we believe is sufficient to absorb probable incurred losses in our loan portfolio. Management determines the adequacy of the allowance based on periodic evaluations of the loan portfolio and other factors, including past loss experience, the results of our ongoing loan grading process, the amount of past due and nonperforming loans, legal requirements, recommendations or requirements of regulatory authorities, and current economic conditions. These evaluations are inherently subjective as they require management to make material estimates, all of which may be susceptible to significant change. Actual losses in any year may exceed allowance amounts. The allowance is increased by provisions charged to expense and decreased by provisions released from expense or by actual charge-offs, net of recoveries or previous amounts charged-off. 54 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 and interest rate discounts representing the principal losses expected over the life of the loan are a component of the initial fair value and the total combined 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 discount is similar to organic loans, and if necessary, additional reserves are recognized in the allowance. Our allowance consists of specific and general components. The specific components relate to loans that are individually classified as impaired. Once a loan is deemed to be impaired, we follow guidelines set forth in Accounting Standards Codification (“ASC”) No. 310. For loans secured by CRE, we use collateral value as the basis for determining the size of the impairment. Accruing TDRs are generally evaluated based on the cash flow of the property with any shortfall in the stabilized value of the property charged off. We then compare that balance to the ‘as is’ appraisal value and hold any shortfall as an allowance. Non-accruing loans (TDRs or otherwise) are generally considered collateral dependent via sale of the asset, and we apply the “as is” appraisal less expected cost to sell with any shortfall charged off. For C&I loans, we generally use discounted cash flow as the basis for determining the size of the impairment and any shortfall is held as a specific reserve. The general component relates to loans that are not impaired and not individually evaluated. Loans in the general component are grouped into the following homogeneous pools: •CRE loans; •multi-family loans; •construction and land loans; •C&I; •consumer/small business; •purchased student loans; •purchased Government Guaranteed loans •legacy purchased HELOCs and 1-4 family residential loans; •HELOCs and 1-4 family residential loans originated by us; and •recently purchased 1-4 family residential loans. Commercial loans are further segmented by risk rating: pass, special mention, substandard, accruing substandard, non-accruing and doubtful. We use a historical lookback period to determine loss rates based on our own loss experiences, or, if there is insufficient data, through proxy data. The current lookback period starts in 2010, the earliest time that we have relevant data and will continue to lengthen until we experience a complete economic cycle. Additionally, we apply an estimated loss emergence period (the “LEP”) to recognize that an event may have already occurred that has yet to manifest itself as a deterioration in the credit that may eventually lead to a loss. There are three components to the LEP: (1) observable—the observed time from a downgrade or delinquency to a loss; (2) known pre-emergence period—the time from when information becomes available until a downgrade is recorded; and (3) unknown period—the time between when an event (e.g. loss of income source) occurred until it becomes known and impacts the financial situation of the borrower. We also consider qualitative factors that mirror nine environmental factors suggested by the 2006 Interagency Policy Statement on the Allowance for Loan and Lease Losses. These factors are reviewed each quarter using empirical data, where it is available and relevant, to guide management’s judgment to set the level and direction of risk for each factor. The maximum size is determined quarterly by looking at the current loss coverage of the allowance against the historical maximum loss rates during the look back period. We update the loss factors quarterly and the LEP annually. We do not use an unallocated allowance. Together, the quantitative and qualitative reserves form the general component of the allowance. Our allowance is heavily weighted to the general allowances for pools of loans, ASC 450-20, which incorporate quantitative adjustments (e.g., historical loan loss rates) and qualitative adjustments (e.g., portfolio growth and trends, credit concentrations, economic and regulatory factors, etc.). This is a function of the dynamic lookback period, which expands from 2010 and is designed to capture a full credit cycle, and the ‘accordion feature’ of the qualitative scale. The current range of possible outcomes for the qualitative allowance is $7 million to $37 million and at year-end 2021, our qualitative allowance is $14.7 million. Based on management’s determination, the overall level of allowance is periodically adjusted to account for the inherent and specific risks within the entire portfolio. The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. While management uses available information to recognize losses on loans, future additions or reductions in the allowance may be necessary due to changes in one or more evaluation factors, such as management’s assumptions as to rates of default, loss or recoveries, or management’s intent with regard to disposition or cure options. The amount of the allowance is also affected by the size and composition of the loan portfolio. Based on this assessment, 55 the allowance is adjusted each quarter. The allowance reflects management’s best estimate of the losses that are inherent in the loan portfolio at the balance sheet date. A shift in lending strategy may also warrant a change in the allowance due to a changing credit profile. In addition, various regulatory agencies review our allowance and may require us to recognize additions to, or charge-offs against, the allowance based on their judgment about information available to them at the time of their examination. There are several controls around the allowance to insure an adequate, precise, and supportable value. We start with a separation of duties. There is a Process Owner who calculates the allowance and incorporates process controls to insure that all balances are accounted for and the overall accuracy of the data. Next, there is a Control Owner that performs separate controls to confirm the data, calculations, and results. We also have the ALLL Management Committee comprised of the Chief Credit Risk Officer, Chief Financial Officer, Chief Accounting Officer, and Chief Risk Officer who review the totality of the ALLL, assumptions, data, controls and offers creditable challenges. The ALLL Management Committee compares the ALLL to our peers, historic results, and current expectations and then approves the ALLL. The Credit Policy Committee thereafter reviews the ALLL, any changes from the prior quarter, and ratifies the ALLL. Fair value The use of fair values is required in determining the carrying values of certain assets and liabilities, as well as for specific disclosures. ASC No. 820-10 defines fair value as an estimate of the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction (i.e., not a forced transaction, such as a liquidation or distressed sale) between market participants at the measurement date and is based on the assumptions market participants would use when pricing an asset or liability. In determining the fair value of financial instruments, market prices of the same or similar instruments are used whenever such prices are available. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. If observable market prices are unavailable or impracticable to obtain, we are required to make judgments about assumptions that market participants would use in estimating the fair value of the financial instrument. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Fair value is estimated using modeling techniques and incorporates assumptions about interest rates, duration, prepayment speeds, future expected cash flows, market conditions, risks inherent in a particular valuation technique and the risk of nonperformance. These assumptions are inherently subjective as they require material estimates, all of which may be susceptible to significant change. The models used to determine fair value adjustments are periodically evaluated by management for relevance under current facts and circumstances. Fair value measurement and disclosure guidance differentiates between those assets and liabilities required to be carried at fair value at every reporting period on a recurring basis, such as investment securities that are available-for-sale and those assets and liabilities that are only required to be adjusted to fair value under certain circumstances on a non-recurring basis, such as when there is evidence of impairment. See Note 13 of our consolidated financial statements, which are included beginning on page 120 of this report, for further information on the fair value of financial instruments. Income taxes We use the asset and liability method to account for income taxes. The objective of this method is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the income tax basis of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Our annual tax rate is based on our income, statutory tax rates and available tax planning opportunities. Changes to the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws, the status of examinations being conducted by taxing authorities and changes to statutory, judicial, and regulatory guidance that impact the relative risks of tax positions. These changes, when they occur, can affect deferred and accrued taxes as well as the current period’s income tax expense and can be material to our operating results. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss carryforwards. At least once each year, or more frequently, if warranted, we make estimates of future taxable income that we believe we are likely to generate during those future periods. If we conclude, on the basis of those estimates and 56 the amount of tax benefit available to use, that it is more likely than not that we will be able to use those tax benefits before their expiration, we recognize the deferred tax assets in full on our balance sheet. However, if we conclude that it is more likely than not that we will not be able to utilize those tax benefits in full before their expiration, then we establish a valuation allowance to reduce the deferred tax asset on our balance sheet to the amount that we believe we can utilize. The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretations, and judgments concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to our consolidated results of operations and reported earnings. We also invest in renewable energy projects to derive tax benefits (e.g., investment tax credits, accelerated depreciation). The federal and/or state investment tax credits (ITCs) generated from the project flow to the Company as an investor and provide tax savings or deferred tax assets when not utilized in the current tax year. Federal ITCs are received once the project is placed in service and recognized; state ITCs, if applicable, are subject to a variety of rules that vary by jurisdiction. The accelerated depreciation generated from the project will generally create a deferred tax item as a result of the temporary difference in an investor’s book versus tax basis in that investment. Tax accounting for the ITCs may utilize the flow-through method or the deferral method. The Company has elected the deferral method where the benefit from the income tax credit is reflected in income over the productive life of the investment. Under this method, the investment tax credits are recognized as a reduction to the related asset. See Note 10 of our consolidated financial statements, which are included beginning on page 112 of this report for further information on income taxes. Recently Issued Accounting Pronouncements See Note 2 of our consolidated financial statements, which are included beginning on page 93 of this report for a discussion of recently issued accounting pronouncements that have been or will be adopted by us that will require enhanced disclosures in our financial statements in future periods. Impact of Inflation and Changing Prices Our consolidated financial statements have been prepared in accordance with GAAP, which requires us to measure financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession generally are not considered. The primary effect of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, our assets and liabilities are primarily monetary in nature. Therefore, the effect of changes in interest rates will have a more significant effect on our performance than will the effect of changing prices and inflation in general. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond our control, including changes in the expected rate of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities. For more information about how we evaluate interest rate risk, please see the section entitled “Quantitative and Qualitative Disclosures about Market Risk – Evaluation of Interest Rate Risk.” 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. Net income for the year ended December 31, 2021 was $52.9 million, or $1.68 per average diluted share, compared to $46.2 million, or $1.48 per average diluted share, for the same period in 2020. The $6.7 million increase was primarily due to a $0.3 57 million recovery of provision for loan loss compared to a $24.8 million provision for loan loss for the same period in 2020, as well as a $1.6 million decrease in non-interest expense. This recovery of provision was partially offset by a $12.2 million decrease in non-interest income and a $5.7 million decrease in net interest income. Additional discussion of our provision for loan losses is included in the “—Provision for Loan Losses” below. 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. 58 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: [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2021","","2020","2019"],["(In thousands)","","Average Balance","","Income / Expense","","Yield / Rate","","Average Balance","","Income / Expense","","Yield / Rate","","Average Balance","","Income / Expense","","Yield / Rate"],["Interest earning assets:"],["Interest-bearing deposits in banks","","$","521,681","","","$","651","","","0.12","%","","$","371,112","","","$","697","","","0.19","%","","$","75,487","","","$","949","","","1.26","%"],["Securities and FHLB stock","","2,461,661","","","54,614","","","2.22","%","","1,834,384","","","47,046","","","2.56","%","","1,338,339","","","45,010","","","3.36","%"],["Resell Agreements","","138,833","","","1,943","","","1.40","%","","56,440","","","769","","","1.36","%","","\u2014","","","\u2014","","","0.00","%"],["Total loans, net (1)(2)","","3,180,093","","","123,318","","","3.88","%","","3,527,261","","","141,983","","","4.03","%","","3,276,603","","","139,995","","","4.27","%"],["Total interest earning assets","","6,302,268","","","180,526","","","2.86","%","","5,789,197","","","190,495","","","3.29","%","","4,690,429","","","185,954","","","3.96","%"],["Non-interest earning assets:"],["Cash and due from banks","","7,853","","","","","","","25,220","","","","","","","8,159"],["Other assets","","259,718","","","","","","","229,825","","","","","","","239,336"],["Total assets","","$","6,569,839","","","","","","","$","6,044,242","","","","","","","$","4,937,924"],["Interest bearing liabilities:"],["Savings, NOW and money market deposits","","2,622,584","","","$","4,788","","","0.18","%","","2,297,841","","","$","7,303","","","0.32","%","","1,902,414","","","$","9,068","","","0.48","%"],["Time deposits","","248,507","","","1,035","","","0.42","%","","335,433","","","3,149","","","0.94","%","","435,157","","","5,393","","","1.24","%"],["Total deposits","","2,871,091","","","5,823","","","0.20","%","","2,633,274","","","10,452","","","0.40","%","","2,337,571","","","14,461","","","0.62","%"],["Federal Home Loan Bank advances","","123","","","\u2014","","","0.00","%","","1,585","","","27","","","1.70","%","","202,837","","","4,835","","","2.38","%"],["Other Borrowings","","12,575","","","399","","","3.17","%","","\u2014","","","\u2014","","","0.00","%","","890","","","21","","","2.36","%"],["Total interest bearing liabilities","","2,883,789","","","6,222","","","0.22","%","","2,634,859","","","10,479","","","0.40","%","","2,541,298","","","19,317","","","0.76","%"],["Non-interest bearing liabilities:"],["Demand and transaction deposits","","3,017,621","","","","","","","2,798,106","","","","","","","1,832,083"],["Other liabilities","","116,256","","","","","","","102,282","","","","","","","93,816"],["Total liabilities","","6,017,666","","","","","","","5,535,247","","","","","","","4,467,197"],["Stockholders' equity","","552,173","","","","","","","508,995","","","","","","","470,727"],["Total liabilities and stockholders' equity","","$","6,569,839","","","","","","","$","6,044,242","","","","","","","$","4,937,924"],["Net interest income / interest rate spread","","","","$","174,304","","","2.64","%","","","","$","180,016","","","2.89","%","","","","$","166,637","","","3.20","%"],["Net interest earning assets / net interest margin","","$","3,418,479","","","","","2.77","%","","$","3,154,338","","","","","3.11","%","","$","2,149,131","","","","","3.55","%"],["Total Cost of Deposits","","","","","","0.10","%","","","","","","0.19","%","","","","","","0.35","%"]] [[/GREPCENT_TABLE]] (1) Amounts are net of deferred origination costs (fees) and the allowance for loan losses and includes loans held for sale (2) Income and yield includes prepayment penalty income in December YTD 2021 of $1.7 million, December YTD 2020 of $4.1 million, and December YTD 2019 of $888,234. Net interest income was $174.3 million for the year ended December 31, 2021, compared to $180.0 million for the same period in 2020. This decrease of $5.7 million was primarily attributable to a decrease in average loans and lower yields earned on securities and loans. These impacts are partially offset by an increase in average securities and a decrease in average rates paid on deposits. Net interest spread was 2.64% for the year ended December 31, 2021, compared to 2.89% for the same period in 2020, a decrease of 25 basis points. Our net interest margin was 2.77% for the year ended December 31, 2021, a decrease of 34 basis points from 3.11% in the same period in 2020. This was largely due to the excess liquidity held on the balance sheet due to increased deposits as depositors held cash due to the uncertainty around the pandemic. The yield on average earning assets was 2.86% for the year ended December 31, 2021, compared to 3.29% for the same period in 2020, a decrease of 43 basis points. This decrease was driven primarily by a decrease in yields on loans and securities due to a 59 decrease in the Federal Funds rate. The Federal Funds rate began a steep decline during 2019 and continued during the beginning of the pandemic, remaining 1 basis point or lower since May 2020. The average rate on interest-bearing liabilities, comprised almost entirely of deposits, was 0.22% for the year ended December 31, 2021, a decrease of 18 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 year ended December 31, 2021, contributing to a total cost of deposits of 10 basis points in 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: [[GREPCENT_TABLE]] [["","","","","","","","Year Ended December 31, 2021 over December 31, 2020"],["","","","(In thousands)","","","","","","","","Volume","","Changes Due To Rate","","Net Change"],["","","","Interest earning assets:"],["","","","Interest-bearing deposits in banks","","","","","","","","$","227","","","$","(273)","","","$","(46)"],["","","","Securities and FHLB stock","","","","","","","","15,183","","","(7,615)","","","7,568"],["","","","Resell agreements","","","","","","","","$","1,151","","","$","23","","","$","1,174"],["","","","Total loans, net","","","","","","","","(13,784)","","","(4,881)","","","(18,665)"],["","","","Total interest income","","","","","","","","2,777","","","(12,746)","","","(9,969)"],["","","","Interest bearing liabilities:"],["","","","Savings, NOW and money market deposits","","","","","","","","664","","","(3,179)","","","(2,515)"],["","","","Time deposits","","","","","","","","(466)","","","(1,648)","","","(2,114)"],["","","","Total deposits","","","","","","","","198","","","(4,827)","","","(4,629)"],["","","","Federal Home Loan Bank advances","","","","","","","","\u2014","","","(27)","","","(27)"],["","","","Other Borrowings","","","","","","","","199","","","200","","","399"],["","","","Total borrowings","","","","","","","","199","","","173","","","372"],["","","","Total interest expense","","","","","","","","397","","","(4,654)","","","(4,257)"],["","","","Change in net interest income","","","","","","","","$","2,380","","","$","(8,092)","","","$","(5,712)"]] [[/GREPCENT_TABLE]] 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. 60 Provision for loan losses totaled a recovery of $0.3 million for the year ended December 31, 2021, compared to an expense of $24.8 million for the same period in 2020. The recovery for the year ended December 31, 2021 was primarily driven by lower loan balances and improvements in credit quality, offset by charge-offs primarily related to our focus on reducing nonperforming assets. For a further discussion of the allowance, see “Allowance for Loan Losses” below. Non-Interest Income Our non-interest income includes Trust Department fees, which consist of fees received in connection with investment advisory and custodial management services of investment accounts, service fees charged on deposit accounts, income on BOLI, gain or loss on sales of securities, sales of loans, and other real estate owned, income from equity method investments, and other income. The following table presents our non-interest income for the periods indicated: [[GREPCENT_TABLE]] [["","","","Year Ended December 31,"],["(In thousands)","","","","","2021","","2020","","2019"],["Trust Department fees","","","","","$","13,352","","","$","15,222","","","$","18,598"],["Service charges on deposit accounts","","","","","9,355","","","9,201","","","8,544"],["Bank-owned life insurance","","","","","2,388","","","3,085","","","1,649"],["Gain (loss) on sale of investment securities available for sale, net","","","","","649","","","1,605","","","83"],["Gain (loss) on sale of loans, net","","","","","1,887","","","2,520","","","13"],["Gain (loss) on other real estate owned, net","","","","","(407)","","","(482)","","","(564)"],["Equity method investments","","","","","150","","","7,411","","","\u2014"],["Other income","","","","","1,015","","","2,042","","","878"],["Total non-interest income","","","","","$","28,389","","","$","40,604","","","$","29,201"]] [[/GREPCENT_TABLE]] Non-interest income was $28.4 million for the year ended December 31, 2021, compared to $40.6 million for the same period in 2020, a decrease of $12.2 million. This decrease is primarily due to the tax credits on equity investment projects being in a loss position compared to a gain position in the prior year, as well as a $1.4 million gain on the sale of a branch reported in other non-interest income in the prior year, and a $1.9 million decrease in Trust Department fees primarily attributed to the run-off of the ULTRA real estate fund, which ceased earning revenues in 2020. Due to increased levels of cash and cash equivalents during 2021, the Company engaged in fewer securities sales resulting in a $1.0 million decrease in gain (loss) on sale of investment securities, net. The decrease in equity method investments is primarily driven by the structure of our solar tax equity investments whereas the realization of tax benefits in the projects lives and subsequent change in the fair value of the investments creates volatility in the earnings stream. Each investment contributes income when established due to tax credits and then generates losses until it reaches a steady state income phase. Non-Interest Expense Non-interest expense includes compensation and employee benefits, occupancy and depreciation expense, professional fees (including legal, accounting and other professional services), data processing, office maintenance and depreciation, amortization of intangible assets, advertising and promotion, and other expenses. The following table presents non-interest expense for the periods indicated: 61 [[GREPCENT_TABLE]] [["","","","Year Ended December 31,"],["(In thousands)","","","","","2021","","2020","","2019"],["Compensation and employee benefits, net","","","","","$","69,844","","","$","69,421","","","$","70,276"],["Occupancy and depreciation","","","","","14,023","","","23,040","","","17,721"],["Professional fees","","","","","12,961","","","11,205","","","11,934"],["Data processing","","","","","16,042","","","11,330","","","10,880"],["Office maintenance and depreciation","","","","","3,057","","","3,314","","","3,540"],["Amortization of intangible assets","","","","","1,207","","","1,370","","","1,374"],["Advertising and promotion","","","","","3,230","","","3,514","","","2,908"],["Other","","","","","11,891","","","10,692","","","9,194"],["Total non-interest expense","","","","","$","132,255","","","$","133,886","","","127,827"]] [[/GREPCENT_TABLE]] Non-interest expense for the year ended December 31, 2021 was $132.3 million, a decrease of $1.6 million from $133.9 million for the year ended December 31, 2020. The decrease was primarily due to a $9.0 million decrease in occupancy and depreciation expense due to the branch closures in the prior year and lower rent expense in the current year, offset by a $1.8 million increase in professional fees mainly related to our holding company formation and chief executive officer search, $1.3 million in merger-related expenses, a $4.7 million increase in data processing mainly related to the modernization of our Trust Department and increased transaction processing costs post COVID-19, and a $1.2 million increase in other expenses mainly related to insurance costs, reserves for unused loan commitments, and foreclosure recoveries that were recognized in the prior year. Income Taxes We had a provision for income tax expense of $17.8 million for the year ended December 31, 2021, compared to $15.8 million for the same period in 2020. Our effective tax rate was 25.2% for the year ended December 31, 2021, compared to 25.4% for the same period in 2020. Financial Condition Balance Sheet Total assets were $7.1 billion at December 31, 2021, compared to $6.0 billion at December 31, 2020. The increase of $1.1 billion was driven primarily by a $291.7 million increase in cash and cash equivalents and a $922.7 million increase in investment securities, of which $206.4 million was from PACE assessments, which was partially offset by a $170.9 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, support the Company's mission, 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 property assessed clean energy, or PACE, bonds, in order to generate higher returns, improve portfolio 62 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 December 31, 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 December 31, 2021 and December 31, 2020, we had available for sale securities of $2.1 billion and $1.5 billion, respectively. The $573.5 million increase was primarily from the purchase of asset-backed securities (“ABS”). At December 31, 2021, our held to maturity securities portfolio primarily consisted of 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 $843.6 million at December 31, 2021, and $494.4 million at December 31, 2020. The majority of this increase was from growth in PACE bonds. Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At December 31, 2021, we evaluated those securities which had an unrealized loss for other than temporary impairment, or OTTI, and determined all of the decline in value to be temporary. There were $1.2 billion of investment securities with unrealized losses at December 31, 2021 of which none had a continuous unrealized loss position for 12 consecutive months or longer that was greater than 5% of amortized cost. We anticipate full recovery of amortized cost with respect to these securities by the time that these securities mature, or sooner in the case that a more favorable market interest rate environment causes their fair value to increase. We do not intend to sell these securities and we believe it is more likely than not that we will be required to sell them before full recovery of their amortized cost basis, which may be at the time of their maturity. The following table is a summary of our investment portfolio, using market value for available for sale securities and amortized cost for held to maturity securities, as of the dates indicated. 63 [[GREPCENT_TABLE]] [["","","December 31, 2021","","December 31, 2020","","December 31, 2019"],["","(In thousands)","Amount","","% of Portfolio","","Amount","","% of Portfolio","","Amount","","% of Portfolio"],["","Available for sale:"],["","Mortgage-related:"],["","GSE residential certificates","$","3,967","","","0.1","%","","$","13,299","","","0.7","%","","$","36,385","","2.4","%"],["","GSE residential CMOs","463,883","","","15.7","%","","366,421","","","18.0","%","","282,434","","18.6","%"],["","GSE commercial certificates & CMO","370,364","","","12.5","%","","432,614","","","21.3","%","","253,913","","16.7","%"],["","Non-GSE residential certificates","66,139","","","2.3","%","","33,384","","","1.6","%","","59,008","","3.9","%"],["","Non-GSE commercial certificates","81,101","","","2.7","%","","44,968","","","2.2","%","","46,874","","3.1","%"],["","Other debt:"],["","U.S. Treasury","200","","","0.0","%","","203","","","0.0","%","","199","","0.0","%"],["","ABS","989,188","","","33.5","%","","597,546","","","29.3","%","","523,777","","34.5","%"],["","Trust preferred","14,147","","","0.5","%","","13,773","","","0.7","%","","13,897","","0.9","%"],["","Corporate","124,421","","","4.2","%","","37,654","","","1.9","%","","8,283","","0.6","%"],["","Total available for sale","2,113,410","","","71.5","%","","1,539,862","","","75.7","%","","1,224,770","","","80.7","%"],["","Held to maturity:"],["","Mortgage-related:"],["","GSE commercial certificates","$","30,742","","","1.0","%","","$","\u2014","","","0.0","%","","$","\u2014","","0.0","%"],["","GSE residential certificates","442","","","0.0","%","","611","","","0.0","%","","635","","0.0","%"],["","Non GSE commercial certificates","10,333","","","0.3","%","","212","","","0.0","%","","270","","0.0","%"],["","Non GSE residential certificates","10,796","","","0.4","%","","\u2014","","","0.0","%","","\u2014","","0.0","%"],["","Other debt:"],["","ABS","75,800","","","2.6","%","","$","\u2014","","","0.0","%","","$","\u2014","","0.0","%"],["","PACE","627,394","","","21.2","%","","421,036","","","20.7","%","","263,805","","17.4","%"],["","Municipal","84,962","","","2.9","%","","67,490","","","3.3","%","","22,894","","1.5","%"],["","Other","3,100","","","0.1","%","","5,100","","","0.3","%","","5,100","","0.3","%"],["","Total held to maturity","843,569","","","28.5","%","","494,449","","","24.3","%","","292,704","","","19.3","%"],["","Total securities","$","2,956,979","","","100.0","%","","$","2,034,311","","","100.0","%","","$","1,517,474","","","100.0","%"]] [[/GREPCENT_TABLE]] 64 The following table show contractual maturities and yields for the available-for sale and held-to-maturity securities portfolios: [[GREPCENT_TABLE]] [["","Contractual Maturity as of December 31, 2021"],["","","One Year or Less","","One to Five Years","","Five to Ten Years","","Due after Ten Years"],["","(In thousands)","Amortized Cost","","Weighted AverageYield (1)","","Amortized Cost","","Weighted Average Yield (1)","","Amortized Cost","","Weighted Average Yield (1)","","Amortized Cost","","Weighted Average Yield (1)"],["","Available for sale:"],["","Mortgage-related:"],["","GSE residential certificates","$","\u2014","","","0.0","%","","$","\u2014","","","0.0","%","","$","\u2014","","","0.0","%","","$","3,838","","","2.5","%"],["","GSE residential CMOs","\u2014","","","0.0","%","","\u2014","","","0.0","%","","43,134","","","1.6","%","","417,437","","","1.5","%"],["","GSE commercial certificates & CMO","1,054","","","3.1","%","","16,876","","","2.5","%","","243,893","","","1.2","%","","102,451","","","2.3","%"],["","Non-GSE residential certificates","\u2014","","","0.0","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%","","66,756","","","1.9","%"],["","Non-GSE commercial certificates","\u2014","","","0.0","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%","","81,705","","","1.6","%"],["","Other debt:"],["","U.S. Treasury","200","","","1.7","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%"],["","ABS","\u2014","","","0.0","%","","5,000","","","1.1","%","","304,019","","","1.6","%","","679,042","","","1.8","%"],["","Trust preferred","\u2014","","","0.0","%","","\u2014","","","0.0","%","","14,631","","","0.8","%","","\u2014","","","0.0","%"],["","Corporate","\u2014","","","0.0","%","","38,043","","","4.3","%","","84,970","","","3.5","%","","\u2014","","","0.0","%"],["","Held to maturity:"],["","Mortgage-related:"],["","GSE commercial certificates","\u2014","","","0.0","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%","","30,742","","","1.9","%"],["","GSE residential certificates","\u2014","","","0.0","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%","","442","","","3.6","%"],["","Non GSE commercial certificates","\u2014","","","0.0","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%","","10,333","","","1.9","%"],["","Non GSE residential certificates","\u2014","","","0.0","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%","","10,796","","","0.0","%"],["","Other debt:"],["","ABS","\u2014","","","0.0","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%","","75,800","","","0.0","%"],["","PACE","\u2014","","","0.0","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%","","627,394","","","4.2","%"],["","Municipal","\u2014","","","0.0","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%","","84,962","","","2.1","%"],["","Other","1,100","","","3.4","%","","2,000","","","3.3","%","","\u2014","","","0.0","%","","\u2014","","","0.0","%"],["","Total securities","$","2,354","","","3.1","%","","$","61,919","","","3.5","%","","$","690,647","","","1.7","%","","$","2,191,698","","","2.5","%"]] [[/GREPCENT_TABLE]] (1) Estimated yield based on book price (amortized cost divided by par) using estimated prepayments and no change in interest rates. Securities yields are not reported on a taxable-equivalent basis as the impact on the portfolio yield is not material. 65 The following table shows a breakdown of our asset backed securities by sector and ratings as of December 31, 2021: [[GREPCENT_TABLE]] [["","","","","","Expected Avg. Life in Years","","Credit RatingsHighest Rating if split rated"],["","(In thousands)","","Amount","%","% Floating","% AAA","% AA","% A","% BBB","% Not Rated","Total"],["","CLO Commercial & Industrial","","$","612,234","","57","%","3.5","88","%","100","%","0","%","0","%","0","%","0","%","100","%"],["","Consumer","","199,361","","19","%","4.4","0","%","18","%","21","%","57","%","4","%","0","%","100","%"],["","Mortgage","","169,334","","16","%","2.9","100","%","100","%","0","%","0","%","0","%","0","%","100","%"],["","Student","","84,010","","8","%","5.0","83","%","100","%","0","%","0","%","0","%","0","%","100","%"],["","Total Securities:","","$","1,064,939","","100","%","3.7","73","%","84","%","4","%","11","%","1","%","0","%","100","%"]] [[/GREPCENT_TABLE]] 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 $3.3 billion as of December 31, 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. We actively purchase loans from other originating institutions that we believe provide attractive risk-adjusted returns. Over the last two years we have made the following loan purchases: •In 2021, we purchased $154.0 million of residential solar loans, $81.1 million of commercial loans that are unconditionally guaranteed by the U.S. Government, $45.6 million of residential mortgages, $9.6 million of commercial energy efficient loans and $2.5 million of consumer home improvement loans. •In 2020, we purchased $114.4 million of commercial loans that are unconditionally guaranteed by the U.S. Government (which includes $51.3 million of loans originated through the Government’s Paycheck Protection Program), $80.3 million of residential solar loans, $34.6 million of residential mortgages and $2.0 million of commercial energy efficiency loans We plan to selectively evaluate the purchase of additional loan pools that meet our underwriting criteria as part of our strategic plan. 66 The following table sets forth the composition of our loan portfolio, as of December 31, 2021 and December 31, 2020: [[GREPCENT_TABLE]] [["","(In thousands)","","December 31, 2021","","December 31, 2020"],["","","","Amount","","% of total loans","","Amount","","% of total loans"],["","Commercial portfolio:"],["","Commercial and industrial","","$","729,385","","","22.0","%","","$","677,192","","","19.5","%"],["","Multifamily mortgages","","821,801","","","24.8","%","","947,177","","","27.2","%"],["","Commercial real estate mortgages","","369,429","","","11.2","%","","372,736","","","10.7","%"],["","Construction and land development mortgages","","31,539","","","1.0","%","","56,087","","","1.6","%"],["","Total commercial portfolio","","1,952,154","","","59.0","%","","2,053,192","","","59.0","%"],["","Retail portfolio:"],["","Residential real estate lending","","1,063,682","","","32.2","%","","1,238,697","","","35.5","%"],["","Consumer and other","","291,818","","","8.8","%","","190,676","","","5.5","%"],["","Total retail portfolio","","1,355,500","","","41.0","%","","1,429,373","","","41.0","%"],["","Total loans","","3,307,654","","","100.0","%","","3,482,565","","","100.0","%"],["","Net deferred loan origination costs (fees)","","4,570","","","","","6,330"],["","Allowance for loan losses","","(35,866)","","","","","(41,589)"],["","Total loans, net","","$","3,276,358","","","","","$","3,447,306"]] [[/GREPCENT_TABLE]] Commercial loan portfolio Our commercial loan portfolio comprised 59.0% of our total loan portfolio at December 31, 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. In addition, our C&I portfolio includes commercial solar financings; for many of these we are the sole lender, while for some others we are a participant in a syndicated credit facility led by another institution. The primary source of repayment for C&I loans is generally operating cash flows of the business or project. We also seek to minimize risks related to these loans by requiring such loans to be collateralized by various business assets (including inventory, equipment, accounts receivable, and the assignment of contracts that generate cash flow). The average size of our C&I loans at December 31, 2021 by exposure was $4.0 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 $729.4 million at December 31, 2021, which comprised 22.0% of our total loan portfolio. During the year ended 2021, the C&I loan portfolio increased by 7.7% 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 80% 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. Our multifamily loans totaled $821.8 million at December 31, 2021, which comprised 24.8% of our total loan portfolio. During the year ended 2021, the multifamily loan portfolio decreased by 13.2% 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 21 borrowers financing owner‑occupied buildings which account for an aggregate total of $42.5 million in loans as of December 31, 2021. Our CRE loans totaled $369.4 million at December 31, 2021, which comprised 11.2% of our total loan portfolio. During the year ended December 31, 2021, the CRE loan portfolio decreased by 0.9% from $372.7 million at December 31, 2020. 67 Retail loan portfolio Our retail loan portfolio comprised 41.0% of our total loan portfolio at December 31, 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 December 31, 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, 14% were purchased from two third parties on or after July 2014, and 4% were purchased by us from other originators before 2010. Our residential real estate lending loans totaled $1.1 billion at December 31, 2021, which comprised 78.5% of our retail loan portfolio and 32.2% of our total loan portfolio. During the year ended December 31, 2021, our residential real estate lending loans decreased by 14.1% 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 $291.8 million at December 31, 2021, which comprised 8.8% of our total loan portfolio, compared to $190.7 million, or 5.5% of our total loan portfolio, at December 31, 2020. The increase was primarily driven by increased loan purchases within our residential solar loans portfolio. Maturities and Sensitivity of Loans to Changes in Interest Rates The information in the following table is based on the contractual maturities of individual loans, including loans that may be subject to renewal at their contractual maturity. Renewal of these loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below because borrowers have the right to prepay obligations with or without prepayment penalties. The following tables summarize the loan maturity distribution by type and related interest rate characteristics at December 31, 2021 and December 31, 2020: [[GREPCENT_TABLE]] [["","(In thousands)","","","One year or less","","After one but within five years","","After 5 years","","Total"],["","December 31, 2021:"],["","Commercial Portfolio:"],["","Commercial and industrial","","","$","89,499","","","$","241,432","","","$","398,454","","","$","729,385"],["","Multifamily","","","147,340","","","429,126","","","245,335","","","821,801"],["","Commercial real estate","","","88,506","","","222,843","","","58,080","","","369,429"],["","Construction and land development","","","29,264","","","2,275","","","\u2014","","","31,539"],["","Retail Portfolio:"],["","Residential real estate lending","","","399","","","1,836","","","1,061,447","","","1,063,682"],["","Consumer and other","","","1,327","","","1,151","","","289,340","","","291,818"],["","Total Loans","","","$","356,335","","","$","898,663","","","$","2,052,656","","","$","3,307,654"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","(In thousands)","","","","","","","After one but within five years","","After 5 years","","Total"],["","Gross loan maturing after one year with:"],["","Fixed interest rates","","","","","","","$","709,569","","","$","1,456,484","","","$","2,166,053"],["","Floating or adjustable interest rates","","","","","","","189,094","","","596,172","","","785,266"],["","Total Loans","","","","","","","$","898,663","","","$","2,052,656","","","$","2,951,319"]] [[/GREPCENT_TABLE]] 68 [[GREPCENT_TABLE]] [["(In thousands)","","","One year or less","","After one but within five years","","After 5 years","","Total"],["December 31, 2020:"],["Commercial Portfolio:"],["Commercial and industrial","","","$","149,870","","","$","266,209","","","$","261,113","","","$","677,192"],["Multifamily","","","127,009","","","496,107","","","324,061","","","947,177"],["Commercial real estate","","","58,124","","","259,664","","","54,948","","","372,736"],["Construction and land development","","","41,293","","","9,773","","","5,021","","","56,087"],["Retail Portfolio:"],["Residential real estate lending","","","450","","","1,834","","","1,236,413","","","1,238,697"],["Consumer and other","","","536","","","2,372","","","187,768","","","190,676"],["Total Loans","","","$","377,282","","","$","1,035,959","","","$","2,069,324","","","$","3,482,565"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(In thousands)","","","After one butwithin five years","","After 5 years","","Total"],["Gross loan maturing after one year with:"],["Fixed interest rates","","","$","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"]] [[/GREPCENT_TABLE]] 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 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. 69 The following tables presents, by loan type, the changes in the allowance for the periods indicated: [[GREPCENT_TABLE]] [["","","","Year Ended December 31,"],["(In thousands)","","","","","2021","","2020","","2019"],["Balance at beginning of period","","","","","$","41,589","","","$","33,847","","","$","37,195"],["Loan charge-offs:"],["Commercial portfolio:"],["Commercial and industrial","","","","","813","","","11,293","","","9,236"],["Multifamily","","","","","4,081","","","\u2014","","","\u2014"],["Commercial real estate","","","","","314","","","3,787","","","\u2014"],["Construction and land development","","","","","\u2014","","","970","","","\u2014"],["Retail portfolio:"],["Residential real estate lending","","","","","1,081","","","492","","","683"],["Consumer and other","","","","","2,699","","","1,691","","","710"],["Total loan charge-offs","","","","","8,988","","","18,233","","","10,629"],["Recoveries of loans previously charged-off:"],["Commercial portfolio:"],["Commercial and industrial","","","","","221","","","57","","","1,696"],["Construction and land development","","","","","3","","","1","","","\u2014"],["Retail portfolio:"],["Residential real estate lending","","","","","3,168","","","975","","","1,594"],["Consumer and other","","","","","160","","","151","","","154"],["Total loan recoveries","","","","","3,552","","","1,184","","","3,444"],["Net (recoveries) charge-offs","","","","","5,436","","","17,049","","","7,185"],["Provision for (recovery of) loan losses","","","","","(287)","","","24,791","","","3,837"],["Balance at end of period","","","","","$","35,866","","","$","41,589","","","$","33,847"]] [[/GREPCENT_TABLE]] The allowance for loan losses decreased $5.7 million to $35.9 million at December 31, 2021 from $41.6 million at December 31, 2020. At December 31, 2021, we had $53.2 million of impaired loans for which a specific allowance of $5.1 million was made, compared to $80.5 million of impaired loans at December 31, 2020 for which a specific allowance of $6.2 million was made. The ratio of allowance to total loans was 1.08% at December 31, 2021 and 1.19% at December 31, 2020. The decrease in the allowance for loan losses and improvement in allowance metrics was primarily due to improved credit quality within the loan portfolio. 70 Allocation of Allowance for Loan Losses The following table presents the allocation of the allowance and the percentage of the total amount of loans in each loan category listed as of the dates indicated: [[GREPCENT_TABLE]] [["","At December 31, 2021","","At December 31, 2020"],["(In thousands)","Amount","","% of total loans","","Amount","","% of total loans"],["Commercial Portfolio:"],["Commercial and industrial","$","10,652","","","22.0","%","","$","9,065","","","19.4","%"],["Multifamily","4,760","","","24.8","%","","10,324","","","27.2","%"],["Commercial real estate","7,273","","","11.2","%","","6,213","","","10.7","%"],["Construction and land development","405","","","1.0","%","","2,077","","","1.6","%"],["Total commercial portfolio","$","23,090","","","59.0","%","","$","27,679","","","58.9","%"],["Retail Portfolio:"],["Residential real estate lending","$","9,008","","","32.2","%","","$","12,330","","","35.6","%"],["Consumer and other","$","3,768","","","8.8","%","","$","1,580","","","5.5","%"],["Total retail portfolio","$","12,776","","","41.0","%","","$","13,910","","","41.1","%"],["Total allowance for loan losses","$","35,866","","","","","$","41,589"]] [[/GREPCENT_TABLE]] 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. Interest on loans is generally recognized on the accrual basis. Interest is not accrued on loans that are more than 90 days delinquent on payments, and any interest that was accrued but unpaid on such loans is reversed from interest income at that time, or when deemed to be uncollectible. Interest subsequently received on such loans is recorded as interest income or alternatively as a reduction in the amortized cost of the loan if there is significant doubt as to the collectability of the unpaid principal balance. Loans are returned to accrual status when principal and interest amounts contractually due are brought current and future payments are reasonably assured. 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 number of requests for temporary loan modifications. As of December 31, 2021, we had COVID-19 related loan payment deferrals or deferral requests in process totaling $12.2 million, of which 82% were in our commercial portfolio. We have granted these borrowers short-term concessions of three to six months in the form of payment deferrals. According to the interagency guidance and the CARES Act, which expired on January 1, 2022, loans modified during the COVID-19 pandemic were not considered TDRs as long as the borrower was not experiencing financial difficulty before the pandemic and the reason for the deferral was temporary in nature and the loans were expected to continue performing after the COVID-19 pandemic. 71 The following table sets forth our nonperforming assets as of December 31, 2021 and December 31, 2020: [[GREPCENT_TABLE]] [["(In thousands)","December 31, 2021","","December 31, 2020"],["Loans 90 days past due and accruing","$","\u2014","","","$","1,404"],["Nonaccrual loans excluding held for sale loans and restructured loans","14,722","","","40,039"],["Nonaccrual loans held for sale","1,000","","","\u2014"],["Troubled debt restructured loans - nonaccrual","13,497","","","20,885"],["Troubled debt restructured loans - accruing","24,997","","","19,553"],["Other real estate owned","307","","","306"],["Impaired securities","63","","","47"],["Total nonperforming assets","$","54,586","","","$","82,234"],["Nonaccrual loans:"],["Commercial and industrial","$","8,313","","","$","12,444"],["Multifamily","2,907","","","9,575"],["Commercial real estate","4,054","","","3,433"],["Construction and land development","\u2014","","","11,184"],["Total commercial portfolio","15,274","","","36,636"],["Residential real estate lending","12,525","","","23,656"],["Consumer and other","420","","","632"],["Total retail portfolio","12,945","","","24,288"],["Total nonaccrual loans","$","28,219","","","$","60,924"],["Nonperforming assets to total assets","0.77","%","","1.38","%"],["Nonaccrual assets to total assets","0.42","%","","1.02","%"],["Nonaccrual loans to total loans","0.85","%","","1.75","%"],["Allowance for loan losses to nonaccrual loans","127.10","%","","68.26","%"],["Allowance for loan losses to total loans","1.08","%","","1.19","%"],["Annualized net charge-offs (recoveries) to average loans","0.17","%","","0.48","%"]] [[/GREPCENT_TABLE]] Nonperforming assets totaled $54.6 million, or 0.77% of period-end total assets at December 31, 2021, a decrease of $27.6 million, compared with $82.2 million, or 1.38% of period-end total assets at December 31, 2020. The decrease in nonperforming assets at December 31, 2021 compared to December 31, 2020 was primarily driven by the payoff of $11.2 million of non-accruing construction loans, $3.5 million of multifamily loans, and $2.6 million of C&I loans, as well as a sale of $4.5 million nonperforming residential loans, and a partial charge-off and transfer of a $3.2 million multifamily loan to held-for-sale. 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 $219.0 million, or 3.1% of total assets, at December 31, 2021, as follows: $215.1 million are commercial loans currently in workout that management expects will be rehabilitated; $43.2 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; $3.9 million are residential 1-4 family or retail loans, with $2.3 million at 30 days delinquent, and $1.6 million at 60 days delinquent. Resell Agreements As of December 31, 2021, we have $229.0 million of short term investments of resell agreements backed by government guaranteed loans and other residential loans, with a weighted interest rate of 1.21%. As of December 31, 2020, we have $154.8 million of short term investments of resell agreements backed by government guaranteed loans, with a weighted interest rate of 1.25%. 72 Deferred Tax Asset We had a deferred tax asset, net of deferred tax liabilities, of $26.7 million at December 31, 2021 and $27.9 million at December 31, 2020. As of December 31, 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 $6.4 billion at December 31, 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 December 31, 2021 and December 31, 2020, we had approximately $1.0 billion and $602.8 million, respectively, in political deposits which are primarily in demand deposits. The following table sets forth the average balance amounts and the average rates paid on deposits held by us for the years ended December 31, 2021, December 31, 2020 and December 31, 2019. [[GREPCENT_TABLE]] [["","2021","","2020","","2019"],["","Average Balance","","Income / Expense","","Average Rate Paid","","Average Balance","","Income / Expense","","Average Rate Paid","","Average Balance","","Income / Expense","","Average Rate Paid"],["(In thousands)"],["Non-interest bearing demand and transaction deposits","$","3,017,621","","","$","\u2014","","","0.00","%","","$","2,798,106","","","$","\u2014","","","0.00","%","","$","1,832,083","","","$","\u2014","","","0.00","%"],["NOW accounts","203,144","","","170","","","0.08","%","","334,669","","","440","","","0.13","%","","225,017","","","1,039","","","0.46","%"],["Money market deposit accounts","2,054,286","","","4,237","","","0.21","%","","1,748,288","","","6,445","","","0.37","%","","1,340,138","","","7,324","","","0.55","%"],["Savings accounts","365,154","","","381","","","0.10","%","","214,884","","","418","","","0.19","%","","337,259","","","704","","","0.21","%"],["Time deposits","248,507","","","1,035","","","0.42","%","","335,433","","","3,149","","","0.94","%","","435,157","","","5,393","","","1.24","%"],["Brokered CD","\u2014","","","","","\u2014","%","","\u2014","","","\u2014","","","\u2014","%","","19,981","","","509","","","2.55","%"],["","$","5,888,712","","","$","5,823","","","0.10","%","","$","5,431,380","","","$","10,452","","","0.19","%","","$","4,189,635","","","$","14,970","","","0.36","%"]] [[/GREPCENT_TABLE]] We had uninsured deposits of $4.3 million, $3.2 million, and $2.7 million for the years ended 2021, 2020, and 2019, respectively. Maturities of time certificates of deposit and other time deposits of $250,000 or more outstanding at December 31, 2021 are summarized as follows: [[GREPCENT_TABLE]] [["Maturities as of December 31, 2021"],["(In thousands)"],["Within three months","$","9,806"],["After three but within six months","12,511"],["After six months but within twelve months","18,587"],["After twelve months","2,796"],["","$","43,700"]] [[/GREPCENT_TABLE]] 73 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 December 31, 2021, our cash and equivalents, which consist of cash and amounts due from banks and interest-bearing deposits in other financial institutions, amounted to $330.5 million, or 4.7% of total assets, compared to $38.8 million, or 0.6% of total assets at December 31, 2020. Our available for sale securities at December 31, 2021 were $2.1 billion, or 29.9% 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 $90.8 million at December 31, 2021 were pledged to secure public deposits. 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 December 31, 2021, we had no advances from the FHLB and a remaining credit availability of $1.6 billion. In addition, we maintain borrowing capacity of approximately $72.3 million with the Federal Reserve’s discount window that is secured by certain securities from our portfolio which are not pledged for other purposes. We also had $85.0 million in subordinated debt. The Company is party to agreements with Pace Funding Group LLC, which operates Home Run Financing, for the purchase of property assessed clean energy, or PACE, assessment securities until the end of 2022. These investments are to be held in the Company's held-to-maturity investment portfolio. As of December 31, 2021, we had purchased $314.1 million of PACE assessment securities from Pace Funding Group LLC and had a remaining commitment of $145.8 million. The PACE assessments have equal-lien priority with property taxes and generally rank senior to first lien mortgages. The Company anticipates these commitments will be funded by means of normal cash flows, will be funded by a reduction in cash and cash equivalents, or by pay-downs and maturities of loans and and other investments. Capital Resources Total stockholders’ equity at December 31, 2021 was $563.9 million, compared to $535.8 million at December 31, 2020, an increase of $28.1 million. The increase was primarily driven by $52.9 million of net income, partially offset by $10.1 million of dividends and a $11.8 million decrease in accumulated other comprehensive income due to the mark to market on our securities 74 portfolio and a $3.0 million decrease in additional paid-in capital, which was primarily driven by $2.9 million of common stock that was purchased as part of our 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 $3 billion. In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain the fully phased in “capital conservation buffer” of 2.5% on top of its minimum risk-based capital requirements. This buffer must consist solely of common equity Tier 1 risk-based capital, but the buffer applies to all three measurements (common equity Tier 1 risk-based capital, Tier 1 capital and total capital). The capital conservation is equal to 2.5% of risk-weighted assets. 75 The following table shows the regulatory capital ratios for the Company: [[GREPCENT_TABLE]] [["","","Actual","","For Capital Adequacy Purposes(1)"],["","","Amount","","Ratio","","Amount","","Ratio"],["","(In thousands)"],["","December 31, 2021"],["","Consolidated:"],["","Total capital to risk weighted assets","$","656,719","","","15.95","%","","$","329,471","","","8.00","%"],["","Tier 1 capital to risk weighted assets","534,381","","","12.98","%","","247,103","","","6.00","%"],["","Tier 1 capital to average assets","534,381","","","7.62","%","","280,454","","","4.00","%"],["","Common equity tier 1 to risk weighted assets","534,381","","","12.98","%","","185,327","","","4.50","%"]] [[/GREPCENT_TABLE]] (1) Amounts are shown exclusive of the capital conservation buffer of 2.50%. The following table shows the regulatory capital ratios for the Bank: [[GREPCENT_TABLE]] [["","Actual","","For Capital Adequacy Purposes(1)","","To Be Considered Well Capitalized"],["","Amount","","Ratio","","Amount","","Ratio","","Amount","","Ratio"],["(In thousands)"],["December 31, 2021"],["Total capital to risk weighted assets","$","613,030","","","14.89","%","","$","329,376","","","8.00","%","","$","411,720","","","10.00","%"],["Tier 1 capital to risk weighted assets","575,692","","","13.98","%","","247,032","","","6.00","%","","329,376","","","8.00","%"],["Tier 1 capital to average assets","575,692","","","8.21","%","","164,688","","","4.00","%","","205,860","","","5.00","%"],["Common equity tier 1 to risk weighted assets","575,692","","","13.98","%","","185,274","","","4.50","%","","267,618","","","6.50","%"],["December 31, 2020"],["Total capital to risk weighted assets","$","534,684","","","14.25","%","","$","300,199","","","8.00","%","","$","375,249","","","10.00","%"],["Tier 1 capital to risk weighted assets","491,913","","","13.11","%","","225,149","","","6.00","%","","300,199","","","8.00","%"],["Tier 1 capital to average assets","491,913","","","7.97","%","","246,904","","","4.00","%","","308,630","","","5.00","%"],["Common equity tier 1 to risk weighted assets","491,913","","","13.11","%","","168,862","","","4.50","%","","243,912","","","6.50","%"]] [[/GREPCENT_TABLE]] (1) Amounts are shown exclusive of the capital conservation buffer of 2.50%. As of December 31, 2021, the Bank was categorized as “well capitalized” under the prompt corrective action measures and met the capital conservation buffer requirements. Contractual Obligations We have entered into contractual obligations in the normal course of business that involve elements of credit risk, interest rate risk and liquidity risk. The following table summarizes these relations as of December 31, 2021 and December 31, 2020: [[GREPCENT_TABLE]] [["","","December 31, 2021"],["","","(In thousands)","Total","","Less than 1 year","","1-3 years","","3-5 years","","More than 5 years"],["","","Subordinated Debt","$","83,831","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","83,831"],["","","Operating Leases","51,824","","","10,955","","","21,420","","","18,923","","","526"],["","","Purchase Obligations","31,322","","","4,612","","","9,224","","","8,386","","","9,100"],["","","Certificates of Deposit","207,152","","","182,654","","","18,784","","","5,714","","","\u2014"],["","","","$","374,129","","","$","198,221","","","$","49,428","","","$","33,023","","","$","93,457"]] [[/GREPCENT_TABLE]] 76 [[GREPCENT_TABLE]] [["December 31, 2020"],["(In thousands)","Total","","Less than 1 year","","1-3 years","","3-5 years","","More than 5 years"],["Operating Leases","$","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"]] [[/GREPCENT_TABLE]] 77