What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-06 · 135 added, 200 removed, 346 unchanged (49% of the section changed)

16 unchanged sentences

Executive Overview

We are focused on being the banking provider of choice and to serve as an alternative to our larger competitors.

We aim to do this through:

• Responsive, client-centric products and services;

• Organic growth and strategic acquisitions when market opportunities present themselves;

• Utilization of efficient and scalable infrastructure;

• Disciplined focus on risk management.

We strive to be the preferred banking provider, offering a compelling alternative to larger institutions.

Our strategy rests

on our competitive strengths:

• Strategic Market Reach:

While we serve our client base within 100 miles of our branch network, we also selectively pursue commercial banking opportunities beyond this radius, leveraging established business relationships and technology to support our clients’ growth.

• Experienced Leadership:

Our Executive Management Team brings a proven track record of success and deep industry expertise.

• Dedicated Board of Directors:

Our Board combines valuable expertise with close community ties, ensuring we understand and respond to local needs and are positioned to capitalize on market opportunities.

• Disciplined Risk Management:

We employ a robust and proactive risk management framework to safeguard assets, ensure regulatory compliance, and support sustainable growth.

• Strong Capital Position:

Our capital position has facilitated our growth and is integral to the execution of our business

• Scalable Operating Platform:

Designed for efficiency and scalability, our platform supports our growth and provides a

seamless customer experience.

Critical Accounting Policies and Estimates

4 unchanged sentences

Earnings and Performance Overview

For the three months ended September 30, 2024, net interest income was $20.7 million, a decrease of $2.0 million or 8.7% when compared to the same period in 2023.

For the nine months ended September 30, 2024, net interest income was $63.1 million, a decrease of $9.1 million or 12.7% when compared to the same period in 2023.

The decrease in net interest income for the three and nine months ended September 30, 2024 was primarily attributable to an increase in interest expense partially offset by an increase in interest on loans due to higher overall loan yields.

Net income available to common shareholders was $1.9 million, or $0.24 per diluted share, and $9.8 million, or $1.25 per diluted share, for the three months ended September 30, 2024 and 2023, respectively.

Net income available to common shareholders was $6.8 million, or $0.86 per diluted share, and $28.1 million, or $3.58 per diluted share, for the nine months ended September 30, 2024 and 2023, respectively.

The decrease in net income for the three and nine months ended September 30, 2024 was primarily due to an increase in the provision for credit losses and an increase in interest expense.

This decrease was partially offset by an increase in interest on loans due to higher overall loan yields.

Returns on average shareholders' equity and average assets for the three months ended September 30, 2024 were 2.83% and 0.24%, respectively, compared to 15.19% and 1.19%, respectively, for the three months ended September 30, 2023.

Returns on average shareholders' equity and average assets for the nine months ended September 30, 2024 were 3.35% and 0.29%, respectively, compared to 15.16% and 1.16%, respectively, for the nine months ended September 30, 2023.

Revenues ( net interest income plus noninterest income) for the quarter ended March 31, 2025 were $23.6 million, versus $22.1 million for the quarter ended March 31, 2024.

The increase in revenues for the quarter was mainly attributable to a decrease in interest expense, an increase in service charges and fees, and an increase in interest and dividends on securities.

Net income available to common shareholders was $6.9 million, or $0.87 per diluted share, and $3.8 million, or $0.48 per diluted share, for the three months ended March 31, 2025 and 2024, respectively .

The increase over the prior year period was primarily due to the aforementioned increase in revenues and a decrease in provision for credit losses.

Returns on average shareholders' equity and average assets for the three months ended March 31, 2025 were 10.16% and 0.86%, respectively, compared to 5.59% and 0.47%, respectively, for the three months ended March 31, 2024.

Results of Operations

Net Interest Income

Net interest income is the difference between interest earned on loans, securities, and cash less interest paid on deposits and other borrowings, and is the primary source of our operating income.

Net interest income is the difference between interest earned on loans and securities and interest paid on deposits and other borrowings, and is the primary source of our operating income.

Net interest income is affected by the level of interest rates, changes in interest rates and changes in the amount and composition of interest earning assets and interest bearing liabilities.

4 unchanged sentences

Premium amortization and discount accretion are included in the respective interest income and interest expense amounts.

FTE net interest income for the three months ended September 30, 2024 and 2023 was $20.8 million and $22.7 million, respectively.

FTE net interest income for the nine months ended September 30, 2024 and 2023 was $63.3 million and $72.4 million, respectively.

FTE interest income for the three months ended September 30, 2024 remained flat at $48.3 million, compared to FTE interest income for the three months ended September 30, 2023.

FTE interest income for the nine months ended September 30, 2024 increased by $5.2 million, or 3.7%, to $144.4 million, compared to FTE interest income for the nine months ended September 30, 2023.

FTE net interest income for the three months ended March 31, 2025 and 2024 was $22.2 million and $21.2 million, respectively.

FTE interest income for the three months ended March 31, 2025 increased by $0.3 million, or 0.6%, to $48.6 million, compared to FTE interest income for the three months ended March 31, 2024.

This increase was due to an increase in interest and fees on loans due to higher overall loan yields.

Interest expense for the three months ended September 30, 2024 increased by $1.9 million compared to interest expense for the three months ended September 30, 2023.

Interest expense for the nine months ended September 30, 2024 increased by $14.2 million compared to interest expense for the nine months ended September 30, 2023.

The increase in interest expense for the three and nine months ended September 30, 2024 was driven by an increase in rates on interest bearing deposits.

Interest expense for the three months ended March 31, 2025 decreased by $0.7 million compared to interest expense for the three months ended March 31, 2024.

The decrease in interest expense for the three months ended March 31, 2025 was driven by a decrease in interest expense on deposits, resulting from a decrease in rates on interest bearing deposits.

Distribution of Assets, Liabilities and Shareholders’ Equity;

Interest Rates and Interest Differential

The following tables present the average balances and yields earned on interest earning assets and average balances and weighted average rates paid on our funding liabilities for the three and nine months ended September 30, 2024 and 2023.

The following table presents the average balances and yields earned on interest earning assets and average balances and weighted average rates paid on our funding liabilities for the three months ended March 31, 2025 and 2024.

For the Quarter Ended

September 30, 2024 September 30, 2023

Balance Interest Yield/

Cash and Fed funds sold $ 253,664 $ 3,205 5.03 % $ 265,115 $ 3,393 5.08 %

Securities (1)

147,431 1,390 3.78 127,229 953 3.00

Commercial real estate 1,905,506 28,288 5.81 1,943,725 28,140 5.67

Residential real estate 47,481 736 6.20 53,966 671 4.97

Construction 156,273 3,070 7.69 209,154 3,908 7.31

Commercial business 512,507 10,783 8.23 539,185 10,394 7.54

Consumer 41,845 719 6.84 44,020 741 6.66

Total loans 2,663,612 43,596 6.40 2,790,050 43,854 6.15

Federal Home Loan Bank stock 5,655 122 8.32 5,696 115 8.13

Total earning assets 3,070,362 $ 48,313 6.16 % 3,188,090 $ 48,315 5.93 %

Other assets 90,410 78,089

Total assets $ 3,160,772 $ 3,266,179

Liabilities and shareholders' equity:

Interest bearing liabilities:

NOW $ 94,958 $ 44 0.18 % $ 102,149 $ 47 0.18 %

Money market 832,430 8,597 4.11 922,036 9,064 3.90

Savings 89,463 692 3.07 105,366 817 3.08

Time 1,347,857 16,246 4.79 1,322,074 13,861 4.16

Total interest bearing deposits 2,364,708 25,579 4.30 2,451,625 23,789 3.85

Borrowed Money 159,349 1,895 4.73 159,103 1,783 4.39

Total interest bearing liabilities 2,524,057 $ 27,474 4.33 % 2,610,728 $ 25,572 3.89 %

Noninterest bearing deposits 303,213 345,988

Other liabilities 62,602 54,136

Total liabilities 2,889,872 3,010,852

Shareholders' equity 270,900 255,327

Total liabilities and shareholders' equity $ 3,160,772 $ 3,266,179

Net interest income (2)

$ 20,839 $ 22,743

Interest rate spread 1.83 % 2.04 %

Net interest margin (3)

2.72 % 2.85 %

(1) Average balances and yields for securities are based on amortized cost.

(2) The adjustment for securities and loans taxable equivalency amounted to $122 thousand and $52 thousand for the three months ended September 30, 2024 and 2023, respectively.

(3) Annualized net interest income as a percentage of earning assets.

(4) Yields are calculated using the contractual day count convention for each respective product type.

For the Nine Months Ended

September 30, 2024 September 30, 2023

March 31, 2025 March 31, 2024

Balance Interest Yield/

33 unchanged sentences

(1) Average balances and yields for securities are based on amortized cost.

(2) The adjustment for securities and loans taxable equivalency amounted to $239 thousand and $154 thousand for the

nine months ended September 30, 2024 and 2023, respectively.

(2) The adjustment for securities and loans taxable eq ui valency amounted to $142 thousand and $51 thousand for the three months ended March 31, 2025 and 2024, respectively.

(3) Annualized net interest income as a percentage of earning assets.

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Changes attributable to both volume and rate have been allocated proportionately based on the relationship of the absolute dollar amount of change in each.

Three Months Ended September 30, 2024 vs 2023

Increase (Decrease) Nine Months Ended September 30, 2024 vs 2023

Three Months Ended

March 31, 2025 vs 2024

Increase (Decrease)

(In thousands) Volume Rate Total Volume Rate Total

(In thousands) Volume Rate Total

Interest and dividend income:

10 unchanged sentences

Interest expense:

NOW (3) 1 (2) — 5 5

Money market 98 (723) (625)

5 unchanged sentences

Change in net interest income $ (188) $ 1,198 $ 1,010

Provision (credit) for Credit Losses

The provision (credit) for credit losses is based on management’s periodic assessment of the adequacy of our ACL-Loans and ACL-Unfunded Commitments which, in turn, is based on interrelated factors such as the composition of our loan portfolio and its inherent risk characteristics, the level of nonperforming loans and net charge-offs, both current and historic, local economic and credit conditions, the direction of real estate values, and regulatory guidelines.

The provision (credit) for credit losses is charged against earnings in order to maintain our ACL-Loans and ACL-Unfunded Commitments and reflects management’s best estimate of probable losses inherent in our loan portfolio as of the balance sheet date.

The provision for credit losses for the three months ended September 30, 2024 was $6.3 million compared to a credit for credit losses of $1.6 million for the three months ended September 30, 2023.

The provision for credit losses for the nine months ended September 30, 2024 was $18.2 million compared to a provision for credit losses of $1.8 million for the nine months ended September 30, 2023.

The increase in the provision for credit losses for the quarter was primarily due to a charge-off of $8.2 million.

The increase was partially offset by a $1.0 million recovery on a previously charged-off loan.

The increase in provision for credit losses for the nine months ended September 30, 2024 was primarily driven due to charge-offs of $20.1 million partially offset by recoveries of $1.3 million.

Provision for Credit Losses

The provision for credit losses is based on management’s periodic assessment of the adequacy of our ACL-Loans and ACL-Unfunded Commitments which, in turn, is based on interrelated factors such as the composition of our loan portfolio and its inherent risk characteristics, the level of nonperforming loans and net charge-offs, both current and historic, economic and credit conditions, the direction of real estate values, and regulatory guidelines.

The provision for credit losses is charged against earnings in order to maintain our ACL-Loans and ACL-Unfunded Commitments and reflects management’s best estimate of probable losses inherent in our loan portfolio as of the balance sheet date.

The provision for credit losses for the three months ended March 31, 2025 was $0.5 million compared to a provision for credit losses of $3.7 million for the three months ended March 31, 2024.

Noninterest Income

Noninterest income is a component of our revenue and is comprised primarily of fees generated from deposit relationships with our clients, fees generated from sales and referrals of loans, and income earned on bank-owned life insurance.

The following tables compare noninterest income for the three and nine months ended September 30, 2024 and 2023:

The following table compares noninterest income for the three months ended March 31, 2025 and 2024:

Three Months Ended

September 30, Change

March 31, Change

(Dollars in thousands) 2025 2024 $ %

4 unchanged sentences

Total noninterest income $ 1,505 $ 915 $ 590 64.5 %

Nine Months Ended

September 30, Change

(Dollars in thousands) 2024 2023 $ %

Gains and fees from sales of loans $ 499 $ 1,893 $ (1,394) (73.6) %

Bank-owned life insurance 1,008 876 132 15.1

Service charges and fees 1,374 941 433 46.0

Other (127) 3 (130) Unfavorable

Total noninterest income $ 2,754 $ 3,713 $ (959) (25.8) %

Noninterest income increased by $0.4 million to $1.2 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Noninterest income decreased by $1.0 million to $2.8 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The increase in noninterest income was driven by an increase in service charges and fees for the three months ended 2024.

The decrease in noninterest income was driven by a decrease in SBA loan sales partially offset by an increase in service charges and fees for the nine months ended 2024.

Noninterest inc ome increased by $0.6 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The increase in noninterest income was mainly driven by higher service charges and fees for the quarter ended March 31, 2025.

Noninterest Expense

The following tables compare noninterest expense for the three and nine months ended September 30, 2024 and 2023:

The following table compares noninterest expense for the three months ended March 31, 2025 and 2024:

Three Months Ended

September 30, Change

(Dollars in thousands) 2024 2023 $ %

Salaries and employee benefits $ 6,223 $ 6,036 $ 187 3.1 %

Occupancy and equipment 2,334 2,146 188 8.8

Professional services 1,142 491 651 132.6

Data processing 851 741 110 14.8

Director fees 292 362 (70) (19.3)

FDIC insurance 853 1,026 (173) (16.9)

Marketing 73 184 (111) (60.3)

Other 1,097 1,219 (122) (10.0)

Total noninterest expense $ 12,865 $ 12,205 $ 660 5.4 %

Nine Months Ended

September 30, Change

March 31, Change

(Dollars in thousands) 2025 2024 $ %

8 unchanged sentences

Total noninterest expense $ 14,141 $ 13,297 $ 844 6.3 %

Noninterest expense increased by $0.7 million to $12.9 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Noninterest expense increased by $0.9 million to $38.4 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The increase in noninterest expense was primarily driven by an increase in professional services for the three and nine months ended September 30, 2024.

Income tax expense for the three months ended September 30, 2024 and 2023 totaled $0.8 million and $3.1 million, respectively.

The effective tax rates for the three months ended September 30, 2024 and 2023 were 29.0% and 23.9%, respectively.

Income tax expense for the nine months ended September 30, 2024 and 2023 totaled $2.5 million and $8.4 million, respectively.

The effective tax rates for the nine months ended September 30, 2024 and 2023 were 26.6% and 23.1%, respectively.

Noninterest expense increased by $0.8 million to $14.1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Income tax expense for the three months ended March 31, 2025 and 2024 totaled $2.1 million and $1.3 million, respectively.

The effective tax rates for the three months ended March 31, 2025 and 2024 were 23.2% and 26.0%, respectively.

Financial Condition

Assets totaled $3.2 billion at September 30, 2024 a decrease of $54.4 million or 1.7% compared to December 31, 2023.

Gross loans totaled $2.6 billion at September 30, 2024, a decrease of $95.4 million or 3.5% compared to December 31, 2023.

Deposits totaled $2.7 billion at September 30, 2024, a decrease of $48.6 million, or 1.8% compared to December 31, 2023.

Shareholders’ equity totaled $267.9 million as of September 30, 2024, an increase of $2.2 million compared to December 31, 2023, primarily a result of net income of $6.8 million for the nine months ended September 30, 2024.

The increase was partially offset by dividends paid of $4.7 million.

Assets totaled $3.2 billion at March 31, 2025 a decrease of $84.6 million or 2.6% compared to December 31, 2024.

Gross loans totaled $2.6 billion at March 31, 2025, a decrease of $61.0 million or 2.3% compared to December 31, 2024.

Deposits totaled $2.8 billion at March 31, 2025, a decrease of $37.1 million, or 1.3% compared to December 31, 2024.

Shareholders’ equity totaled $275.2 million as of March 31, 2025, an increase of $4.7 million compared to December 31, 2024, primarily a result of net income of $6.9 million for the three months ended March 31, 2025.

The increase was partially offset by dividends paid of $1.6 million and share repurchases of $0.9 million.

Loan Portfolio

2 unchanged sentences

Our loan portfolio is the largest category of our earning assets.

Total loans before deferred loan fees and the ACL-Loans were $2.6 billion at September 30, 2024 and $2.7 billion at December 31, 2023.

Total gross loans decreased $95.4 million as of September 30, 2024 compared to the year ended December 31, 2023.

Total loans before deferred loan fees and the ACL-Loans were $2.6 billion at March 31, 2025 and $2.7 billion at December 31, 2024.

Total gross loans decreased $61.0 million as of March 31, 2025 compared to the year ended December 31, 2024.

The following table compares the composition of our loan portfolio for the dates indicated:

(In thousands) At September 30, 2024 At December 31, 2023 Change

(In thousands) At March 31, 2025 At December 31, 2024 Change

Real estate loans:

6 unchanged sentences

Total loans $ 2,644,903 $ 2,705,888 $ (60,985)

The following table compares the composition of our commercial real estate loan portfolio by non-owner occupied and owner occupied loans at September 30, 2024 and December 31, 2023:

At September 30, 2024

At December 31, 2023

The following table compares the composition of our commercial real estate loan portfolio by non-owner occupied and owner occupied loans at March 31, 2025 and December 31, 2024:

At March 31, 2025

At December 31, 2024 Change

Total % Total % Total

5 unchanged sentences

$ 1,810,575 100.00 % $ 1,898,915 100.00 % $ (88,340)

(1) Excl udes the positive fair value effect of the portfolio layer swap of $1,200 thousand and the positive fair value effect of the portfolio layer swap of $742 thousand for Commercial Real Estate at September 30, 2024 and December 31, 2023, respectively.

The following table compares the composition of our commercial real estate loan portfolio by property type, and collateral location as of September 30, 2024:

(1) Excludes the positive fair value effect of the portfolio layer swap of $348 thousand and the positive fair value effect of the portfolio layer swap of $219 thousand for Commercial Real Estate at March 31, 2025 and December 31, 2024, respectively.

The following table compares the composition of our commercial real estate loan portfolio by property type, and collateral location as of March 31, 2025 :

Commercial Real Estate CT All Other NY NYC NJ FL OH PA All Other Total (1)

12 unchanged sentences

$ 484,791 $ 246,174 $ 214,054 $ 86,103 $ 314,830 $ 70,443 $ 82,135 $ 312,045 $ 1,810,575

(1) Excludes the positive fair value effect of the portfolio layer swap of $1,200 thousand for Commercial Real Estate at September 30, 2024.

(1) Excludes the positive fair value effect of the portfolio layer swap of $348 thousand for Comm ercial Real Estate at March 31, 2025 .

(2) Primarily consists of skilled nursing and assisted living facilities.

(3) Includes Special use, self storage, and land.

As of September 30, 2024, the Bank had $166.1 million of loans collateralized by offices, which represented 6.3% of the total loan portfolio.

As of March 31, 2025, the Bank had $160.4 million of loans collateralized by offices, which represented 8.9% of the total loan portfolio.

Most of the properties in this portfolio are in suburban locations.

96.6% of this portfolio was pass rated, and there were two relationships totaling $5.5 million on nonaccrual status.

As of September 30, 2024, we had $284.6 million of loans collateralized by multifamily properties, which represented 10.9% of the total loan portfolio.

These properties are all located in Connecticut, New York, Pennsylvania, or New Jersey, with nine properties, totaling $51.7 million, located in New York City.

We also performed an additional review of our multifamily exposure.

As of March 31, 2025, we had $253.6 million of loans collateralized by multifamily properties, which represented 9.6% of the total loan portfolio.

89.7% of the portfolio is pass rated and current.

These properties are all located in Connecticut, New York, New Jersey, or Pennsylvania, with eight properties, totaling $50.1 million, located in New York City.

78.3% of the New York City exposure is located in Brooklyn, 11.9% in Manhattan and the remaining 9.8% in Queens.

The following table presents an analysis of the commercial real estate portfolio's loan to value at origination and by property type as of September 30, 2024.

The following table presents an analysis of the commercial real estate portfolio's loan to value at origination and by property type as of March 31, 2025 .

Commercial Real Estate Total CRE Portfolio (1)

12 unchanged sentences

All other 66,865 3.7 54.8

62,964 3.3 62.1

Total $ 1,810,575 100.0 % 63.7 %

(1) Excludes the positive fair value effect of the portfolio layer swap of $1,200 thousand for Commercial Real Estate at September 30, 2024.

(1) Excludes the positive fair value effect of the portfolio layer swap of $348 thousand for Commercial Real Estate at March 31, 2025.

(2) Primarily consists of skilled nursing and assisted living facilities.

(3) Includes Special use, self storage, and land.

Asset Quality

14 unchanged sentences

The Company does not provide first or second consumer mortgage loans secured by residential properties but has a small legacy portfolio which continues to amortize, pay off due to the sale of the collateral, or refinance away from the Company.

Credit risk management involves a partnership between our relationship managers and our credit approval, portfolio management, credit administration and collections departments.

Disciplined underwriting, portfolio monitoring and early problem recognition are important aspects of maintaining our high credit quality standards and low levels of nonperforming assets since our inception in 2002.

Credit quality indicators.

To measure credit risk for the loan portfolios, the Company employs a credit risk rating system.

This risk rating represents an assessed level of a loan’s risk based on the character and creditworthiness of the borrower/guarantor, the capacity of the borrower to adequately service the debt, any credit enhancements or additional sources of repayment, and the quality, value and coverage of the collateral, if any.

The following table presents credit risk ratings as of March 31, 2025 and December 31, 2024:

Credit Risk Ratings

March 31, 2025

December 31, 2024

(In thousands)

Pass $ 2,453,117 $ 2,557,136

Special Mention (1)

163,158 93,214

Substandard 27,192 54,083

Doubtful 1,436 1,455

Total loans $ 2,644,903 $ 2,705,888

( 1) 99.4% and 99.6% of Risk Rated 6 loans are current on payments, 95.8% and 93.0% are guaranteed by ultra-high net worth sponsors as of March 31, 2025 and December 31, 2024, respectively.

Credit risk management involves a partnership between our relationship managers and our credit approval, portfolio management, credit administration and collections teams.

Disciplined underwriting, portfolio monitoring and early problem recognition are important aspects of maintaining our high credit quality standards.

Nonperforming assets .

1 unchanged sentence

The following table presents nonperforming assets and additional asset quality data for the dates indicated:

(In thousands) At September 30, 2024 At December 31, 2023

(In thousands) At March 31, 2025 At December 31, 2024

Nonaccrual loans:

12 unchanged sentences

Total past due loans to total gross loans 1.08 % 1.63 %

Nonperforming assets totale d $65.5 million and represented 2.07% of total assets at September 30, 2024, compared to $49.2 million and 1.53% of total assets at December 31, 2023.

Nonaccrual loans totaled $65.5 million at September 30, 2024 and $49.2 million at December 31, 2023.

Nonaccrual loans were $56.2 million as of June 30, 2024.

The increase in nonaccrual loans compared to June 30, 2024 was primarily due to a $27.1 million 1 commercial real estate multi-family loan that was placed on nonaccrual in the third quarter of 2024.

The increase was partially offset by two loans that were partially charged-off for a total of $15.4 million and two loans that were paid off totaling $4.7 million in the third quarter of 2024.

As of November 6, 2024, the Company has a signed agreement for the sale of this loan at par value.

As of September 30, 2024, this loan comprises 1.03% of the 2.50% nonperforming loans as a percentage of total loans.

There was no Other Real Estate Owned ("OREO") at September 30, 2024 or December 31, 2023.

We evaluate the adequacy of the ACL-Loans based on "forward looking" expected losses.

Management believes that the current ACL-Loans will be adequate to absorb credit losses on existing loans that may become uncollectible based on the evaluation of known and inherent risks in the loan portfolio.

The evaluation takes into consideration such factors as changes in the nature and size of the portfolio, overall portfolio quality and specific problem loans, and current economic conditions which may affect the borrowers’ ability to pay.

The evaluation also details historical losses by loan segment and the resulting credit loss rates which are projected for current loan total amounts.

Loss estimates for specified problem loans are also detailed.

All of the factors considered in the analysis of the adequacy of the ACL-Loans may be subject to change.

We estimate losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined.

Nonaccrual loans totaled $26.4 million at March 31, 2025 and $53.3 million at December 31, 2024.

During the first quarter of 2025, the Company sold a $27.1 million multifamily commercial real estate loan on nonperforming status at par value.

There was no Other Real Estate Owned ("OREO") at March 31, 2025 and $8.3 million of OREO at December 31, 2024.

During the first quarter of 2025, the Company sold a property that it had acquired during the fourth quarter of 2024 and held as an OREO asset.

The OREO asset had previously secured a non-performing construction loan.

The Company received net proceeds from the sale of such OREO in the amount of $8.2 million.

Allowance for Credit Losses - Loans ("ACL-Loans")

Our Board of Directors has adopted an Allowance for Credit Losses policy designed to provide management with a methodology for determining and documenting the allowance for credit losses for each reporting period.

We evaluate the adequacy of the ACL-Loans at least quarterly, and in determining our ACL-Loans, we estimate losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined.

The balance of our ACL-Loans is based on internally assigned risk classifications of loans, the Bank’s and peer banks’ historical loss experience, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates.

Our general practice is to identify problem credits early and recognize full or partial charge-offs as promptly as practicable when it is determined that it is probable that the loan will not be repaid according to its original contractual terms, including principal and interest.

Full or partial charge-offs on collateral dependent individually evaluated loans are recognized when the collateral is deemed to be insufficient to support the carrying value of the loan.

Full or partial charge-offs on collateral dependent loans are recognized when the collateral is deemed to be insufficient to support the carrying value of the loan.

We do not recognize a recovery when an updated appraisal indicates a subsequent increase in value of the collateral.

1 unchanged sentence

Charge-offs are recorded on a monthly basis, as incurred.

Partially charged-off loans continue to be evaluated on a monthly basis and additional charge-offs may be recorded on the remaining loan balance based on the same criteria.

Partially charged-off loans continue to be evaluated on a monthly basis and additional charge-offs or provisions for credit losses may be recorded on the remaining loan balance based on the same criteria.

The following table presents the activity in our ACL-Loans and related ratios for the dates indicated:

Three Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in thousands) 2025 2024

Balance at beginning of period $ 29,007 $ 27,946

CECL Day 1 Adjustment — — — 5,079

Balance at beginning of period-Adjusted 36,083 30,694 27,946 27,510

Residential real estate — (132)

2 unchanged sentences

Consumer (33) (49)

Construction (616) — (616) —

Total charge-offs (100) (3,684)

Residential real estate — — 141 —

Commercial real estate — —

1 unchanged sentence

Consumer 36 4

Construction — — — —

Total recoveries 40 31

Net (charge-offs) recoveries (60) (3,653)

Provision (credit) for credit losses - loans 6,516 (1,433) 18,582 2,179

Provision for credit losses - loans 538 3,698

Balance at end of period $ 29,485 $ 27,991

1 unchanged sentence

ACL-Loans to total gross loans 1.11 % 1.04 %

At September 30, 2024 , our ACL-Loans was $27.8 million and represented 1.06% of total gross loans, compared to $27.9 million, or 1.03% of total gross loans, at December 31, 2023.

At March 31, 2025 , our ACL-Loans was $29.5 million and represented 1.11% of total gross loans, compared to $29.0 million or 1.07% of total gross loans, at December 31, 2024.

The following table presents the allocation of the ACL-Loans balance and the related allocation percentage of these loans across the total loan portfolio:

At September 30, 2024 At December 31, 2023

(Dollars in thousands) ACL-Loans Amount ACL-Loan Percentage Loan Segment to Total Loans Percentage ACL-Loans ACL-Loan Percentage Loan Segment to Total Loans Percentage

At March 31, 2025 At December 31, 2024

(Dollars in thousands) ACL-Loans Amount ACL-Loans Percentage Loan Segment to Total Loans Percentage ACL-Loans Amount ACL-Loans Percentage Loan Segment to Total Loans Percentage

Residential real estate $ 87 0.3 % 1.5 % $ 94 0.3 % 1.6 %

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Total ACL-Loans $ 29,485 100.0 % 100.0 % $ 29,007 100.0 % 100.0 %

The allocation of the ACL-Loans at September 30, 2024 reflects our assessment of credit risk and probable loss within each portfolio.

We believe that the level of the ACL-Loans at September 30, 2024 is appropriate to cover probable losses.

The allocation of the ACL-Loans at March 31, 2025 reflects our assessment of credit risk and probable loss within each portfolio.

We believe that the level of the ACL-Loans at March 31, 2025 is appropriate to cover probable losses.

ACL- Unfunded Commitments

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Investment Securities

At September 30, 2024, the carrying value of our investment securities portfolio totaled $145.9 million and represented 4.6% of total assets, compared to $127.6 million, or 4.0% of total assets, at December 31, 2023.

The net unrealized loss position on our investment portfolio at September 30, 2024 was $2.4 million and included gross unrealized gains of $3.0 million.

At March 31, 2025, the carrying val ue of our investment securit ies portfolio totaled $136.0 million and represented 4.3% of total assets, compared to $146.1 million, or 4.5% of total assets, at December 31, 2024.

The net unrealized loss position on our investment portfolio at March 31, 2025 was $3.5 million and included gross unrealized gains of $1.4 million.

The net unrealized loss position on our investment portfolio at December 31, 2024 was $4.9 million and included gross unrealized gains of $1.3 million.

Deposit Activities and Other Sources of Funds

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

(Dollars in thousands) Amount Percent Amount Percent

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Total deposits $ 2,750,445 100.00 % $ 2,787,570 100.00 %

Total deposits were $2.7 billion at September 30, 2024, a decrease of $48.6 million, from the balance at December 31, 2023.

Brokered certificates of deposits totaled $730.6 million at September 30, 2024 and $860.5 million at December 31, 2023.

There were no certificates of deposits from national listing services at September 30, 2024 or December 31, 2023.

Brokered money market accounts totaled $52.9 million at September 30, 2024 and $91.4 million at December 31, 2023.

As of September 30, 2024, our FDIC insured deposits were $2.0 billion, or 75% of total deposits.

Additionally, $116.1 million of deposits, or 4% of total deposits, are insured by standby letters of credit with the Federal Home Loan Bank of Boston.

At September 30, 2024 and December 31, 2023, time deposits with a denomination of $100 thousand or more, including CDARS and brokered deposits, totaled $1.2 billion and $1.2 billion, respectively, maturing during the periods indicated in the table below:

(Dollars in thousands) September 30, 2024 December 31, 2023

Tota l deposits were $2.8 billion at March 31, 2025, a decrease of $37.1 million, fro m t he balance at December 31, 2024.

Brokered certificates of depo sits totaled $570.3 million at March 31, 2025 and $651.5 million at December 31, 2024, respectively.

Brokered money market accounts totaled $54.1 million at March 31, 2025 and $53.5 million at December 31, 2024, respectively.

Certificate of deposits from national listing services were $109.5 million and $109.1 million as of March 31, 2025 and December 31, 2024, respectively.

There were no one-way buy CDARS or one-way buy ICS at March 31, 2025 or December 31, 2024.

Brokered deposits are comprised of Brokered CDs, brokered money market accounts, one-way buy CDARS, and one-way buy ICS.

As of March 31, 2025, our FDIC insured deposits were $1,948.0 million, or 71% of total deposits.

Additionally, deposits totaling $118.6 million, or 4% of total deposits, are insured by standby letters of credit with the Federal Home Loan Bank of Boston.

At March 31, 2025 and December 31, 2024, time deposits with a denomination of $100 thousand or more, including CDARS and brokered deposits, totaled $1.1 billion and $1.2 billion, respectively, maturing during the periods indicated in the table below:

(Dollars in thousands) March 31, 2025 December 31, 2024

Within 3 months $ 402,272 $ 421,808

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We utilize advances from the Federal Home Loan Bank of Boston, or FHLB, as part of our overall funding strategy and to meet short-term liquidity needs, and to a lesser degree, manage interest rate risk arising from the difference in asset and liability maturities.

Total FHLB advances were $90.0 million at September 30, 2024 and December 31, 2023, respectively.

The Bank has additional borrowing capacity at the FHLB up to a certain percentage of the value of qualified collateral.

Total FHLB advances were $40.0 million and $90.0 million at March 31, 2025 and December 31, 2024, respectively.

The Bank has addition al borrowing capacity at the FHLB up to a certain percentage of the value of qualified collateral.

In accordance with agreements with the FHLB, the qualified collateral must be free and clear of liens, pledges and encumbrances.

At September 30, 2024, the Bank had pledged $762.8 million of eligi ble loans as collateral to support borrowing capacity at the FHLB of Boston.

As of September 30, 2024, the Bank had immediate availability to borrow an additional $280.0 million based on qualified collateral.

At September 30, 2024 , the Bank had a secured borrowing line with the FRB, a letter of credit with the FHLB, and unsecured lines of credit with Zions Bank, Pacific Coast Bankers Bank ("PCBB"), and Atlantic Community Bankers Bank ("ACBB").

The total borrowing line, letter, or line of credit and the amount outstanding at September 30, 2024 is summarized below:

September 30, 2024

At March 31, 2025, the Bank had pledged $816.4 million of eligible loans as collateral to support borrowing capacity at the

As of March 31, 2025, the Bank had immediate availability to borrow an additional $373.1 million from the FHLB based on qualified collateral.

At March 31, 2025 , the Bank had a secured borrowing line with the FRB, a letter of credit with the FHLB, and unsecured lines of credit with Zions Bank, Pacific Coast Bankers Bank ("PCBB"), and Atlantic Community Bankers Bank ("ACBB").

The total borrowing line, letter, or line of credit and the amount outstanding at March 31, 2025 is summarized below:

March 31, 2025

Total Letter or Line of Credit Total Outstanding

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Capital Resources

The increase was partially offset by dividends paid of $4.7 million.

The increase was partially offset by dividends paid of $1.6 million and share repurchases of $0.9 million.

The Bank and Company are subject to various regulatory capital requirements administered by the federal banking agencies.

Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.

At September 30, 2024, the Bank met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the regulatory framework for prompt corrective action.

At September 30, 2024, the Bank’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 11.80%, total capital to risk-weighted assets was 12.83%, Tier 1 capital to risk-weighted assets was 11.80% and Tier 1 capital to average assets was 10.24%.

At September 30, 2024, the Company met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under th e regulatory framework for prompt corrective action.

At September 30, 2024,

the Company’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 9.70%, total capital to risk-weighted assets was 13.26%, Tier 1 capital to risk-weighted assets was 9.70% and Tier 1 capital to average assets was 8.44%.

At March 31, 2025, the Bank met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the regulatory framework for prompt corrective action.

At March 31, 2025, the Bank’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 12.10%, total capital to risk-weighted assets was 12.10%, Tier 1 capital to risk-weighted assets was 13.21% and Tier 1 capital to average assets was 10.14%.

At March 31, 2025, the Company met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the regulatory framework for prompt corrective action.

At March 31, 2025, the Company’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 10.04%, total capital to risk-weighted assets was 10.04%, Tier 1 capital to risk-weighted assets was 13.70% and Tier 1 capital to average assets was 8.41%.

Under the current guidelines, banking organizations must have a minimum total risk-based capital ratio of 8.0%, a minimum Tier 1 risk-based capital ratio of 6.0%, a minimum common equity Tier 1 risk-based capital ratio of 4.5%, and a minimum leverage ratio of 4.0% in order to be "adequately capitalized." In addition to these requirements, banking organizations must maintain a capital conservation buffer consisting of common Tier 1 equity in an amount above the minimum risk-based capital requirements for “adequately capitalized” institutions equal to 2.5% of total risk-weighted assets, resulting in a requirement for the Company and the Bank to effectively maintain common equity Tier 1, Tier 1 and total capital ratios of 7.0%, 8.5% and 10.5%, respectively.

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Per Company policy, the Bank should not be outside these limits for twelve consecutive months unless the Bank's forecasted capital ratios are considered to be "well capitalized".

As of September 30, 2024, the Bank has met all minimum regulatory capital requirements to be considered "well capitalized".

The following tables set forth the estimated percentage change in our net interest income at risk over one-year simulation periods beginning September 30, 2024 and December 31, 2023:

As of March 31, 2025, the Bank has met all minimum regulatory capital requirements to be considered "well capitalized".

The following tables set forth the estimated percentage change in our net interest income at risk over one-year simulation periods beginning March 31, 2025 and December 31, 2024:

Parallel Ramp Estimated Percent Change in Net Interest Income

Rate Changes (basis points) September 30, 2024 December 31, 2023

Rate Changes (basis points) March 31, 2025 December 31, 2024

-100 (0.70) % 0.40 %

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Parallel Shock Estimated Percent Change in Net Interest Income

Rate Changes (basis points) September 30, 2024 December 31, 2023

Rate Changes (basis points) March 31, 2025 December 31, 2024

-100 (3.00) % (1.00) %

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+300 7.50 1.40

The net interest income at risk simulation results indicate that, as of September 30, 2024, we remain liability sensitive.

The net interest income at risk simulation results indicate that, as of March 31, 2025, we remain liability sensitive.

The liability sensitivity is due to the fact that there are more liabilities than assets subject to repricing as market rates change.

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Estimated Percent Change in Economic Value of Equity ("EVE")

Rate Changes (basis points) September 30, 2024 December 31, 2023

Rate Changes (basis points) March 31, 2025 December 31, 2024

-100 0.10 % 0.40 %

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Another significant simulation assumption is the sensitivity of core deposits to fluctuations in interest rates.

Income simulation results assume that changes in both core savings deposit rates and balances are related to changes in short-term interest rates.

Income simulation results assume that changes in both core savings

deposit rates and balances are related to changes in short-term interest rates.

Lastly, mortgage-backed securities and mortgage loans involve a level of risk that unforeseen changes in prepayment speeds may cause related cash flows to vary significantly in differing rate environments.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis