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Item 1A. Risk Factors

2026-03-13 compared with 2025-03-14 · 104 added, 37 removed, 489 unchanged (22% of the section changed)

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Summary of Risk Factors

● Our one- to four- family residential mortgage lending and certain niche loan products could expose us to credit risks that may be different than would apply to a more diversified or traditional loan portfolio.

● Our business and operations are concentrated in the New York metropolitan area, and we are sensitive to adverse changes in the local economy.

● We are subject to the various risks associated with our banking business and operations, including, among others, credit, market, liquidity, interest rate and compliance risks, which may have an adverse effect on our business, financial condition and results of operations if we are unable to manage such risks.

● SBA and other government guaranteed lending programs are an increasingly important part of our business, and changes to SBA or other government guaranteed lending programs, including funding for such programs, or the rules governing such programs or other government guaranteed lending programs, may adversely affect our profitability.

In addition, we may incur greater risk on our SBA and other government guaranteed lending as we seek to expand our guaranteed lending activities outside of our primary market area.

● We have begun offering banking services to businesses in the state licensed cannabis industry, and this could expose us to liabilities and regulatory compliance costs.

● Our liquidity and capital needs, particularly given our growth strategy, may suffer if not managed effectively or if capital is not available on terms acceptable to us.

● Our ability to sustain growth will diminish if we are unable to continue to make commercially attractive acquisitions, or if we are unable to realize the benefits of prior or future acquisitions in a reasonable timeframe.

● We operate in a highly competitive market and face increasing competition from traditional and new financial services providers.

● We are dependent on key personnel and the unexpected loss of their services, or if we are unable to attract new personnel as we execute our growth strategy, will adversely impact our financial condition.

● We operate in a highly regulated industry, and the current regulatory framework and any future legislative and regulatory changes, may have an adverse effect on our business, financial condition and results of operations.

● We are subject to risks associated with our dependency on our information technology and telecommunications systems and third-party servicers including exposures to systems failures, interruptions or breaches of security.

● Due to the limited public float and trading volume of our stock, our stock price may be volatile, which could result in substantial losses for investors.

● Anti-takeover provisions in our charter and under New York and Federal law could limit certain shareholder actions.

Economic, Market and Investment Risks:

Inflationary pressures and rising prices may affect our results of operations and financial condition.

Inflation rose sharply at the end of 2021 and remained at an elevated level through 2024.

If we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, we may experience a material adverse effect on our financial condition and results of operations.

A substantial portion of our business is in the New York metro area;

therefore, our business is particularly vulnerable to an economic downturn in our primary market area.

The performance of our New York multifamily real estate loans could be adversely impacted by regulation.

We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability.

We engage in lending secured by real estate and may be forced to foreclose on the collateral, subjecting us to the costs and potential risks associated with the ownership of the real property.

Other aspects of our business may be adversely affected by unfavorable economic, market, and political conditions.

Lending Activities Risks:

Our SBA lending program is dependent upon the U.S.

federal government, and we face specific risks associated with originating SBA loans.

The non-guaranteed portion of SBA loans that we retain could expose us to various credit and default risks.

We have expanded the geographic scope of our SBA, and other government guaranteed lending, and this may expose us to greater and additional risks than lending in our primary trade area.

The recognition of gains on the sale of loans and servicing asset valuations reflect certain assumptions.

Imposition of limits by bank regulators on CRE lending activities could adversely affect our earnings.

The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans which may be considered less liquid and riskier.

Interest rate shifts may reduce net interest income.

Credit Risks:

We may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses.

Our emphasis on one- to four- family residential mortgage loans could adversely affect our financial condition.

Our niche lending products may expose us to greater risk than traditional lending products.

The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans.

Our allowance for credit losses may not be adequate to cover actual losses.

If our non-performing assets increase, our earnings will be adversely affected.

We are dependent on the use of data and modeling in our management’s decision-making, and faulty data or modeling approaches could negatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future.

Liquidity Risks:

If we do not manage our liquidity effectively, our business could suffer.

Our growth strategy may require us to raise additional capital in the future to fund such growth, and the unavailability of additional capital on terms acceptable to us could adversely affect us or our growth.

Municipal deposits are an important source of funds for us and a reduced level of such deposits may hurt our profits.

Strategic Risks:

If we do not effectively execute our strategic plans, our business and results of operations may be negatively affected.

Any failure by us to manage acquisitions and other significant transactions successfully may have a material adverse effect on our results of operations, financial condition, and cash flows.

We have grown and may continue to grow through acquisitions.

Attractive acquisition opportunities may not be available to us in the future.

Competition Risks:

Competition in originating loans and attracting deposits may adversely affect our profitability.

We need to invest in innovation, and the inability or failure to do so may affect our business and earnings negatively.

Key Personnel Risks:

We rely heavily on our executive management team and other key personnel for our successful operation, and we could be adversely affected by the unexpected loss of their services.

If we are not able to attract, retain and motivate other key personnel, our business could be negatively affected.

Regulatory and Compliance Risks:

We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us and our future growth.

Federal and State banking agencies periodically conduct examinations of our business and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations could adversely affect us.

Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations.

Increases in FDIC insurance premiums could adversely affect our earnings and results of operations.

Changes in tax laws and regulations, or changes in the interpretation of existing tax laws and regulations, may have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions.

Financial institutions, such as the Bank, face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

We are subject to numerous laws and regulations of certain regulatory agencies, and failure to comply with these laws could lead to a wide variety of sanctions.

The FRB may require us to commit capital resources to support the Bank, and we may not have sufficient access to such capital resources.

Our deposit services for businesses in the state licensed cannabis industry could expose us to liabilities and regulatory compliance costs.

Technology Risks:

Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation.

We have a continuing need for technological change, and we may not have the resources to implement new technology effectively, or we may experience operational challenges when implementing new technology or technology needed to compete effectively with larger institutions may not be available to us on a cost-effective basis.

Operational Risks:

Many types of operational risks can affect our earnings negatively.

Our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

We are subject to certain operational risks, including, but not limited to, customer, employee or third-party fraud and data processing system failures and errors.

We may be subject to environmental liabilities in connection with the real properties we own and the foreclosure on real estate assets securing our loan portfolio.

Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations.

Pandemics, natural disasters, global climate change, acts of terrorism and global conflicts may have a negative impact on our business and operations.

Legal and regulatory proceedings and related matters could adversely affect us.

Societal responses to climate change could adversely affect our business and performance.

Common Stock and Trading Risks:

The price of our common stock could be volatile.

The holders of our existing and future debt obligations will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest.

Our dividend policy may change without notice and our future ability to pay dividends is subject to restrictions.

The inability to receive dividends from our subsidiary bank could impact our ability to maintain or increase the current level of cash dividends we pay to our stockholders.

ECONOMIC, MARKET AND INVESTMENT RISKS

Inflationary pressures and rising prices may affect our results of operations and financial condition.

Inflation rose sharply at the end of 2021 and remained at a slightly elevated level through 2025.

Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.

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Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff.

Accordingly, as a part of our liquidity management, we must use a number of funding sources in addition to deposits and repayments and maturities of loans and investments, which may include Federal Home Loan Bank of New York advances, Federal Reserve Bank of New York’s discount window advances, federal funds purchased and brokered certificates of deposit.

Accordingly, as a part of our liquidity management, we must use a number of funding sources in addition to deposits and repayments and maturities of loans and investments, which may include Federal Home Loan Bank of New York advances, Federal Reserve Bank of New York discount window advances, federal funds purchased and brokered certificates of deposit.

Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources.

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If alternative funding sources were no longer available to us, we may need to sell a portion of our investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets.

As of December 31, 2024, we had a net unrealized loss of $1.3 million on our available for-sale investment securities portfolio as a result of the higher interest rate environment.

As of December 31, 2025, we had a net unrealized loss of $0.3 million on our available for-sale investment securities portfolio.

Our investment securities totaled $100.6 million, or 4.2% of total assets, at December 31, 2025.

The details of this portfolio are included in Note 2 to the consolidated financial statements.

A substantial portion of our business is in the New York metro area, therefore, our business is particularly vulnerable to an economic downturn in our primary market area.

A substantial portion of our business is in the New York metro area;

therefore, our business is particularly vulnerable to an economic downturn in our primary market area.

We primarily serve businesses, municipalities and individuals located in the New York metro area.

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In addition, the market value of the real estate securing loans as collateral could be adversely affected by unfavorable changes in market and economic conditions.

As of December 31, 2024, 67% of our commercial real estate loan portfolio was secured by real estate located in the five boroughs of New York City and Nassau County, New York.

As of December 31, 2025, 94% of our commercial real estate loan portfolio was secured by real estate located in the New York metro area.

Adverse developments affecting commerce or real estate values in the local economies in our primary market areas could increase the credit risk associated with our loan portfolio and have an adverse impact on our revenues and financial condition.

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A prolonged economic downturn which adversely effects tax revenues or other governmental funding sources could have an adverse impact on our ability to gather cost efficient deposits, and fund our loans and other investments, thereby adversely affecting our results of operations.

The performance of our New York multifamily real estate loans could be adversely impacted by regulation.

At December 31, 2025, our total multifamily rent regulated exposure in New York was approximately $175.9 million, or 9%, of our total loan portfolio.

New York has enacted legislation increasing the restrictions on rent increases in a rent-regulated apartment building, including, among other provisions, (i) repealing the vacancy bonus and longevity bonus, which allowed a property owner to raise rents as much as 20 percent each time a rental unit became vacant, (ii) eliminating high rent vacancy deregulation and high-income deregulation, which allowed a rental unit to be removed from rent stabilization once it crossed a statutory high-rent threshold and became vacant, or the tenant’s income exceeded the statutory amount in the preceding two years, and (iii) eliminating an exception that allowed a property owner who offered preferential rents to tenants to raise the rent to the full legal rent upon renewal.

This legislation generally limits a landlord’s ability to increase rents on rent-regulated apartments and makes it more difficult to convert rent regulated apartments to market rate apartments.

As a result, the value of the collateral located in New York State securing our multi-family loans or the future net operating income of such properties could potentially become impaired which, in turn, could have a material adverse effect on our financial condition and results of operations.

We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability.

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Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property, in which case we would be exposed to the risks inherent in the ownership of real estate.

Although we held no OREO properties at December 31, 2024, it is possible that in future periods we may take title to OREO properties in the event of defaults on outstanding loans.

The amount that we, as a mortgagee, may realize after a default depends on factors outside of our control, including, but not limited to, general or local economic conditions, environmental cleanup liabilities, assessments, interest rates, real estate tax rates, operating expenses of the mortgaged properties, our ability to obtain and maintain adequate occupancy of the properties, zoning laws, governmental and regulatory rules, and natural disasters.

Our inability to manage the amount of costs or size of the risks associated with the ownership of real estate, or writedowns in the value of OREO, could have an adverse effect on our business, financial condition and results of operations.

Our inability to manage the amount of costs or size of the risks associated with the ownership of real estate, or write-downs in the value of OREO, could have an adverse effect on our business, financial condition and results of operations.

Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time and expense associated with the foreclosure process or prevent us from foreclosing at all.

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In addition, if repurchase and indemnity demands increase on loans that we sell from our portfolio, our liquidity, results of operations and financial condition could be adversely affected.

We are expanding the geographic scope of our SBA, and other government guaranteed lending, and this may expose us to greater and additional risks than lending in our primary trade area.

We have expanded the geographic scope of our SBA, and other government guaranteed lending, and this may expose us to greater and additional risks than lending in our primary trade area.

Historically, our SBA and other government guaranteed lending has been to customers, and secured by collateral, located primarily on our metropolitan New York trade area.

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Imposition of limits by bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings.

In 2006, the OCC, the FDIC, and the FRB, or collectively, the Agencies, issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices,” or the “CRE Guidance.” Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure will receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.

Our commercial real estate and multi-family loans balance have decreased 4% combined for the year ended December 31, 2024 and commercial real estate loans represent 385% of our risk-based capital at December 31, 2024, a decrease from 432% at December 31, 2023 and 448% at September 30, 2023.

In 2006, the OCC, the FDIC, and the FRB (collectively, the “Agencies”) issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices,” or the “CRE Guidance.” Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure will receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.

Our commercial real estate and multifamily loans balance have decreased 3% in the aggregate for the year ended December 31, 2025 and commercial real estate loans represent 360% of our risk-based capital at December 31, 2025, a decrease from 385% at December 31, 2024.

In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending, or the “2015 Statement.” In the 2015 Statement, the Agencies, among other things, indicated the intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward.

If the FDIC, our primary federal regulator, were to impose restrictions on the amount of such loans we can hold in our portfolio or require us to implement additional compliance measures, for reasons noted above or otherwise, our earnings could be adversely affected as would our earnings per share.

The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans which may be considered less liquid and more risky.

The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans which may be considered less liquid and riskier.

The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans, which are typically considered to have a higher degree of risk and are less liquid than conforming residential mortgage loans.

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As of December 31, 2025, we had $777.0 million in one- to four- family residential mortgage loans, representing 39% of our total loan portfolio.

Approximately 91% of these loans are secured by properties in the five boroughs of New York City and Nassau County, New York and 66% of these loans are rental properties and are not owner-occupied.

Approximately 96% of these loans are secured by properties in the five boroughs of New York City, Nassau County and Suffolk County, New York and 64% of these loans are rental properties and are not owner-occupied.

These loans expose us to credit risks that may be different from those related to loans secured by owner-occupied properties or commercial loans.

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Non-qualified mortgage loans are considered to have a higher degree of risk and are less liquid than qualified mortgage loans.

For the year ended December 31, 2024 and fiscal year ended September 30, 2023, we originated $130.4 million and $196.0 million in non-qualified mortgage loans, respectively.

During the year ended December 31, 2024 we sold into the secondary market $37.6 million of our non-qualified mortgages.

There were no such sales for the fiscal year ended September 30, 2023.

For the years ended December 31, 2025 and 2024, we originated $246.4 million and $130.4 million in non-qualified mortgage loans, respectively.

During the years ended December 31, 2025 and 2024 we sold into the secondary market $92.3 million and $37.6 million, respectively of our non-qualified mortgages.

Although we have developed underwriting standards and procedures designed to reduce the risk of loss, we can provide no assurance that these standards and procedures will be effective in reducing losses.

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Our allowance for credit losses may not be adequate to cover actual losses.

We maintain an allowance for credit losses that represents management’s judgment of expected credit losses and risks inherent in our loan portfolio.

We maintain an allowance for credit losses which represents management’s judgment of expected credit losses and risks inherent in our loan portfolio.

As of December 31, 2025, our allowance for credit losses totaled $18.7 million, which represented approximately 0.93% of our total loans held for investment.

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If our non-performing assets increase, our earnings will be adversely affected.

At December 31, 2024, our non-performing assets, which consist of non-performing loans and OREO (of which we had none at December 31, 2024), were $16.4 million, or 0.71% of total assets.

At December 31, 2025, our non-performing assets, which consist of non-performing loans and OREO, were $22.3 million, or 0.93% of total assets.

Our non-performing assets adversely affect our net income in various ways:

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Such events could have a material adverse effect on our business, financial condition and results of operations.

Municipal deposits are an important source of funds for us and a reduced level of such deposits may hurt our profits.

Municipal deposits are an important source of funds for our lending and investment activities.

At December 31, 2025, $700.7 million, or 34.5%, of our total deposits were comprised of municipal deposits, including public funds deposits from local government entities primarily domiciled in the State of New York.

Given our use of these high-average balance municipal deposits as a source of funds, our inability to retain such funds could have an adverse effect on our liquidity.

In addition, our municipal deposits are primarily demand deposit accounts or short-term deposits and therefore are more sensitive to changes in interest rates.

If we are forced to pay higher rates on our municipal deposits to retain those funds, or if we are unable to retain those funds and we are forced to turn to borrowing sources for our lending and investment activities, the interest expense associated with such borrowings may be higher than the rates we are paying on our municipal deposits, which could adversely affect our net income.

STRATEGIC RISKS

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We rely heavily on our executive management team and other key personnel for our successful operation, and we could be adversely affected by the unexpected loss of their services.

Our success depends in large part on the performance of our key personnel at the Bank that have substantial experience and tenure with the Bank and in the markets that we serve.

Our success depends in large part on the performance of our key personnel at the Bank, who have substantial experience and tenure with the Bank and in the markets that we serve.

Our continued success and growth depend in large part on the efforts of these key personnel, the support of our Directors, and ability to attract, motivate and retain highly qualified senior and middle management and other skilled employees to complement and succeed to our core senior management team.

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Any change in tax laws or regulations, or new interpretation of an existing law or regulation, could significantly alter the tax impact on our financial results.

The net deferred tax asset reported on our balance sheet generally represents the tax benefit of future deductions from taxable income for items that have already been recognized for financial reporting purposes.

The bulk of these deferred tax assets consists of deferred loan loss deductions and deferred compensation deductions.

The net deferred tax asset is measured by applying currently enacted income tax rates to the accounting period during which the tax benefit is expected to be realized.

As of December 31, 2024, our net deferred tax asset was $1.6 million.

Failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions.

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Pandemics, natural disasters, global climate change, acts of terrorism and global conflicts may have a negative impact on our business and operations.

Pandemics, natural disasters, global climate change, acts of terrorism, global conflicts or other similar events have in the past, and may in the future have, a negative impact on our business and operations.

Pandemics, natural disasters, global climate change, acts of terrorism, global conflicts or other similar events have occurred in the past, and may in the future have, a negative impact on our business and operations.

These events impact us negatively to the extent that they result in reduced capital markets activity, lower asset price levels, or disruptions in general economic activity in the United States or abroad, or in financial market settlement functions.

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For further information see “Supervision and Regulation—Dividends.”

The inability to receive dividends from our subsidiary bank could impact our ability to maintain or increase the current level of cash dividends we pay to our stockholders.

The Company (i.e., the company on an unconsolidated basis) is a separate and distinct legal entity from the Bank, and a substantial portion of the revenues the Company receives consists of dividends from the Bank.

These dividends are the primary funding source for the dividends we pay on our common stock and the interest and principal payments on our debt.

Various federal and state laws and regulations limit the amount of dividends that a bank may pay to its parent company.

If the Bank is unable to pay dividends to the Company, we might not be able to service our debt, pay our obligations, or pay dividends on our common stock.

For further information see “Supervision and Regulation—Dividends.”

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-K

Item 1A. Risk Factors