Hanover Bancorp, Inc. /MD

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

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, 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, Suffolk County, New York to serve the thriving Suffolk County area. Regulatory authorization has been received for the opening of a full-service branch in a state-of-the-art facility in downtown Riverhead, New York. In anticipation of the branch opening later this year, a temporary loan production office in Riverhead with business development staff became operational in March 2026. 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.

Previous wording

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.

Current wording

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 higher market interest rates experienced 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.

Previous wording

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.

Current wording

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 March 31, 2026 and 2025, the Company sold $35.2 million and $18.3 million, respectively, of residential loans under its flow origination program and recorded gains on sale of loans held-for-sale of $0.9 million and $0.4 million, respectively.

Previous wording

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

Current wording

As of or for the three months ended March 31, 2026 and 2025

Previous wording

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.

Current wording

At March 31, 2026 the Company, on a consolidated basis, had total assets of $2.4 billion, total deposits of $2.0 billion and total stockholders’ equity of $201.4 million. The Company recorded net income of $1.9 million, or $0.25 per diluted share (including Series A preferred shares) for the three months ended March 31, 2026 compared to net income of $1.5 million, or $0.20 per diluted share (including Series A preferred shares), for the same period in 2025.

Previous wording

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.

Current wording

During the quarter ended March 31, 2026, net interest income increased $1.7 million and non-interest expense decreased $0.4 million, compared to the March 31, 2025 quarter. These were partially offset by a decrease of $1.0 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $0.9 million, and a $0.8 million increase income tax expense, resulting in a $0.4 million increase in net income between these periods.

Previous wording

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.

Current wording

The Company’s return on average assets and return on average stockholders’ equity were 0.33% and 3.74%, respectively, for the three months ended March 31, 2026, versus 0.27% and 3.11%, respectively, for the comparable 2025 quarter.

Previous wording

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.

Current wording

Total non-accrual loans at March 31, 2026 were $24.6 million, or 1.23% of total loans, compared to $21.6 million, or 1.08% of total loans at December 31, 2025 and $11.7 million, or 0.60% of total loans, at March 31, 2025. The allowance for credit losses as a percentage of total non-accrual loans amounted to 78%, 87% and 196% at March 31, 2026, December 31, 2025 and March 31, 2025, respectively.

Previous wording

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.

Current wording

The Company’s efficiency ratio was 81.68% for the three months ended March 31, 2026, versus 87.12% in the March 31, 2025 quarter.

Previous wording

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.

Current wording

Financial Condition – Total assets of the Company were $2.4 billion at March 31, 2026 and at December 31, 2025. Total securities available for sale at March 31, 2026 were $105.8 million, an increase of $6.2 million from December 31, 2025, primarily driven by growth in U.S. GSE residential mortgage-backed securities and corporate bonds, offset by decreases in U.S. Treasury securities and collateralized loan obligations. Total loans at March 31, 2026 and December 31, 2025 were $2.0 billion. Total deposits were $2.0 billion at March 31, 2026 and at December 31, 2025. Total borrowings and subordinated debt at March 31, 2026 were $118.8 million, including $59.8 million (net of $470 thousand deferred prepayment penalty) of outstanding FHLB advances, compared to $125.5 million at December 31, 2025.

Previous wording

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.

Current wording

At March 31, 2026, the residential loan portfolio amounted to $764.1 million, or 38.3% of total loans. Commercial real estate loans, including multifamily loans and construction and land development loans, totaled $1.1 billion or 54.2% of total loans at March 31, 2026. Commercial and industrial loans totaled $147.9 million or 7.4% of total loans at March 31, 2026.

Previous wording

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.

Current wording

Total deposits were $2.0 billion at March 31, 2026 and at December 31, 2025. Our loan to deposit ratio was 99% at March 31, 2026 and at December 31, 2025. Core deposit balances, which consist of demand, NOW, savings and money market deposits, represented 74.4% and 74.9% of total deposits at March 31, 2026 and December 31, 2025, respectively. At those dates, demand deposit balances represented 11.7% and 12.2% 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 program. At March 31, 2026, total municipal deposits were $665.6 million, representing 32.4% of total deposits, compared to $700.7 million, or 34.5% of total deposits at December 31, 2025. The weighted average rate on the municipal deposit portfolio was 3.04% at March 31, 2026 and 3.01% at December 31, 2025. The aggregate amount of the Company’s outstanding uninsured deposits was $296.9 million or 14.5% of total deposits as of March 31, 2026 and $304.8 million or 15.0% of total deposits as of December 31, 2025.

Previous wording

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.

Current wording

Borrowings at March 31, 2026 and December 31, 2025 were $59.8 million (net of $470 thousand deferred prepayment penalty) and $100.7 million, respectively, comprised of outstanding FHLB advances. The Company had no borrowings outstanding under lines of credit with correspondent banks at March 31, 2026 and December 31, 2025.

Previous wording

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.

Current wording

The Company continues to actively manage its Multifamily and Commercial Real Estate portfolios which resulted in a reduction in the commercial real estate concentration ratio to 354% of capital at March 31, 2026. The Company will selectively explore Commercial Real Estate opportunities with an emphasis on relationship based Commercial Real Estate lending.

Previous wording

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.

Current wording

A significant portion of the Bank’s commercial real estate portfolio consists of loans secured by Multifamily 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 March 31, 2026 is not significant at $11.5 million, all at floating interest rates. As shown below, as of March 31, 2026, 21% of the loan balances in these combined portfolios will either have a rate reset or mature in 2026, with another 55% with rate resets or maturing in 2027.

Previous wording

Stabilized Multi-Family Pro Forma Stress Results

Current wording

Stabilized Multifamily Pro Forma Stress Results

Previous wording

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.

Current wording

The table below reflects a a pro forma stressed evaluation of the Bank’s Multifamily stabilized loan portfolio as of March 31, 2026, using the primary assumption for a revised Debt Service Coverage Ratio (“DSCR”) calculation, for all loans where the current interest rate is below 5.75%. The current balance for these loans is recast at 5.75% 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.

Previous wording

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.

Current wording

As reflected above, only 6 loans totaling $11 million in the multifamily rent stabilized portfolio would have a pro forma DSCR less than 1x while maintaining projected weighted average LTV’s under 100%. This represents 2% of the total multifamily portfolio. The remainder of this portfolio, totaling $180 million, representing 33% of the entire multifamily portfolio, 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 73% of the entire multifamily portfolio 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. The Bank continues to successfully manage multifamily loans with scheduled rate repricing or maturities. Matured loans that qualified for renewal have been retained while others have paid off in full through refinances. The majority of the rate resetting loans remain as performing loans at the new higher interest rate.

Previous wording

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.

Current wording

The table below segments our portfolio of loans secured by Multifamily properties based on rental terms and location as of March 31, 2026. As shown below, 65% 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.

Previous wording

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.

Current wording

The Bank’s exposure to the Office market is not significant. Loans secured by office space accounted for 2% of the total loan portfolio at March 31, 2026, with a total balance of $41.5 million, of which less than 1% is located in Manhattan. The pool has a 2.41x weighted average DSCR and a 54% weighted average LTV.

Previous wording

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.

Current wording

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 $300.2 million and $308.5 million at March 31, 2026 and December 31, 2025, 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 March 31, 2026, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $763.0 million or approximately 257% of uninsured deposit balances.

Previous wording

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.

Current wording

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 March 31, 2026, total deposits were $2.0 billion, of which $508.0 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 March 31, 2026. At March 31, 2026 and December 31, 2025, the Company had $59.8 million (net of $470 thousand deferred prepayment penalty) and $100.7 million, respectively, in borrowings outstanding.

Previous wording

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.

Current wording

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 March 31, 2026, the Bank had a total borrowing capacity of $814.1 million at the Federal Home Loan Bank of New York, of which $647.3 million was used to collateralize municipal deposits and $60.3 million was utilized for term advances. At March 31, 2026, the Bank had a $91.2 million collateralized line of credit from the Federal Reserve Bank of New York’s discount window with no outstanding borrowings. At March 31, 2026, 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 March 31, 2026.

Previous wording

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.

Current wording

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 $152.2 million, $0.3 million and $0, or 7.4%, 0.0% and 0.0% of total deposits, respectively, at March 31, 2026. 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.

Previous wording

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.

Current wording

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 $201.4 million at March 31, 2026 and $200.3 million at December 31, 2025. Retained earnings increased by $1.1 million due primarily to net income of $1.9 million for the three months ended March 31, 2026, which was offset by $0.7 million of dividends declared. The accumulated other comprehensive loss at March 31, 2026 was 0.33% of total equity and was comprised of a $0.4 million after tax net unrealized loss on the investment portfolio and a $0.2 million after tax net unrealized loss on derivatives.

Previous wording

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.

Current wording

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 9.20%, 13.32%, 13.32% and 14.57%, respectively, at March 31, 2026, 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 March 31, 2026, the Bank’s capital buffer was in excess of requirements.

Previous wording

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.

Current wording

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. There were no repurchases of common stock during the three months ended March 31, 2026. As of March 31, 2026, 284,075 shares remained available for repurchase under the program. See “Part II – Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds” for additional information about repurchases of common stock.

Previous wording

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.)

Current wording

The Company’s total stockholders’ equity to total assets ratio and tangible common equity to tangible assets ratio (“TCE ratio”) were 8.50% and 7.74%, respectively, at March 31, 2026, versus 8.40% and 7.65%, respectively, at December 31, 2025. 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 March 31, 2026 (in thousands). (See also Non-GAAP Disclosure contained herein.)

Previous wording

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.

Current wording

The Company’s Board of Directors approved the declaration of a $0.10 per share cash dividend on both common shares and Series A preferred shares payable on May 18, 2026 to stockholders of record on May 11, 2026.

Previous wording

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.

Current wording

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 March 31, 2026 and December 31, 2025, commitments to originate loans and commitments under unused lines of credit for which the Bank is obligated amounted to approximately $137.2 million and $160.9 million, respectively.

Previous wording

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.

Current wording

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 March 31, 2026 and December 31, 2025, letters of credit outstanding were approximately $1.0 million and $0.8 million, respectively.

Previous wording

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.

Current wording

Results of Operations – Comparison of the Three Months Ended March 31, 2026 and 2025 – The Company recorded net income of $1.9 million during the three months ended March 31, 2026, versus net income of $1.5 million in the 2025 comparable quarter. During the quarter ended March 31, 2026, net interest income increased $1.7 million and non-interest expense decreased $0.4 million, compared to the March 31, 2025 quarter. These were partially offset by a decrease of $1.0 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $0.9 million, and a $0.8 million increase income tax expense.

Previous wording

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.

Current wording

The $1.7 million increase in net interest income for the three months ended March 31, 2026, versus the comparable 2025 quarter was due to improvement in the Company’s net interest margin to 2.96% in the 2026 quarter from 2.68% in the comparable 2025 quarter. The cost of interest-bearing liabilities decreased to 3.51% in the 2026 quarter from 4.01% in the comparable 2025 quarter, a decrease of 50 basis points. This decrease was partially offset by a 17 basis point decrease in the yield on interest earning assets to 5.84% in the 2026 quarter from 6.01% in the first quarter of 2025. Net interest income on a linked quarter basis increased $0.5 million or 3.36%, resulting from a 16 basis point decrease in cost of interest-bearing liabilities.

Previous wording

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.)

Current wording

The Company recorded a provision for credit losses of $530 thousand (including a $30 thousand provision for credit losses on unfunded commitments) for the three months ended March 31, 2026, versus $600 thousand in the quarter ended March 31, 2025. Net charge-offs of $45 thousand were incurred during the quarter ended March 31, 2026. The March 31, 2026 allowance for credit losses was $19.1 million versus $18.7 million at December 31, 2025. The allowance for credit losses as a percentage of total loans was 0.96% at March 31, 2026 and 0.93% at December 31, 2025. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)

Previous wording

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.

Current wording

The Company maintains a reserve, recorded in other liabilities, associated with unfunded loan commitments accepted by borrowers. The amount of the reserve was $0.7 million at March 31, 2026 and $0.6 million at December 31, 2025. 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.

Previous wording

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.

Current wording

Non-interest income decreased by $1.0 million for the three months ended March 31, 2026 versus the comparable 2025 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 was partially offset by an increase in service charges on deposit accounts.

Previous wording

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.

Current wording

The Company recorded income tax expense of $1.1 million for an effective tax rate of 36.9% for the three months ended March 31, 2026, versus income tax expense of $0.2 million for an effective tax rate of 13.8% in the comparable 2025 quarter. Effective tax rate in the first quarter of 2026 is higher due to tax impact of the severance payment to the former President of the Bank and the Company. The lower effective tax rate in the first quarter of 2025 was due to the tax impact of the tax benefit from stock options that were exercised and the vesting of restricted stock.

Previous wording

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.

Current wording

Asset Quality - Total non-accrual loans at March 31, 2026 were $24.6 million, or 1.23% of total loans, compared to $21.6 million, or 1.08% of total loans at December 31, 2025, an increase of $3.0 million. The allowance for credit losses as a percentage of total non-accrual loans amounted to 78%, 87% and 196% at March 31, 2026, December 31, 2025 and March 31, 2025, respectively.

Previous wording

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.

Current wording

Total loans having credit risk ratings of Special Mention and Substandard were $57.4 million at March 31, 2026, versus $56.1 million at December 31, 2025. The Company’s Special Mention and Substandard loans were comprised of residential real estate, multifamily, commercial real estate loans, commercial and industrial loans (including SBA facilities) and construction and land development loans at March 31, 2026. 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.