Content analysis
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Legalese | ||
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H.S. junior Bad
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New words:
Charlotte, enabled, ineligible, Israel, kick, short, shutdown, workout
Removed:
advertising, amend, arm, costing, divestiture, failed, impacting, indirect, media, ongoing, planned, promotion, public, reputation, scrutiny, segment, spending, stability, unable, yielding
Financial report summary
?Risks
- Our business is highly susceptible to credit risk. If our ACL is insufficient to absorb losses in our loan and lease portfolio, our earnings could decrease.
- Changes in the composition of our loan portfolio may expose us to increased lending risks.
- Our emphasis on commercial, commercial real estate and mortgage warehouse lending may expose us to increased lending risks.
- Our New York State multifamily loan portfolio could be adversely impacted by changes in legislation or regulation.
- The fair value of our investment securities fluctuates due to market conditions. Adverse economic performance can lead to adverse security performance and potential impairment.
- Changes to estimates and assumptions made by management in preparing financial statements could adversely affect our business, operating results, reported assets and liabilities, financial condition and capital levels.
- Changes in accounting standards and policies can be difficult to predict and can materially impact how we record and report our financial results.
- The geographic concentration in the Northeast and Mid-Atlantic regions makes our business susceptible to downturns in the local economies and depressed banking markets, which could materially and adversely affect us.
- We depend on our executive officers and key personnel to implement our strategy and could be harmed by the loss of their services.
- We face significant competition from other financial institutions and financial services providers, which may materially and adversely affect us.
- Like other financial services institutions, our asset and liability structures are monetary in nature. Such structures are affected by a variety of factors, including changes in interest rates, which can impact the value of financial instruments held by us.
- The phase-out of LIBOR as a financial benchmark may adversely affect our business.
- Acceptance and success of CBIT, our blockchain-based instant B2B payments platform, is subject to a variety of factors that are difficult to evaluate.
- We are dependent on our information technology and telecommunications systems and third-party service providers, and systems failures, interruptions or breaches of security, or the failure of our third-party service providers to adequately perform their services, could have a material adverse effect on us.
- Loss of, or failure to adequately safeguard, confidential or proprietary information may adversely affect our operations, net income or reputation.
- Breaches of security measures, computer viruses or malware, fraudulent activity and infrastructure failures could materially and adversely affect our reputation or harm our business including the unauthorized access to or disclosure of data relating to BM Technologies serviced deposit account holders.
- We intend to engage in acquisitions of other businesses from time to time. These acquisitions may not produce revenue or earnings enhancements or cost savings at levels, or within time frames, originally anticipated and may result in unforeseen integration difficulties.
- Our acquisitions generally will require regulatory approvals, and failure to obtain them would restrict our growth.
- To the extent that we are unable to increase loans through organic core loan growth, we may be unable to successfully implement our growth strategy, which could materially and adversely affect us.
- We may not be able to effectively manage our growth.
- If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses.
- We are dependent upon maintaining an effective system of internal controls to provide reasonable assurance that transactions and activities are conducted in accordance with established policies and procedures and are captured and reported in the financial statements. Failure to comply with the system of internal controls may result in events or losses which could adversely affect our operations, net income, financial condition, reputation and compliance with laws and regulations.
- We may not be able to meet the cash flow requirements of our loan funding obligations, deposit withdrawals, or other business needs and fund our asset growth unless we maintain sufficient liquidity.
- We may not be able to develop and retain a strong core deposit base and other low-cost, stable funding sources.
- Competitors’ technology-driven products and services and improvements to such products and services may adversely affect our ability to generate core deposits through mobile banking.
- We may incur losses due to minority investments in other financial institutions or related companies.
- We continue to face the risks and challenges associated with BM Technologies following the merger of BMT with Megalith Financial Acquisition Corp.
- Worsening general business and economic conditions could materially and adversely affect us.
- The COVID-19 and its variants have impacted our business, and the ultimate impact on our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted, including their scope, duration and severity and actions taken by governmental authorities in response to COVID-19 and its variants.
- We are a participating lender in SBA’s PPP program and have originated a significant number of loans under this program, which may result in a material amount of PPP loans remaining on our consolidated balance sheets at a very low yield for an extended period of time.
- Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business.
- Severe weather, natural disasters, public health issues, acts of war or terrorism, and other external events could significantly impact our ability to conduct business.
- Our business, financial condition, results of operations and future prospects could be adversely affected by the highly regulated environment in which we operate, including the effects of heightened regulatory requirements applicable to banks with assets in excess of $10 billion.
- We operate in a highly regulated environment, and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could materially and adversely affect us.
- Our use of third-party service providers and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention.
- We are subject to numerous laws and governmental regulations and to regular examinations by our regulators of our business and compliance with laws and regulations, and our failure to comply with such laws and regulations or to adequately address any matters identified during our examinations could materially and adversely affect us.
- Other litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.
- The FDIC’s restoration plan and the related increased assessment rate could materially and adversely affect us.
- The Federal Reserve may require us to commit capital resources to support our subsidiary bank.
- We are subject to stringent capital requirements which may adversely impact return on equity, require additional capital raises, or limit the ability to pay dividends or repurchase shares.
- We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
- Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.
- Reviews performed by the Internal Revenue Service and state taxing authorities for the fiscal years that remain open for investigation may result in a change to income taxes recorded in our consolidated financial statements and adversely affect our results of operations.
- The trading volume in our common stock may generally be less than that of other larger financial services companies.
- We do not expect to pay cash dividends on our common stock in the foreseeable future, and our ability to pay dividends is subject to regulatory limitations.
- We may issue additional shares of our common stock in the future which could adversely affect the value or voting power of our outstanding common stock.
- Future issuances of debt securities, which would rank senior to our common stock upon our liquidation, and future issuances of equity securities, which would dilute the holdings of our existing holders of common stock and may be senior to our common stock for the purposes of making distributions, periodically or upon liquidation, may negatively affect the market price of our common stock.
- Provisions in our articles of incorporation and bylaws may inhibit a takeover of us, which could discourage transactions that would otherwise be in the best interests of our shareholders and could entrench management.
- Shareholders may be deemed to be acting in concert or otherwise in control of us and our bank subsidiaries, which could impose prior approval requirements and result in adverse regulatory consequences for such holders.
- Our directors and executive officers can influence the outcome of shareholder votes and, in some cases, shareholders may not have the opportunity to evaluate and affect the investment decision regarding potential investment, acquisition or disposition transactions.
- The FDIC’s policy statement imposing restrictions and criteria on private investors in failed bank acquisitions will apply to us and our investors.
- The shares of our Series E and Series F Preferred Stock are equity securities and are subordinate to our existing and future indebtedness.
- We may not pay dividends on the shares of Series E and Series F Preferred Stock.
- Dividends on the shares of Series E and Series F Preferred Stock are non-cumulative.
- Our ability to pay dividends on the shares of Series E and Series F Preferred Stock is dependent on dividends and distributions we receive from our subsidiaries, which are subject to regulatory and other limitations.
- Holders of Series E and Series F Preferred Stock should not expect us to redeem their shares when they first become redeemable at our option or on any particular date thereafter, and our ability to redeem the shares will be subject to the prior approval of the Federal Reserve.
- We may be able to redeem the Series E and Series F Preferred Stock before their initial redemption dates upon a “regulatory capital treatment event.”
- Holders of Series E and Series F Preferred stock have limited voting rights.
- General market conditions and unpredictable factors could adversely affect market prices for the Series E and Series F Preferred Stock.
- The Series E and Series F Preferred Stock may not have an active trading market.
- The Series E and Series F Preferred Stock may be junior or equal in rights and preferences to preferred stock we may issue in the future.
- We intend to calculate the floating rate dividends payable on our Series E and Series F Preferred Stock based on three-month SOFR instead of three-month LIBOR.
- Our 2.875% Senior Notes, 4.5% Senior Notes, 6.125% Subordinated Notes and 5.375% Subordinated Notes contain limited covenants.
- Our ability to make interest and principal payments on the Senior Notes and Subordinated Notes is dependent on dividends and distributions we receive from our subsidiaries, which are subject to regulatory and other limitations.
- We may not be able to generate sufficient cash to service our debt obligations, including our obligations under the Senior Notes and Subordinated Notes.
- The Senior Notes and Subordinated Notes may not have an active trading market.
- Downgrades in U.S. government and federal agency securities could adversely affect us.
- We may not be able to maintain consistent earnings or profitability.
Management Discussion
- Customers reported net income available to common shareholders of $83.0 million and $177.2 million for the three and nine months ended September 30, 2023, respectively, compared to net income available to common shareholders of $61.4 million and $192.8 million for the three and nine months ended September 30, 2022, respectively. Factors contributing to the change in net income available to common shareholders for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 were as follows.
- Net interest income increased $40.7 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 due to an increase in average interest-earning assets and higher market interest rates on variable rate loans, interest-earning deposits and investments, offset in part by higher funding costs from higher average balances of interest bearing deposits and other borrowings and increased market interest rates. Average interest-earning assets increased by $1.5 billion for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The increase in interest-earning assets was driven by increases in interest-earning deposits, investments and commercial and industrial loans and leases, primarily in variable rate lower credit risk specialty lending, offset in part by decreases in PPP loans due to PPP loan forgiveness and guarantee payments from the SBA as the PPP program was substantially completed in early 2023, commercial loans to mortgage companies due to lower mortgage activity from rising interest rates and consumer installment loans as Customers continued its de-risking strategy. NIM increased by 54 basis points to 3.70% for the three months ended September 30, 2023 from 3.16% for the three months ended September 30, 2022. The NIM increase was primarily attributable to higher interest income on variable rate loans, investments, and interest-earning deposits given the rising interest rate environment and higher-than-expected purchase discount accretion of approximately $27 million recognized on the Venture Banking loan portfolio acquired from the FDIC on June 15, 2023 due to loan maturities and increased payoffs, which is unlikely to occur in future periods. The NIM increase was partially offset by the shift in the mix of interest-bearing liabilities in a rising interest rate environment, which drove a 248 basis point increase in the cost of interest-bearing liabilities for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, and reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness, which accelerated the recognition of net deferred loan origination fees, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. Customers' total cost of funds, including non-interest bearing deposits was 3.48% and 1.62% for the three months ended September 30, 2023 and 2022, respectively.
- Net interest income increased $26.4 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 due to an increase in average interest-earning assets and higher market interest rates on variable rate loans, interest-earning deposits and investments, offset in part by higher funding costs from higher average balances of interest bearing deposits and other borrowings and increased market interest rates. Average interest-earning assets increased by $1.6 billion for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The increase in interest-earning assets was driven by increases in interest-earning deposits, commercial and industrial loans and leases, primarily in variable rate lower credit risk specialty lending and multifamily loans, offset in part by decreases in PPP loans due to PPP loan forgiveness and guarantee payments from the SBA as the PPP program was substantially completed in early 2023, commercial loans to mortgage companies due to lower mortgage activity from rising interest rates, and consumer installment loans as Customers continued its de-risking strategy. NIM decreased by 10 basis points to 3.28% for the nine months ended September 30, 2023 from 3.38% for the nine months ended September 30, 2022. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a 297 basis point increase in the cost of interest-bearing liabilities and contributed to the NIM decrease for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease in NIM was also due to reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness, which accelerated the recognition of net deferred loan origination fees, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The NIM decrease was partially offset by a shift in the mix of interest-earning assets in a rising interest rate environment mostly due to higher interest rates on variable rate loans in specialty lending, investments, and interest-earning deposits which drove a 224 basis point increase in the yield on interest-earning assets, and higher-than-expected purchase discount accretion of approximately $27 million recognized on the Venture Banking loan portfolio acquired from the FDIC on June 15, 2023 due to loan maturities and increased payoffs, which is unlikely to occur in future periods. Customers' total cost of funds, including non-interest bearing deposits was 3.42% and 0.93% for the nine months ended September 30, 2023 and 2022, respectively.