Hanover Bancorp, Inc. /MD

Previous wording

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.

Current wording

The Company was added to the Russell 2000 Index in late June 2025. The Russell 2000 Index tracks 2,000 small-cap 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.

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, 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.

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. Our new full-service branch in downtown Riverhead, New York is currently scheduled to open for business in the third quarter of 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

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.

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 June 30, 2026 and 2025, the Company sold $27.2 million and $23.7 million, respectively, of residential loans under its flow origination program and recorded gains on sale of loans held-for-sale of $0.7 million and $0.5 million, respectively.

Previous wording

During the quarters ended March 31, 2026 and 2025, the Company sold approximately $6.3 million and $23.4 million, respectively, in government guaranteed SBA loans and recorded gains on sale of loans held-for-sale of $0.5 million and $1.9 million, respectively. SBA loan originations and gains on sales continue to be lower due to a less favorable economic outlook for many business owners along with the Bank’s ongoing prudent decision to tighten credit. Together, these factors contributed to lower SBA loan volume, approval levels, and related gain-on-sale income.

Current wording

During the quarters ended June 30, 2026 and 2025, the Company sold approximately $8.3 million and $22.3 million, respectively, of government guaranteed SBA loans and recorded gains on sale of loans held-for-sale of $0.7 million and $1.8 million, respectively. SBA loan originations and gains on sale continue to be lower due to a less favorable economic outlook for many business owners along with the Bank’s ongoing prudent decision to tighten credit. Together, these factors contributed to lower SBA loan volume, approval levels, and related gain-on-sale income.

Previous wording

On March 12, 2026, the Company issued $35 million of 10-year fixed-to-floating rate subordinated notes with a fixed coupon rate of 7.25% for the first five years. The Company used the net proceeds to provide capital to support growth of the consolidated entity and to redeem in full, its previously outstanding $25 million of 8.54% floating rate subordinated notes on April 15, 2026, thereby reducing the Company’s cost of funds.

Current wording

On March 12, 2026, the Company issued $35 million of 10-year fixed-to-floating rate subordinated notes with a fixed coupon rate of 7.25% for the first five years. The Company used the net proceeds to provide capital to support growth of the consolidated entity and redeemed in full its previously outstanding $25 million of 8.54% floating rate subordinated notes on April 15, 2026, thereby reducing the Company’s cost of funds.

Previous wording

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

Current wording

As of or for the three and six months ended June 30, 2026 and 2025

Previous 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.

Current wording

At June 30, 2026 the Company, on a consolidated basis, had total assets of $2.3 billion, total deposits of $2.0 billion and total stockholders’ equity of $202.7 million. The Company recorded net income of $4.1 million, or $0.55 per diluted share (including Series A preferred shares) for the three months ended June 30, 2026 compared to net income of $2.4 million, or $0.33 per diluted share (including Series A preferred shares), for the same period in 2025.

Previous 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.

Current wording

During the quarter ended June 30, 2026, net interest income increased $2.0 million and provision for credit losses decreased $1.9 million, compared to the June 30, 2025 quarter. These were partially offset by a decrease of $0.8 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $0.9 million, a $1.0 million increase in non-interest expense, which includes $240 thousand debt extinguishment charges in the 2026 quarter and a $0.4 million increase in income tax expense, resulting in a $1.6 million increase in net income between these periods.

Previous wording

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

Current wording

The Company’s return on average assets and return on average stockholders’ equity were 0.73% and 8.01%, respectively, for the three months ended June 30, 2026, versus 0.44% and 4.93%, respectively, for the comparable 2025 quarter.

Previous 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.

Current wording

Total non-accrual loans at June 30, 2026 were $28.3 million, or 1.42% of total loans, compared to $21.6 million, or 1.08% of total loans at December 31, 2025 and $12.7 million, or 0.64% of total loans, at June 30, 2025. The allowance for credit losses as a percentage of total non-accrual loans amounted to 68%, 87% and 171% at June 30, 2026, December 31, 2025 and June 30, 2025, respectively.

Previous 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.

Current wording

The Company’s efficiency ratio was 69.75% for the three months ended June 30, 2026, versus 68.73% in the June 30, 2025 quarter.

Previous 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.

Current wording

Financial Condition – Total assets of the Company were $2.3 billion at June 30, 2026 and $2.4 billion at December 31, 2025. Total securities available for sale at June 30, 2026 were $135.0 million, an increase of $35.5 million from December 31, 2025, primarily driven by growth in U.S. GSE residential mortgage-backed securities, collateralized loan obligations and corporate bonds, offset by decreases in U.S. Treasury securities and collateralized mortgage obligations. Total loans at June 30, 2026 and December 31, 2025 were $2.0 billion. Total deposits were $2.0 billion at June 30, 2026 and at December 31, 2025. Total borrowings and subordinated debt at June 30, 2026 were $94.0 million, including $59.8 million (net of $440 thousand deferred prepayment penalty) of outstanding FHLB advances, compared to $125.5 million at December 31, 2025.

Previous 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.

Current wording

At June 30, 2026, the residential loan portfolio amounted to $764.2 million, or 38.2% 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 June 30, 2026. Commercial and industrial loans totaled $150.4 million or 7.5% of total loans at June 30, 2026.

Previous 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.

Current wording

Total deposits were $2.0 billion at June 30, 2026 and at December 31, 2025. Our loan to deposit ratio was 99% at June 30, 2026 and at December 31, 2025. Core deposit balances, which consist of demand, NOW, savings and money market deposits, represented 74.8% and 74.9% of total deposits at June 30, 2026 and December 31, 2025, respectively. At those dates, demand deposit balances represented 12.6% 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 June 30, 2026, total municipal deposits were $577.4 million, representing 28.7% 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 2.98% at June 30, 2026 and 3.01% at December 31, 2025. The aggregate amount of the Company’s outstanding uninsured deposits was $258.2 million or 12.8% of total deposits as of June 30, 2026 and $304.8 million or 15.0% of total deposits as of December 31, 2025.

Previous 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.

Current wording

Borrowings at June 30, 2026 and December 31, 2025 were $59.8 million (net of $440 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 June 30, 2026 and December 31, 2025.

Previous 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.

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 346% of capital at June 30, 2026.

Previous 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.

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 June 30, 2026 is not significant at $10.3 million, all at floating interest rates. As shown below, as of June 30, 2026, 16% of the loan balances in these combined portfolios will either have a rate reset or mature in 2026, with another 54% with rate resets or maturing in 2027.

Previous 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.

Current wording

The table below reflects a pro forma stressed evaluation of the Bank’s Multifamily stabilized loan portfolio as of June 30, 2026, using the primary assumption for a revised Debt Service Coverage Ratio (“DSCR”) calculation, for all loans where the current interest rate is below 6.00%. The current balance for these loans is recast at 6.00% 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 6.25% cap rate 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, 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.

Current wording

As reflected above, only 5 loans totaling $16 million in the multifamily rent stabilized portfolio would have a pro forma DSCR less than 1x, which represents 3% of the total multifamily portfolio. The remainder of this portfolio, totaling $194 million, representing 34% 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 rent stabilized loans and 74% 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 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.

Current wording

The table below segments our portfolio of loans secured by Multifamily properties based on rental terms and location as of June 30, 2026. As shown below, 63% 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% 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.

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 June 30, 2026, with a total balance of $40.2 million, of which less than 1% is located in Manhattan. The pool has a 2.44x 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 $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.

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 $276.3 million and $308.5 million at June 30, 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 June 30, 2026, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $742.6 million or approximately 288% 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 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.

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 June 30, 2026, total deposits were $2.0 billion, of which $496.5 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 87% of total deposits at June 30, 2026. At June 30, 2026 and December 31, 2025, the Company had $59.8 million (net of $440 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 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.

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 June 30, 2026, the Bank had a total borrowing capacity of $829.3 million at the Federal Home Loan Bank of New York, of which $553.6 million was used to collateralize municipal deposits, $60.3 million was utilized for term advances and $0.2 million was used for MPF-CMA Credit enhancements. At June 30, 2026, the Bank had an $85.2 million collateralized line of credit from the Federal Reserve Bank of New York’s discount window with no outstanding borrowings. At June 30, 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 June 30, 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 $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.

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 $126.9 million, $0.3 million and $0, or 6.3%, 0.0% and 0.0% of total deposits, respectively, at June 30, 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 $201.4 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.

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 $202.7 million at June 30, 2026 and $200.3 million at December 31, 2025. Retained earnings increased by $4.4 million due primarily to net income of $5.9 million for the six months ended June 30, 2026, which was offset by $1.5 million of dividends declared. The accumulated other comprehensive loss at June 30, 2026 was 0.28% of total equity and was comprised of a $0.5 million after tax net unrealized loss on the investment portfolio and a $0.1 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 9.20%, 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.

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 9.76%, 13.59%, 13.59% and 14.84%, respectively, at June 30, 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 June 30, 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. 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.

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. During the six months ended June 30, 2026, the Company repurchased 112,346 shares of its common stock at an aggregate cost of $2.6 million. There were no share repurchases during the six months ended June 30, 2025. As of June 30, 2026, 171,729 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 8.50% 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.)

Current wording

The Company’s total stockholders’ equity to total assets ratio and tangible common equity to tangible assets ratio (“TCE ratio”) were 8.68% and 7.91%, respectively, at June 30, 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 June 30, 2026 (in thousands). (See also Non-GAAP Disclosure contained herein.)

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 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.

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 June 30, 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 $168.3 million and $160.9 million, respectively.

Previous 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.

Current wording

Results of Operations – Comparison of the Three Months Ended June 30, 2026 and 2025 – The Company recorded net income of $4.1 million during the three months ended June 30, 2026, versus net income of $2.4 million in the 2025 comparable quarter. During the quarter ended June 30, 2026, net interest income increased $2.0 million and provision for credit losses decreased $1.9 million, compared to the June 30, 2025 quarter. These were partially offset by a decrease of $0.8 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $0.9 million, a $1.0 million increase in non-interest expense, which includes $240 thousand debt extinguishment charges in the 2026 quarter, and a $0.4 million increase income tax expense.

Previous 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.

Current wording

The $2.0 million increase in net interest income for the three months ended June 30, 2026, versus the comparable 2025 quarter was due to improvement in the Company’s net interest margin to 3.10% in the 2026 quarter from 2.76% in the comparable 2025 quarter. The cost of interest-bearing liabilities decreased to 3.46% in the 2026 quarter from 3.94% in the comparable 2025 quarter, a decrease of 48 basis points. This decrease was partially offset by a 5 basis point decrease in the yield on interest earning assets to 5.93% in the 2026 quarter from 5.98% in the second quarter of 2025. Net interest income on a linked quarter basis increased $0.4 million or 2.50%, resulting from a 9 basis point increase in the yield on interest earning assets and a 5 basis point decrease in cost of interest-bearing liabilities.

Previous 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.)

Current wording

The Company recorded a provision for credit losses of $500 thousand for the three months ended June 30, 2026, versus $2.4 million (including a $187 thousand provision for credit losses on unfunded commitments) in the quarter ended June 30, 2025. Net charge-offs of $510 thousand were incurred during the quarter ended June 30, 2026. The June 30, 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 June 30, 2026 and 0.93% at December 31, 2025. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)

Previous 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.

Current wording

Non-interest income decreased by $0.8 million for the three months ended June 30, 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 of $0.9 million, which was partially offset by increases in loan servicing and fee income and other income.

Previous 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.

Current wording

The Company recorded income tax expense of $1.4 million for the three months ended June 30, 2026, versus income tax expense of $0.9 million in the comparable 2025 quarter.

Previous wording

Total non-interest expense decreased by $0.4 million for the three months ended March 31, 2026 versus the comparable 2025 quarter. Salaries and employee benefits for the three months ended March 31, 2026 includes a severance benefit of approximately $2.2 million to the former President of the Company and the Bank whose last day of employment was March 31, 2026. Non-interest expense for the three months ended March 31, 2025 includes a $3.2 million core system conversion expenses.

Current wording

Total non-interest expense increased by $0.6 million for the six months ended June 30, 2026 versus the comparable 2025 period. The increase in non-interest expense was primarily related to increases of $3.3 million in salaries and employee benefits and $0.3 million in occupancy and equipment. Salaries and employee benefits for the six months ended June 30, 2026 includes a severance benefit of approximately $2.2 million to the former President of the Company and the Bank whose last day of employment was March 31, 2026. Non-interest expense for the six months ended June 30, 2025 includes a $3.2 million core system conversion expenses.

Previous 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.

Current wording

Asset Quality - Total non-accrual loans at June 30, 2026 were $28.3 million, or 1.42% of total loans, compared to $21.6 million, or 1.08% of total loans at December 31, 2025. The allowance for credit losses as a percentage of total non-accrual loans amounted to 68%, 87% and 171% at June 30, 2026, December 31, 2025 and June 30, 2025, respectively.

Previous 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.

Current wording

Total loans having credit risk ratings of Special Mention and Substandard were $56.4 million at June 30, 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 June 30, 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.

Previous wording

At March 31, 2026, the Company’s allowance for credit losses amounted to $19.1 million or 0.96% of period-end total loans outstanding. The allowance as a percentage of loans outstanding was 0.93% at December 31, 2025 and 1.17% at March 31, 2025. The Company recorded net loan charge-offs of $45 thousand for the three months ended March 31, 2026. Net loan charge-offs of $454 thousand were recorded during the three months ended March 31, 2025.

Current wording

At June 30, 2026, the Company’s allowance for credit losses amounted to $19.1 million or 0.96% of period-end total loans outstanding. The allowance as a percentage of loans outstanding was 0.93% at December 31, 2025 and 1.10% at June 30, 2025. Net loan charge-offs of $510 thousand were recorded during the three months ended June 30, 2026. The Company recorded net loan charge-offs of $3.5 million for the three months ended June 30, 2025, of which $2.5 million is attributable to the charge-off of a specific reserve on an individually evaluated commercial loan.

Previous 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 recorded for the comparable period in 2025. Additional information regarding the ACL and the associated provisions recognized during the quarters ended March 31, 2026 and 2025 is presented in Note 4 to the unaudited consolidated financial statements. (See also Critical Accounting Policies, Judgments and Estimates contained herein).

Current wording

The Company recorded a provision for credit losses of $0.5 million for the three months ended June 30, 2026, versus $2.4 million (including a $187 thousand provision for credit losses on unfunded commitments) for the June 30, 2025 quarter. Additional information regarding the ACL and the associated provisions recognized during the quarters ended June 30, 2026 and 2025 is presented in Note 4 to the unaudited consolidated financial statements. (See also Critical Accounting Policies, Judgments and Estimates contained herein).