Hanover Bancorp, Inc. /MD

Previous wording

As previously announced on July 20, 2026, Kevin O’Connor has been named to the position of President of the Company and the Bank effective July 27, 2026. Mr. O’Connor brings more than 35 years of banking experience to Hanover Bank, having most recently served as Long Island Market President at Valley Bank.

Current wording

Kevin O’Connor was named to the position of President of the Company and the Bank effective July 27, 2026. Mr. O’Connor brings more than 35 years of banking experience to Hanover Bank, having most recently served as Long Island Market President at Valley 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, 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.

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. These new de novo branches in Hauppauge and Port Jefferson continue to demonstrate robust growth. As of September 30, 2026, the Hauppauge branch achieved $149.1 million in deposits with a 1.64% cost of funds, while the Port Jefferson location reached $52.1 million in deposits with a 1.85% cost of funds. Building on this momentum, our newest de novo full-service branch in downtown Riverhead, New York officially opened on September 30, 2026. This strategic expansion enables us to better serve the East End of Long Island with our complete suite of financial and banking services. 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 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.

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 September 30, 2026 and 2025, the Company sold $18.7 million and $21.4 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 $0.5 million, respectively.

Previous 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.

Current wording

During the quarters ended September 30, 2026 and 2025, the Company sold approximately $1.3 million and $11.4 million, respectively, of government guaranteed SBA loans and recorded gains on sale of loans held-for-sale of $0.1 million and $0.9 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

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

Current wording

As of or for the three and nine months ended September 30, 2026 and 2025

Previous 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.

Current wording

At September 30, 2026 the Company, on a consolidated basis, had total assets of $2.4 billion, total deposits of $2.1 billion and total stockholders’ equity of $202.9 million. The Company recorded net income of $4.3 million, or $0.60 per diluted share (including Series A preferred shares) for the three months ended September 30, 2026 compared to net income of $3.5 million, or $0.47 per diluted share (including Series A preferred shares), for the same period in 2025.

Previous 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.

Current wording

During the quarter ended September 30, 2026, net interest income increased $1.8 million and provision for credit losses decreased $0.2 million, compared to the September 30, 2025 quarter. These were partially offset by a decrease of $0.5 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $0.9 million, a $0.4 million increase in non-interest expense and a $0.3 million increase in income tax expense, resulting in a $0.9 million increase in net income between these periods.

Previous wording

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

Current wording

The Company’s return on average assets and return on average stockholders’ equity were 0.75% and 8.44%, respectively, for the three months ended September 30, 2026, versus 0.61% and 6.90%, respectively, for the comparable 2025 quarter.

Previous 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.

Current wording

Total non-accrual loans at September 30, 2026 were $29.1 million, or 1.40% of total loans, compared to $21.6 million, or 1.08% of total loans at December 31, 2025 and $17.2 million, or 0.86% of total loans, at September 30, 2025. The allowance for credit losses as a percentage of total non-accrual loans amounted to 68%, 87% and 130% at September 30, 2026, December 31, 2025 and September 30, 2025, respectively.

Previous 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.

Current wording

The Company’s efficiency ratio was 64.29% for the three months ended September 30, 2026, versus 66.71% in the September 30, 2025 quarter.

Previous 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.

Current wording

Financial Condition – Total assets of the Company were $2.4 billion at September 30, 2026 and December 31, 2025. Total securities available for sale at September 30, 2026 were $138.2 million, an increase of $38.7 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 were $2.1 billion at September 30, 2026 and $2.0 billion at December 31, 2025. Total deposits were $2.1 billion at September 30, 2026 and $2.0 billion at December 31, 2025. Total borrowings and subordinated debt at September 30, 2026 were $94.1 million, including $59.8 million (net of $410 thousand deferred prepayment penalty) of outstanding FHLB advances, compared to $125.5 million at December 31, 2025.

Previous 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.

Current wording

At September 30, 2026, the residential loan portfolio amounted to $806.5 million, or 38.7% of total loans. Commercial real estate loans, including multifamily loans and construction and land development loans, totaled $1.1 billion or 53.5% of total loans at September 30, 2026. Commercial and industrial loans totaled $161.9 million or 7.8% of total loans at September 30, 2026.

Previous 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.

Current wording

Total deposits were $2.1 billion at September 30, 2026 and $2.0 billion at December 31, 2025. Our loan to deposit ratio was 99% at September 30, 2026 and at December 31, 2025. Core deposit balances, which consist of demand, NOW, savings and money market deposits, represented 75.9% and 74.9% of total deposits at September 30, 2026 and December 31, 2025, respectively. At those dates, demand deposit balances represented 12.1% 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 emphasize its municipal deposit program. At September 30, 2026, total municipal deposits were $558.1 million, representing 26.4% 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 3.11% at September 30, 2026 and 3.01% at December 31, 2025. The aggregate amount of the Company’s outstanding uninsured deposits was $280.4 million or 13.3% of total deposits as of September 30, 2026 and $304.8 million or 15.0% of total deposits as of December 31, 2025.

Previous 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.

Current wording

Borrowings at September 30, 2026 and December 31, 2025 were $59.8 million (net of $410 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 September 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 346% of capital at June 30, 2026.

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 358% of capital at September 30, 2026 from 362% of capital at December 31, 2025.

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 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.

Current wording

Multifamily and CRE Investor-owned real estate 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, 2026 is not significant at $10.7 million, all of which are at floating interest rates. As shown below, as of September 30, 2026, 12% of the loan balances in these combined portfolios will either have a scheduled rate reset or mature in 2026, with another 51% with scheduled rate resets or maturing in 2027.

Previous 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.

Current wording

The table below reflects a pro forma stressed evaluation of the Bank’s Multifamily stabilized loan portfolio as of September 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 6.75%. The current balance for these loans is recast at 6.75% 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 6.25% 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 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.

Current wording

As reflected above, as of September 30, 2026, only 8 loans totaling $22 million in the multifamily rent stabilized portfolio would have a pro forma DSCR less than 1x, which represents 4% of the total multifamily portfolio. The remainder of this portfolio, totaling $171 million and representing 30% of the entire multifamily portfolio, would possess pro forma DSCR’s greater than 1x while maintaining a projected weighted average LTV well within our policy guidelines. Additionally, as of September 30, 2026, 72% of the rent stabilized loans and 74% of the entire multifamily portfolio are further enhanced with personal guarantees from the principals of 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 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.

Current wording

The table below segments our portfolio of loans secured by Multifamily properties based on rental terms and location as of September 30, 2026. As shown below, 66% 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 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.

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 September 30, 2026, with a total balance of $41.2 million, of which less than 1% is located in Manhattan. The pool has a 2.94x weighted average DSCR and a 55% weighted average LTV as of September 30, 2026.

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 $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.

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 $280.8 million and $308.5 million at September 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 September 30, 2026, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $830.4 million or approximately 296% 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 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.

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 September 30, 2026, total deposits were $2.1 billion, of which $487.1 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 September 30, 2026. At September 30, 2026 and December 31, 2025, the Company had $59.8 million (net of $410 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 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.

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 September 30, 2026, the Bank had a total borrowing capacity of $817.2 million at the Federal Home Loan Bank of New York, of which $546.3 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 September 30, 2026, the Bank had a $79.7 million collateralized line of credit from the Federal Reserve Bank of New York’s discount window with no outstanding borrowings. At September 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 September 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 $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.

Current wording

Our sources of wholesale funding include 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 $75.0 million, $0.3 million and $0, or 3.6%, 0.0% and 0.0% of total deposits, respectively, at September 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 $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.

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 $202.9 million at September 30, 2026 and $200.3 million at December 31, 2025. Retained earnings increased by $8.1 million due primarily to net income of $10.3 million for the nine months ended September 30, 2026, which was offset by $2.2 million of dividends declared. The accumulated other comprehensive loss at September 30, 2026 was 1.13% of total equity and was comprised of a $2.3 million after tax net unrealized loss on the investment portfolio that was partially offset by a $0.1 million after tax net unrealized gain 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 9.76%, 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.

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 9.43%, 12.85%, 12.85% and 14.07%, respectively, at September 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 September 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. 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.

Current wording

In October 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, 2026, the Company repurchased 192,718 shares of its common stock at an aggregate cost of $4.8 million. The authorized dollar limit for the program was up to $6.6 million. The Company exhausted the program dollar limit on August 31, 2026. 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 8.68% 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.)

Current wording

The Company’s total stockholders’ equity to total assets ratio and tangible common equity to tangible assets ratio (“TCE ratio”) were 8.31% and 7.58%, respectively, at September 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 September 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 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.

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 September 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 $170.0 million and $160.9 million, respectively.

Previous 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.

Current wording

Results of Operations – Comparison of the Three Months Ended September 30, 2026 and 2025 – The Company recorded net income of $4.3 million during the three months ended September 30, 2026, versus net income of $3.5 million in the 2025 comparable quarter. During the quarter ended September 30, 2026, net interest income increased $1.8 million and provision for credit losses decreased $0.2 million, compared to the September 30, 2025 quarter. These were partially offset by a decrease of $0.5 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $0.9 million due to a lower volume of SBA loan sales, a $0.4 million increase in non-interest expense, and a $0.3 million increase income tax expense.

Previous 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.

Current wording

The $1.8 million increase in net interest income for the three months ended September 30, 2026, versus the comparable 2025 quarter was due to improvement in the Company’s net interest margin to 3.02% in the 2026 quarter from 2.74% in the comparable 2025 quarter. The cost of interest-bearing liabilities decreased to 3.50% in the 2026 quarter from 3.89% in the comparable 2025 quarter, a decrease of 39 basis points. This decrease was partially offset by a 5 basis point decrease in the yield on interest earning assets to 5.89% in the 2026 quarter from 5.94% in the third quarter of 2025. Net interest income on a linked quarter basis increased by $0.3 million or 1.52%.

Previous 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.)

Current wording

The Company recorded a provision for credit losses of $1.1 million for the three months ended September 30, 2026, versus $1.3 million (net of a $50 thousand credit to provision for credit losses on unfunded commitments) in the quarter ended September 30, 2025. Net charge-offs of $322 thousand were incurred during the quarter ended September 30, 2026. The September 30, 2026 allowance for credit losses was $19.9 million versus $18.7 million at December 31, 2025. The allowance for credit losses as a percentage of total loans was 0.96% at September 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 $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.

Current wording

Non-interest income decreased by $0.5 million for the three months ended September 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 due to a lower volume of SBA loan sales, which was partially offset by increases in BOLI income and other income.

Previous wording

Total non-interest expense increased by $1.0 million for the three months ended June 30, 2026 versus the comparable 2025 quarter due to a $0.3 million increase in salaries and employee benefits, a $0.1 million increase in occupancy and equipment and a $0.6 million increase in other expenses, which includes $240 thousand debt extinguishment charges in the 2026 quarter.

Current wording

Total non-interest expense increased by $0.4 million for the three months ended September 30, 2026 versus the comparable 2025 quarter due to a $0.1 million increase in salaries and employee benefits, a $0.1 million increase in occupancy and equipment and a $0.2 million increase in data processing.

Previous 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.

Current wording

The Company recorded income tax expense of $1.4 million for the three months ended September 30, 2026, versus income tax expense of $1.2 million in the comparable 2025 quarter.

Previous wording

Results of Operations – Comparison of the Six Months Ended June 30, 2026 and 2025** **– The Company recorded net income of $5.9 million during the six months ended June 30, 2026, versus net income of $4.0 million in the comparable 2025 six month period. The $1.9 million increase in earnings for the six months ended June 30, 2026, versus the comparable 2025 period resulted from a $3.7 million increase in net interest income and a $1.9 million decrease in provision for credit losses. This was partially offset by a $1.8 million decrease in non-interest income, primarily the decrease in the net gain on sale of loans held for sale, a $0.6 million increase in non-interest expense, and a $1.3 million increase in income tax expense.

Current wording

Results of Operations – Comparison of the Nine Months Ended September 30, 2026 and 2025** **– The Company recorded net income of $10.3 million during the nine months ended September 30, 2026, versus net income of $7.5 million in the comparable 2025 nine month period. The $2.8 million increase in earnings for the nine months ended September 30, 2026, versus the comparable 2025 period resulted from a $5.5 million increase in net interest income and a $2.2 million decrease in provision for credit losses. This was partially offset by a $2.3 million decrease in non-interest income, primarily the decrease in the net gain on sale of loans held for sale due to a lower volume of SBA loan sales, a $1.0 million increase in non-interest expense, and a $1.5 million increase in income tax expense.

Previous wording

The $3.7 million increase in net interest income for the six months ended June 30, 2026, versus the comparable 2025 period was due to the improvement of the Company’s net interest margin to 3.03% in the 2026 six month period from 2.72% in the comparable 2025 period. The cost of interest-bearing liabilities decreased to 3.48% in the 2026 six months period from 3.98% in the comparable 2025 period, a decrease of 50 basis points. This decrease was partially offset by a 11 basis point decrease in the yield on interest earning assets to 5.88% in the 2026 period from 5.99% in the comparable 2025 period.

Current wording

The $5.5 million increase in net interest income for the nine months ended September 30, 2026, versus the comparable 2025 period was due to the improvement of the Company’s net interest margin to 3.03% in the 2026 nine month period from 2.73% in the comparable 2025 period. The cost of interest-bearing liabilities decreased to 3.49% in the 2026 nine month period from 3.95% in the comparable 2025 period, a decrease of 46 basis points. This decrease was partially offset by a 9 basis point decrease in the yield on interest earning assets to 5.89% in the 2026 period from 5.98% in the comparable 2025 period.

Previous wording

The following table, “Net Interest Income Analysis”, presents for the six months ended June 30, 2026 and 2025, the Company’s average assets, liabilities and stockholders’ equity. The Company’s net interest income, net interest spread and net interest margin are also reflected.

Current wording

The following table, “Net Interest Income Analysis”, presents for the nine months ended September 30, 2026 and 2025, the Company’s average assets, liabilities and stockholders’ equity. The Company’s net interest income, net interest spread and net interest margin are also reflected.

Previous wording

The Company recorded a provision for credit losses of $1.0 million (including a $30 thousand provision for credit losses on unfunded commitments) for the six months ended June 30, 2026, versus $3.0 million (including a $187 thousand provision for credit losses on unfunded commitments) recorded for the comparable period in 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 $2.1 million (including a $30 thousand provision for credit losses on unfunded commitments) for the nine months ended September 30, 2026, versus $4.3 million (including a $137 thousand provision for credit losses on unfunded commitments) recorded for the comparable period in 2025. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)

Previous wording

Non-interest income decreased by $1.8 million for the six months ended June 30, 2026 versus the comparable 2025 period. This decrease was driven by a $1.8 million decrease in net gain on sale of loans held for sale and a $0.1 million decrease in other income, which were partially offset by a total $0.1 million increase in loan servicing and fee income and service charges on deposit accounts.

Current wording

Non-interest income decreased by $2.3 million for the nine months ended September 30, 2026 versus the comparable 2025 period. This decrease was driven by a $2.7 million decrease in net gain on sale of loans held for sale due to a lower volume of SBA loan sales, and a $0.1 million decrease in loan servicing and fee income, which were partially offset by a total $0.5 million increase in BOLI income and other income.