Hanover Bancorp, Inc. /MD - Quarter Report: 2025 September (Form 10-Q)

HANOVER BANCORP, INC.

Form 10-Q

Table of Contents


		Page
	PART I

Item 1.	Financial Statements	3

	Consolidated Statements of Financial Condition as of September 30, 2025 (unaudited) and December 31, 2024	3

	Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 2025 and 2024	4

	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2025 and 2024	5

	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three and Nine Months Ended September 30, 2025 and 2024	6

	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2025 and 2024	8

	Notes to Unaudited Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53

Item 4.	Controls and Procedures	54

	PART II

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	54

Item 4.	Mine Safety Disclosures	54

Item 5.	Other Information	55

Item 6.	Exhibits	55

	Signatures	56

2

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PART I

ITEM 1. – FINANCIAL STATEMENTS

HANOVER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share and per share amounts)


	September 30, 2025		December 31, 2024
ASSETS	(unaudited)
Cash and non-interest-bearing deposits due from banks	$		$
Interest-bearing deposits due from banks
Total cash and cash equivalents
Securities held to maturity, fair value of $ at September 30, 2025 and $ at December 31, 2024 (net of allowance for credit losses of $ at September 30, 2025 and December 31, 2024)
Securities available for sale, at fair value (net of allowance for credit losses of $ at September 30, 2025 and December 31, 2024)
Loans held for sale
Loans
Allowance for credit losses		()		()
Loans, net
Premises and equipment, net
Operating lease assets
Accrued interest receivable
Prepaid post retirement plan
Stock in Federal Home Loan Bank ("FHLB"), at cost
Goodwill
Other intangible assets
Loan servicing rights
Deferred income taxes
Other assets
TOTAL ASSETS	$		$
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest-bearing demand	$		$
Savings, NOW and money market
Time
Total deposits
Borrowings
Subordinated debentures ($ face amount less unamortized debt issuance costs of $ and $ at September 30, 2025 and December 31, 2024, respectively)
Operating lease liabilities
Accrued interest payable
Other liabilities
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENT LIABILITIES		—		—
STOCKHOLDERS' EQUITY
Preferred stock, Series A (par value $; shares authorized; issued and outstanding at September 30, 2025 and December 31, 2024, respectively)
Common stock (par value $; shares authorized; issued and outstanding and at September 30, 2025 and December 31, 2024, respectively)
Surplus
Retained earnings
Accumulated other comprehensive loss, net of tax		()		()
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$		$

See accompanying notes to unaudited consolidated financial statements.

3

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HANOVER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2025

2024

2025

2024

INTEREST INCOME

Loans

$

Taxable securities

Other interest income

Total interest income

INTEREST EXPENSE

Savings, NOW and money market deposits

Time deposits

Borrowings

Total interest expense

Net interest income

Provision for credit losses

Net interest income after provision for credit losses

NON-INTEREST INCOME

Loan servicing and fee income

Service charges on deposit accounts

Gain on sale of loans held-for-sale

Gain on sale of securities available-for-sale

—

Other income

Total non-interest income

NON-INTEREST EXPENSE

Salaries and employee benefits

Conversion expenses

—

Occupancy and equipment

Data processing

Professional fees

Federal deposit insurance premiums

Other expenses

Total non-interest expense

Income before income tax expense

Income tax expense

NET INCOME

$

Earnings per share:

BASIC

$

DILUTED

$

See accompanying notes to unaudited consolidated financial statements.

4

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HANOVER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2025

2024

2025

2024

Net income

$

Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on investment securities available for sale:

Change in unrealized gain (loss) on securities available for sale arising during the period, net of tax of $, $, $ and $, respectively

Reclassification adjustment for gains realized in net income, net of tax of $, $, $ and ($), respectively

—

()

Net change in unrealized gains (losses) on securities available for sale

Unrealized gains (losses) on cash flow hedges:

Change in unrealized gain (loss) on cash flow hedges arising during the period, net of tax of $, ($), ($) and ($), respectively

()

Total other comprehensive income (loss), net of tax

()

Total comprehensive income, net of tax

$

See accompanying notes to unaudited consolidated financial statements.

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HANOVER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands, except share and per share data)

For the Three and Nine Months Ended September 30, 2025

Common

Accumulated Other

Total

Stock

Preferred

Common

Retained

Comprehensive

Stockholders’

(Shares)

Stock

Surplus

Earnings

Loss, Net

Equity

Balance at January 1, 2025

$

()

$

Net income

—

Other comprehensive loss, net of tax

—

()

Cash dividends declared ($ per share)

—

()

—

()

Stock-based compensation

—

Stock awards granted, net of forfeitures

—

Shares issued for performance stock units

—

Shares received related to tax withholding

()

—

()

—

()

Exercise of stock options, net

—

()

—

()

Balance at March 31, 2025

$

()

$

Net income

—

Other comprehensive income, net of tax

—

Cash dividends declared ($ per share)

—

()

—

()

Stock-based compensation

—

Stock awards granted, net of forfeitures

()

—

Shares received related to tax withholding

()

—

()

—

()

Balance at June 30, 2025

$

()

$

Net income

—

Other comprehensive income, net of tax

—

Cash dividends declared ($ per share)

—

()

—

()

Stock-based compensation

—

Stock awards granted, net of forfeitures

()

—

Shares received related to tax withholding

()

—

()

—

()

Stock repurchases

()

—

()

—

()

Balance at September 30, 2025

$

()

$

See accompanying notes to unaudited consolidated financial statements.

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HANOVER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) (Continued)

(Dollars in thousands, except share and per share data)

For the Three and Nine Months Ended September 30, 2024

Common

Accumulated Other

Total

Stock

Preferred

Common

Retained

Comprehensive

Stockholders’

(Shares)

Stock

Surplus

Earnings

Loss, Net

Equity

Balance at January 1, 2024

$

()

$

Net income

—

Other comprehensive income, net of tax

—

Cash dividends declared ($ per share)

—

()

—

()

Stock-based compensation

—

Stock awards granted, net of forfeitures

—

Shares received related to tax withholding

()

—

()

—

()

Exercise of stock options, net

—

Balance at March 31, 2024

$

()

$

Net income

—

Other comprehensive loss, net of tax

—

()

Cash dividends declared ($ per share)

—

()

—

()

Stock-based compensation

—

Stock awards granted, net of forfeitures

—

Shares received related to tax withholding

()

—

()

—

()

Preferred stock issued in exchange for common stock

()

—

Exercise of stock options, net

—

Balance at June 30, 2024

$

()

$

Net income

—

Other comprehensive loss, net of tax

—

()

Cash dividends declared ($ per share)

—

()

—

()

Stock-based compensation

—

Stock awards granted, net of forfeitures

()

—

Shares received related to tax withholding

()

—

()

—

()

Exercise of stock options, net

—

()

—

()

Balance at September 30, 2024

$

()

$

See accompanying notes to unaudited consolidated financial statements.

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HANOVER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)


	Nine Months Ended September 30,
	2025		2024
Cash flows from operating activities:
Net income	$		$
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
Depreciation and amortization
Amortization of right-of-use assets
Net gain on sale of securities available-for-sale		—		()
Gain on sale of fixed assets (included in other income)		()		—
Stock-based compensation
Net gain on sale of loans		()		()
Net amortization of premiums, discounts and loan fees and costs
Amortization of intangible assets
Amortization of debt issuance costs
Loan servicing rights valuation adjustments
Payments on operating leases		()		()
Origination of loans held for sale		()		()
Proceeds from loans held for sale
Decrease (increase) in accrued interest receivable				()
Decrease (increase) in other assets				()
Increase in accrued interest payable
(Decrease) increase in other liabilities		()
Net cash provided by (used in) operating activities				()
Cash flows from investing activities:
Purchases of securities available-for-sale		()		()
Repayments of restricted securities, net
Proceeds from sales of securities available-for-sale		—
Principal repayments of securities held to maturity
Maturities, prepayments and calls of securities available-for-sale
Proceeds from loans held for sale previously classified as portfolio loans
Net increase in loans		()		()
Purchases of premises and equipment		()		()
Proceeds from sales of fixed assets				—
Net cash used in investing activities		()		()
Cash flows from financing activities:
Net increase in deposits
Repayments of term FHLB advances		()		()
Proceeds from Federal Reserve Bank borrowings		—
Repayments of Federal Reserve Bank borrowings		—		()
Proceeds of other short-term borrowings, net		—
Payments related to tax withholding for equity awards		()		()
Cash dividends paid		()		()
Repurchase of common stock of Hanover Bancorp, Inc.		()		—
Proceeds from exercise of stock options, net		()
Net cash provided by financing activities
Increase (decrease) in cash and cash equivalents				()
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period	$		$
Supplemental cash flow information:
Interest paid	$		$
Income taxes paid
Supplemental non-cash disclosure:
Transfers from portfolio loans to loans held-for-sale	$		$
Preferred stock issued in exchange for common stock		—
Lease liabilities arising from obtaining right-of-use assets

See accompanying notes to unaudited consolidated financial statements.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

million, which was comprised of $ million in consulting and audit fees, $ million in deconversion fees to previous provider, and $ million in training and other related charges.

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stock options that were antidilutive for the three and nine months ended September 30, 2025 and 2024.

$

Less: Dividends paid and earnings allocated to participating securities

()

Income attributable to common stock

$

Weighted average common shares outstanding, including participating securities

Less: Weighted average participating securities

()

Weighted average common shares outstanding

Basic EPS

$

Income attributable to common stock

$

Weighted average common shares outstanding

Weighted average common equivalent shares outstanding

Weighted average common and equivalent shares outstanding

Diluted EPS

$

10

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$

()

$

U.S. GSE residential collateralized mortgage obligations

()

U.S. GSE commercial mortgage-backed securities

()

Collateralized loan obligations

()

Corporate bonds

()

Total available for sale securities

$

()

$

Gross

Allowance

Amortized

Unrecognized

for Credit

Cost

Gains

Losses

Fair Value

Losses

Held to maturity:

U.S. GSE residential mortgage-backed securities

$

()

$

U.S. GSE commercial mortgage-backed securities

()

Total held to maturity securities

$

()

$

U.S. GSE residential mortgage-backed securities

()

U.S. GSE commercial mortgage-backed securities

()

Collateralized loan obligations

Corporate bonds

()

Total available for sale securities

$

()

$

Gross

Allowance

Amortized

Unrecognized

for Credit

Cost

Gains

Losses

Fair Value

Losses

Held to maturity:

U.S. GSE residential mortgage-backed securities

$

()

$

U.S. GSE commercial mortgage-backed securities

()

Total held to maturity securities

$

()

$

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$

Five to ten years

Beyond ten years

U.S. GSE residential mortgage-backed securities

U.S. GSE residential collateralized mortgage obligations

U.S. GSE commercial mortgage-backed securities

Total securities available for sale

Securities held to maturity:

U.S. GSE residential mortgage-backed securities

U.S. GSE commercial mortgage-backed securities

Total securities held to maturity

Total investment securities

$

At September 30, 2025 and December 31, 2024, investment securities with a carrying amount of $ million and $ million, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

There were sales of securities during the three and nine months ended September 30, 2025. There were sales of securities during the three months ended September 30, 2024. For the nine months ended September 30, 2024, proceeds from sales of securities available for sale totaled $ million, with an associated gross realized gain of $ thousand.

There were holdings of securities of any one issuer in an amount greater than 10% of stockholders' equity other than securities issued by the U.S. government and its agencies at September 30, 2025 and December 31, 2024.

The following tables summarize securities available-for-sale in an unrealized loss position for which an allowance for credit losses has not been recorded at September 30, 2025 and December 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position:

$

()

$

()

$

()

U.S. GSE residential collateralized mortgage obligations

—

()

U.S. GSE commercial mortgage-backed securities

()

—

()

Collateralized loan obligations

()

Corporate bonds

()

Total available-for-sale

$

()

$

()

$

()

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$

()

$

()

$

()

U.S. GSE commercial mortgage-backed securities

()

Corporate bonds

()

Total available-for-sale

$

()

$

()

$

()

Assessment of Available for Sale Debt Securities for Credit Risk

Management assesses the decline in fair value of investment securities periodically. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates both qualitative and quantitative factors to assess whether an impairment exists. The following is a discussion of the credit quality characteristics of portfolio segments carrying unrealized losses at September 30, 2025 and December 31, 2024.

Obligations of U.S. Government agencies and sponsored entities

The mortgage-backed securities and collateralized mortgage obligations held by the Company were issued by U.S government-sponsored entities and agencies. The decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality. The Company does not have the intent to sell these mortgage-backed securities and collateralized mortgage obligations and it is likely that it will not be required to sell the securities before their anticipated recovery. The Company considers these securities to carry zero loss estimates and allowance for credit losses was recorded at September 30, 2025 and December 31, 2024.

Corporate bonds

The Company’s corporate bond portfolio is comprised of subordinated debt issues of community and regional banks. Management considers the credit quality of each individual investment. Management reviewed the collectibility of these investments, taking into account such factors as the financial condition of the issuers, reported regulatory capital ratios, and credit ratings, when available, and other factors. All corporate bond debt securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers. The Company considers the potential credit risk of the issuers to be immaterial and has t allocated an allowance for credit losses on its corporate bond portfolio as of September 30, 2025 and December 31, 2024.

Collateralized loan obligations (“CLO”)

The Company’s CLO portfolio is comprised of an actively managed portfolio of senior secured Class A Notes. Management considers the credit quality of each individual investment. Management reviewed the collectibility of these investments, taking into account such factors as the financial condition of the issuers and credit ratings, when available and other factors. All CLO securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers. The Company considers the potential credit risk of the issuers to be immaterial and has not allocated an allowance for credit losses on its CLO portfolio as of September 30, 2025.

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$

Multi-family

Commercial real estate

Commercial and industrial

Construction and land development

Consumer

Total loans

Allowance for credit losses

()

Total loans, net

$

At September 30, 2025 and December 31, 2024, the Company was servicing approximately $ million and $ million, respectively, of loans for others. The Company had $ million and $ million of SBA loans held for sale at September 30, 2025 and December 31, 2024, respectively. The Company had $ million and $ million of residential real estate loans held for sale at September 30, 2025 and December 31, 2024, respectively.

For the three months ended September 30, 2025 and 2024, the Company sold loans totaling approximately $ million and $ million, respectively, recognizing net gains of $ million and $ million, respectively. For the nine months ended September 30, 2025 and 2024, the Company sold loans totaling approximately $ million and $ million, respectively, recognizing net gains of $ million and $ million, respectively.

The following tables summarize the activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2025 and 2024:

$

Charge-offs

—

()

—

()

Recoveries

—

Provision for credit losses ⁽¹⁾

()

Ending balance

$

(1)	Additional provision related to off-balance sheet exposure was a credit of $ thousand for the three months ended September 30, 2025.

Three Months Ended September 30, 2024

Commercial

Construction

Residential

Multi-

Commercial

and

and Land

Real Estate

Family

Real Estate

Industrial

Development

Consumer

Loans

Total

(in thousands)

Allowance for credit losses:

Beginning balance

$

Charge-offs

—

()

—

()

—

()

Recoveries

—

Provision for credit losses

()

Ending balance

$

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$

Charge-offs

—

()

—

()

Recoveries

—

Provision for credit losses ⁽¹⁾

()

Ending balance

$

(1)	Additional provision related to off-balance sheet exposure was a debit of $ thousand for the nine months ended September 30, 2025.

Nine Months Ended September 30, 2024

Commercial

Construction

Residential

Multi-

Commercial

and

and Land

Real Estate

Family

Real Estate

Industrial

Development

Consumer

Loans

Total

(in thousands)

Allowance for credit losses:

Beginning balance

$

Charge-offs

—

()

—

()

Recoveries

—

Provision for credit losses ⁽¹⁾

()

Ending balance

$

(1)	Additional provision related to off-balance sheet exposure was a debit of $ thousand for the nine months ended September 30, 2024.

Allowance for Credit Losses on Unfunded Commitments

The Company has recorded an ACL for unfunded credit commitments, which is recorded in other liabilities. The provision for credit losses on unfunded commitments is recorded within the provision for credit losses on the Company’s income statement. The following table presents the allowance for credit losses for unfunded commitments for the three and nine months ended September 30, 2025 and 2024:

$

Provision for credit losses

()

Balance at end of period

$

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$

—

Multi-family

—

Commercial real estate

Commercial and industrial

—

Construction and land development

—

Consumer

—

Total

$


	December 31, 2024
	Nonaccrual				Loans Past
	With No				Due Over
	Allowance				89 Days
(in thousands)	for Credit Loss		Nonaccrual		Still Accruing
Residential real estate	$		$		$	—
Multi-family						—
Commercial real estate						—
Commercial and industrial						—
Construction and land development		—		—		—
Consumer		—		—		—
Total	$		$		$	—

The Company recognized $ thousand and $ thousand of interest income on nonaccrual loans during the nine months ended September 30, 2025 and 2024, respectively.

Individually Analyzed Loans

The Company analyzes loans on an individual basis when management has determined that the loan no longer exhibits risk characteristics consistent with the risk characteristics existing in its designed pool of loans, under the Company’s CECL methodology. Loans individually analyzed include certain nonaccrual loans.

As of September 30, 2025, the amortized cost basis of individually analyzed loans amounted to $ million, of which $ million were considered collateral dependent. For collateral dependent loans where foreclosure is probable or the borrower is experiencing financial difficulty and repayment is likely to be substantially provided through the sale or operation of the collateral, the ACL is measured based on the difference between the fair value of the collateral adjusted for sales costs and the amortized cost basis of the loan, at measurement date. Certain assets held as collateral may be exposed to future deterioration in fair value, particularly due to changes in real estate markets or usage.

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$

—

Multi-family⁽²⁾

Commercial real estate ⁽²⁾

Commercial and industrial ^{(1) (2) (3)}

Total

$

(1)	Secured by residential real estate

(2)	Secured by commercial real estate

(3)	Secured by business assets


	December 31, 2024
(in thousands)	Amortized Cost Basis	Related Allowance

Residential real estate ⁽¹⁾	$	$	—
Multi-family⁽²⁾			—
Commercial real estate ⁽²⁾			—
Commercial and industrial ^{(1) (2) (3)}
Total	$	$

(1)	Secured by residential real estate

(2)	Secured by commercial real estate

(3)	Secured by business assets

The following tables present the aging of the amortized cost basis in past due loans as of September 30, 2025 and December 31, 2024 by class of loans:

$

Multi-family

Commercial real estate

Commercial and industrial

Construction and land development

Consumer

Total

$

(in thousands)

30 - 59

60 - 89

Greater than

Days

89 Days

Total

Loans Not

December 31, 2024

Past Due

Total

Residential real estate

$

Multi-family

Commercial real estate

Commercial and industrial

Construction and land development

Consumer

Total

$

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$

—

$

—

$

—

%

Nine Months Ended September 30, 2025

% of

Total

Interest

Class of

Principal

Payment

Term

Rate

Financing

(in thousands)

Reduction

Delay

Extension

Reduction

Combination

Receivable

Commercial real estate

$

—

$

—

$

—

$

—

%

Commercial and industrial

—

Total

$

—

$

—

$

—

%

For the Three and Nine Months Ended September 30, 2024

% of

Total

Interest

Class of

Principal

Payment

Term

Rate

Financing

(in thousands)

Reduction

Delay

Extension

Reduction

Combination

Receivable

Multi-family

$

—

$

—

$

—

$

—

%

The Company had commitment to lend additional funds to borrowers for which modifications described above were made during the three and nine months ended September 30, 2025 and 2024.

The Company monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. such loans that have been modified in the twelve month periods preceeding September 30, 2025 and September 30, 2024 were past due.

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—


	Nine Months Ended September 30, 2025
					Weighted
					Average
					Term
	Principal		Payment		Extension
(in thousands)	Reduction		Delay		(in months)
Commercial real estate	$	—	$		—
Commercial and industrial		—		—


	For the Three and Nine Months Ended September 30, 2024
				Weighted
		Weighted		Average
		Average		Term
	Principal	Interest Rate		Extension
(in thousands)	Reduction	Reduction		(in months)
Multi-family	$	—	%	—

Upon the Company’s determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. During the three and nine months ended September 30, 2025 and 2024, loans that were modified to borrowers experiencing financial difficulty had a payment default within twelve months of modification.

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20

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$

—

$

Special Mention

—

Substandard

—

Total Residential real estate

—

Current period gross charge-offs

$

—

$

—

$

—

$

—

$

—

$

—

$

—

$

—

$

—

Multi-family

Pass

—

Special Mention

—

Substandard

—

Total Multi-family

—

Current period gross charge-offs

—

Commercial real estate

Pass

—

Special Mention

—

Substandard

—

Total Commercial real estate

—

Current period gross charge-offs

—

Commercial and industrial

Pass

—

Special Mention

—

Substandard

—

Total Commercial and industrial

—

Current period gross charge-offs

—

Construction and land development

Pass

—

Special Mention

—

Substandard

—

Total Construction and land development

—

Current period gross charge-offs

—

Consumer

Pass

—

Special Mention

—

Substandard

—

Total Consumer

—

Current period gross charge-offs

—

Total Loans

$

—

$

Gross charge-offs

$

—

$

—

$

—

$

(1)

Certain fixed rate residential mortgage loans are included in a fair value hedging relationship. The amortized cost excludes a contra asset of $ related to basis adjustments for loans in the closed portfolio under the portfolio layer method at September 30, 2025. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See “Note 10 – Derivatives” for more information on the fair value hedge.

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$

—

$

Special Mention

—

Substandard

—

Total Residential real estate

—

Multi-family

Pass

—

Special Mention

—

Substandard

—

Total Multi-family

—

Commercial real estate

Pass

—

Special Mention

—

Substandard

—

Total Commercial real estate

—

Commercial and industrial

Pass

—

Special Mention

—

Substandard

—

Total Commercial and industrial

—

Construction and land development

Pass

—

Special Mention

—

Substandard

—

Total Construction and land development

—

Consumer

Pass

—

Special Mention

—

Substandard

—

Total Consumer

—

Total Loans

$

—

$

(1)

Certain fixed rate residential mortgage loans are included in a fair value hedging relationship. The amortized cost excludes a contra asset of $ related to basis adjustments for loans in the closed portfolio under the portfolio layer method at December 31, 2024. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See “Note 10 – Derivatives” for more information on the fair value hedge.

shares of the Company’s common stock or equivalents were approved for issuance, of which shares remain available for issuance at September 30, 2025. Of the total shares of common stock approved for issuance under the 2018 Plan, shares remain available for issuance at September 30, 2025.

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and contractual terms of . All stock options fully vest upon a change in control.

The fair value of stock options is estimated on the date of grant using a closed form option valuation (Black-Scholes) model. Expected volatilities are based on historical volatilities of the common stock of the Company’s peers. The Company uses historical data to estimate option exercise and post-vesting termination behavior. Expected terms are based on historical data and represent the periods in which the options are expected to be outstanding. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

There were stock options exercised resulting in the net issuance (after netting the value of the exercise price and/or certain tax liabilities) of shares of common stock during the nine months ended September 30, 2025. There were stock options exercised resulting in the net issuance of shares of common stock during the nine months ended September 30, 2024.

$

years

Granted

Exercised

()

Forfeited

Outstanding, September 30, 2025 ⁽¹⁾

$

years

(1)	All outstanding options are fully vested and exercisable.

The following table presents information related to the stock option plan for the periods presented:

$

Cash received from option exercises

—

Tax benefit from option exercises

There was compensation expense attributable to stock options for the three and nine months ended September 30, 2025 and 2024.

Restricted Stock Awards

During the nine months ended September 30, 2025 and 2024, restricted stock awards of shares and shares, respectively, were granted with a vesting period. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date.

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$

Granted

Vested

()

Forfeited

()

Unvested, September 30, 2025

$

Compensation expense attributable to restricted stock awards was $ thousand and $ thousand for the three months ended September 30, 2025 and 2024, respectively. Compensation expense attributable to restricted stock awards was $ thousand and $ thousand for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025 and December 31, 2024, there was $ million and $ million of total unrealized compensation cost related to unvested restricted stock, expected to be recognized over a weighted-average term of years and years, respectively. The total fair value of shares vested during the nine months ended September 30, 2025 and 2024 was $ million and $ million, respectively.

Restricted Stock Units

Long Term Incentive Plan

Restricted stock units (“RSU”s) represent an obligation to deliver shares to a grantee at a future date if certain vesting conditions are met. RSUs are subject to a time-based vesting schedule and the satisfaction of performance conditions and are settled in shares of the Company's common stock. RSUs do not provide voting rights and RSUs may accrue dividends from the date of grant.

The following table summarizes the unvested performance-based RSU activity for the nine months ended September 30, 2025:

$

Granted

Incremental performance shares vested

Vested

()

Forfeited

()

Unvested, September 30, 2025

$

During the nine months ended September 30, 2025, the Company granted RSUs. These performance-based RSUs cliff vest after three years and are subject to the achievement of the Company's pre-defined performance goals for the period ending December 31, 2027.

Compensation expense attributable to RSUs was $ thousand and $ thousand, respectively, for the three months ended September 30, 2025 and 2024. Compensation expense attributable to RSUs was $ thousand and $ thousand, respectively, for the nine months ended September 30, 2025 and 2024. As of September 30, 2025 and December 31, 2024, there was $ thousand and $ thousand of total unrecognized compensation cost related to non-vested RSUs.

24

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%

$

%

$

%

$

%

Tier 1 capital to risk-weighted assets

%

Common equity tier 1 capital to risk-weighted assets

%

Tier 1 capital to average total assets

%

N/A

%

December 31, 2024

Total capital to risk-weighted assets

$

%

$

%

$

%

$

%

Tier 1 capital to risk-weighted assets

%

Common equity tier 1 capital to risk-weighted assets

%

Tier 1 capital to average total assets

%

N/A

%

Dividend restrictions - The Company’s principal source of funds for dividend and debt service payments is dividends received from the Bank. During the nine months ended September 30, 2025 the Bank paid $ million in cash dividends to the Company. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. As of September 30, 2025, the Bank had $ million of retained net income available for dividends to the Company, without obtaining regulatory approval, provided that the Bank satisfies the regulatory capital requirements, including the capital conservation buffer, disclosed above.

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26

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$

U.S. GSE residential collateralized mortgage obligations

U.S. GSE commercial mortgage-backed securities

Collateralized loan obligations

Corporate bonds

Loan servicing rights

Total

$

Financial liabilities:

Derivatives

$

December 31, 2024

Fair Value Measurements Using:

Quoted Prices In

Active Markets

Significant

for Identical

Significant Other

Unobservable

Carrying

Assets

Observable Inputs

Inputs

(In thousands)

Amount

(Level 1)

(Level 2)

(Level 3)

Financial assets:

Available-for-sale securities:

U.S. Treasury securities

$

U.S. GSE residential mortgage-backed securities

U.S. GSE commercial mortgage-backed securities

Collateralized loan obligations

Corporate bonds

Loan servicing rights

Derivatives

Total

$

Financial liabilities:

Derivatives

$

The fair value for the securities available-for-sale were obtained from an independent broker based upon matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. The Company has determined these are classified as Level 2 inputs within the fair value hierarchy.

Derivatives represent interest rate swaps for which the estimated fair values are based on valuation models using observable market data as of the measurement date resulting in a Level 2 classification.

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% to %, prepayment speeds ranging from % to % and a weighted average life ranging from to years. Fair value at December 31, 2024 for loan servicing rights related to residential mortgage loans was determined based on discounted expected future cash flows using discount rates ranging from % to %, prepayment speeds ranging from % to % and a weighted average life ranging from to years.

The fair value of loan servicing rights for SBA loans at September 30, 2025 was determined based on discounted expected future cash flows using discount rates ranging from % to %, prepayment speeds ranging from % to % and a weighted average life ranging from to years. The fair value of loan servicing rights for SBA loans at December 31, 2024 was determined based on discounted expected future cash flows using discount rates ranging from % to %, prepayment speeds ranging from % to % and a weighted average life ranging from to years.

The Company has determined these are mostly unobservable inputs and considers them Level 3 inputs within the fair value hierarchy.

The following table presents the changes in mortgage servicing rights for the periods presented:

$

Additions

Adjustment to fair value

()

Balance at end of period

$

Assets Measured at Fair Value on a Non-recurring Basis

assets measured at fair value on a non-recurring basis as of December 31, 2024. Assets measured at fair value on a non-recurring basis as of September 30, 2025 are summarized below:

September 30, 2025

Fair Value Measurements Using:

Quoted Prices In

Significant

Active Markets

Significant Other

Unobservable

Carrying

for Identical Assets

Observable Inputs

Inputs

(in thousands)

Amount

(Level 1)

(Level 2)

(Level 3)

Collateral-dependent loans:

Multi-family

$

—

$

—

$

Commercial real estate

—

Commercial and industrial

—

Total collateral-dependent loans

$

—

$

—

$

28

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million at September 30, 2025.

Income approach

Adjustments to

%

appraised value

(%)

Commercial real estate

Income approach

Adjustments to

%

appraised value

(%)

Commercial and industrial

Sales comparison approach

Adjustments to

%

appraised value

(%)

Total collateral-dependent loans

$

Financial Instruments Not Measured at Fair Value

The following presents the carrying amounts and estimated fair values of the Company’s financial instruments not carried at fair value at September 30, 2025 and December 31, 2024:

$

Securities held-to-maturity

Loans, net

Accrued interest receivable

Financial liabilities:

Time deposits

Demand and other deposits

Borrowings

Subordinated debentures

Accrued interest payable

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$

Securities held-to-maturity

Loans, net

Accrued interest receivable

Financial liabilities:

Time deposits

Demand and other deposits

Borrowings

Subordinated debentures

Accrued interest payable

million and $ million, respectively, all of which were fixed rate.

There were FHLB overnight borrowings outstanding at September 30, 2025 and December 31, 2024.

Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. The advances were collateralized by residential and commercial mortgage loans under a blanket lien arrangement at September 30, 2025 and December 31, 2024. Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow up to an additional total of $ million and $ million at September 30, 2025 and December 31, 2024, respectively.

% to %

%

2027, rates from % to %

%

2028, rates from % to %

%

Total term advances

%

Total FHLB advances

$

%

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% to %

%

2026, rates from % to %

%

2027, rates from % to %

%

2028, rates from % to %

%

Total term advances

%

Total FHLB advances

$

%

Federal Reserve Borrowings

The Company pledges residential and commercial loans and investments to the Federal Reserve Bank of New York’s Discount Window. Based on this collateral, the Company was eligible to borrow up to $ million and $ million as of September 30, 2025 and December 31, 2024, respectively. The Company did t have any outstanding borrowings against this line as of September 30, 2025 and December 31, 2024.

Correspondent Bank Borrowings

At September 30, 2025, approximately $ million in unsecured lines of credit extended by correspondent banks were available to be utilized for short-term funding purposes. borrowings were outstanding under lines of credit with correspondent banks at September 30, 2025 and December 31, 2024.

million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2030 (the “Notes”) to certain qualified institutional buyers and accredited investors. The Notes bore interest, payable semi-annually, at the rate of % per annum, until October 15, 2025. From and including October 15, 2025 through maturity or earlier redemption, the interest rate applicable to the outstanding principal amount due will reset quarterly to the then current Secured Overnight Financing Rate (“SOFR”) plus basis points. The Company may, at its option, beginning with the interest payment date of October 15, 2025, and on any scheduled interest payment date thereafter, redeem the Notes, in whole or in part, subject to the receipt of any required regulatory approval. The Notes are not subject to redemption at the option of the holders of the Notes. The portion of the proceeds of these subordinated notes contributed to the Bank is included as a component of the Bank’s Tier 1 capital for regulatory reporting.

At September 30, 2025 and December 31, 2024, the unamortized issuance costs of the Notes were $ million. For the three months ended September 30, 2025 and 2024, $ thousand in issuance costs were recorded in interest expense. For the nine months ended September 30, 2025 and 2024, $ thousand in issuance costs were recorded in interest expense. The Notes are presented net of unamortized issuance costs in the Company’s Consolidated Statements of Financial Condition.

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$

()

Fair value hedges:

Interest rate swaps (Loans)

—

()

Total

$

—

$

—

$

()

December 31, 2024

Cash flow hedges:

Interest rate swaps (Brokered Certificates of Deposit)

$

()

Fair value hedges:

Interest rate swaps (Loans)

—

()

Total

$

()

(1)

Derivatives in a positive position are recorded as “Other assets” and derivatives in a negative position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling $ million as of September 30, 2025 and December 31, 2024, were designated as cash flow hedges of certain Brokered Certificates of Deposit. The swaps were determined to be fully effective during the periods presented and therefore no amount of ineffectiveness has been included in net income. The aggregate fair value of the swaps is recorded in other assets/(other liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining term of the swaps.

The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the consolidated statements of income relating to the cash flow derivative instruments for the periods indicated.

$

()

$

()

$

()

(Loss) gain recognized in interest expense

()

32

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interest rate swap with a notional amount totaling $ million which was designated as a fair value hedge of certain fixed rate residential mortgages. The Company pays a fixed rate of % and receives a floating rate based on SOFR for the life of the agreement without an exchange of the underlying notional amount. The hedge was determined to be effective during all periods presented and the Company expects the hedge to remain effective during the remaining term of the swap. The gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk is recognized in interest income.

The following table presents the effects of the Company’s derivative instruments designated as fair value hedges on the Consolidated Statements of Income for the three and nine months ended September 30, 2025 and 2024.

$

(Loss) gain on hedge recorded in interest income on loans

()

At September 30, 2025 and December 31, 2024, the following amounts were recorded on the Statement of Financial Condition related to cumulative basis adjustment for fair value hedges.

$

Fair value hedging adjustment included in the carrying amount of the hedged assets

(1)

This amount includes the amortized cost basis of the closed portfolios of loans receivable used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. At September 30, 2025 and December 31, 2024, the amortized cost basis of the closed portfolios used in the hedging relationships was $ million and $ million, respectively. The cumulative basis adjustments associated with these hedging relationships was $ million and $ million, respectively, and the amounts of the designated hedged items were $ million and $ million, respectively.

Credit-Risk-Related Contingent Features

The Company has minimum collateral posting thresholds with certain of its derivative counterparties. If the termination value of derivatives is a net liability position, the Company is required to post collateral against its obligations under the agreements. However, if the termination value of derivatives is a net asset position, the counterparty is required to post collateral to the Company. At September 30, 2025 and December 31, 2024, the Company posted $ million and $ million, respectively, in collateral to its counterparties in a net liability position.

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)

$

()

$

()

Other comprehensive income, before reclassification

Amount reclassified from accumulated other comprehensive income

—

Net current period other comprehensive income

Balance at September 30, 2025

$

()

$

()

$

()


	Unrealized Gains and		Gains and
	Losses on Available-		Losses on
	for-Sale Debt		Cash Flow
(in thousands)	Securities		Hedges		Total
Balance at July 1, 2024	$	()	$		$	()
Other comprehensive income (loss), before reclassification				()		()
Amount reclassified from accumulated other comprehensive income		—		—		—
Net current period other comprehensive income (loss)				()		()
Balance at September 30, 2024	$	()	$	()	$	()


	Unrealized Gains and		Gains and
	Losses on Available-		Losses on
	for-Sale Debt		Cash Flow
(in thousands)	Securities		Hedges		Total
Balance at January 1, 2025	$	()	$	()	$	()
Other comprehensive income (loss), before reclassification				()
Amount reclassified from accumulated other comprehensive income		—		—		—
Net current period other comprehensive income (loss)				()
Balance at September 30, 2025	$	()	$	()	$	()



	Unrealized Gains and		Gains and
	Losses on Available-		Losses on
	for-Sale Debt		Cash Flow
(in thousands)	Securities		Hedges		Total
Balance at January 1, 2024	$	()	$	()	$	()
Other comprehensive income (loss), before reclassification				()
Amount reclassified from accumulated other comprehensive income		()		—		()
Net current period other comprehensive income (loss)				()
Balance at September 30, 2024	$	()	$	()	$	()

There were significant amounts reclassified out of accumulated other comprehensive (loss) income for the three and nine months ended September 30, 2025 and 2024.

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operating segment or unit. The activities of the Company comprise reportable segment, "Community Banking." All of the Company’s activities are interrelated, and each activity is dependent and assessed based on the manner in which it supports the other activities of the Company. All the consolidated assets are attributable to the Community Banking segment.

The Company provides a range of community banking services, including commercial and consumer lending, personal and business banking, cash management services, and other financial services primarily to individuals, businesses, and municipalities in the New York metropolitan area.

The CODM is provided with the Company’s consolidated statements of financial condition and income and evaluates the Company’s operating results based on consolidated net interest income, non-interest income, non-interest expense, and net income, which can be seen on the consolidated statements of income. These results are used to measure the Company against its competitors. Other significant non-cash items assessed by the CODM are depreciation, amortization and provision for credit losses consistent with the reporting on the consolidated statements of cash flows. Expenditures for long-lived assets are also evaluated and are consistent with the reporting on the consolidated statements of cash flows. Strategic plans and budget to actual monitoring are evaluated as reportable segment. The actual results are used in assessing performance of the segment and in establishing compensation. All revenues are derived from banking operations within the United States, and for the three and nine months ended September 30, 2025 and 2024, there was no customer that accounted for more than 10% of the Company's consolidated revenue.

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ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements - This document contains a number of forward-looking statements, including statements about the financial condition, results of operations, earnings outlook and prospects of the Company. Forward-looking statements are typically identified by words such as “should,” “likely,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “target,” “project,” “goal” and other similar words and expressions. The forward-looking statements involve certain risks and uncertainties. The ability of the Company to predict results or the actual effects of its plans and strategies is subject to inherent uncertainty.

Factors that may cause actual results or earnings to differ materially from such forward-looking statements include those set forth in Part I, Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as updated by the Company’s subsequent filings with the SEC and, among others, the following:

●

Changes in monetary and fiscal policies of the FRB and the U. S. Government, particularly related to changes in interest rates, money supply and inflation, may affect interest margins and the fair value of financial instruments;

●

Changes in general economic conditions, either nationally or in our market areas, including due to increased market volatility related to government policy or the impact of tariffs or trade policy, that are different than expected and the impact of changing political conditions or federal government shutdowns;

●

The ability to enhance revenue through increased market penetration, expanded lending capacity and product offerings;

●

Occurrence of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, or outbreaks of hostilities, such as between Russia and Ukraine and in the Middle East, or the effects of climate change, and the ability of the Company to deal effectively with disruptions caused by the foregoing;

●

Legislative, regulatory or policy changes, including those relating, but not limited, to banking, securities, rent regulation and housing, financial accounting and reporting, environmental protection and insurance matters and the impact of such changes, as well as our ability to comply such changes in a timely manner;

●

Downturns in demand for loan, deposit and other financial services in the Company’s market area and the adequacy of the allowance for credit losses;

●

Increased competition from other banks and non-bank providers of financial services;

●

Technological changes and increased technology-related costs;

●

A breach of our information systems security, including the occurrence of a cyber incident or a deficiency in cyber security; and

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●

Changes in accounting principles, or the application of generally accepted accounting principles.

Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this document. All subsequent written and oral forward-looking statements concerning matters addressed in this document and attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this document. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

Non-GAAP Disclosure - This discussion includes discussions of the Company’s tangible common equity (“TCE”) ratio, TCE, tangible assets and efficiency ratio, all of which are non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or modifies amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. The Company believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and the Company’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other financial institutions.

With respect to the calculations and reconciliations of TCE, tangible assets and the TCE ratio, please see Liquidity and Capital Resources contained herein for a reconciliation to the most directly comparable GAAP measure.

Executive Summary – The Company is a one-bank holding company incorporated in 2016. The Company operates as the parent for its wholly owned subsidiary, the Bank, which commenced operations in 2008. The income of the Company is primarily derived through the operations of the Bank. Unless the context otherwise requires, references herein to the Company include the Company and the Bank on a consolidated basis.

The Company completed its core processing system conversion to FIS Horizon in February 2025. This conversion, coupled with our recently refreshed corporate logo, exemplifies our momentum towards a more technologically advanced, modern and digitally forward-thinking bank.

The Company was added to the Russell 2000 Index in late June 2025. The Russell 2000 Index encompasses the 2,000 largest U.S.-traded stocks by objective, market-capitalization rankings, and style attributes. The Russell Indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for active investment strategies.

The Bank operates as a locally headquartered, community-oriented bank, serving customers throughout the New York metro area from offices in Nassau, Suffolk, Queens, Kings (Brooklyn) and New York (Manhattan) Counties, New York and Freehold in Monmouth County, New Jersey. We opened the Bank’s Hauppauge Business Banking Center in Hauppauge, Suffolk County, New York in May 2023. This location is the nexus of our expanded commercial lending and deposit activities that are integral to the ongoing diversification of our balance sheet as we fill the void left by the diminishing number of commercial banks in the NYC Metro area. In June 2025, we opened a full-service branch in Port Jefferson, on Long Island, New York to serve the thriving Suffolk County area. During the fourth quarter of 2023, we began offering business banking services to the legal, licensed cannabis industry, initially in New York state. We now offer these services in New Jersey and may in the future consider opening accounts for licensed entities in other states. We offer personal and business loans on a secured and unsecured basis, SBA and USDA guaranteed loans, revolving lines of credit, commercial mortgage loans, and one- to four-family non-qualified mortgages secured by primary and secondary residences that may be owner occupied or investment properties, home equity loans, bridge loans and other personal purpose loans.

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The Bank works to provide more direct, personal attention to customers than management believes is offered by competing financial institutions, the majority of which are headquartered outside of the Bank’s primary trade area and are represented locally by branch offices. By striving to employ professional, responsive and knowledgeable staff, the Bank believes it offers a superior level of service to its customers. As a result of senior management’s availability for consultation on a daily basis, the Bank believes it offers customers quicker responses on loan applications and other banking transactions, as well as greater and earlier certainty as to whether these transactions will actually close, than competitors, whose decisions may take longer and be made in distant headquarters.

Historically, the Bank has generated additional income by strategically originating and selling residential and government guaranteed loans to other financial institutions at premiums, while also retaining servicing rights in some sales. However, with the rapid and significant rise in market interest rates in recent years, the appetite among the Bank’s purchasers of residential loans for pools of loans declined, eliminating the Bank’s ability to sell residential loans in its portfolio on desirable terms. In response, the Bank developed a flow origination program under which the Bank originates individual loans for sale to specific buyers, thereby positioning the Bank to resume residential loan sales and generate fee income to complement sale premiums earned from the sale of the guaranteed portion of SBA loans. The Bank is an approved SBA Preferred Lender, enabling the Bank to process SBA applications under delegated authority from the SBA and enhancing the Bank’s ability to compete more effectively for SBA lending opportunities.

The Bank remains focused on expanding its core verticals and continues to originate loans for its portfolio and for sale in the secondary market under its residential flow origination program. During the quarters ended September 30, 2025 and 2024, the Company sold $21.4 million and $16.5 million, respectively, of residential loans under its flow origination program and recorded gains on sale of loans held-for-sale of $0.5 million and $0.4 million, respectively.

During the quarters ended September 30, 2025 and 2024, the Company sold approximately $11.4 million and $27.1 million, respectively, in government guaranteed SBA loans and recorded gains on sale of loans held-for-sale of $0.9 million and $2.4 million, respectively. SBA loan originations and gains on sale were lower than expected due to a confluence of factors. One factor is the impact of the “higher-for-longer” interest rate environment that management believes has both worsened the financial condition of and reduced demand among small business borrowers, resulting in a lower volume of creditworthy customers. Another factor is the negative impact of and uncertainty created by tariffs, which we believe have also dampened loan demand among borrowers in certain industries. A third factor is the Bank’s decision to tighten credit standards over the course of the last year. Although management continues to believe this to be a prudent measure, it has nonetheless resulted in a lower volume of loan approvals. Taken together these and other factors have adversely impacted SBA loan originations and closings. The Bank concluded the third quarter of 2025 with C&I loan originations of approximately $24.1 million. Based on its existing pipeline, the Bank expects C&I lending and deposit activity to grow as the year progresses.

The Bank finances most of its activities through a combination of deposits, including non-interest-bearing demand, savings, NOW and money market deposits as well as time deposits, and both short- and long-term borrowings. The Company’s chief competition includes local banks within its market area, New York City money center banks and regional banks, as well as non-bank lenders, including fintech lenders.

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Financial Performance Summary

As of or for the three and nine months ended September 30, 2025 and 2024

(dollars in thousands, except per share data)


	Three months ended						Nine months ended
	September 30,						September 30,
	2025			2024			2025			2024
Revenue ⁽¹⁾	$	18,008		$	17,056		$	54,725		$	50,436
Non-interest expense		12,013			12,238			40,625			34,712
Provision for credit losses		1,325			200			4,282			4,540
Net income		3,491			3,539			7,455			8,444
Net income per share - diluted		0.47			0.48			1.00			1.14
Return on average assets		0.61	%		0.62	%		0.44	%		0.50	%
Return on average stockholders' equity ⁽²⁾		6.90	%		7.35	%		5.00	%		5.93	%
Tier 1 leverage ratio		9.15	%		8.85	%		9.15	%		8.85	%
Common equity tier 1 risk-based capital ratio		13.13	%		12.99	%		13.13	%		12.99	%
Tier 1 risk-based capital ratio		13.13	%		12.99	%		13.13	%		12.99	%
Total risk-based capital ratio		14.38	%		14.24	%		14.38	%		14.24	%
Total stockholders' equity/total assets⁽³⁾		8.66	%		8.26	%		8.66	%		8.26	%
Tangible common equity ratio (non-GAAP) ⁽²⁾		7.89	%		7.49	%		7.89	%		7.49	%
Efficiency ratio ⁽⁴⁾		66.71	%		71.75	%		74.23	%		68.82	%

(1)	Represents net interest income plus total non-interest income.

(2)	Includes common stock and Series A preferred stock.

(3)	The ratio of total stockholders’ equity to total assets is the most comparable GAAP measure to the non-GAAP tangible common equity ratio presented herein.

(4)	Represents non-interest expense divided by the sum of net interest income and non-interest income.

At September 30, 2025 the Company, on a consolidated basis, had total assets of $2.3 billion, total deposits of $2.0 billion and total stockholders’ equity of $201.8 million. The Company recorded net income of $3.5 million, or $0.47 per diluted share (including Series A preferred shares) for the three months ended September 30, 2025 compared to net income of $3.5 million, or $0.48 per diluted share (including Series A preferred shares), for the same period in 2024.

During the quarter ended September 30, 2025, net interest income increased $2.1 million and non-interest expense decreased $0.2 million compared to the September 30, 2024 quarter. These were offset by an increase of $1.1 million in provision for credit losses and a decrease of $1.2 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $1.4 million, resulting in flat earnings between these periods.

The Company’s return on average assets and return on average stockholders’ equity were 0.61% and 6.90%, respectively, for the three months ended September 30, 2025, versus 0.62% and 7.35%, respectively, for the comparable 2024 quarter.

Total non-accrual loans at September 30, 2025 were $17.2 million, or 0.86% of total loans, compared to $16.4 million, or 0.82% of total loans at December 31, 2024 and $15.4 million, or 0.77% of total loans, at September 30, 2024. The allowance for credit losses as a percentage of total non-accrual loans amounted to 130%, 139% and 152% at September 30, 2025, December 31, 2024 and September 30, 2024, respectively.

The Company’s efficiency ratio was 66.71% for the three months ended September 30, 2025, versus 71.75% in the September 30, 2024 quarter.

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Critical Accounting Policies, Judgments and Estimates - To prepare financial statements in conformity with U.S. GAAP, the Company’s management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. Critical accounting estimates are accounting estimates where (a) the nature of the estimate is material due to levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and (b) the impact of the estimate on financial condition or operating performance is material. At September 30, 2025, there have been no material changes to the Company’s critical accounting policies as compared to the critical accounting policies disclosed in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2024.

Financial Condition – Total assets of the Company were $2.3 billion at September 30, 2025 and at December 31, 2024. Total securities available for sale at September 30, 2025 were $100.0 million, an increase of $16.3 million from December 31, 2024, primarily driven by growth in collateralized mortgage obligations and corporate bonds. Total loans at September 30, 2025 and December 31, 2024 were $2.0 billion. Total deposits were $2.0 billion at September 30, 2025 and at December 31, 2024. Total borrowings and subordinated debt at September 30, 2025 were $125.5 million, including $100.7 million of outstanding FHLB advances, compared to $132.5 million at December 31, 2024.

At September 30, 2025, the residential loan portfolio amounted to $751.5 million, or 37.8% of total loans. Commercial real estate loans, including multi-family loans and construction and land development loans, totaled $1.1 billion or 54.1% of total loans at September 30, 2025. Commercial and industrial loans totaled $161.2 million or 8.1% of total loans at September 30, 2025.

Total deposits were $2.0 billion at September 30, 2025 and at December 31, 2024. Our loan to deposit ratio was 101% at September 30, 2025 and 102% at December 31, 2024. Core deposit balances, which consist of demand, NOW, savings and money market deposits, represented 71.5% and 74.5% of total deposits at September 30, 2025 and December 31, 2024, respectively. At those dates, demand deposit balances represented 11.8% and 10.8% of total deposits. The Company’s municipal deposit program is built on long-standing relationships developed in the local marketplace. We believe that this core deposit business will continue to provide a stable source of funding for the Company’s lending products at costs lower than both consumer deposits and market-based borrowings. The Company continues to broaden its municipal deposit base and currently services 42 municipal customer relationships. At September 30, 2025, total municipal deposits were $513.6 million, representing 26.0% of total deposits, compared to $509.3 million, or 26.1% of total deposits at December 31, 2024. The weighted average rate on the municipal deposit portfolio was 3.47% at September 30, 2025. The aggregate amount of the Company’s outstanding uninsured deposits was $281.9 million or 14.3% of total deposits as of September 30, 2025 and $252.0 million or 12.9% of total deposits as of December 31, 2024.

Borrowings at September 30, 2025 and December 31, 2024 were $100.7 milliion and $107.8 million, respectively, comprised of outstanding FHLB advances. The Company had no borrowings outstanding under lines of credit with correspondent banks at September 30, 2025 and December 31, 2024.

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Commercial Real Estate Statistics

The Company continues to actively manage its Multi-Family and Commercial Real Estate portfolios which resulted in a reduction in the commercial real estate concentration ratio to 362% of capital at September 30, 2025 from 385% at December 31, 2024. The Company will selectively explore Commercial Real Estate opportunities with an emphasis on relationship based Commercial Real Estate lending.

A significant portion of the Bank’s commercial real estate portfolio consists of loans secured by Multi-Family and CRE-Investor owned real estate that are predominantly subject to fixed interest rates for an initial period of 5 years. The Bank’s exposure to Land/Construction loans as of September 30, 2025 is not significant at $5.9 million, all at floating interest rates. As shown below, as of September 30, 2025, 28% of the loan balances in these combined portfolios will either have a rate reset or mature in 2025 and 2026, with another 56% with rate resets or maturing in 2027.


Multi-Family Market Rent Portfolio Fixed Rate Reset/Maturity Schedule								Multi-Family Stabilized Rent Portfolio Fixed Rate Reset/Maturity Schedule
Calendar Period	# Loans	Total O/S ($000's omitted)		Avg O/S ($000's omitted)		Avg Interest Rate		Calendar Period	# Loans	Total O/S ($000's omitted)		Avg O/S ($000's omitted)		Avg Interest Rate

2025	3	$	1,531	$	510	7.38	%	2025	3	$	4,622	$	1,541	4.65	%
2026	36		116,571		3,238	3.66	%	2026	20		42,655		2,133	3.80	%
2027	70		184,209		2,632	4.41	%	2027	51		122,134		2,395	4.22	%
2028	16		21,175		1,323	6.20	%	2028	12		10,069		839	7.07	%
2029	6		4,877		813	7.70	%	2029	4		4,291		1,073	6.38	%
2030+	6		14,563		2,427	6.23	%	2030+	7		9,742		1,392	4.40	%
Fixed Rate	137		342,926		2,503	4.41	%	Fixed Rate	97		193,513		1,995	4.35	%
Floating Rate	2		445		223	9.39	%	Floating Rate	1		449		449	9.00	%
Total	139	$	343,371	$	2,470	4.41	%	Total	98	$	193,962	$	1,979	4.36	%


CRE Investor Portfolio Fixed Rate Reset/Maturity Schedule
Calendar Period	# Loans	Total O/S ($000's omitted)		Avg O/S ($000's omitted)		Avg Interest Rate

2025	19	$	25,621	$	1,348	7.00	%
2026	32		38,468		1,202	5.17	%
2027	88		148,355		1,686	4.86	%
2028	28		30,613		1,093	6.65	%
2029	5		5,970		1,194	6.70	%
2030+	20		16,914		846	6.59	%
Fixed Rate	192		265,941		1,385	5.47	%
Floating Rate	8		10,493		1,312	9.11	%
Total CRE-Inv.	200	$	276,434	$	1,382	5.60	%

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Stabilized Multi-Family Pro Forma Stress Results

The table below reflects a proforma stressed evaluation of the Bank’s multifamily stabilized loan portfolio as of September 30, 2025, using the primary assumption for a revised Debt Service Coverage Ratio (“DSCR”) calculation, for all loans where the current interest rate is below 6%. The current balance for these loans is recast at 6% (despite lower current market rates) with a 30-year amortization. The chart below reflects the impact of these adjustments on the portfolio. The projected loan to value (“LTV”) assumption resets all loans using a 6% cap rate (despite lower current cap rates) and the last reported property net operating income (“NOI”) to determine an implied property valuation and based on the current loan balance the resultant LTV.


Multi-Family Stabilized Rent Portfolio
DSCR Range	# Loans	Total O/S ($000's omitted)		% of Total MF Portfolio		Current Weighted Average LTV		Projected Weighted Average LTV

< 1.0	9	$	13,946	3	%	60	%	96	%
1.0 < x <1.2	22		68,884	13	%	66	%	75	%
1.2 < x <1.3	17		38,089	7	%	63	%	68	%
1.3 < x <1.5	15		31,301	5	%	62	%	61	%
1.5 < x <2.0	22		33,500	6	%	57	%	54	%
x > 2.0	13		8,242	2	%	43	%	31	%
Total	98	$	193,962	36	%	62	%	67	%

As reflected above, the results show approximately 2.60%, or 9 loans totaling $14 million of the total multi-family portfolio would have proforma DSCR’s less than 1x while maintaining projected weighted average LTV’s under 100%. Approximately 93% or 89 loans totaling $180 million would possess DSCR’s greater than 1x while maintaining a projected weighted average LTV well within our policy guidelines. Additionally, 73% of the stabilized loans and 72% of the entire multi-family are further secured with personal guarantees from the borrowers. Based on the maturities and rate resets in the previous 12 months, we believe the overall demand for multifamily housing in our market will allow our borrowers to address any adverse impact proactively. Of the previous 12 months maturities and rate resets, 27% of the loan pool successfully refinanced with other institutions at market rates similar to those used in the above analysis and the balance remained with the Bank.

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Rental breakdown of Multi-Family portfolio

The table below segments our portfolio of loans secured by Multi-Family properties based on rental terms and location as of September 30, 2025. As shown below, 64% of the combined portfolio is secured by properties subject to free market rental terms, which is the dominant tenant type. Both the Market Rent and Stabilized Rent segments of our portfolio present very similar average borrower profiles. The portfolio is primarily located in the New York City boroughs of Brooklyn, the Bronx and Queens.


Multi-Family Loan Portfolio - Loans by Rent Type
Rent Type	# Notes	Outstanding Loan Balance		% of Total Multi-Family		Avg Loan Size		LTV		Current DSCR	Avg # of Units
		($000's omitted)				($000's omitted)

Market	139	$	343,371	64	%	$	2,470	61.7	%	1.42	11
Location
Manhattan	7	$	10,203	2	%	$	1,458	49.4	%	1.91	14
Other NYC	91	$	254,076	47	%	$	2,792	61.5	%	1.40	9
Outside NYC	41	$	79,092	15	%	$	1,929	63.7	%	1.42	14

Stabilized	98	$	193,962	36	%	$	1,979	61.8	%	1.45	12
Location
Manhattan	7	$	10,394	2	%	$	1,485	47.9	%	1.71	19
Other NYC	80	$	166,473	31	%	$	2,081	62.5	%	1.42	11
Outside NYC	11	$	17,095	3	%	$	1,554	62.9	%	1.54	14

Office Property Exposure

The Bank’s exposure to the Office market is not significant. Loans secured by office space accounted for 2.67% of the total loan portfolio at September 30, 2025, with a total balance of $53.1 million, of which less than 1% is located in Manhattan. The pool has a 2.31x weighted average DSCR, a 52% weighted average LTV and less than $350,000 of exposure in Manhattan.

Liquidity and Capital Resources – Liquidity management is defined as the ability of the Company and the Bank to meet their financial obligations on a continuous basis without material loss or disruption of normal operations. These obligations include the withdrawal of deposits on demand or at their contractual maturity, the repayment of borrowings as they mature, funding new and existing loan commitments and the ability to take advantage of business opportunities as they arise. Asset liquidity is provided by short-term investments, such as fed funds sold, the marketability of securities available for sale and interest-bearing deposits due from the Federal Reserve Bank of New York, FHLB and correspondent banks, which totaled $267.6 million and $246.6 million at September 30, 2025 and December 31, 2024, respectively. These liquid assets may include assets that have been pledged primarily against municipal deposits or borrowings. Liquidity is also provided by the maintenance of a base of core deposits, cash and non-interest-bearing deposits due from banks, the ability to sell or pledge marketable assets and access to lines of credit. At September 30, 2025, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $712.2 million or approximately 253% of uninsured deposit balances.

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Liquidity is continuously monitored, thereby allowing management to better understand and react to emerging balance sheet trends, including temporary mismatches with regard to sources and uses of funds. After assessing actual and projected cash flow needs, management seeks to obtain funding at the most economical cost. These funds can be obtained by converting liquid assets to cash or by attracting new deposits or other sources of funding. Many factors affect the Company’s ability to meet liquidity needs, including variations in the markets served, loan demand, its asset/liability mix, its reputation and credit standing in its markets and general economic conditions. Borrowings and the scheduled amortization of investment securities and loans are more predictable funding sources. Deposit flows and securities prepayments are somewhat less predictable as they are often subject to external factors. Among these are changes in the local and national economies, competition from other financial institutions and changes in market interest rates.

The Company’s primary sources of funds are cash provided by deposits, which may include brokered and listing service deposits, borrowings, proceeds from maturities and sales of securities and cash provided by operating activities. At September 30, 2025, total deposits were $2.0 billion, of which $553.6 million were time deposits scheduled to mature within the next 12 months. Based on historical experience, the Company expects to be able to replace a substantial portion of those maturing deposits with comparable deposit products. Insured and collateralized deposits, which include municipal deposits, accounted for approximately 86% of total deposits at September 30, 2025. At September 30, 2025 and December 31, 2024, the Company had $100.7 million and $107.8 million, respectively, in borrowings outstanding.

The Liquidity and Wholesale Funding Policy of the Bank establishes specific policies and operating procedures governing liquidity levels to assist management in developing plans to address future and current liquidity needs. Management monitors the rates and cash flows from loan and investment portfolios while also examining the maturity structure and volatility characteristics of liabilities to develop an optimum asset/liability mix. Available funding sources include retail, commercial and municipal deposits, purchased liabilities and stockholders’ equity. Daily, management receives a current cash position update to ensure that all obligations are satisfied. On a weekly basis, appropriate senior management receives a current liquidity position report and a ninety day forecasted cash flow to ensure that all short-term obligations will be met and there is sufficient liquidity available. At September 30, 2025, the Bank had a total borrowing capacity of $814.1 million at the Federal Home Loan Bank of New York, of which $537.6 million was used to collateralize municipal deposits and $100.7 million was utilized for term advances. At September 30, 2025, the Bank had a $101.5 million collateralized line of credit from the Federal Reserve Bank of New York’s discount window with no outstanding borrowings. At September 30, 2025, the Bank had access to approximately $92 million in unsecured lines of credit extended by correspondent banks, if needed, for short-term funding purposes. No borrowings were outstanding under lines of credit with correspondent banks at September 30, 2025.

Our sources of wholesale funding included brokered deposits, listing service certificates of deposit and insured cash sweep (“ICS”) reciprocal deposits in excess of 20% of total liabilities, which balances totaled approximately $115.1 million, $2.4 million and $0, or 5.8%, 0.1% and 0.0% of total deposits, respectively, at September 30, 2025. We utilized brokered certificates of deposit and listing service certificates of deposit as alternatives to other forms of wholesale funding, including borrowings, when interest rates and market conditions favor the use of such deposits. For a portion of our brokered certificates of deposit, we utilized interest rate swap contracts to effectively extend their duration and to fix their cost.

The Company strives to maintain an efficient level of capital, commensurate with its risk profile, on which a competitive rate of return to stockholders will be realized over the short and long terms. Capital is managed to enhance stockholder value while providing flexibility for management to act opportunistically in a changing marketplace. Management continually evaluates the Company’s capital position in light of current and future growth objectives and regulatory guidelines. Total stockholders’ equity was $201.8 million at September 30, 2025 and $196.6 million at December 31, 2024. Retained earnings increased by $5.2 million due primarily to net income of $7.5 million for the nine months ended September 30, 2025, which was offset by $2.3 million of dividends declared. The accumulated other comprehensive loss at September 30, 2025 was 0.39% of total equity and was comprised of a $0.3 million after tax net unrealized loss on the investment portfolio and a $0.5 million after tax net unrealized loss on derivatives.

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The Bank is subject to regulatory capital requirements. The Bank’s tier 1 leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios were 9.15%, 13.13%, 13.13% and 14.38%, respectively, at September 30, 2025, exceeding all regulatory guidelines for a well-capitalized institution, the highest regulatory capital category. Moreover, capital rules also place limits on capital distributions and certain discretionary bonus payments if a banking organization does not maintain a buffer of common equity tier 1 capital above the minimum capital requirements. At September 30, 2025, the Bank’s capital buffer was in excess of requirements.

On October 5, 2023, the Company announced that the Board of Directors approved a stock repurchase program. Under the repurchase program, the Company may repurchase up to 366,050 shares of its common stock, or approximately 5% of its then outstanding shares. The repurchase program permits shares to be repurchased in the open market as conditions allow, or in privately negotiated transactions, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. During the nine months ended September 30, 2025, the Company repurchased 25,264 shares of its common stock at an aggregate cost of $546 thousand. There were no share repurchases during the nine months ended September 30, 2024. The remaining buyback authority under the share repurchase program were 340,786 shares as of September 30, 2025. See “Part II – Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds” for additional information about repurchases of common stock.

The Company’s total stockholders’ equity to total assets ratio and tangible common equity to tangible assets ratio (“TCE ratio”) were 8.66% and 7.89%, respectively, at September 30, 2025, versus 8.50% and 7.73%, respectively, at December 31, 2024. The TCE ratio is a non-GAAP ratio. The ratio of total stockholders’ equity to total assets is the most comparable U.S. GAAP measure to this non-GAAP ratio. The ratio of tangible common equity to tangible assets, or TCE ratio, is calculated by dividing total stockholders’ equity by total assets, after reducing both amounts by intangible assets. The TCE ratio is not required by U.S. GAAP or by applicable bank regulatory requirements, but is a metric used by management to evaluate the adequacy of our capital levels. Since there is no authoritative requirement to calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and tangible assets are non-GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with U.S. GAAP. Set forth below are the reconciliations of tangible common equity to U.S. GAAP total stockholders’ equity and tangible assets to U.S. GAAP total assets at September 30, 2025 (in thousands). (See also Non-GAAP Disclosure contained herein.)


						Ratios
Total stockholders' equity ⁽³⁾	$	201,833	Total assets	$	2,331,580	8.66%	⁽¹⁾
Less: goodwill		(19,168)	Less: goodwill		(19,168)
Less: core deposit intangible		(209)	Less: core deposit intangible		(209)
Tangible common equity ⁽³⁾	$	182,456	Tangible assets	$	2,312,203	7.89%	⁽²⁾

(1)	The ratio of total stockholders’ equity to total assets is the most comparable GAAP measure to the non-GAAP tangible common equity ratio presented herein.

(2)

TCE ratio

(3)	Includes common stock and Series A preferred stock.

All dividends must conform to applicable statutory and regulatory requirements. The Company’s ability to pay dividends to stockholders depends on the Bank’s ability to pay dividends to the Company. Additionally, the ability of the Bank to pay dividends to the Company is subject to certain regulatory restrictions. Under New York law, a bank may pay a dividend on its common stock only out of net profits, and must obtain the approval of the Superintendent of the DFS if the total of all dividends declared by a bank or trust company in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock.

The Company’s Board of Directors approved the declaration of a $0.10 per share cash dividend on both common and Series A preferred shares payable on November 20, 2025 to stockholders of record on November 13, 2025.

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Off-Balance Sheet Arrangements - The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated financial statements. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to customers provided there are no violations of material conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer. Collateral required varies, but may include accounts receivable, inventory, equipment, real estate and income-producing commercial properties. At September 30, 2025 and December 31, 2024, commitments to originate loans and commitments under unused lines of credit for which the Bank is obligated amounted to approximately $169.7 million and $130.3 million, respectively.

Letters of credit are conditional commitments guaranteeing payments of drafts in accordance with the terms of the letter of credit agreements. Commercial letters of credit are used primarily to facilitate trade or commerce and are also issued to support public and private borrowing arrangements, bond financings and similar transactions. Collateral may be required to support letters of credit based upon management’s evaluation of the creditworthiness of each customer. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. At September 30, 2025 and December 31, 2024, letters of credit outstanding were approximately $1.8 million and $0.8 million, respectively.

Results of Operations – Comparison of the Three Months Ended September 30, 2025 and 2024 – The Company recorded net income of $3.5 million for each of the three months ended September 30, 2025 and 2024. During the quarter ended September 30, 2025, net interest income increased $2.1 million and non-interest expense decreased $0.2 million compared to the September 30, 2024 quarter. These were offset by an increase of $1.1 million in provision for credit losses and a decrease of $1.2 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $1.4 million, resulting in flat earnings between these periods.

Net Interest Income and Margin

The $2.1 million increase in net interest income for the three months ended September 30, 2025, versus the comparable 2024 quarter was due to improvement of the Company’s net interest margin to 2.74% in the 2025 quarter from 2.37% in the comparable 2024 quarter. The cost of interest-bearing liabilities decreased to 3.89% in the 2025 quarter from 4.53% in the comparable 2024 quarter, a decrease of 64 basis points. This decrease was partially offset by a 23 basis point decrease in the yield on interest earning assets to 5.94% in the 2025 quarter from 6.17% in the third quarter of 2024. Net interest income on a linked quarter basis increased $0.4 million or 2.89%, from a 5 basis point decrease in cost of interest-bearing liabilities, partially offset by a 4 basis point decrease on yield on interest earning assets.

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The following table, “Net Interest Income Analysis”, presents for the three months ended September 30, 2025 and 2024, the Company’s average assets, liabilities and stockholders’ equity. The Company’s net interest income, net interest spread and net interest margin are also reflected.

NET INTEREST INCOME ANALYSIS

For the Three Months Ended September 30, 2025 and 2024

(dollars in thousands)


	2025						2024
	Average				Average		Average				Average
	Balance		Interest		Yield/Cost⁽¹⁾		Balance		Interest		Yield/Cost⁽¹⁾
Assets:
Interest-earning assets
Loans⁽²⁾	$	1,978,375	$	29,951	6.01	%	$	2,019,384	$	31,356	6.18	%
Investment securities		99,816		1,604	6.38	%		103,870		1,619	6.20	%
Interest-earning cash		117,314		1,311	4.43	%		69,204		934	5.37	%
FHLB stock and other investments		7,821		128	6.49	%		8,610		204	9.43	%
Total interest-earning assets		2,203,326		32,994	5.94	%		2,201,068		34,113	6.17	%
Non interest-earning assets:
Cash and due from banks		10,083						9,360
Other assets		53,860						50,730
Total assets	$	2,267,269					$	2,261,158

Liabilities and stockholders' equity:
Interest-bearing liabilities
Savings, NOW and money market deposits	$	1,186,968	$	11,207	3.75	%	$	1,209,030	$	13,941	4.59	%
Time deposits		493,724		5,097	4.10	%		487,377		5,546	4.53	%
Total interest-bearing deposits		1,680,692		16,304	3.85	%		1,696,407		19,487	4.57	%
Borrowings		106,866		1,141	4.24	%		126,104		1,198	3.78	%
Subordinated debentures		24,720		326	5.23	%		24,666		326	5.26	%
Total interest-bearing liabilities		1,812,278		17,771	3.89	%		1,847,177		21,011	4.53	%
Demand deposits		223,570						194,725
Other liabilities		30,622						27,826
Total liabilities		2,066,470						2,069,728
Stockholders' equity		200,799						191,430
Total liabilities and stockholders' equity	$	2,267,269					$	2,261,158
Net interest rate spread⁽³⁾					2.05	%					1.64	%
Net interest income/margin⁽⁴⁾			$	15,223	2.74	%			$	13,102	2.37	%

(1)	Annualized.

(2)	Includes non-accrual loans.

(3)	Net interest spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)	Net interest margin represents net interest income divided by average interest-earning assets.

Provision and Allowance for Credit losses on Loans

The Company recorded a $1.4 million provision for credit losses on loans for the three months ended September 30, 2025, versus $0.2 million in the quarter ended September 30, 2024. Net charge-offs of $0.6 million were incurred during the quarter ended September 30, 2025. The September 30, 2025 allowance for credit losses was $22.4 million versus $22.8 million at December 31, 2024. The allowance for credit losses as a percentage of total loans was 1.12% at September 30, 2025 and 1.15% at December 31, 2024. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)

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Reserve for Unfunded Commitments

The Company maintains a reserve, recorded in other liabilities, associated with unfunded loan commitments accepted by borrowers. The amount of the reserve was $0.5 million at September 30, 2025 and $0.3 million at December 31, 2024. This reserve is determined based upon the outstanding volume of loan commitments at the end of each period. Any increases or reductions in this reserve are recognized in the provision for credit losses.

Non-interest Income

Non-interest income decreased by $1.2 million for the three months ended September 30, 2025 versus the comparable 2024 quarter. The decrease in non-interest income is primarily related to the decrease in the net gain on sale of loans held for sale which were partially offset by increases in loan servicing and related fee income, and service charges on deposit accounts.

Non-Interest Income

For the three and nine months ended September 30, 2025 and 2024

(in thousands)


	Three months ended				Nine months ended
	September 30,				September 30,
(in thousands)	2025		2024		2025		2024
Loan servicing and fee income	$	1,057	$	960	$	3,221	$	2,709
Service charges on deposit accounts		237		123		516		333
Net gain on sale of loans held for sale		1,451		2,834		6,101		7,926
Net gain on sale of investments available-for-sale		—		—		—		4
Other income		40		37		240		180
Total non-interest income	$	2,785	$	3,954	$	10,078	$	11,152

Non-interest Expense

Total non-interest expense decreased by $0.2 million for the three months ended September 30, 2025 versus the comparable 2024 quarter. The decrease in non-interest expense was primarily related to lower data processing costs from a recently converted core system.

Non-Interest Expense

For the three and nine months ended September 30, 2025 and 2024

(in thousands)


	Three months ended				Nine months ended
	September 30,				September 30,
(in thousands)	2025		2024		2025		2024
Salaries and employee benefits	$	6,774	$	6,840	$	21,009	$	18,901
Conversion expenses		—		—		3,180		—
Occupancy and equipment		1,960		1,799		5,706		5,412
Data processing		313		547		1,414		1,560
Professional fees		732		762		2,397		2,297
Federal deposit insurance premiums		334		360		1,036		1,043
Other expenses		1,900		1,930		5,883		5,499
Total non-interest expense	$	12,013	$	12,238	$	40,625	$	34,712

The Company recorded income tax expense of $1.2 million for an effective tax rate of 25.2% for the three months ended September 30, 2025, versus income tax expense of $1.1 million for an effective tax rate of 23.4% in the comparable 2024 quarter. We expect a normalized effective tax rate of 25.0% for the remainder of the year.

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Results of Operations – Comparison of the Nine Months Ended September 30, 2025 and 2024 – The Company recorded net income of $7.5 million during the nine months ended September 30, 2025, versus net income of $8.4 million in the comparable 2024 period. The $0.9 million decrease in earnings for the nine months ended September 30, 2025, versus the comparable 2024 period resulted from a $5.9 million increase in non-interest expense, particularly a $2.1 million increase in salaries and employee benefits, and the one-time core system conversion expenses of $3.2 million, and a decrease of $1.1 million in non-interest income, primarily due to the decrease in the net gain on sale of loans held for sale. This was partially offset by a $5.4 million increase in net interest income, together with a $0.3 million decrease in the provision for credit losses, and a $0.4 million decrease in income tax expense.

Net Interest Income and Margin

The $5.4 million increase in net interest income for the nine months ended September 30, 2025, versus the comparable 2024 period was due to the improvement of the Company’s net interest margin to 2.73% in the 2025 nine month period from 2.41% in the comparable 2024 period. The cost of interest-bearing liabilities decreased to 3.95% in the 2025 nine months period from 4.45% in the comparable 2024 period, a decrease of 50 basis points. This decrease was partially offset by a 16 basis point decrease in the yield on interest earning assets to 5.98% in the 2025 period from 6.14% in the comparable 2024 period. The increase in the net interest margin was a result of the late 2024 and recent reductions in the Fed Funds effective rate and the liability sensitive nature of the Bank’s balance sheet.

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The following table, “Net Interest Income Analysis”, presents for the nine months ended September 30, 2025 and 2024, the Company’s average assets, liabilities and stockholders’ equity. The Company’s net interest income, net interest spread and net interest margin are also reflected.

NET INTEREST INCOME ANALYSIS

For the Nine Months Ended September 30, 2025 and 2024

(dollars in thousands)


	2025						2024
	Average				Average		Average				Average
	Balance		Interest		Yield/Cost⁽¹⁾		Balance		Interest		Yield/Cost⁽¹⁾
Assets:
Interest-earning assets
Loans⁽²⁾	$	1,982,194	$	89,720	6.05	%	$	2,006,142	$	92,217	6.14	%
Investment securities		95,086		4,223	5.94	%		99,363		4,610	6.20	%
Interest-earning cash		104,452		3,488	4.46	%		60,202		2,445	5.42	%
FHLB stock and other investments		7,957		449	7.54	%		9,771		693	9.47	%
Total interest-earning assets		2,189,689		97,880	5.98	%		2,175,478		99,965	6.14	%
Non interest-earning assets:
Cash and due from banks		9,603						8,431
Other assets		51,254						50,593
Total assets	$	2,250,546					$	2,234,502
Liabilities and stockholders' equity:
Interest-bearing liabilities
Savings, NOW and money market deposits	$	1,176,852	$	33,311	3.78	%	$	1,162,587	$	39,541	4.54	%
Time deposits		490,607		15,475	4.22	%		478,581		15,418	4.30	%
Total interest-bearing deposits		1,667,459		48,786	3.91	%		1,641,168		54,959	4.47	%
Borrowings		111,280		3,469	4.17	%		156,792		4,744	4.04	%
Subordinated debentures		24,707		978	5.29	%		24,653		978	5.30	%
Total interest-bearing liabilities		1,803,446		53,233	3.95	%		1,822,613		60,681	4.45	%
Demand deposits		220,032						194,694
Other liabilities		27,677						26,944
Total liabilities		2,051,155						2,044,251
Stockholders' equity		199,391						190,251
Total liabilities and stockholders' equity	$	2,250,546					$	2,234,502
Net interest rate spread⁽³⁾					2.03	%					1.69	%
Net interest income/margin⁽⁴⁾			$	44,647	2.73	%			$	39,284	2.41	%

(1)	Annualized.

(2)	Includes non-accrual loans.

(3)	Net interest spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)	Net interest margin represents net interest income divided by average interest-earning assets.

Provision for Credit Losses on Loans

The Company recorded a $4.1 million provision for credit losses on loans for the nine months ended September 30, 2025, versus $4.5 million recorded for the comparable period in 2024. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)

Non-interest Income

Non-interest income dereased by $1.1 million for the nine months ended September 30, 2025 versus the comparable 2024 period. This decrease was driven by a total $1.8 million decrease in net gain on sale of loans held for sale, which were partially offset by a $0.5 million increase in loan servicing and fee income and a $0.2 million increase in service charges on deposit accounts.

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Non-interest Expense

Total non-interest expense increased by $5.9 million for the nine months ended September 30, 2025 versus the comparable 2024 period. The increase in non-interest expense was primarily related to increases of $2.1 million in salaries and employee benefits and the one-time core system conversion expenses of $3.2 million. The increase in salaries and employee benefits expense for the nine months ended September 30, 2025 versus the comparable 2024 period was primarily related to additional headcount to staff the new Port Jefferson branch and expansion of the C&I lending vertical and lower deferred loan origination costs partially offset by lower incentive compensation expense resulting from reduced lending activity.

The Company recorded income tax expense of $2.4 million for an effective tax rate of 24.1% for the nine months ended September 30, 2025, versus income tax expense of $2.7 million for an effective tax rate of 24.5% in the comparable 2024 period.

Asset Quality - Total non-accrual loans at September 30, 2025 were $17.2 million, or 0.86% of total loans, compared to $16.4 million, or 0.82% of total loans at December 31, 2024, an increase of $0.8 million. The allowance for credit losses as a percentage of total non-accrual loans amounted to 130%, 139% and 152% at September 30, 2025, December 31, 2024 and September 30, 2024, respectively.

Total loans having credit risk ratings of Special Mention and Substandard were $66.4 million at September 30, 2025, versus $40.8 million at December 31, 2024. The Company’s Special Mention and Substandard loans were comprised of residential real estate, multi-family, commercial real estate loans, commercial and industrial loans (including SBA facilities) and construction and land development loans at September 30, 2025. The Company had no loans with a credit risk rating of Doubtful for the periods presented. All loans not having credit risk ratings of Special Mention, Substandard or Doubtful are considered pass loans.

At September 30, 2025, the Company’s allowance for credit losses amounted to $22.4 million or 1.12% of period-end total loans outstanding. The allowance as a percentage of loans outstanding was 1.15% at December 31, 2024 and 1.17% at September 30, 2024. The Company recorded net loan charge-offs of $0.6 million for the three months ended September 30, 2025. Net loan charge-offs of $0.4 million were recorded during the three months ended September 30, 2024.

The Company recorded a $1.4 million provision for credit losses on loans for the three months ended September 30, 2025, versus $0.2 million recorded for the comparable period in 2024. Additional information regarding the ACL and the associated provisions recognized during the quarters ended September 30, 2025 and 2024 is presented in Note 4 to the unaudited consolidated financial statements. (See also Critical Accounting Policies, Judgments and Estimates contained herein).

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ASSET QUALITY

September 30, 2025 versus December 31, 2024 and September 30, 2024

(dollars in thousands)


	As of or for the three months ended
		9/30/2025			12/31/2024			9/30/2024
Non-accrual loans	$	17,169		$	16,368		$	15,365
Non-accrual loans held for sale		—			—			—
Loans greater than 90 days past due and accruing		3,307			—			—
Other real estate owned		—			—			—
Total non-performing assets ⁽¹⁾	$	20,476		$	16,368		$	15,365

Loans held for sale	$	8,852		$	12,404		$	16,721
Loans held for investment		1,988,683			1,985,524			2,005,813

Allowance for credit losses:
Beginning balance	$	21,571		$	23,406		$	23,644
Provision		1,375			400			200
Charge-offs		(594)			(1,033)			(438)
Recoveries		2			6			—
Ending balance	$	22,354		$	22,779		$	23,406

Allowance for credit losses as a % of total loans ⁽²⁾		1.12	%		1.15	%		1.17	%

Allowance for credit losses as a % of non-accrual loans⁽²⁾		130	%		139	%		152	%

Non-accrual loans as a % of total loans ⁽²⁾		0.86	%		0.82	%		0.77	%

Non-performing assets as a % of total loans, loans held for sale and other real estate owned		1.03	%		0.82	%		0.76	%

Non-performing assets as a % of total assets		0.88	%		0.71	%		0.66	%

Non-performing assets to total loans held for sale and investment		1.03	%		0.82	%		0.76	%

(1)	Non-performing assets defined as non-accrual loans, non-accrual loans held for sale, loans greater than 90 days past due and accruing and other real estate owned.

(2)	Excludes loans held for sale.

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ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company originates and invests in interest-earning assets and solicits interest-bearing deposit accounts. The Company’s operations are subject to market risk resulting from fluctuations in interest rates to the extent that there is a difference between the amounts of interest-earning assets and interest-bearing liabilities that are prepaid, withdrawn, matured or repriced in any given period of time. The Company’s earnings or the net value of its portfolio will change under different interest rate scenarios. The principal objective of the Company’s asset/liability management program is to maximize net interest income within an acceptable range of overall risk, including both the effect of changes in interest rates and liquidity risk.

The Company utilizes a number of strategies to manage interest rate risk including, but not limited to: (i) balancing the types and structures of interest-earning assets and interest-bearing liabilities by diversifying mix, coupons, maturities and/or repricing characteristics, (ii) reducing the overall interest rate sensitivity of liabilities by emphasizing core and/or longer-term deposits; utilizing FHLB advances and wholesale deposits for our interest rate risk profile, and (iii) entering into interest rate swap agreements.

The following presents the Company’s economic value of equity (“EVE”) and net interest income (“NII”) sensitivities at September 30, 2025 (dollars in thousands). The results are within the Company’s policy limits.


At September 30, 2025
Interest Rates	Estimated		Estimated Change in EVE			Interest Rates	Estimated		Estimated Change in NII⁽¹⁾

(basis points)	EVE		Amount		%	(basis points)	NII⁽¹⁾		Amount		%
+200	$	176,340	$	(29,349)	(14.3)	+200	$	58,791	$	(6,411)	(9.8)
+100		190,834		(14,855)	(7.2)	+100		62,139		(3,063)	(4.7)
0		205,689				0		65,202
-100		220,648		14,959	7.3	-100		68,623		3,421	5.2
-200		250,909		45,220	22.0	-200		71,773		6,571	10.1
-300		281,445		75,756	36.8	-300		74,703		9,501	14.6

(1)	Assumes 12 month time horizon.

Certain model limitations are inherent in the methodology used in the EVE and net interest income measurements. The models require the making of certain assumptions which may tend to oversimplify the way actual yields and costs respond to changes in market interest rates. The models assume that the composition of the Company’s interest sensitive assets and liabilities existing at the beginning of a period remain constant over the period being measured, thus they do not consider the Company’s strategic plans, or any other steps it may take to respond to changes in rates over the forecasted period of time. Additionally, the models assume immediate changes in interest rates, based on yield curves as of a point-in-time, which are reflected in a parallel, instantaneous and uniform manner across all yield curves, when in reality changes may rarely be of this nature. The models also utilize data derived from historical performance and as interest rates change the actual performance of loan prepayments, rate sensitivities, and average life assumptions may deviate from assumptions utilized in the models and can impact the results. Accordingly, although the above measurements provide an indication of the Company’s interest rate risk exposure at a particular point in time, such measurements are not intended to provide a precise forecast of the effect of changes in market interest rates. Given the speed with which interest rates may change, the projections noted above on the Company’s EVE and net interest income can be expected to differ from actual results.

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ITEM 4. – CONTROLS AND PROCEDURES

Disclosure controls and procedures. The Company carried out an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures as defined in Rule l3a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company’s periodic reports filed with the Securities and Exchange Commission.

Changes in internal controls over financial reporting. There have been no changes in the Company’s internal controls over financial reporting that occurred during the Company’s last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

ITEM 1. - LEGAL PROCEEDINGS

The Company is not subject to any legal proceedings, which if determined adversely to the Company could have a materially adverse impact on its results of operations and financial condition.

ITEM 1A. – RISK FACTORS

There have been no material changes to the risks disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission.

ITEM 2. – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Issuer Purchases of Equity Securities

Total number of

Maximum number

shares purchased

of shares that may

Total number

Average

as part of publicly

yet be purchased

of shares

price paid

announced

under the

Period

purchased

per share

programs

program ⁽¹⁾

July 2025

3,035

$

21.10

3,035

363,015

August 2025

22,229

21.64

22,229

340,786

September 2025

—

340,786

(1)

In October 2023, the Company announced the adoption of a new stock repurchase program of up to 366,050 shares of its common stock. The stock repurchase program may be suspended, terminated, or modified at any time for any reason, and has no termination date. As of September 30, 2025, there were 340,786 shares remaining to be purchased in the program.

ITEM 3. – DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. – MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5. – OTHER INFORMATION

During the fiscal quarter ended September 30, 2025, of our directors or officers informed us of the or termination of a “ trading arrangement or “ trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.

ITEM 6. – EXHIBITS




31.1		Certification of principal executive officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of principal financial officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HANOVER BANCORP, INC.

Dated: November 7, 2025	/s/ Michael P. Puorro
	Michael P. Puorro
	Chairman & Chief Executive Officer
	(principal executive officer)

Dated: November 7, 2025	/s/ Lance P. Burke
	Lance P. Burke
	Executive Vice President & Chief Financial Officer
	(principal financial and accounting officer)

56

Hanover Bancorp, Inc. /MD - Quarter Report: 2025 September (Form 10-Q)

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