Flushing Financial Corporation
03/06/2026 | Press release | Distributed by Public on 03/06/2026 14:20
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
As used in this discussion and analysis, the words "we," "us," "our" and the "Company" are used to refer to Flushing Financial Corporation (the "Holding Company") and its direct and indirect wholly owned subsidiaries, Flushing Bank (the "Bank"), Flushing Service Corporation and FSB Properties Inc. Discussion and analysis of our 2024 fiscal year specifically, as well as the year-over-year comparison of our 2024 financial performance to 2023, are located under Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 13, 2025, which is available on our investor relations website at FlushingBank.com and the SEC's website at sec.gov.
General
We are a Delaware corporation organized in 1994. The Bank was organized in 1929 as a New York State-chartered mutual savings bank. Today the Bank operates as a full-service New York State commercial bank. The primary business of the Holding Company has been the operation of the Bank. The Bank owned two subsidiaries: Flushing Service Corporation, and FSB Properties Inc. The Bank also operates an internet branch, which operates under the brands of iGObanking® and BankPurely® (the "Internet Branch"). The Bank's primary regulator is the New York State Department of Financial Services, and its primary federal regulator is the Federal Deposit Insurance Corporation ("FDIC"). The Bank's deposits are insured to the maximum allowable amount by the FDIC.
The Holding Company also owns Flushing Financial Capital Trust II, Flushing Financial Capital Trust III, and Flushing Financial Capital Trust IV (the "Trusts"), which are special purpose business trusts formed during 2007 to issue a total of $60.0 million of capital securities, and $1.9 million of common securities (which are the only voting securities). The Holding Company owns 100% of the common securities of the Trusts. The Trusts used the proceeds from the issuance of these securities to purchase junior subordinated debentures from the Holding Company. The Trusts are not included in our consolidated financial statements, as we would not absorb the losses of the Trusts if losses were to occur.
The following discussion of financial condition and results of operations includes the collective results of the Holding Company and its subsidiaries (collectively, the "Company"), but reflects principally the Bank's activities. Management views the Company as operating as a single unit - a community bank. Therefore, segment information is not provided.
Recent Developments
As announced, on December 29 2025, we entered into a definitive merger agreement pursuant to which we and OceanFirst, will combine in the first merger. Upon completion of the first merger, Flushing Bank will merge into OceanFirst Bank, with OceanFirst Bank surviving that bank merger. Based on OceanFirst's closing stock price on December 26, 2025, of $19.76, the transaction was valued at $579 million and is intended to create a high-performing regional bank with a significant presence across New Jersey, Long Island and New York markets. Immediately following closing of the mergers, the combined company is expected to have approximately $23 billion in assets, $17 billion in total loans, and $18 billion in total deposits across 71 retail branches.
OceanFirst has entered into an investment agreement with affiliates of funds managed by Warburg, which committed to invest $225 million for newly issued equity securities subject to the closing of the first merger.
Upon completion of the proposed transaction, (a) the shares issued to our stockholders in the first merger are expected to represent approximately 30% of the outstanding shares of the combined company, (b) the shares issued to Warburg Pincus in the equity capital raise transaction discussed above are expected to represent approximately 12% of the outstanding shares of the combined company and (c) the shares of OceanFirst common stock that are outstanding immediately prior to completion of the first merger are expected to represent approximately 58% of the outstanding shares of the combined company.
The mergers are expected to close in the second quarter of 2026, subject to the receipt of regulatory approvals, approval by OceanFirst's shareholders and our shareholders, and the satisfaction of other customary closing conditions. The equity capital raise with Warburg is expected to close concurrently with the first merger, subject to the concurrent
closing of the first merger and other closing conditions. See "Risk Factors - Risks Relating to the Consummation of the Mergers and OceanFirst following the Mergers.
Overview
Our principal business is attracting retail deposits from the general public and investing those deposits together with funds generated from ongoing operations and borrowings, primarily in (1) originations and purchases of multi-family residential properties, commercial business loans, commercial real estate mortgage loans and, to a lesser extent, one-to-four family (focusing on mixed-use properties, which are properties that contain both residential dwelling units and commercial units); (2) construction loans; (3) equipment financing loans; (4) Small Business Administration ("SBA") loans; (5) mortgage loan surrogates such as mortgage-backed securities; and (6) U.S. government securities, corporate fixed-income securities and other marketable securities. We also originate certain other consumer loans including overdraft lines of credit. Our results of operations depend primarily on net interest income, which is the difference between the income earned on its interest-earning assets and the cost of our interest-bearing liabilities. Net interest income is the result of our interest rate margin, which is the difference between the average yield earned on interest-earning assets and the average cost of interest-bearing liabilities, adjusted for the difference in the average balance of interest-earning assets as compared to the average balance of interest-bearing liabilities. We also generate non-interest income from loan fees, service charges on deposit accounts, mortgage servicing fees, and other fees, income earned on Bank Owned Life Insurance ("BOLI"), dividends on Federal Home Bank of New York ("FHLB-NY") stock and net gains and losses on sales of securities and loans. Our operating expenses consist principally of employee compensation and benefits, occupancy and equipment costs, other general and administrative expenses and income tax expense. Our results of operations can also be significantly affected by our periodic provision for credit losses and specific provision for losses on real estate owned.
Interest Rate Risk
Interest rate risk is the impact on earnings and capital from changes in interest rates. Interest rate risk exists because our interest-earning assets and interest-bearing liabilities may mature or reprice at different times or by different amounts. We assess interest rate risk by comparing the results of several income and capital simulations scenarios to the base case compared to scenarios with changes in interest rates, degree of change over time, speed of change, and changes in the shape of the yield curve. These scenarios have assumptions including loan originations, investment securities purchases and sales, prepayment rates on loans and investment securities, deposit flows, and mix and pricing decisions.
Asset/Liability Management. Asset/liability management involves assessing, monitoring and managing interest rate risk. The Asset Liability Investment Committee of the Board of Directors ("Board ALCO") has primary oversight responsibility of interest rate risk. The actions and activities of the Board ALCO are dictated by the "ALCO and Investment Committee Charter of the Company Board of Directors (the "Charter")". The Board ALCO has established policy limits for changes of net interest income and the economic value of equity under various scenarios and liquidity risk limits to ensure the Company has sufficient liquid assets to meet its short-term obligations, even during periods of financial stress and is reviewed no less frequently than quarterly. The ALCO policy and oversight is interconnected to the Company's capital plan.
The Board ALCO reviews simulations of various interest rate scenarios to assess the potential impact on the Company's Consolidated Statements of Financial Condition and Consolidated Statements of Operations. The model employed by the Company uses a static balance sheet as of the date the modeling is being generated. The limitation to this model is that unexpected events may not be captured in the output. The model is validated no less frequently than annually with the variables in the model subjected to annual stress tests. In addition, the interest rate risk model is back-tested no less frequently than quarterly to ensure the model remains consistent with actual results. The information from the interest rate risk modeling allows the Board ALCO to assess the potential impact of interest rate changes on the Company's profitability and future earnings.
The interest rate risk scenarios affect the position the Company may take with the pricing of assets and liabilities.
Models are inherently imperfect and subject to assumptions and limitations. The model output is affected by the data quality and the assumptions used. The Company uses both internal and external inputs into the model. The change in deposit betas is based upon deposit studies completed by an independent third party; loan prepayment assumptions are
based upon internal analysis; loan origination data is Company generated; and additions to assets and liabilities is derived from the budget or forecast or internally generated projected cash flows.
There was no material change in the source of the data used in our interest rate risk modeling in the current year. Current economic factors such as interest rate forecasts as changed from period over period may affect the modeling. Key assumptions include deposit betas and loan origination yields. Deposit betas vary by product and direction of interest rates. In an upward shock, weighted average deposit betas (based on period end balances) were 69% at December 31, 2025 compared to 70% at December 31,2024. In a downward shock, weighted average deposit betas (based on period end balances) were 60% at December 31, 2025 compared to 61% at December 31, 2024. Loan origination yields vary by product and the weighted average yield (based on period end loan balances) was 6.29% at December 31, 2025 compared to 6.99% at December 31, 2024.
Management ALCO, which consists of representatives from treasury, finance, business units, and senior management, oversees the interest rate risk, liquidity risk and capital risk while providing regular reports to the Board ALCO. These reports quantify the potential changes in net interest income and economic value of equity through various rate scenarios. The Management ALCO also provides the results of the liquidity stress test prepared by the Chief Risk Officer, the sensitivity analyses of the interest rate risk model variables, and the capital position of the Company and the Bank.
Economic Value of Equity Analysis. The Consolidated Statements of Financial Condition have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"), which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in fair value of certain investments due to changes in interest rates. Generally, the fair value of financial investments such as loans and securities fluctuate inversely with changes in interest rates. As a result, increases in interest rates could result in decreases in the fair value of the Company's interest-earning assets which could adversely affect the Company's results of operations if such assets were sold, or, in the case of securities classified as available for sale, decreases in the Company's stockholders' equity, if such securities were retained.
The Company quantifies the net portfolio value should interest rates immediately go up or down 100 or 200 basis points, assuming the yield curves of the rate shocks will be parallel to each other. Net portfolio value is defined as the market value of assets net of the market value of liabilities. The market value of assets and liabilities is determined using a discounted cash flow calculation. The net portfolio value ratio is the ratio of the net portfolio value to the market value of assets. The changes in value are measured as percentage changes from the net portfolio value at the base interest rate scenario. The base interest rate scenario assumes interest rates at December 31, 2025. Various estimates regarding prepayment assumptions are made at each level of rate shock. At December 31, 2025, the Company was within the guidelines set forth by the Board of Directors for each interest rate level.
The following table presents the Company's interest rate shock as of December 31:
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Projected Percentage Change In |
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Net Portfolio Value (NPV) |
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Net Portfolio Value Ratio |
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December 31, |
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December 31, |
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December 31, |
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December 31, |
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Change in Interest Rate |
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2025 |
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2024 |
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2025 |
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2024 |
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-200 Basis points |
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7.6 |
% |
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2.9 |
% |
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9.7 |
% |
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9.0 |
% |
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-100 Basis points |
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3.2 |
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1.2 |
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9.5 |
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9.0 |
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Base interest rate |
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- |
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- |
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9.4 |
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9.0 |
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+100 Basis points |
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(5.7) |
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(5.0) |
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9.0 |
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8.7 |
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+200 Basis points |
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(11.6) |
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(10.9) |
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8.6 |
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8.3 |
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Income Simulation Analysis. The Company manages the mix of interest-earning assets and interest-bearing liabilities on a continuous basis to maximize return and adjust its exposure to interest rate risk. The starting point for the net interest income simulation is an estimate of the next twelve months' net interest income assuming that both interest rates and the Company's interest-sensitive assets and liabilities remain at period-end levels. The report quantifies the potential changes in net interest income should interest rates go up or down 100 or 200 basis points (shocked), assuming the yield curves of the rate shocks will be parallel to each other. All changes in income are measured as percentage changes from the projected net interest income at the base interest rate scenario. The base interest rate scenario assumes interest rates at December 31, 2025 and 2024. Prepayment penalty income is excluded from this analysis. Actual results could differ significantly from these estimates. At December 31, 2025, the Company was within the guidelines set forth by the Board of Directors for each interest rate level.
The following table presents the Company's interest rate shock as of December 31:
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Projected Percentage Change in Net Interest Income |
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Change in Interest Rate |
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2025 |
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2024 |
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-200 Basis points |
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2.1 |
% |
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0.5 |
% |
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-100 Basis points |
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0.5 |
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0.1 |
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Base interest rate |
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- |
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- |
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+100 Basis points |
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(4.7) |
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(4.8) |
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+200 Basis points |
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(9.5) |
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(10.4) |
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Another net interest income simulation assumes that changes in interest rates change gradually in equal increments over the twelve-month period. Prepayment penalty income is excluded from this analysis. Based on these assumptions, net interest income would be reduced by 5.4% from a 200 basis point increase in rates over the next twelve months and increase by 1.3% from a 200 basis point decrease in rates over the same period. Actual results could differ significantly from these estimates.
At December 31, 2025 and 2024, the Company had a derivative portfolio with a notional value totaling $2.8 billion and $2.6 billion, respectively. This portfolio is designed to provide protection against rising interest rates. See Note 20 ("Derivative Financial Instruments") of the Notes to the Consolidated Financial Statements.
A portion of this portfolio is comprised of cash flow hedges on certain short-term advances and brokered deposits totaling $1.0 billion at December 31, 2025. At December 31, 2025, $725.8 million of the cash flow hedges are effective swaps at a weighted average rate of 3.07% compared to $875.8 million at 2.46% at December 31, 2024. Of the $1.0 billion outstanding at December 31, 2025, $180.0 million at an average rate of 1.56% will mature during 2026, and will be partially replaced by forward starting cash flow hedges totaling $180.0 million at an average rate of 3.35%.
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends upon the relative amount of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them.
The following table sets forth certain information relating to our Consolidated Statements of Financial Condition and Consolidated Statements of Operations for the years ended December 31, 2025, 2024, and 2023, and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances. The yields include amortization of fees that are considered adjustments to yields.
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For the years ended December 31, |
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2025 |
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2024 |
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2023 |
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Average |
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Yield/ |
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Average |
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Yield/ |
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Average |
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Yield/ |
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Balance |
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Interest |
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Cost |
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Balance |
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Interest |
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Cost |
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Balance |
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Interest |
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Cost |
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(Dollars in thousands) |
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Assets |
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Interest-earning assets: |
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Loans held for sale |
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$ |
21,962 |
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$ |
911 |
4.15 |
% |
$ |
192 |
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$ |
7 |
3.65 |
% |
$ |
- |
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$ |
- |
- |
% |
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Mortgage loans, net |
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$ |
5,227,869 |
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$ |
294,961 |
5.64 |
% |
$ |
5,346,975 |
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$ |
291,437 |
5.45 |
% |
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5,328,067 |
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267,178 |
5.01 |
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Other loans, net |
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1,406,092 |
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81,559 |
5.80 |
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1,420,424 |
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84,134 |
5.92 |
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1,517,282 |
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88,170 |
5.81 |
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Total loans, net (1) (2) |
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6,633,961 |
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376,520 |
5.68 |
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6,767,399 |
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375,571 |
5.55 |
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6,845,349 |
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355,348 |
5.19 |
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Taxable securities: |
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Mortgage-backed securities |
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868,289 |
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47,607 |
5.48 |
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765,700 |
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37,485 |
4.90 |
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442,228 |
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11,505 |
2.60 |
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Other securities |
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570,044 |
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31,915 |
5.60 |
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655,428 |
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40,230 |
6.14 |
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485,118 |
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24,700 |
5.09 |
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Total taxable securities |
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1,438,333 |
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79,522 |
5.53 |
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1,421,128 |
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77,715 |
5.47 |
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927,346 |
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36,205 |
3.90 |
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Tax-exempt securities: (3) |
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Other securities |
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43,325 |
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1,829 |
4.22 |
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65,245 |
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1,887 |
2.89 |
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66,533 |
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1,923 |
2.89 |
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Total tax-exempt securities |
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43,325 |
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1,829 |
4.22 |
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65,245 |
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1,887 |
2.89 |
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66,533 |
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1,923 |
2.89 |
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Interest-earning deposits and federal funds sold |
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203,221 |
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7,831 |
3.85 |
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218,829 |
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10,578 |
4.83 |
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184,565 |
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8,405 |
4.55 |
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Total interest-earning assets |
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8,340,802 |
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466,613 |
5.59 |
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8,472,793 |
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465,758 |
5.50 |
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8,023,793 |
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401,881 |
5.01 |
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Other assets |
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528,936 |
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481,698 |
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477,771 |
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Total assets |
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$ |
8,869,738 |
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$ |
8,954,491 |
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$ |
8,501,564 |
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Interest-bearing liabilities: |
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Deposits: |
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Savings accounts |
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$ |
94,482 |
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395 |
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0.42 |
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$ |
102,843 |
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472 |
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0.46 |
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$ |
121,102 |
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520 |
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0.43 |
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NOW accounts |
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2,245,412 |
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77,235 |
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3.44 |
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1,965,774 |
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75,683 |
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3.85 |
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1,937,974 |
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64,191 |
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3.31 |
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Money market accounts |
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1,710,557 |
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61,804 |
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3.61 |
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1,699,869 |
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67,992 |
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4.00 |
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1,754,059 |
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58,898 |
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3.36 |
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Certificates of deposit accounts |
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2,461,895 |
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88,823 |
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3.61 |
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2,604,817 |
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100,235 |
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3.85 |
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2,091,677 |
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64,844 |
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3.10 |
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Total due to depositors |
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6,512,346 |
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228,257 |
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3.50 |
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6,373,303 |
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244,382 |
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3.83 |
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5,904,812 |
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188,453 |
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3.19 |
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Mortgagors' escrow accounts |
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90,468 |
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270 |
|
0.30 |
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82,095 |
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254 |
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0.31 |
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81,015 |
|
202 |
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0.25 |
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Total interest-bearing deposits |
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6,602,814 |
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228,527 |
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3.46 |
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6,455,398 |
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244,636 |
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3.79 |
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5,985,827 |
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188,655 |
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3.15 |
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Borrowings |
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479,552 |
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22,170 |
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4.62 |
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795,348 |
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38,715 |
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4.87 |
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776,050 |
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33,670 |
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4.34 |
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Total interest-bearing liabilities |
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7,082,366 |
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250,697 |
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3.54 |
|
7,250,746 |
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283,351 |
|
3.91 |
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6,761,877 |
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222,325 |
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3.29 |
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Non interest-bearing demand deposits |
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899,143 |
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|
843,151 |
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867,667 |
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Other liabilities |
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170,090 |
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|
189,808 |
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196,869 |
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Total liabilities |
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8,151,599 |
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|
8,283,705 |
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|
7,826,413 |
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Equity |
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718,139 |
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|
670,786 |
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|
675,151 |
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Total liabilities and equity |
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$ |
8,869,738 |
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$ |
8,954,491 |
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$ |
8,501,564 |
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Net interest income / net interest rate spread (4) |
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$ |
215,916 |
|
2.05 |
% |
|
|
|
$ |
182,407 |
|
1.59 |
% |
|
|
|
$ |
179,556 |
|
1.72 |
% |
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Net interest-earning assets / net interest margin (5) |
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$ |
1,258,436 |
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|
2.59 |
% |
$ |
1,222,047 |
|
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|
2.15 |
% |
$ |
1,261,916 |
|
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|
2.24 |
% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest-earning assets to interest-bearing liabilities |
|
|
|
1.18 |
X |
|
|
|
|
1.17 |
X |
|
|
|
1.19 |
X |
|||||||||
| (1) | Average balances include non-accrual loans. |
| (2) | Loan interest income includes net loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties) of approximately $3.1 million, $1.0 million, and $0.8 million for the years ended December 31, 2025, 2024, and 2023, respectively. |
| (3) | Interest and yields are calculated on the tax equivalent basis using statutory federal income tax rate of 21% for the years ended December 31, 2025, 2024, and 2023. |
| (4) | Interest rate spread represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities. |
| (5) | Net interest margin represents net interest income before the provision for credit losses divided by average interest-earning assets. |
Rate/Volume Analysis
The following table presents the impact of changes in interest rates and in the volume of interest-earning assets and interest-bearing liabilities on the Company's interest income and interest expense during the periods indicated. Information is provided in each category with respect to (1) changes attributable to changes in volume (changes in volume multiplied by the prior rate), (2) changes attributable to changes in rate (changes in rate multiplied by the prior volume) and (3) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in Net Interest Income for the years ended December 31, |
||||||||||||||||
|
|
|
2025 vs. 2024 |
|
2024 vs. 2023 |
||||||||||||||
|
|
|
Due to |
|
|
|
|
Due to |
|
|
|
||||||||
|
|
|
Volume |
|
Rate |
|
Net |
|
Volume |
|
Rate |
|
Net |
||||||
|
|
|
(Dollars in thousands) |
||||||||||||||||
|
Interest-Earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loans held for sale |
|
$ |
903 |
|
$ |
1 |
|
$ |
904 |
|
$ |
- |
|
$ |
7 |
|
$ |
7 |
|
Mortgage loans, net |
|
|
(6,547) |
|
|
10,071 |
|
|
3,524 |
|
|
942 |
|
|
23,317 |
|
|
24,259 |
|
Other loans, net |
|
(855) |
|
(1,720) |
|
(2,575) |
|
(5,687) |
|
1,651 |
|
(4,036) |
||||||
|
Mortgage-backed securities |
|
5,374 |
|
4,748 |
|
10,122 |
|
11,759 |
|
14,221 |
|
25,980 |
||||||
|
Other securities |
|
(4,964) |
|
(3,351) |
|
(8,315) |
|
9,782 |
|
5,748 |
|
15,530 |
||||||
|
Tax-Exempt securities |
|
|
(757) |
|
|
699 |
|
|
(58) |
|
|
(36) |
|
|
- |
|
|
(36) |
|
Interest-earning deposits and federal funds sold |
|
(714) |
|
(2,033) |
|
(2,747) |
|
1,632 |
|
541 |
|
2,173 |
||||||
|
Total interest-earning assets |
|
(7,560) |
|
8,415 |
|
855 |
|
18,392 |
|
45,485 |
|
63,877 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Savings accounts |
|
(37) |
|
(40) |
|
(77) |
|
(82) |
|
34 |
|
(48) |
||||||
|
NOW accounts |
|
10,106 |
|
(8,554) |
|
1,552 |
|
929 |
|
10,563 |
|
11,492 |
||||||
|
Money market accounts |
|
429 |
|
(6,617) |
|
(6,188) |
|
(1,864) |
|
10,958 |
|
9,094 |
||||||
|
Certificates of deposit accounts |
|
(5,342) |
|
(6,070) |
|
(11,412) |
|
17,818 |
|
17,573 |
|
35,391 |
||||||
|
Mortgagors' escrow accounts |
|
24 |
|
(8) |
|
16 |
|
3 |
|
49 |
|
52 |
||||||
|
Borrowings |
|
(14,651) |
|
(1,894) |
|
(16,545) |
|
854 |
|
4,191 |
|
5,045 |
||||||
|
Total interest-bearing liabilities |
|
(9,471) |
|
(23,183) |
|
(32,654) |
|
17,658 |
|
43,368 |
|
61,026 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net interest income |
|
$ |
1,911 |
|
$ |
31,598 |
|
$ |
33,509 |
|
$ |
734 |
|
$ |
2,117 |
|
$ |
2,851 |
Comparison of Operating Results for the Years Ended December 31, 2025 and 2024
General. Net (loss) income for the year ended December 31, 2025 was $18.9 million, an increase of $50.2 million, or 160.3%, compared to ($31.3) million for the year ended December 31, 2024. Diluted (loss) earnings per common share was $0.54 for the year ended December 31, 2025, an increase of $1.59 per common share, or 151.4%, from ($1.05) per common share for the year ended December 31, 2024.
Return on average equity increased to 2.63% for the year ended December 31, 2025, from (4.67%) for the comparable prior year period. Return on average assets increased to 0.21% for the year ended December 31, 2025 from (0.35%) for the comparable prior year period.
Interest Income. Interest income increased $0.8 million, or 0.2%, to $466.2 million for the year ended December 31, 2025 from $465.4 million for the year ended December 31, 2024. The increase in interest income was primarily due to an increase of nine basis points in the yield of interest-earning assets to 5.59% for the year ended December 31, 2025 from 5.50% for the year ended December 31, 2024, coupled with a decrease of $132.0 million in the average balance of interest-earning assets to $8,340.8 million for the year ended December 31, 2025 from $8,472.8 million for the year ended December 31, 2024. The nine basis point increase in the yield of interest-earning assets was primarily due to increases of 13 basis points in both the yield of total loan net and of total securities. Excluding prepayment penalty income from loans
and securities, net recoveries/(reversals) of interest from non-accrual loans, net gains from fair value adjustments on hedges, swap termination fees and purchase accounting adjustments, the yield on total loans, net, increased 11 basis points to 5.59% for the year ended December 31, 2025 from 5.48% for the year ended December 31, 2024.
Interest Expense. Interest expense decreased $32.7 million, or 11.5% to $250.7 million for the year ended December 31, 2025 from $283.4 million for the year ended December 31, 2024. The decrease in interest expense was primarily due to an increase of 37 basis points in the average cost of interest-bearing liabilities to 3.54% for the year ended December 31, 2025 from 3.91% for the year ended December 31, 2024, coupled with a decrease of $168.4 million in the average balance of interest-bearing liabilities to $7,082.4 million for the year ended December 31, 2025 from $7,250.7 million for the comparable prior year period.
Net Interest Income. Net interest income for the year ended December 31, 2025 totaled $215.5 million, an increase of $33.5 million, or 18.4% from $182.0 million for the year ended December 31, 2024. The increase in net interest income was driven by the net interest margin increasing 44 basis points to 2.59% for the year ended December 31, 2025 compared to the prior year period. Included in net interest income was prepayment penalty income and net recoveries/(reversals) loans and securities totaling $4.1 million and $3.5 million for the years ended December 31, 2025 and 2024, respectively, net gains (losses) from fair value adjustments on hedges and swap termination fees totaling $0.3 million and $3.5 million for the years ended December 31, 2025 and 2024, respectively, and purchase accounting income of $0.9 million and $0.8 million for the years ended December 31, 2025 and 2024, respectively. Excluding all of these items, the net interest margin for the year ended December 31, 2025 was 2.53%, an increase of 47 basis points, from 2.06% for the year ended December 31, 2024.
Provision for Credit Losses. Provision for credit losses was $12.8 million for the year ended December 31, 2025, compared to $9.6 million during the comparable prior year period. The provision recorded in 2025 was primarily due to a reserve applied to one commercial real estate loan which lost its primary tenant, an increased reserve applied to one commercial business and other loan, coupled with net charge-offs as a result of loan sales, short payoffs and previously reserved loans deemed unrecoverable. The provision recorded in 2024 was driven by increased reserves on several commercial business and real estate multi-family loans.During the year ended December 31, 2025, non-performing loans increased $8.3 million to $41.6 million from $33.3 million at December 31, 2024. During the year ended December 31, 2025, the Bank recorded net charge-offs totaling $9.8 million compared to $7.7 million recorded in the comparable prior year period. The average loan-to-value ratio for our non-performing assets collateralized by real estate was 61.5% at December 31, 2025. The Bank continues to maintain conservative underwriting standards.
Non-Interest (Loss) Income. Non-interest (loss) income for the year ended December 31, 2025 was $23.4 million, an increase of $80.8 million, or 140.7% from ($57.4) million for the year ended December 31, 2024. Non-interest income increased primarily due to the prior year sale of securities associated with the balance sheet restructuring.
Non-Interest Expense. Non-interest expense was $191.6 million for the year ended December 31, 2025, an increase of $28.4 million, or 17.4% from $163.3 million for the year ended December 31, 2024. The increase in non-interest expense was primarily due to increases in impairment of Goodwill, professional services, and salaries and employee benefits related to increased staffing.
Income Tax Provision (Benefit). Income tax expense for the year ended December 31, 2025 increased $32.6 million, or 192.4% to $15.6 million, compared to a benefit of ($16.9) million for the year ended December 31, 2024. The increase was primarily due to a tax benefit relating to the balance sheet restructuring during the year ended December 31, 2024. The effective tax rate was 45.3% for the year ended December 31, 2025 compared to 35.1% in the prior year.
Liquidity, Regulatory Capital and Capital Resources
Liquidity and Capital Resources. Liquidity is the ability to economically meet current and future financial obligations. The Company's primary objectives in terms of managing liquidity is to maintain the ability to originate and purchase loans, repay borrowings as they mature, satisfy financial obligations that arise in the normal course of business and meet our customer's deposit withdrawal needs. Our primary sources of funds are deposits, borrowings, principal and interest payments on loans, mortgage-backed and other securities, and proceeds from sales of securities and loans. Deposit flows and mortgage prepayments, however, are greatly influenced by general interest rates, economic conditions and competition. The Company has other sources of liquidity, including unsecured overnight lines of credit, brokered deposits
and other types of borrowings. At December 31, 2025, the Company had $3.9 billion in combined available liquidity through cash lines with the FHLB-NY, Federal Reserve Bank, and other commercial banks as well as unencumbered securities compared to $3.6 billion at December 31, 2024.
The following tables present the Company's available liquidity by source at the periods indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2025 |
|||||||
|
|
|
Total |
|
Amount |
|
Net |
|||
|
|
|
Available |
|
Used |
|
Availability |
|||
|
|
|
(In millions) |
|||||||
|
Internal Sources: |
|
|
|
|
|
|
|||
|
Unencumbered Securities |
|
$ |
957.1 |
|
$ |
- |
|
$ |
957.1 |
|
Interest Earnings Deposits |
|
45.7 |
|
- |
|
45.7 |
|||
|
External Sources: |
|
|
|
|
|
|
|||
|
Federal Home Loan Bank |
|
2,661.6 |
|
1,727.3 |
|
934.3 |
|||
|
Federal Reserve Bank |
|
1,383.6 |
|
- |
|
1,383.6 |
|||
|
Other Banks |
|
627.0 |
|
60.0 |
|
567.0 |
|||
|
Total Liquidity |
|
$ |
5,675.0 |
|
$ |
1,787.3 |
|
$ |
3,887.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2024 |
|||||||
|
|
|
Total |
|
Amount |
|
Net |
|||
|
|
|
Available |
|
Used |
|
Availability |
|||
|
|
|
(In millions) |
|||||||
|
Internal Sources: |
|
|
|
|
|
|
|||
|
Unencumbered Securities |
|
$ |
954.3 |
|
$ |
- |
|
$ |
954.3 |
|
Interest Earnings Deposits |
|
57.4 |
|
- |
|
57.4 |
|||
|
External Sources: |
|
|
|
|
|
|
|||
|
Federal Home Loan Bank |
|
2,730.3 |
|
2,034.7 |
|
695.6 |
|||
|
Federal Reserve Bank |
|
1,528.9 |
|
- |
|
1,528.9 |
|||
|
Other Banks |
|
379.0 |
|
50.0 |
|
329.0 |
|||
|
Total Liquidity |
|
$ |
5,649.9 |
|
$ |
2,084.7 |
|
$ |
3,565.2 |
Liquidity management is both a short and long-term function of management. During 2025, funds were provided by the Company's operating and financing activities, which were used to fund our investing activities. In 2025, the Company mainly used cash to invest in its business and pay down debt. Operating activities brought in $61.0 million of cash. The Company used the cash to invest in securities and loans, partly paid for by securities and loan paydowns. We also paid off $435.0 million in borrowings and paid $30.0 million in dividends. Our most liquid assets are cash and cash equivalents, which include cash and due from banks, overnight interest-earning deposits and federal funds sold with original maturities of 90 days or less. The level of these assets is dependent on our operating, financing, lending and investing activities during any given period. At December 31, 2025, cash and cash equivalents totaled $126.1 million, a decrease of $26.5 million from December 31, 2024. We also held marketable securities available for sale with a market value of $1,389.9 million at December 31, 2025. A portion of our cash and cash equivalents is restricted cash held as collateral for interest rate swaps, totaled $16.6 million and $43.2 million, at December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024, cash (including restricted cash) held in excess of FDIC deposit insurance limits at other commercial banks totaling $34.8 million, and $62.4 million, respectively.
At December 31, 2025, we had commitments to extend credit totaling $435.2 million. Since generally all of the loan commitments are expected to be drawn upon, the total loan commitments approximate future cash requirements, whereas the amounts of lines of credit may not be indicative of our future cash requirements. The loan commitments generally expire in 90 days, while construction loan lines of credit mature within 18 months and home equity loan lines of credit mature within 10 years. We use the same credit policies in making commitments and conditional obligations as we do for on-balance-sheet instruments. See Note 16 ("Commitments and Contingencies") in Notes to the Consolidated Financial Statements.
Our total interest expense and non-interest expense in 2025 were $250.7 million and $191.6 million, respectively.
We maintain three postretirement defined benefit plans for our employees: a noncontributory defined benefit pension plan which was frozen as of September 30, 2006, a contributory medical plan, and a noncontributory life insurance plan. The life insurance plan was amended to discontinue providing life insurance benefits to future retirees after January 1, 2010 and the medical plan was frozen to employees hired after January 1, 2011. We also maintain a noncontributory defined benefit plan for certain of our non-employee directors, which was frozen as of January 1, 2004. The employee pension plan is the only plan that we have funded. During 2025, we incurred cash expenditures of $0.2 million for the medical and life insurance plans and we modified these plans as fully described in Note 12 ("Pension and Other Postretirement Benefit Plans") of Notes to the Consolidated Financial Statements. We did not make a contribution to the employee pension plan in 2025. We expect to pay similar amounts for these plans in 2026. See Note 12 ("Pension and Other Postretirement Benefit Plan") of Notes to the Consolidated Financial Statements.
The amounts reported in our financial statements are obtained from reports prepared by independent actuaries and are based on significant assumptions. The most significant assumption is the discount rate used to determine the accumulated postretirement benefit obligation ("APBO") for these plans. The APBO is the present value of projected benefits that employees and retirees have earned to date. The discount rate is a single rate at which the liabilities of the plans are discounted into today's dollars and could be effectively settled or eliminated. The discount rate used is based on the FTSE Pension Discount Curve and reflects a rate that could be earned on bonds over a similar period that we anticipate the plans' liabilities will be paid. An increase in the discount rate would reduce the APBO, while a reduction in the discount rate would increase the APBO.
The Company's actuaries use several other assumptions that could have a significant impact on our APBO and periodic expense for these plans. These assumptions include, but are not limited to, expected rate of return on plan assets, future increases in medical and life insurance premiums, turnover rates of employees, and life expectancy. The accounting standards for postretirement plans involve mechanisms that serve to limit the volatility of earnings by allowing changes in the value of plan assets and benefit obligations to be amortized over time when actual results differ from the assumptions used, there are changes in the assumptions used, or there are plan amendments. At December 31, 2025, our employee pension plan had an unrecognized loss of $4.8 million. The medical and life insurance plan and non-employee director plan had unrecognized gains of $2.3 million and $1.0 million, respectively.
The change in the discount rate is the only significant change made to the assumptions used for these plans for each of the three years ended December 31, 2025. During the years ended December 31, 2025, 2024, and 2023, the actual (loss) return on the employee pension plan assets was approximately 7%, (105%), and 15%, respectively, of the assumed return used to determine the periodic pension expense for that respective year.
The market value of the assets of our employee pension plan is $18.0 million at December 31, 2025, which is $2.0 million more than the projected benefit obligation. We do not anticipate a change in the market value of these assets which would have a significant effect on liquidity, capital resources, or results of operations.
At the time of the Bank's conversion from a federally chartered mutual savings bank to a federally chartered stock savings bank, the Bank was required by its primary regulator to establish a liquidation account which is reduced as and to the extent that eligible account holders reduce their qualifying deposits. The balance of the liquidation account at December 31, 2025 was $0.2 million. In the unlikely event of a complete liquidation of the Bank, each eligible account holder will be entitled to receive a distribution from the liquidation account. The Bank is not permitted to declare or pay a dividend or to repurchase any of its capital stock if the effect would be to cause the Bank's regulatory capital to be reduced below the amount required for the liquidation account but approval of the NYDFS Superintendent (the "Superintendent") is required if the total of all dividends declared by the Bank in a calendar year would exceed the total of its net profits for that year combined with its retained net profits for the preceding two years less prior dividends paid. The amount of dividends the Holding Company can declare and pay is generally limited to its net profits for the preceding year less dividends paid during that period. In addition, dividends paid by the Holding Company would be prohibited if the effect thereof would cause the Holding Company's capital to be reduced below applicable minimum capital requirements.
We have significant obligations that arise in the normal course of business. We finance our assets with deposits and borrowings. We also use borrowings to manage our interest-rate risk. We have the means to refinance these borrowings as they mature or are called through our financing arrangements with the FHLB-NY and access to unsecured lines of credit with other commercial banks. See Note 8 ("Deposits") and Note 9 ("Borrowed Funds") in Notes to the Consolidated Financial Statements. At December 31, 2025, we had borrowings obligations of $484.7 million of which $256.4 million
represents our current obligations within one year, including borrowing callable within one year. At December 31, 2025, we had deposit obligations of $7,311.7 million of which $7,199.2 million represents our current obligations within one year.
At December 31, 2025, the Bank had 30 branches, which were all leased. In addition, we lease our executive offices. We currently outsource our data processing, loan servicing and check processing functions. We believe that this is the most cost effective method for obtaining these services. These arrangements are usually volume dependent and have varying terms. The contracts for these services usually include annual increases based on the increase in the consumer price index. At December 31, 2025, we had operating lease and purchasing obligations totaling $74.0 million.
We currently provide a non-qualified deferred compensation plan for officers who have achieved the designated level and completed one year of service. However, certain officers who have not reached the designated level but were already participants remain eligible to participate in the Plan. In addition to the amounts deferred by the officers, we match 50% of their contributions, generally up to a maximum of 5% of the officer's salary. These plans generally require the deferred balance to be credited with earnings at a rate earned by certain mutual funds. At December 31, 2025, we had deferred compensation plan obligations of $25.3 million. This expense is provided in the Consolidated Statements of Operations, and the liability has been provided in the Consolidated Statements of Financial Condition.
Regulatory Capital Position. Under applicable regulatory capital regulations, the Bank and the Company are required to comply with each of four separate capital adequacy standards: leverage capital, common equity Tier I risk-based capital, Tier I risk-based capital and total risk-based capital. Such classifications are used by the FDIC and other bank regulatory agencies to determine matters ranging from each institution's quarterly FDIC deposit insurance premium assessments, to approvals of applications authorizing institutions to grow their asset size or otherwise expand business activities. At December 31, 2025 and 2024, the Bank and the Company exceeded each of their four regulatory capital requirements. See Note 14 ("Regulatory Capital") of Notes to the Consolidated Financial Statements.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with generally accepted accounting principles generally accepted in the United States requires the use of estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as related disclosures. These estimates and assumptions are subject to uncertainty, and actual results may differ materially from those estimates. Changes in these assumptions, including changes in the significant inputs used in our models, could have a material effect on our consolidated financial statements from period to period. Our critical accounting estimates, which involve assumptions that are highly uncertain and reasonably likely to have a material impact on our financial condition or results of operations, are discussed below. Additional information about these critical accounting estimates and other significant accounting policies, including our use of estimates, is provided in Note 2 ("Summary of Significant Accounting Policies - Use of Estimates") to the Consolidated Financial Statements.
The Company's accounting policies are integral to understanding its results of operations and statement of financial condition and are described in the Notes to the Consolidated Financial Statements. Several of these policies require management's judgment to determine the value of the Company's assets and liabilities. The Company has established detailed written policies, models and control procedures designed to support the consistent application of these significant inputs and assumptions and to monitor changes in them over time. The Company has identified four accounting areas that involve significant management valuation judgment and higher levels of estimation uncertainty-the allowance for credit losses, the fair value of financial instruments, goodwill impairment and income taxes-and, for each, we describe below the significant inputs and assumptions used, why those inputs and assumptions are subject to uncertainty, and, where material and reasonably available, how they have changed from period to period and how such changes have affected the amounts reported in the consolidated financial statements.
Allowance for Credit Losses. An allowance for credit losses ("ACL") is an estimate that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial assets. The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects management's assessment of the credit quality of the financial assets. Management estimates the allowance balance using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The factors are both quantitative and qualitative in nature including, but not limited to, historical
losses, economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio mix, and internal loan processes Judgment is required to determine how many years of historical loss experience are to be included when reviewing historical loss experience. A full credit cycle must be used, or loss estimates may be inaccurate. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available.
The quantitative allowance is calculated using a number of inputs and assumptions. The results of this process support management's assessment as to the adequacy of the ACL at each period end presented in the Consolidated Statements of Financial Condition.
In determining the allowance for credit losses, assumptions are input for economic forecasts, baseline loss rates, prepayment rates, utilization rates for off-balance sheet commitments, and forecast and reversion periods. The allowance for credit losses is estimated utilizing internal and external data, information derived from historical events, current conditions, and economic forecasts. Historically observed credit loss experience adjusted for prepayment and macro-economic variables, provide the basis for the estimation of quantitatively modeled expected credit losses.
The Company includes quantitative factors in the allowance model which include (1) amortized costs, (2) collective and individual loan evaluations, (3) contractual terms, (4) prepayments, (5) basis for credit loss estimates, (6) recoveries, (7) reasonable and supportable forecast assumptions, and (8) off-balance sheet commitments.
Notwithstanding the judgment required in assessing the components of the ACL, the Company believes that the ACL is adequate to cover losses inherent in the loan portfolio. The policy has been applied on a consistent basis for all periods presented in the Consolidated Financial Statements. In calculating the ACL, the Company specifies both the reasonable and supportable forecast and reversion periods in three economic conditions (expansion, transition, contraction). When calculating the ACL estimate for December 31, 2025 and 2024, the reasonable and supportable forecast was for a period of two quarters and the reversion period was four quarters. See Notes 2 ("Summary of Significant Accounting Policies") and 3 ("Loans and Allowance for Credit Losses") of Notes to the Consolidated Financial Statements.
Fair Value of Financial Instruments. The Company carries certain financial assets and financial liabilities at fair value under the fair value option. Fair value is considered the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The securities portfolio also consists of mortgage-backed and other securities for which the fair value election was not selected. These securities are classified as available for sale or held-to-maturity. Securities classified as available for sale are carried at fair value in the Consolidated Statements of Financial Condition, with changes in fair value recorded in accumulated other comprehensive loss. Securities held-to-maturity are carried at their amortized cost in the Consolidated Statements of Financial Condition.
Financial assets and financial liabilities reported at fair value are required to be measured based on the following alternatives: (1) quoted prices in active markets for identical financial instruments (Level 1), (2) significant other observable inputs (Level 2), or (3) significant unobservable inputs (Level 3). Judgment is required in selecting the appropriate level to be used to determine fair value. The majority of investments classified as available for sale and held-to-maturity, were measured using Level 2 inputs, which require judgment to determine the fair value. The trust preferred securities held in the investment portfolio, and the Company's junior subordinated debentures, were measured using Level 3 inputs due to the inactive market for these securities. The significant unobservable inputs used in the fair value measurement of the Company's trust preferred securities and junior subordinated debentures valued under Level 3 at December 31, 2025 and 2024, are the effective yields used in the cash flow models. Significant increases or decreases in the effective yield in isolation would result in a significantly lower or higher fair value measurement. See Notes 2 ("Summary of Significant Accounting Policies"), 6 ("Securities") and 19 ("Fair Value of Financial Instruments") of Notes to the Consolidated Financial Statements.
Goodwill Impairment. Goodwill is presumed to have an indefinite life and is tested for impairment, rather than amortized, on at least an annual basis. For the purpose of goodwill impairment testing, management has concluded that Company has one reporting unit. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment of goodwill.
Quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for measurement, when available. Other acceptable valuation methods include an asset approach, which determines a fair value based upon the value of assets net of liabilities, an income approach, which determines fair value using one or more methods that convert anticipated economic benefits into a present single amount, and a market approach, which determines a fair value based on the similar businesses that have been sold.
During the first quarter of 2025, the Company identified the economic uncertainty resulting from the recent tariff increases by the United States on many of its trading partners in conjunction with the prolonged decline in the Company's stock price as a triggering event as of March 31, 2025. As such, the Company initiated a quantitative impairment test which indicated goodwill was fully impaired as of March 31, 2025, resulting in the Company recording an impairment charge of the entire goodwill balance of $17.6 million. This accounting adjustment removed all goodwill from the financial statements. See Note 2 ("Summary of Significant Accounting Policies") of Notes to Consolidated Financial Statements.
Income Taxes. The Company estimates its income taxes payable based on the amounts it expects to owe to the various taxing authorizes (i.e., federal, state and local). In estimating income taxes, management assesses the relative merits and risks of the tax treatment of transactions, taking into account statutory, judicial and regulatory guidance in the context of the Company's tax position. Management also relies on tax opinions, recent audits, and historical experience.
The Company also recognizes deferred tax assets and liabilities for the future tax consequences of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is required for deferred tax assets that the Company estimates are more likely than not to be unrealizable, based on evidence available at the time the estimate is made. These estimates can be affected by changes to tax laws, statutory tax rates, and future income levels. See Notes 2 ("Summary of Significant Accounting Policies") and 10 ("Income Taxes") of Notes to Consolidated Financial Statements.
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