What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 188 added, 114 removed, 367 unchanged (45% of the section changed)

16 unchanged sentences

Executive Overview

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.

We are focused on being the banking provider of choice and serving 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.

Critical Accounting Policies and Estimates

4 unchanged sentences

Earnings and Performance Overview

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.

Revenues (net interest income plus noninterest income) for the three months ended June 30, 2025 were $25.9 million, versus $21.9 million for the three months ended June 30, 2024.

Revenues for the six months ended June 30, 2025 were $49.5 million, versus $44.0 million for the six months ended June 30, 2024.

The increase in revenues for the three and six months ended June 30, 2024 was attributable to a decrease in interest expense on deposits, higher interest income, and higher gains from loan sales.

Net income available to common shareholders was $9.1 million, or $1.15 per diluted share, and $1.1 million, or $0.14 per diluted share, for the three months ended June 30, 2025 and 2024, respectively.

Net income available to common shareholders was $16.0 million, or $2.03 per diluted share, and $4.9 million, or $0.62 per diluted share, for the six months ended June 30, 2025 and 2024, respectively.

The increase in net income for the quarter and six months ended June 30, 2025 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 June 30, 2025 were 12.98% and 1.14%, respectively, compared to 1.65% and 0.14%, respectively, for the three months ended June 30, 2024.

Returns on average shareholders' equity and average assets for the six months ended June 30, 2025 were 11.59% and 1.00%, respectively, compared to 3.61% and 0.31%, respectively, for the six months ended June 30, 2024.

Results of Operations

7 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 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.

FTE net interest income for the three months ended June 30, 2025 and 2024 was $24.1 million and $21.3 million, respectively.

FTE net interest income for the six months ended June 30, 2025 and 2024 was $46.3 million and $42.5 million, respectively.

FTE interest income for the three months ended June 30, 2025 increased by $1.0 million, or 2.2%, to $48.8 million, compared to FTE interest income for the three months ended June 30, 2024.

FTE interest income for the six months ended June 30, 2025 increased by $1.3 million, or 1.4%, to $97.4 million, compared to FTE interest income for the six months ended June 30, 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 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.

Interest expense for the three months ended June 30, 2025 decreased by $1.7 million compared to interest expense for the three months ended June 30, 2024.

Interest expense for the six months ended June 30, 2025 decreased by $2.5 million compared to interest expense for the six months ended June 30, 2024.

The decrease in interest expense for the three and six months ended June 30, 2025 was driven by a decrease in interest expense on deposits, resulting from a decrease in rates on interest bearing deposits and improved deposit mix.

Distribution of Assets, Liabilities and Shareholders’ Equity;

Interest Rates and Interest Differential

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.

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 six months ended June 30, 2025 and 2024.

For the Quarter Ended

March 31, 2025 March 31, 2024

June 30, 2025 June 30, 2024

Balance Interest Yield/

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

(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.

(2) The adjustment for securities and loans taxable eq uivalen cy amounted to $143 thousand and $67 thousand for the three months ended June 30, 2025 and 2024, 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 Six Months Ended

June 30, 2025 June 30, 2024

Balance Interest Yield/

Cash and Fed funds sold $ 322,498 $ 6,600 4.13 % $ 282,981 $ 7,255 5.16 %

Securities (1)

150,059 3,011 4.01 136,049 2,199 3.23

Commercial real estate 1,818,282 55,710 6.09 1,911,896 56,295 5.82

Residential real estate 39,544 1,230 6.22 49,624 1,490 6.01

Construction 187,674 7,320 7.76 160,080 5,844 7.22

Commercial business 533,310 21,204 7.91 520,188 21,314 8.10

Consumer 76,784 2,139 5.62 41,150 1,442 7.05

Total loans 2,655,594 87,603 6.56 2,682,938 86,385 6.37

Federal Home Loan Bank stock 4,799 196 8.21 5,678 239 8.49

Total earning assets 3,132,950 $ 97,410 6.18 % 3,107,646 $ 96,078 6.12 %

Other assets 89,353 93,179

Total assets $ 3,222,303 $ 3,200,825

Liabilities and shareholders' equity:

Interest bearing liabilities:

NOW $ 103,675 $ 187 0.36 % $ 99,493 $ 88 0.18 %

Money market 896,084 17,100 3.85 858,670 17,698 4.14

Savings 89,800 1,325 2.98 91,979 1,402 3.06

Time 1,325,630 29,243 4.45 1,304,332 30,851 4.76

Total interest bearing deposits 2,415,189 47,855 4.00 2,354,474 50,039 4.27

Borrowed Money 136,161 3,269 4.84 159,257 3,555 4.49

Total interest bearing liabilities 2,551,350 $ 51,124 4.04 % 2,513,731 $ 53,594 4.29 %

Noninterest bearing deposits 343,261 352,768

Other liabilities 49,752 62,775

Total liabilities 2,944,363 2,929,274

Shareholders' equity 277,940 271,551

Total liabilities and shareholders' equity $ 3,222,303 $ 3,200,825

Net interest income (2)

$ 46,286 $ 42,484

Interest rate spread 2.14 % 1.83 %

Net interest margin (3)

2.95 % 2.73 %

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

(2) The adjustment for securities and loans taxable equivalency amounted to $285 thousand and $118 thousand for the six months ended June 30, 2025 and 2024, 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.

Effect of changes in interest rates and volume of average earning assets and average interest bearing liabilities

5 unchanged sentences

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

March 31, 2025 vs 2024

Three Months Ended June 30, 2025 vs 2024

Increase (Decrease) Six Months Ended

June 30, 2025 vs 2024

Increase (Decrease)

(In thousands) Volume Rate Total

(In thousands) Volume Rate Total Volume Rate Total

Interest and dividend income:

10 unchanged sentences

Interest expense:

NOW — 28 28 4 95 99

Money market 647 (620) 27 752 (1,351) (599)

5 unchanged sentences

Change in net interest income $ 180 $ 2,613 $ 2,793 $ (31) $ 3,833 $ 3,802

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.

(Credit) Provision for Credit Losses

The (credit) 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, local 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.

The credit for credit losses for the three months ended June 30, 2025 was $0.4 million compared to a provision for credit losses of $8.2 million for the three months ended June 30, 2024.

The provision for credit losses for the six months ended June 30, 2025 was $0.1 million compared to a provision for credit losses of $11.9 million for the six months ended June 30, 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 table compares noninterest income for the three months ended March 31, 2025 and 2024:

The following tables compare noninterest income for the three and six months ended June 30, 2025 and 2024:

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2025 2024 $ %

Gains and fees from sales of loans $ 442 $ 321 $ 121 37.7 %

Gains and fees from sales of loans $ 1,080 $ 45 $ 1,035 Favorable

Bank-owned life insurance 352 333 19 5.7

1 unchanged sentence

Other (94) (190) 96 Favorable

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

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.

Total noninterest income $ 2,012 $ 683 $ 1,329 Favorable

Six Months Ended

June 30, Change

(Dollars in thousands) 2025 2024 $ %

Gains and fees from sales of loans $ 1,522 $ 366 $ 1,156 Favorable

Bank-owned life insurance 696 662 34 5.1

Service charges and fees 1,276 799 477 59.7

Other 23 (229) 252 Favorable

Total noninterest income $ 3,517 $ 1,598 $ 1,919 Favorable

Noninterest income increased by $1.3 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Noninterest income increased by $1.9 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

The increase in noninterest income for the three and six months ended June 30, 2025 was driven by higher gains from loan sales.

Noninterest Expense

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

The following tables compare noninterest expense for the three and six months ended June 30, 2025 and 2024:

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2025 2024 $ %

8 unchanged sentences

Total noninterest expense $ 14,546 $ 12,245 $ 2,301 18.8 %

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.

Six Months Ended

June 30, Change

(Dollars in thousands) 2025 2024 $ %

Salaries and employee benefits $ 14,573 $ 12,467 $ 2,106 16.9 %

Occupancy and equipment 5,080 4,561 519 11.4

Professional services 3,161 2,054 1,107 53.9

Data processing 1,597 1,495 102 6.8

Director fees 681 1,206 (525) (43.5)

FDIC insurance 1,463 1,635 (172) (10.5)

Marketing 360 203 157 77.3

Other 1,772 1,921 (149) (7.8)

Total noninterest expense $ 28,687 $ 25,542 $ 3,145 12.3 %

Noninterest expense increased by $2.3 million to $14.5 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Noninterest expense increased by $3.1 million to $28.7 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

The increase in noninterest expense was primarily driven by an increase in salaries and employee benefits mainly related to additional new hires.

Additionally, professional services increased as a result of new initiatives including recruiting costs.

Income tax expense for the three months ended June 30, 2025 and 2024 totaled $2.7 million and $0.4 million, respectively.

The effective tax rates for the three months ended June 30, 2025 and 2024 were 23.1% and 24.2%, respectively.

Income tax expense for the six months ended June 30, 2025 and 2024 totaled $4.8 million and $1.7 million, respectively.

The effective tax rates for the six months ended June 30, 2025 and 2024 were 23.1% and 25.5%, respectively.

Financial Condition

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.

Assets totaled $3.2 billion at June 30, 2025 a decrease of $31.9 million or 1.0% compared to December 31, 2024.

Gross loans totaled $2.7 billion at June 30, 2025, a decrease of $36.9 million or 1.4% compared to December 31, 2024.

Deposits totaled $2.8 billion at June 30, 2025, a decrease of $28.3 million, or 1.0% compared to December 31, 2024.

Shareholders’ equity totaled $283.3 million as of June 30, 2025, an increase of $1.2 million compared to December 31, 2024, primarily a result of net income of $16.0 million for the six months ended June 30, 2025.

The increase was partially offset by dividends paid of $3.1 million and share repurchases of $1.3 million.

3 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 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.

Total loans before deferred loan fees and the ACL-Loans were $2.7 billion at June 30, 2025 and $2.7 billion at December 31, 2024.

Total gross loans decreased $36.9 million as of June 30, 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 March 31, 2025 At December 31, 2024 Change

(In thousands) At June 30, 2025

At December 31, 2024

Real estate loans:

6 unchanged sentences

Total loans $ 2,668,982 $ 2,705,888 $ (36,906)

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

The following table compares the composition of our commercial real estate loan portfolio by non-owner occupied and owner occupied loans at June 30, 2025 and December 31, 2024:

At June 30, 2025

At December 31, 2024

Total % Total % Total

5 unchanged sentences

$ 1,802,014 100.00 % $ 1,898,915 100.00 % $ (96,901)

(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)

(1) Excludes the positive fair value effect of the portfolio layer swap of $210 thousand and the positive fair value effective of the portfolio layer swap of $219 thousand for Commercial Real Estate at June 30, 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 June 30, 2025 :

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

(Dollars in thousands)

11 unchanged sentences

$ 460,687 $ 256,267 $ 213,200 $ 75,726 $ 265,605 $ 79,855 $ 72,497 $ 378,177 $ 1,802,014

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

(1) Excludes the positive fair value effect of the portfolio layer swap of $210 thousand for Commercial Real Estate at June 30, 2025.

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

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

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.

As of June 30, 2025, the Bank had $149.7 million of loans collateralized by offices, which represented 8.3% 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.

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.

95.2% of this portfolio was pass rated, and there was one relationship totaling $5.5 million on nonaccrual status.

As of June 30, 2025, the Bank had $244.8 million of loans collateralized by multifamily properties, which represented 9.2% of the total loan portfolio.

89.0% of this portfolio is pass rated and current;

these properties are all located in Connecticut, New York, or New Jersey, with eight properties, totaling $50.0 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 March 31, 2025 .

The following table presents an analysis of the commercial real estate portfolio's loan to value at origination and by property type as of June 30, 2025 .

Commercial Real Estate Total CRE Portfolio (1)

13 unchanged sentences

Total $ 1,802,014 100.0 % 63.3 %

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

(1) Excludes the positive fair value effect of the portfolio layer swap of $210 thousand for Commercial Real Estate at June 30, 2025.

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

18 unchanged sentences

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:

The following table presents credit risk ratings as of June 30, 2025 and December 31, 2024:

Credit Risk Ratings

March 31, 2025

June 30, 2025

December 31, 2024

6 unchanged sentences

Total loans $ 2,668,982 $ 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.

(1) 99.6% and 99.6% of Risk Rated 6 loans are current on payments, 96.5% and 93.0% are guaranteed by ultra-high net worth sponsors as of June 30, 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.

3 unchanged sentences

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

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

(In thousands) At June 30, 2025

At December 31, 2024

Nonaccrual loans:

8 unchanged sentences

Nonperforming assets to total assets 0.78 % 1.88 %

Nonaccrual loans to total gross loans 1.00 % 1.97 %

Nonaccrual loans to total loans 0.89 % 1.97 %

ACL-loans as a % of total loans 1.10 % 1.07 %

ACL-loans as a % of nonperforming loans 122.54 % 54.45 %

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

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.

Total past due loans to total loans 0.91 % 1.63 %

Nonaccrual loans totaled $23.9 million at June 30, 2025 and $53.3 million at December 31, 2024.

In 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 $1.3 million Other Real Estate Owned ("OREO") at June 30, 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.

1 unchanged sentence

The Company received net proceeds from the sale of such OREO in the amount of $8.3 million.

In the second quarter of 2025, the Company took title to an industrial property, resulting in an OREO asset of $1.3 million.

Efforts to market the property for sale are ongoing.

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

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(Dollars in thousands) 2025 2024 2025 2024

5 unchanged sentences

Total charge-offs (20) (543) (120) (4,227)

Residential real estate — 141 — 141

Commercial real estate — 113 — 113

2 unchanged sentences

Total recoveries 122 267 162 298

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

Provision for credit losses - loans 538 3,698

Net recoveries (charge-offs) 102 (276) 42 (3,929)

(Credit) provision for credit losses - loans (331) 8,368 207 12,066

Balance at end of period $ 29,256 $ 36,083 $ 29,256 $ 36,083

Net charge-offs to average loans — % 0.01 % — % 0.15 %

ACL-Loans to total gross loans 1.11 % 1.04 %

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.

ACL-Loans to total loans 1.10 % 1.36 % 1.10 % 1.36 %

At June 30, 2025, our ACL-Loans was $29.3 million and represented 1.10% 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 March 31, 2025 At December 31, 2024

June 30, 2025

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

5 unchanged sentences

Total ACL-Loans $ 29,256 100.0 % 100.0 % $ 29,007 100.0 % 100.0 %

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.

The allocation of the ACL-Loans at June 30, 2025 reflects our assessment of credit risk and probable loss within each portfolio.

We believe that the level of the ACL-Loans at June 30, 2025 is appropriate to cover probable losses.

ACL- Unfunded Commitments

3 unchanged sentences

Investment Securities

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.

At June 30, 2025, the carrying value of our investment securities portfolio totaled $142.6 million and represented 4.4% 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 June 30, 2025 was $1.8 million and included gross unrealized gains of $1.8 million.

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

Deposit Activities and Other Sources of Funds

March 31, 2025 December 31, 2024

June 30, 2025

December 31, 2024

(Dollars in thousands) Amount Percent Amount Percent

5 unchanged sentences

Total deposits $ 2,759,281 100.0 % $ 2,787,570 100.0 %

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.

Total deposits were $2.8 billion at June 30, 2025, a decrease of $28.3 million, from the balance at December 31, 2024.

Brokered certificates of depo sits to taled $570.2 million at June 30, 2025 and $651.5 million at December 31, 2024, respectively.

Brokered money market accounts totaled $53.7 million a t June 30, 2025 and $53.5 million at December 31, 2024, respectively.

Certificates of deposits from national listing services were $68.4 million and $109.1 million as of June 30, 2025 and December 31, 2024, respectively.

There were no one-way buy CDARS or one-way buy ICS at June 30, 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

As of June 30, 2025, our FDIC insured deposits were $1,903.8 million, or 69% of total deposits.

Additionally, deposits totaling $120.0 million, or 4% of total d eposits, are secured by standby letters of credit with the Federal Home Loan Bank of Boston.

At June 30, 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) June 30, 2025

December 31, 2024

Within 3 months $ 307,865 $ 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 $40.0 million and $90.0 million at March 31, 2025 and December 31, 2024, respectively.

Total FHLB advances w ere $75.0 million and $90.0 million June 30, 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 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

At June 30, 2025, the Bank had pledged $795.0 million of eligible loans as collateral to support borrowing capacity at the FHLB.

As of June 30, 2025, the Bank had immediate availability to borrow an additional $329.6 million fro m the FHLB based on qualified collateral.

At June 30, 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 June 30, 2025 is summarized below:

June 30, 2025

Total Letter or Line of Credit Total Outstanding

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Capital Resources

Shareholders’ equity totaled $283.3 million as of June 30, 2025, an increase of $12.8 million compared to December 31, 2024, primarily a result of net income of $16.0 million for the six months ended June 30, 2025.

The increase was partially offset by dividends paid of $3.1 million and share repurchases of $1.3 million.

1 unchanged sentence

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 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.

At June 30, 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 June 30, 2025, the Bank’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 12.20%, total capital to risk-weighted assets was 12.20%, Tier 1 capital to risk-weighted assets was 13.28% and Tier 1 capital to average assets was 10.57%.

At June 30, 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 June 30, 2025, the Company’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 10.18%, total capital to risk-weighted assets was 10.18%, Tier 1 capital to risk-weighted assets was 13.78% and Tier 1 capital to average assets was 8.81%.

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.

The Company and the Bank must maintain the capital conservation buffer to avoid restrictions on the ability to pay dividends, pay discretionary bonuses, or to engage in share repurchases.

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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 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:

As of June 30, 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 June 30, 2025 and December 31, 2024:

Parallel Ramp Estimated Percent Change in Net Interest Income

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

Rate Changes (basis points) June 30, 2025 December 31, 2024

-100 (1.10) % 0.40 %

1 unchanged sentence

Parallel Shock Estimated Percent Change in Net Interest Income

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

Rate Changes (basis points) June 30, 2025 December 31, 2024

-100 (3.90) % (1.00) %

2 unchanged sentences

+300 10.70 1.40

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

The net interest income at risk simulation results indicate that, as of June 30, 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.

10 unchanged sentences

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

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

Rate Changes (basis points) June 30, 2025 December 31, 2024

-100 (0.30) % 0.40 %

14 unchanged sentences

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