Hanover Bancorp, Inc. /NY

Previous wording

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

Current wording

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

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. Of the $48.8 million in closed residential loans originated in the quarter ended March 31, 2025, $27.6 million were originated for the Bank’s portfolio. The remaining $21.2 million of closed loans were originated for sale in the secondary market. During the quarter ended March 31, 2025, the Company sold $18.3 million of residential loans under its flow origination program and recorded gains on sale of loans held-for-sale of $0.4 million with a premium of 2.38%.

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. The Bank originated $62.2 million in residential loans in the quarter ended June 30, 2025. During the quarters ended June 30, 2025 and 2024, the Company sold $23.7 million and $2.9 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 $0.1 million, respectively.

Previous wording

During the quarters ended March 31, 2025 and 2024, the Company sold approximately $23.4 million and $26.7 million, respectively, in government guaranteed SBA loans and recorded gains on sale of loans held-for-sale of $1.9 million and $2.5 million, respectively. SBA loan originations and gains on sale were lower in 2025 due to a combination of factors, including: lower than expected loan sale premiums due, we believe, to first quarter market turmoil; delays in loan closings resulting from the impact of administrative changes to SBA Standard Operating Procedures; and the inability of certain loans to close because of delays by state regulatory agencies in issuing permit approvals to certain borrowers. As we enter the second quarter of 2025, we expect to navigate these factors and to increase the volume of origination and loan sale activity throughout the year. The Bank concluded the first quarter of 2025 with C&I loan originations of approximately $16.8 million. Based on its existing pipeline, the Bank expects C&I lending and deposit activity to grow as the year progresses.

Current wording

During the quarters ended June 30, 2025 and 2024, the Company sold approximately $22.3 million and $28.0 million, respectively, in government guaranteed SBA loans and recorded gains on sale of loans held-for-sale of $1.8 million and $2.5 million, respectively. SBA loan originations and gains on sale were lower than expected due to a confluence of factors. One factor is the impact of the “higher-for-longer” interest rate environment that management believes has both worsened the financial condition of and reduced demand among small business borrowers, resulting in a lower volume of creditworthy customers. Another factor is the negative impact of and uncertainty created by tariffs, which we believe have also dampened loan demand among borrowers in certain industries. A third factor is the Bank’s decision to tighten credit standards over the course of the last year. Although management continues to believe this to be a prudent measure, it has nonetheless resulted in a lower volume of loan approvals, causing the Bank to re-evaluate the number and caliber of its business development officers. Taken together these and other factors have adversely impacted SBA loan originations and closings. With the addition of additional business development officers in the second half of 2025, we anticipate higher volumes of eligible loans as we transition into 2026. The Bank concluded the second quarter of 2025 with C&I loan originations of approximately $29.3 million. Based on its existing pipeline, the Bank expects C&I lending and deposit activity to grow as the year progresses.

Previous wording

As of or for the three months ended March 31, 2025 and 2024

Current wording

As of or for the three and six months ended June 30, 2025 and 2024

Previous wording

At March 31, 2025 the Company, on a consolidated basis, had total assets of $2.3 billion, total deposits of $1.9 billion and total stockholders’ equity of $196.6 million. The Company recorded net income of $1.5 million, or $0.20 per diluted share (including Series A preferred shares) for the three months ended March 31, 2025 compared to net income of $4.1 million, or $0.55 per diluted share (including Series A preferred shares), for the same period in 2024.

Current wording

At June 30, 2025 the Company, on a consolidated basis, had total assets of $2.3 billion, total deposits of $2.0 billion and total stockholders’ equity of $198.9 million. The Company recorded net income of $2.4 million, or $0.33 per diluted share (including Series A preferred shares) for the three months ended June 30, 2025 compared to net income of $0.8 million, or $0.11 per diluted share (including Series A preferred shares), for the same period in 2024.

Previous wording

The $2.5 million decrease in earnings for the three months ended March 31, 2025, versus the comparable 2024 period resulted from a $5.2 million increase in non-interest expenses, including core system conversion expenses of $3.2 million, an increase in salaries and employee benefits of $1.7 million and a $0.3 million increase in provision for credit losses. These were partially offset by a $1.7 million increase in net interest income, a $0.2 million increase in non-interest income and a $1.1 million decrease in income tax expense.

Current wording

The $1.6 million increase in earnings for the three months ended June 30, 2025, versus the comparable 2024 quarter resulted from a $1.5 million increase in net interest income and a $1.7 million decrease in provision for credit losses. These were partially offset by a $0.9 million increase in non-interest expenses, particularly salaries and employee benefits increase of $0.5 million, and a $0.6 million increase in income tax expense.

Previous wording

The Company’s return on average assets and return on average stockholders’ equity were 0.27% and 3.11%, respectively, for the three months ended March 31, 2025, versus 0.74% and 8.70%, respectively, for the comparable 2024 period.

Current wording

The Company’s return on average assets and return on average stockholders’ equity were 0.44% and 4.93%, respectively, for the three months ended June 30, 2025, versus 0.15% and 1.77%, respectively, for the comparable 2024 quarter.

Previous wording

Total non-accrual loans at March 31, 2025 were $11.7 million, or 0.60% of total loans, compared to $16.4 million, or 0.82% of total loans at December 31, 2024 and $14.9 million, or 0.74% of total loans, at March 31, 2024. The allowance for credit losses as a percentage of total non-accrual loans amounted to 196%, 139% and 134% at March 31, 2025, December 31, 2024 and March 31, 2024, respectively.

Current wording

Total non-accrual loans at June 30, 2025 were $12.7 million, or 0.64% of total loans, compared to $16.4 million, or 0.82% of total loans at December 31, 2024 and $15.8 million, or 0.79% of total loans, at June 30,2024. The allowance for credit losses as a percentage of total non-accrual loans amounted to 171%, 139% and 149% at June 30, 2025, December 31, 2024 and June 30, 2024, respectively.

Previous wording

The Company’s operating efficiency ratio was 87.1% for the three months ended March 31, 2025, versus 65.4% in the March 31, 2024 quarter. The increase in the operating efficiency ratio was due to the increase in non-interest expense, which was partially offset by increases in net interest income and non-interest income.

Current wording

The Company’s operating efficiency ratio was 68.73% for the three months ended June 30, 2025, versus 69.18% in the June 30, 2024 quarter.

Previous wording

Financial Condition – Total assets of the Company were $2.3 billion at March 31, 2025 and at December 31, 2024. Total securities available for sale at March 31, 2025 were $93.2 million, an increase of $9.4 million from December 31, 2024, primarily driven by growth in collateralized mortgage obligations, collateralized loan obligations and corporate bonds. Total loans at March 31, 2025 and December 31, 2024 were $2.0 billion. Total deposits were $1.9 billion and $2.0 billion at March 31, 2025 and December 31, 2024, respectively. Total borrowings and subordinated debt at March 31, 2025 and December 31, 2024 were $132.5 million, including $107.8 million of outstanding FHLB advances.

Current wording

Financial Condition – Total assets of the Company were $2.3 billion at June 30, 2025 and at December 31, 2024. Total securities available for sale at June 30, 2025 were $102.6 million, an increase of $18.9 million from December 31, 2024, primarily driven by growth in collateralized mortgage obligations, collateralized loan obligations and corporate bonds. Total loans at June 30, 2025 and December 31, 2024 were $2.0 billion. Total deposits were $2.0 billion at June 30, 2025 and at December 31, 2024. Total borrowings and subordinated debt at June 30, 2025 and December 31, 2024 were $132.5 million, including $107.8 million of outstanding FHLB advances.

Previous wording

At March 31, 2025, the residential loan portfolio amounted to $733.6 million, or 37.4% of total loans. Commercial real estate loans, including multi-family loans and construction and land development loans, totaled $1.1 billion or 53.9% of total loans at March 31, 2025. Commercial and industrial loans totaled $170.4 million or 8.7% of total loans.

Current wording

At June 30, 2025, the residential loan portfolio amounted to $738.8 million, or 37.6% of total loans. Commercial real estate loans, including multi-family loans and construction and land development loans, totaled $1.1 billion or 54.8% of total loans at June 30, 2025. Commercial and industrial loans totaled $148.9 million or 7.6% of total loans.

Previous wording

Total deposits at March 31, 2025 were $1.9 billion, reflecting a decrease of $17.8 million or 0.9%, compared to $2.0 billion at December 31, 2024. Our loan to deposit ratio was 101% at March 31, 2025 and 102% at December 31, 2024. Core deposit balances, which consist of demand, NOW, savings and money market deposits, represented 73.2% and 74.5% of total deposits at March 31, 2025 and December 31, 2024, respectively. At those dates, demand deposit balances represented 11.1% and 10.8% of total deposits. The Company’s municipal deposit program is built on long-standing relationships developed in the local marketplace. This core deposit business will continue to provide a stable source of funding for the Company’s lending products at costs lower than both consumer deposits and market-based borrowings. The Company continues to broaden its municipal deposit base and currently services 40 customer relationships. At March 31, 2025, total municipal deposits were $517.1 million, representing 26.7% of total deposits, compared to $509.3 million at December 31, 2024, representing 26.1% of total deposits. The weighted average rate on the municipal deposit portfolio was 3.71% at March 31, 2025. The aggregate amount of the Company’s outstanding uninsured deposits was $210.9 million or 10.9% of total deposits as of March 31, 2025 and $252.0 million or 12.9% of total deposits as of December 31, 2024.

Current wording

Total deposits were $2.0 billion at June 30, 2025 and at December 31, 2024. Our loan to deposit ratio was 101% at June 30, 2025 and 102% at December 31, 2024. Core deposit balances, which consist of demand, NOW, savings and money market deposits, represented 73.8% and 74.5% of total deposits at June 30, 2025 and December 31, 2024, respectively. At those dates, demand deposit balances represented 12.5% and 10.8% of total deposits. The Company’s municipal deposit program is built on long-standing relationships developed in the local marketplace. This core deposit business will continue to provide a stable source of funding for the Company’s lending products at costs lower than both consumer deposits and market-based borrowings. The Company continues to broaden its municipal deposit base and currently services 40 customer relationships. At June 30, 2025, total municipal deposits were $517.4 million, representing 26.5% of total deposits, compared to $509.3 million at December 31, 2024, representing 26.1% of total deposits. The weighted average rate on the municipal deposit portfolio was 3.67% at June 30, 2025. The aggregate amount of the Company’s outstanding uninsured deposits was $250.6 million or 12.9% of total deposits as of June 30, 2025 and $252.0 million or 12.9% of total deposits as of December 31, 2024.

Previous wording

The Company continues to actively manage its Multi-Family and Commercial Real Estate portfolios which resulted in a reduction in the commercial real estate concentration ratio to 369% of capital at March 31, 2025 from 385% at December 31, 2024. The Company will selectively explore Commercial Real Estate opportunities with an emphasis on relationship based Commercial Real Estate lending.

Current wording

The Company continues to actively manage its Multi-Family and Commercial Real Estate portfolios which resulted in a reduction in the commercial real estate concentration ratio to 368% of capital at June 30, 2025 from 385% at December 31, 2024. The Company will selectively explore Commercial Real Estate opportunities with an emphasis on relationship based Commercial Real Estate lending.

Previous wording

A significant portion of the Bank’s commercial real estate portfolio consists of loans secured by Multi-Family and CRE-Investor owned real estate that are predominantly subject to fixed interest rates for an initial period of 5 years. The Bank’s exposure to Land/Construction loans is minor at $8.0 million, all at floating interest rates. As shown below, 31% of the loan balances in these combined portfolios will either have a rate reset or mature in 2025 and 2026, with another 56% with rate resets or maturing in 2027.

Current wording

A significant portion of the Bank’s commercial real estate portfolio consists of loans secured by Multi-Family and CRE-Investor owned real estate that are predominantly subject to fixed interest rates for an initial period of 5 years. The Bank’s exposure to Land/Construction loans is minor at $8.2 million, all at floating interest rates. As shown below, 31% of the loan balances in these combined portfolios will either have a rate reset or mature in 2025 and 2026, with another 57% with rate resets or maturing in 2027.

Previous wording

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

Previous wording

The Bank’s exposure to the Office market is minor. Loans secured by office space accounted for 2.23% of the total loan portfolio with a total balance of $43.8 million, of which less than 1% is located in Manhattan. The pool has a 2.32x weighted average DSCR, a 53% weighted average LTV and less than $353,000 of exposure in Manhattan.

Current wording

The Bank’s exposure to the Office market is minor. Loans secured by office space accounted for 2.48% of the total loan portfolio with a total balance of $48.9 million, of which less than 1% is located in Manhattan. The pool has a 2.48x weighted average DSCR, a 53% weighted average LTV and less than $350,000 of exposure in Manhattan.

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 $253.4 million and $246.6 million at March 31, 2025 and December 31, 2024, respectively. These liquid assets may include assets that have been pledged primarily against municipal deposits or borrowings. Liquidity is also provided by the maintenance of a base of core deposits, cash and non-interest-bearing deposits due from banks, the ability to sell or pledge marketable assets and access to lines of credit. At March 31, 2025, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $679.0 million or approximately 322% 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 $267.2 million and $246.6 million at June 30, 2025 and December 31, 2024, respectively. These liquid assets may include assets that have been pledged primarily against municipal deposits or borrowings. Liquidity is also provided by the maintenance of a base of core deposits, cash and non-interest-bearing deposits due from banks, the ability to sell or pledge marketable assets and access to lines of credit. At June 30, 2025, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $686.5 million or approximately 274% 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, 2025, total deposits were $2.0 billion, of which $505.3 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 89% of total deposits at March 31, 2025. At March 31, 2025 and December 31, 2024, the Company had $107.8 million 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, 2025, total deposits were $2.0 billion, of which $502.3 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, 2025. At June 30, 2025 and December 31, 2024, the Company had $107.8 million 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, 2025, the Bank had a total borrowing capacity of $698.0 million at the Federal Home Loan Bank of New York, of which $504.3 million was used to collateralize municipal deposits and $107.8 million was utilized for term advances. At March 31, 2025, the Bank had a $239.9 million collateralized line of credit from the Federal Reserve Bank of New York’s discount window with no outstanding borrowings. At March 31, 2025, the Bank had access to approximately $92 million in unsecured lines of credit extended by correspondent banks, if needed, for short-term funding purposes. No borrowings were outstanding under lines of credit with correspondent banks at March 31, 2025.

Current wording

The Liquidity and Wholesale Funding Policy of the Bank establishes specific policies and operating procedures governing liquidity levels to assist management in developing plans to address future and current liquidity needs. Management monitors the rates and cash flows from loan and investment portfolios while also examining the maturity structure and volatility characteristics of liabilities to develop an optimum asset/liability mix. Available funding sources include retail, commercial and municipal deposits, purchased liabilities and stockholders’ equity. Daily, management receives a current cash position update to ensure that all obligations are satisfied. On a weekly basis, appropriate senior management receives a current liquidity position report and a ninety day forecasted cash flow to ensure that all short-term obligations will be met and there is sufficient liquidity available. At June 30, 2025, the Bank had a total borrowing capacity of $814.1 million at the Federal Home Loan Bank of New York, of which $502.7 million was used to collateralize municipal deposits and $107.8 million was utilized for term advances. At June 30, 2025, the Bank had a $111.2 million collateralized line of credit from the Federal Reserve Bank of New York’s discount window with no outstanding borrowings. At June 30, 2025, the Bank had access to approximately $92 million in unsecured lines of credit extended by correspondent banks, if needed, for short-term funding purposes. No borrowings were outstanding under lines of credit with correspondent banks at June 30, 2025.

Previous wording

Our sources of wholesale funding included brokered certificates of deposit, listing service certificates of deposit and insured cash sweep (“ICS”) reciprocal deposits in excess of 20% of total liabilities, which balances totaled approximately $108.3 million, $2.4 million and $20.4 million, or 5.6%, 0.1% and 1.1% of total deposits, respectively, at March 31, 2025. We utilized brokered certificates of deposit and listing service certificates of deposit as alternatives to other forms of wholesale funding, including borrowings, when interest rates and market conditions favor the use of such deposits. For a portion of our brokered certificates of deposit, we utilized interest rate swap contracts to effectively extend their duration and to fix their cost.

Current wording

Our sources of wholesale funding included brokered deposits, listing service certificates of deposit and insured cash sweep (“ICS”) reciprocal deposits in excess of 20% of total liabilities, which balances totaled approximately $125.3 million, $2.4 million and $1.1 million, or 6.4%, 0.1% and 0.1% of total deposits, respectively, at June 30, 2025. We utilized brokered certificates of deposit and listing service certificates of deposit as alternatives to other forms of wholesale funding, including borrowings, when interest rates and market conditions favor the use of such deposits. For a portion of our brokered certificates of deposit, we utilized interest rate swap contracts to effectively extend their duration and to fix their cost.

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 $196.6 million at March 31, 2025 and December 31, 2024. Retained earnings increased by $0.8 million due primarily to net income of $1.5 million for the quarter ended March 31, 2025, which was offset by $0.7 million of dividends declared. The accumulated other comprehensive loss at March 31, 2025 was 0.71% of total equity and was comprised of a $0.9 million after tax net unrealized loss on the investment portfolio and a $0.5 million after tax net unrealized loss on derivatives.

Current wording

The Company strives to maintain an efficient level of capital, commensurate with its risk profile, on which a competitive rate of return to stockholders will be realized over the short and long terms. Capital is managed to enhance stockholder value while providing flexibility for management to act opportunistically in a changing marketplace. Management continually evaluates the Company’s capital position in light of current and future growth objectives and regulatory guidelines. Total stockholders’ equity was $198.9 million at June 30, 2025 and $196.6 million at December 31, 2024. Retained earnings increased by $2.5 million due primarily to net income of $4.0 million for the six months ended June 30, 2025, which was offset by $1.5 million of dividends declared. The accumulated other comprehensive loss at June 30, 2025 was 0.62% of total equity and was comprised of a $0.7 million after tax net unrealized loss on the investment portfolio and a $0.5 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 8.95%, 13.37%, 13.37% and 14.62%, respectively, at March 31, 2025, exceeding all regulatory guidelines for a well-capitalized institution, the highest regulatory capital category. Moreover, capital rules also place limits on capital distributions and certain discretionary bonus payments if a banking organization does not maintain a buffer of common equity tier 1 capital above the minimum capital requirements. At March 31, 2025, the Bank’s capital buffer was in excess of requirements.

Current wording

The Bank is subject to regulatory capital requirements. The Bank’s tier 1 leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios were 9.29%, 13.16%, 13.16% and 14.41%, respectively, at June 30, 2025, exceeding all regulatory guidelines for a well-capitalized institution, the highest regulatory capital category. Moreover, capital rules also place limits on capital distributions and certain discretionary bonus payments if a banking organization does not maintain a buffer of common equity tier 1 capital above the minimum capital requirements. At June 30, 2025, 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. The Company has not made any stock repurchases under the

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. The Company has not made any stock repurchases under the program. The remaining buyback authority under the share repurchase program therefore remained at 366,050 shares as of June 30, 2025.

Previous wording

The Company’s total stockholders’ equity to total assets ratio and tangible common equity to tangible assets ratio (“TCE ratio”) were 8.58% and 7.80%, respectively, at March 31, 2025, versus 8.50% and 7.73%, respectively, at December 31, 2024. The TCE ratio is a non-GAAP ratio. The ratio of total stockholders’ equity to total assets is the most comparable U.S. GAAP measure to this non-GAAP ratio. The ratio of tangible common equity to tangible assets, or TCE ratio, is calculated by dividing total stockholders’ equity by total assets, after reducing both amounts by intangible assets. The TCE ratio is not required by U.S. GAAP or by applicable bank regulatory requirements, but is a metric used by management to evaluate the adequacy of our capital levels. Since there is no authoritative requirement to calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and tangible assets are non-GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with U.S. GAAP. Set forth below are the reconciliations of tangible common equity to U.S. GAAP total stockholders’ equity and tangible assets to U.S. GAAP total assets at March 31, 2025 (in thousands). (See also Non-GAAP Disclosure contained herein.)

Current wording

The Company’s total stockholders’ equity to total assets ratio and tangible common equity to tangible assets ratio (“TCE ratio”) were 8.60% and 7.83%, respectively, at June 30, 2025, versus 8.50% and 7.73%, respectively, at December 31, 2024. The TCE ratio is a non-GAAP ratio. The ratio of total stockholders’ equity to total assets is the most comparable U.S. GAAP measure to this non-GAAP ratio. The ratio of tangible common equity to tangible assets, or TCE ratio, is calculated by dividing total stockholders’ equity by total assets, after reducing both amounts by intangible assets. The TCE ratio is not required by U.S. GAAP or by applicable bank regulatory requirements, but is a metric used by management to evaluate the adequacy of our capital levels. Since there is no authoritative requirement to calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and tangible assets are non-GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with U.S. GAAP. Set forth below are the reconciliations of tangible common equity to U.S. GAAP total stockholders’ equity and tangible assets to U.S. GAAP total assets at June 30, 2025 (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, 2025 and December 31, 2024, commitments to originate loans and commitments under unused lines of credit for which the Bank is obligated amounted to approximately $140.5 million and $130.3 million, respectively.

Current wording

Commitments to extend credit are agreements to lend to customers provided there are no violations of material conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer. Collateral required varies, but may include accounts receivable, inventory, equipment, real estate and income-producing commercial properties. At June 30, 2025 and December 31, 2024, commitments to originate loans and commitments under unused lines of credit for which the Bank is obligated amounted to approximately $151.4 million and $130.3 million, respectively.

Previous wording

Results of Operations – Comparison of the Three Months Ended March 31, 2025 and 2024 – The Company recorded net income of $1.5 million during the three months ended March 31, 2025, versus net income of $4.1 million in the comparable 2024 quarter. The decrease in earnings for the three months ended March 31, 2025, versus the comparable 2024 quarter resulted from a $5.2 million increase in non-interest expenses, including core system conversion expenses, increases in salaries and employee benefits and a $0.3 million increase in provision for credit losses. These were partially offset by a $1.7 million increase in net interest income, a $0.2 million increase in non-interest income and a $1.1 million decrease in income tax expense.

Current wording

Results of Operations – Comparison of the Three Months Ended June 30, 2025 and 2024 – The Company recorded net income of $2.4 million during the three months ended June 30, 2025, versus net income of $0.8 million in the comparable 2024 quarter. The $1.6 million increase in earnings for the three months ended June 30, 2025, versus the comparable 2024 quarter resulted from a $1.5 million increase in net interest income and a $1.7 million decrease in provision for credit losses. These were partially offset by a $0.9 million increase in non-interest expenses, particularly salaries and employee benefits increase of $0.5 million, and a $0.6 million increase in income tax expense.

Previous wording

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

Current wording

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

Previous wording

Non-interest income increased by $0.2 million for the three months ended March 31, 2025 versus the comparable 2024 period. The increase in non-interest income is primarily related to the increases in loan servicing and fee income and other income which were partially offset by a decrease in the net gain on sale of loans held for sale.

Current wording

Non-interest income decreased by $0.1 million for the three months ended June 30, 2025 versus the comparable 2024 quarter. The decrease in non-interest income is primarily related to the decrease in the net gain on sale of loans held for sale which were partially offset by increases in loan servicing and related fee income, and service charges on deposit accounts.

Previous wording

Total non-interest expense increased by $5.2 million for the three months ended March 31, 2025 versus the comparable 2024 quarter. The increase in non-interest expense was primarily related to core system conversion expenses as well as increases in salaries and employee benefits. The increase in salaries and employee benefits expense in the first quarter of 2025 versus the comparable 2024 quarter was primarily related to lower deferred loan origination costs partially offset by lower incentive compensation expense resulting from reduced lending activity.

Current wording

Total non-interest expense increased by $0.9 million for the three months ended June 30, 2025 versus the comparable 2024 quarter. The increase in non-interest expense was primarily related to increases in salaries and employee benefits as well as professional fees. The increase in salaries and employee benefits expense in the second quarter of 2025 versus the comparable 2024 quarter was primarily related to the staffing of the newly opened Port Jefferson branch and additions to the C&I Banking teams, partially offset by lower incentive compensation expense resulting from reduced lending activity and other expense reduction initiatives.

Previous wording

The Company recorded income tax expense of $0.2 million for an effective tax rate of 13.8% for the three months ended March 31, 2025, versus income tax expense of $1.3 million for an effective tax rate of 24.9% in the comparable 2024 period. The decrease in the effective tax rate was due to the tax impact of the tax benefit from stock options that were exercised and the vesting of restricted stock. We expect a normalized run rate of 25.0% for the remainder of the year.

Current wording

The Company recorded income tax expense of $0.9 million for an effective tax rate of 27.8% for the three months ended June 30, 2025, versus income tax expense of $0.3 million for an effective tax rate of 27.2% in the comparable 2024 quarter. We expect a normalized run rate of 25.0% for the remainder of the year.

Previous wording

The $1.7 million increase in net interest income for the three months ended March 31, 2025, versus the comparable 2024 quarter was due to improvement of the Company’s net interest margin to 2.68% in the 2025 quarter from 2.41% in the comparable 2024 quarter. The yield on interest earning assets decreased to 6.01% in the 2025 quarter from 6.03% in the comparable 2024 quarter, a decrease of 2 basis points that was partially offset by a 32 basis point decrease in the cost of interest-bearing liabilities to 4.01% in 2025 from 4.33% in the first quarter of 2024. The increase in the net interest margin was a result of the late 2024 reductions in the Fed Funds effective rate and the liability sensitive nature of the Bank’s balance sheet.

Current wording

The $3.2 million increase in net interest income for the six months ended June 30, 2025, versus the comparable 2024 period was due to the improvement of the Company’s net interest margin to 2.72% in the 2025 six month period from 2.43% in the comparable 2024 period. The cost of interest-bearing liabilities decreased to 3.98% in the 2025 six months period from 4.41% in the comparable 2024 period, a decrease of 43 basis points. This decrease was partially offset by a 13 basis point decrease in the yield on interest earning assets to 5.99% in the 2025 period from 6.12% in the comparable 2024 period. The increase in the net interest margin was a result of the late 2024 reductions in the Fed Funds effective rate and the liability sensitive nature of the Bank’s balance sheet.

Previous wording

The Company recorded a $0.6 million provision for credit losses expense on loans for the three months ended March 31, 2025, versus $0.3 million recorded for the comparable period in 2024. The March 31, 2025 allowance for credit losses was $22.9 million versus $22.8 million at December 31, 2024. The allowance for credit losses as a percentage of total loans was 1.17% at March 31, 2025 and 1.15% at December 31, 2024. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)

Current wording

The Company recorded a $2.8 million provision for credit losses on loans for the six months ended June 30, 2025, versus $4.1 million recorded for the comparable period in 2024. The decrease was related to the matters discussed above under the comparison of results for the three month period. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)

Previous wording

Asset Quality - Total non-accrual loans at March 31, 2025 were $11.7 million, or 0.60% of total loans, compared to $16.4 million, or 0.82% of total loans at December 31, 2024. The decrease resulted primarily from the sale of non-performing loans totaling $5.0 million, net of a $0.3 million charge-off, during the quarter ended March 31, 2025. The allowance for credit losses as a percentage of total non-accrual loans amounted to 196%, 139% and 134% at March 31, 2025, December 31, 2024 and March 31, 2024, respectively.

Current wording

Asset Quality - Total non-accrual loans at June 30, 2025 were $12.7 million, or 0.64% of total loans, compared to $16.4 million, or 0.82% of total loans at December 31, 2024, a decrease of $3.7 million. This decrease resulted primarily from the proactive sale of non-performing loans, satisfactions and the charge-off of a specific reserve established in June 2024 on an individually evaluated commercial loan. The allowance for credit losses as a percentage of total non-accrual loans amounted to 171%, 139% and 149% at June 30, 2025, December 31, 2024 and June 30, 2024, respectively.

Previous wording

Total loans having credit risk ratings of Special Mention and Substandard were $43.9 million at March 31, 2025, versus $40.8 million at December 31, 2024. The Company’s Special Mention and Substandard loans were comprised of residential real estate, multi-family, commercial real estate loans, commercial and industrial loans (including SBA facilities) and construction and land development loans at March 31, 2025. The Company had no loans with a credit risk rating of Doubtful for the periods presented. All loans not having credit risk ratings of Special Mention, Substandard or Doubtful are considered pass loans.

Current wording

Total loans having credit risk ratings of Special Mention and Substandard were $43.4 million at June 30, 2025, versus $40.8 million at December 31, 2024. The Company’s Special Mention and Substandard loans were comprised of residential real estate, multi-family, commercial real estate loans, commercial and industrial loans (including SBA facilities) and construction and land development loans at June 30, 2025. The Company had no loans with a credit risk rating of Doubtful for the periods presented. All loans not having credit risk ratings of Special Mention, Substandard or Doubtful are considered pass loans.

Previous wording

At March 31, 2025, the Company’s allowance for credit losses amounted to $22.9 million or 1.17% of period-end total loans outstanding. The allowance as a percentage of loans outstanding was 1.15% at December 31, 2024 and 0.99% at March 31, 2024. The Company recorded net loan charge-offs of $0.5 million during the three months ended March 31, 2025 versus net loan charge-offs of $0.1 million during the three months ended March 31, 2024.

Current wording

At June 30, 2025, the Company’s allowance for credit losses amounted to $21.6 million or 1.10% of period-end total loans outstanding. The allowance as a percentage of loans outstanding was 1.15% at December 31, 2024 and 1.17% at June 30, 2024. 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 aforementioned charge-off of a specific reserve on an individually evaluated commercial loan. Net loan charge-offs of $79 thousand were recorded during the three months ended June 30, 2024.

Previous wording

The Company recorded a $0.6 million provision for credit losses expense on loans for the three months ended March 31, 2025, versus $0.3 million recorded for the comparable period in 2024. Additional information regarding the ACL and the associated provisions recognized during the quarters ended March 31, 2025 and 2024 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 $2.2 million provision for credit losses on loans for the three months ended June 30, 2025, versus $3.9 million recorded for the comparable period in 2024. Additional information regarding the ACL and the associated provisions recognized during the quarters ended June 30, 2025 and 2024 is presented in Note 4 to the unaudited consolidated financial statements. (See also Critical Accounting Policies, Judgments and Estimates contained herein).