Hanover Bancorp, Inc. /MD 10-K

ITEM 8. Financial Statements and Supplementary Data ​ 56 Table of Contents ​ ​ ​ ​ Crowe LLP ​ Independent Member Crowe Global ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and the Board of Directors of Hanover Bancorp, Inc. Mineola, New York Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial condition of Hanover Bancorp Inc. and Subsidiary (the "Company") as of September 30, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ Crowe LLP ​ We have served as the Company’s auditor since 2019. Livingston, New Jersey December 22, 2022 ​ 57 Table of Contents HANOVER BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2022 2021 ​ ​ ​ ​ ​ ​ ASSETS ​ ​ ​ ​ ​ Cash and non-interest-bearing deposits due from banks $ 9,934 ​ $ 8,302 Interest-bearing deposits due from banks 139,559 ​ 142,950 Federal funds sold 454 ​ 15,292 Total cash and cash equivalents 149,947 ​ 166,544 Securities: ​ ​ ​ ​ ​ Held to maturity (fair value of $ 4,095 and $ 8,865 , respectively) 4,414 ​ 8,611 Available for sale, at fair value 12,285 ​ 7,747 Total securities ​ 16,699 ​ ​ 16,358 Loans held for investment 1,623,531 ​ 1,247,125 Allowance for loan losses ( 12,844 ) ​ ( 8,552 ) Loans held for investment, net 1,610,687 ​ 1,238,573 Premises and equipment, net 14,462 ​ 15,003 Accrued interest receivable 8,546 ​ 9,363 Prepaid pension 3,444 ​ 4,233 Stock in Federal Home Loan Bank ("FHLB"), at cost 6,280 ​ 3,714 Goodwill 19,168 ​ 19,168 Other intangible assets 399 ​ 480 Loan servicing rights 4,353 ​ 3,690 Deferred income taxes 2,508 ​ 3,558 Other assets 3,565 ​ 3,957 TOTAL ASSETS $ 1,840,058 ​ $ 1,484,641 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ Deposits: ​ Non-interest-bearing demand $ 219,225 ​ $ 191,537 Savings, NOW and money market 969,808 ​ 595,289 Time 339,073 ​ 377,836 Total deposits 1,528,106 ​ 1,164,662 Borrowings 101,752 ​ 159,642 Subordinated debentures 24,568 ​ 24,513 Accrued interest payable 915 ​ 1,290 Other liabilities 12,133 ​ 12,005 TOTAL LIABILITIES 1,667,474 ​ 1,362,112 COMMITMENTS AND CONTINGENT LIABILITIES ​ — ​ ​ — STOCKHOLDERS' EQUITY ​ ​ ​ Preferred stock (par value $ 0.01 ; 15,000,000 shares authorized; none issued) ​ — ​ ​ — Common stock (par value $ 0.01 ; 17,000,000 shares authorized; issued and outstanding 7,285,648 and 5,563,426 , respectively) 73 ​ 56 Surplus 126,656 ​ 97,246 Retained earnings 46,475 ​ 24,971 Accumulated other comprehensive (loss) income, net of tax ( 620 ) ​ 256 TOTAL STOCKHOLDERS' EQUITY 172,584 ​ 122,529 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,840,058 ​ $ 1,484,641 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 58 Table of Contents HANOVER BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ 2022 ​ 2021 INTEREST INCOME ​ ​ Loans $ 67,005 ​ $ 47,685 Taxable securities 484 ​ 685 Other interest income 940 ​ 305 Total interest income 68,429 ​ 48,675 INTEREST EXPENSE ​ Savings, NOW and money market deposits 3,166 ​ 903 Time deposits 2,209 ​ 3,822 Borrowings 1,800 ​ 2,242 Total interest expense 7,175 ​ 6,967 Net interest income 61,254 ​ 41,708 Provision for loan losses 4,450 ​ 1,000 Net interest income after provision for loan losses 56,804 ​ 40,708 NON-INTEREST INCOME ​ Loan servicing and fee income 2,885 ​ 1,207 Service charges on deposit accounts 232 ​ 127 Gain on sale of loans held-for-sale 5,143 ​ 1,307 Gain on sale of securities available-for-sale 105 ​ 240 Other income 507 ​ 468 Total non-interest income 8,872 ​ 3,349 NON-INTEREST EXPENSE ​ Salaries and employee benefits 19,665 ​ 14,761 Occupancy and equipment 5,633 ​ 4,978 Data processing 1,629 ​ 1,280 Advertising and promotion 348 ​ 118 Acquisition costs 250 ​ 4,430 Professional fees 2,568 ​ 1,706 Other expenses 5,088 ​ 2,732 Total non-interest expense 35,181 ​ 30,005 Income before income tax expense 30,495 ​ 14,052 Income tax expense 6,939 ​ 3,201 NET INCOME $ 23,556 ​ $ 10,851 Earnings per common share: ​ BASIC $ 3.74 ​ $ 2.32 DILUTED $ 3.68 ​ $ 2.28 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 59 Table of Contents HANOVER BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ 2022 ​ 2021 Net income $ 23,556 $ 10,851 Other comprehensive (loss) income, net of tax: ​ ​ ​ Change in unrealized (loss) gain on securities available for sale arising during the period, net of tax of ($ 215 ) and $ 77 , respectively ​ ( 795 ) ​ ​ 291 Reclassification adjustment for gains realized in net income, net of tax of $ 24 and $ 49 respectively ( 81 ) ​ ( 191 ) Total other comprehensive (loss) income, net of tax ( 876 ) ​ 100 Total comprehensive income, net of tax $ 22,680 ​ $ 10,951 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 60 Table of Contents HANOVER BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Dollars in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated Other Total ​ ​ Common Stock ​ Common ​ ​ ​ Retained ​ Comprehensive ​ Stockholders' ​ ​ (Shares) ​ Stock ​ Surplus ​ Earnings ​ (Loss) Income, Net ​ Equity Balance at October 1, 2020 4,175,144 ​ $ 42 ​ $ 63,725 ​ $ 14,120 ​ $ 156 ​ $ 78,043 Net income — ​ — ​ — ​ 10,851 ​ — ​ 10,851 Other comprehensive income, net of tax — ​ — ​ — ​ — ​ 100 ​ 100 Stock-based compensation 25,588 ​ — ​ 901 ​ — ​ — ​ 901 Common stock issued in purchase of Savoy Bank ​ 1,357,567 ​ 14 ​ 31,238 ​ — ​ — ​ 31,252 Savoy Bank acquisition rollover options — ​ — ​ 1,269 ​ — ​ — ​ 1,269 Issuance of common stock 5,127 ​ — ​ 113 ​ — ​ — ​ 113 Balance at September 30, 2021 5,563,426 ​ $ 56 ​ $ 97,246 ​ $ 24,971 ​ $ 256 ​ $ 122,529 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income — ​ — ​ — ​ 23,556 ​ — ​ 23,556 Other comprehensive loss, net of tax — ​ — ​ — ​ — ​ ( 876 ) ​ ( 876 ) Issuance of common stock in lieu of directors' fees 2,384 ​ — ​ 42 ​ — ​ — ​ 42 Cash dividends paid ($ 0.10 per share) — ​ — ​ — ​ ( 2,052 ) ​ — ​ ( 2,052 ) Stock-based compensation — ​ — ​ 1,684 ​ — ​ — ​ 1,684 Stock awards granted, net of forfeitures ​ 254,265 ​ ​ 2 ​ ​ ( 2 ) ​ ​ — ​ ​ — ​ ​ — Shares received related to tax withholding ​ ( 677 ) ​ ​ — ​ ​ ( 28 ) ​ ​ — ​ ​ — ​ ​ ( 28 ) Common stock issued in Initial Public Offering ("IPO"), net of costs 1,466,250 ​ 15 ​ 27,714 ​ — ​ — ​ 27,729 Balance at September 30, 2022 7,285,648 ​ $ 73 ​ $ 126,656 ​ $ 46,475 ​ $ ( 620 ) ​ $ 172,584 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 61 Table of Contents HANOVER BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ 2022 2021 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income ​ $ 23,556 ​ $ 10,851 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ Provision for loan losses ​ 4,450 ​ 1,000 Depreciation and amortization ​ 1,663 ​ 1,444 Net gain on sale of securities available-for-sale ​ ( 105 ) ​ ( 240 ) Stock-based compensation ​ 1,684 ​ 901 Net gain on sale of loans held-for-sale ​ ( 5,143 ) ​ ( 1,307 ) Net accretion of premiums, discounts and loan fees and costs ​ ( 3,570 ) ​ ( 3,604 ) Amortization of intangible assets ​ 81 ​ 32 Amortization of debt issuance costs ​ 55 ​ 72 Loan servicing rights valuation adjustments ​ 495 ​ 251 Deferred tax expense ​ 1,318 ​ 365 Decrease in accrued interest receivable ​ 817 ​ 1,924 (Increase) decrease in other assets ​ ( 5 ) ​ 1,398 Decrease in accrued interest payable ​ ( 375 ) ​ ( 134 ) Increase in other liabilities ​ 128 ​ 239 Net cash provided by operating activities ​ 25,049 ​ 13,192 Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Purchases of securities available-for-sale ​ ( 8,000 ) ​ ( 4,700 ) Purchases of restricted securities ​ ( 7,132 ) ​ ( 494 ) Proceeds from sales of securities available-for-sale ​ 2,105 ​ 3,240 Principal repayments of securities held to maturity ​ 4,191 ​ 2,100 Principal repayments of securities available-for-sale ​ 335 ​ 338 Redemptions of restricted securities ​ 4,566 ​ 1,645 Proceeds from sales of loans ​ 85,420 ​ 46,640 Net (increase) decrease in loans ​ ( 454,509 ) ​ 16,996 Purchases of premises and equipment ​ ( 1,122 ) ​ ( 2,079 ) Cash acquired in business combination ​ — ​ 59,155 Cash consideration paid in acquisition ​ — ​ ( 32,991 ) Net cash (used in) provided by investing activities ​ ( 374,146 ) ​ 89,850 Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Net increase in deposits ​ ​ 364,519 ​ ​ 157,725 Advances of term and overnight FHLB borrowings ​ 75,000 ​ — Repayments of FHLB advances ​ ( 24,000 ) ​ ( 34,758 ) Repayments of Federal Reserve Bank borrowings ​ ( 108,710 ) ​ ( 149,242 ) Proceeds from issuance of subordinated debentures, net of issuance costs ​ — ​ 24,455 Repayment of note payable ​ — ​ ( 15,000 ) Payments related to tax withholding for equity awards ​ ( 28 ) ​ — Cash dividends paid ​ ( 2,052 ) ​ — Net proceeds from issuance of common stock ​ 27,771 ​ 113 Net cash provided by (used in) financing activities ​ 332,500 ​ ( 16,707 ) (Decrease) increase in cash and cash equivalents ​ ( 16,597 ) ​ 86,335 Cash and cash equivalents, beginning of period ​ 166,544 ​ 80,209 Cash and cash equivalents, end of period ​ $ 149,947 ​ $ 166,544 Supplemental cash flow information: ​ ​ Interest paid ​ $ 7,550 ​ $ 7,101 Income taxes paid ​ 6,466 ​ 1,375 Supplemental non-cash disclosure: ​ ​ ​ ​ ​ ​ Transfers from portfolio loans to loans held-for-sale ​ $ 80,277 ​ $ 47,826 Transfers from loans held-for-sale to portfolio loans ​ ​ — ​ ​ 2,493 Fair value of tangible assets acquired ​ — ​ 653,380 Fair value of liabilities assumed ​ — ​ 605,815 Common stock issued in business combination ​ — ​ 31,252 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 62 Table of Contents HANOVER BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Note 1. Summary of Significant Accounting Policies Nature of Operations Hanover Bancorp, Inc. (the “Company”) is a New York corporation which became the holding company for Hanover Community Bank (the “Bank”) in 2016. The Bank, headquartered in Mineola, New York, is a New York State chartered bank. The Bank commenced operations on November 4, 2008 and is a full-service bank providing personal and business lending and deposit services. As a New York State chartered, non-Federal Reserve member bank, the Bank is subject to regulation by the New York State Department of Financial Services (“DFS”) and the Federal Deposit Insurance Corporation. The Company is subject to regulation and examination by the Board of Governors of the FRB. Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year’s presentation. These reclassifications had an immaterial effect on the Company’s consolidated financial statements. Use of Estimates In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Risks and Uncertainties In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. The COVID-19 pandemic has adversely affected, local, national and global economic activity. Various actions taken to help mitigate the spread of COVID-19 included restrictions on travel, quarantines and government mandated closures of various businesses. The outbreak caused significant disruptions to the economy and disrupted banking and other financial activity in the areas in which the Company operates. The CARES Act was enacted in March 2020 to, among other things, provide emergency assistance to individuals, families and businesses affected by the COVID-19 pandemic. The ongoing effects of the COVID-19 pandemic may materially and adversely affect the Company’s financial condition and results of operations in future periods, and it is unknown what the complete financial impact will be to the Company. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the coronavirus, the new “waves” of COVID-19 infections, the spread of new variants of the virus and the distribution of vaccines and vaccination rates, among others. It is possible that estimates made in the financial statements could be materially and adversely impacted due to these conditions. The CARES Act expired on December 31, 2021. Significant Group Concentrations of Credit Risk Most of the Company’s activities are with customers located in Nassau, Queens and Kings Counties and surrounding areas of New York State. Note 4 discusses the types of lending that the Company engages in. Although the Company has a diversified loan portfolio, its debtors’ ability to honor their contracts is influenced by the region’s economy. The Company does not have any significant concentrations to any one industry or customer. 63 Table of Contents Business Combinations The Company accounts for its business combinations using the acquisition method of accounting. This method requires the use of fair values in determining the carrying values of the purchased assets and assumed liabilities, which are recorded at fair value at acquisition date, and identifiable intangible assets are recorded at fair value. Costs directly related to the business combinations are recorded as expenses as they are incurred. Fair values are subject to adjustment for up to one year after the closing date of an acquisition as additional information relative to closing date fair values become available. Cash and Cash Equivalents For purposes of reporting consolidated cash flows, cash and due from banks includes cash on hand, cash items in process of collection and amounts due from banks. Cash and cash equivalents also include interest-bearing deposits in banks and federal funds sold. Interest-bearing deposits in other financial institutions mature within 90 days and are carried at cost. Net cash flows are reported for customer loan and deposit transactions and short-term borrowings with original maturities of 90 days or less. Restrictions on Cash Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and clearing requirements. Investment Securities Investment securities are classified as held-to-maturity or available-for-sale at the time of purchase. Investment securities classified as held-to-maturity, which management has the positive intent and ability to hold to maturity, are reported at amortized cost. Investment securities classified as available for sale, which management has the intent and ability to hold for an indefinite period of time, but not necessarily to maturity, are carried at fair value, with unrealized gains and losses, net of related deferred income taxes, included in stockholders’ equity as a separate component of other comprehensive income. Any decision to sell investment securities available for sale would be based on various factors, including, but not limited to, asset / liability management strategies, changes in interest rates or prepayment risks, liquidity needs, or regulatory capital considerations. Premiums are amortized and discounts accreted using the interest method over the remaining terms of the related securities. Dividend and interest income are recognized when earned. Sales of investment securities are recorded at trade date, with realized gains and losses on sales determined using the specific identification method and included in non-interest income. The Company evaluates securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, the Company considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. The Company also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. Federal Home Loan Bank Stock As a member of the FHLB of New York, the Company is required to maintain an investment in the stock of the FHLB based upon the amount of outstanding FHLB borrowings. This stock does not have a readily determinable fair value and is carried at cost. 64 Table of Contents Loans Held for Sale Loans held for sale are carried at the lower of cost or estimated fair value in the aggregate as determined by outstanding commitments from investors. Gains or losses on loan sales are recognized at the time of sale and are determined by the difference between net sales proceeds and the principal balance of the loans sold, adjusted for net deferred loan fees or costs. Loan origination and commitment fees, net of certain direct loan origination costs, are deferred as an adjustment to the carrying value of the loan until it is sold. Loans and Loan Interest Income Recognition Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff, are reported at the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs, and an allowance for loan losses. The loan portfolio is segmented into residential real estate, commercial real estate, multifamily, commercial and industrial, construction, and consumer loans. Interest income on loans is accrued and credited to income as earned. Net loan origination fees and costs are deferred and accreted/amortized to interest income over the loan’s contractual life using the level-yield method, adjusted for actual prepayments. Acquired loans are recorded at their fair value at the acquisition date. Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date. Acquired loans are evaluated upon acquisition and classified as either purchased credit impaired or purchased non-impaired. Purchased credit impaired loans reflect credit deterioration since origination such that it is probable at acquisition that the Company will be unable to collect all contractually required payments. For purchased credit impaired loans, expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the remaining life of the loans (accretable yield) using a level yield method if the timing and amount of the future cash flows is reasonably estimable. The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference). Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are recognized prospectively as interest income. Decreases in expected cash flows after the acquisition date are recognized immediately through the provision for loan losses. For purchased non-impaired loans, the difference between the fair value and unpaid principal balance of the loan at the acquisition date is amortized or accreted to interest income over the economic life of the loans using a method that approximates the interest method. Lending Risk The principal business of the Bank is lending in one-to-four family residential mortgage loans, commercial real estate mortgage loans, multi-family mortgage loans, commercial and industrial loans and consumer loans. The Bank considers its primary lending area to be Nassau County and the New York City boroughs. A substantial portion of the Bank’s loans is secured by real estate in these areas. Accordingly, the ultimate collectability of the loan portfolio is susceptible to changes in market and economic conditions in this region. One-to-four family residential mortgage loans involve certain risks such as interest rate risk and risk of nonpayment. Adjustable-rate loans decrease the interest rate risk to the Company that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default. At the same time, the marketability of the underlying property may be adversely affected by higher interest rates. Repayment risk can be affected by the overall health of the economy, including unemployment rates and housing prices. Commercial real estate lending entails significant additional risks as compared with single-family residential property lending. Such loans typically involve large loan balances to single borrowers or groups of related borrowers. Loans in this classification include income producing investment properties and owner-occupied real estate used for 65 Table of Contents business purposes. The underlying properties are located largely in the Bank’s primary market area. The cash flows of the income producing investment properties could be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, could have an effect on credit quality. In the case of owner-occupied real estate used for business purposes, a weakened economy and resultant decreased consumer and/or business spending could have an adverse effect on credit quality. Multifamily lending entails additional risks as compared with single-family residential property lending, but less when compared to commercial real estate lending. Loans in this classification include income producing residential investment properties of five or more families. Loans are made to established owners with a proven and demonstrable record of strong performance. Loans are secured by a first mortgage lien on the subject property. Repayment is derived generally from the rental income generated from the property and may be supplemented by the owners’ personal cash flow. Credit risk arises with changes in economic conditions that could cause an increase in vacancy rates. Commercial and industrial lending is generally considered higher risk due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on the business. Generally, these loans are primarily secured by inventories and other assets of the business and repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer and/or business spending, will have an effect on the credit quality in this loan class. The Company’s construction loan portfolio covers the development of commercial properties. Construction loans involve the disbursement of funds during construction with repayment substantially dependent on the success of the ultimate project. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans because their ultimate repayment depends on the satisfactory completion of construction and is sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing. Repayment is dependent on completion of the project and the subsequent financing of the completed project as a commercial real estate loan, and in some instances on the rent or sale of the underlying project. Consumer loans generally have shorter terms and higher interest rates than other lending but generally involve more credit risk because of the type and nature of the collateral and, in certain cases, the absence of collateral. Repayment is dependent on the credit quality of the individual borrower and, if applicable, sale of the collateral securing the loan. Therefore, the overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this loan class. Allowance for Loan Losses A loan is considered past due when it is not paid in accordance with its contractual terms. The accrual of income on loans, including impaired loans, and other loans in the process of foreclosure, is generally discontinued when a loan becomes 90 days or more delinquent, or when certain factors indicate that the ultimate collection of principal and interest is in doubt. Loans on which the accrual of income has been discontinued are designated as non-accrual loans. All previously accrued interest is reversed against interest income, and income is recognized subsequently only in the period that cash is received, provided no principal payments are due and the remaining principal balance outstanding is deemed collectible. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Company defines an impaired loan as a loan for which it is probable, based on current information, that the Company will not collect all amounts due in accordance with the contractual terms of the loan agreement. The Company has defined the population of impaired loans to be all non-accrual loans, loans risk rated 9 (Doubtful) or 10 (Loss), and all loans subject to a troubled debt restructuring (“TDR”). Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the expected future cash flows, discounted at the loan’s original effective interest rate, or the underlying collateral (less estimated costs to sell) if the loan is collateral dependent. Impairments are recognized through a charge to the allowance for loan losses for the amount that the loan’s carrying value exceeds the discounted cash flow analysis or estimated fair value of collateral (less estimated costs to sell) if the loan is collateral dependent. 66 Table of Contents The allowance for loan losses is increased by the provision for loan losses charged against income and is decreased by charge-offs, net of recoveries. Loan losses are recognized in the period the loans, or portion thereof, are deemed uncollectible. Generally, the Company will record a loan charge-off (including a partial charge-off) to reduce a loan to the estimated fair value of the underlying collateral, less costs to sell, if it is determined that it is probable that recovery will come primarily from the sale of such collateral. The provision for loan losses is based on management’s evaluation of the adequacy of the allowance which considers, among other things, impaired loans, past loan loss experience, known and inherent risks in the portfolio, existing adverse situations that may affect the borrower’s ability to repay, and estimated fair value of any underlying collateral securing loans. Additionally, management evaluates changes, if any, in underwriting standards, collection, charge-off and recovery practices, the nature or volume of the portfolio, lending staff, concentration of loans, as well as current economic conditions, and other relevant factors. Management believes the allowance for loan losses is adequate to provide for probable and reasonably estimable losses at the statement of condition date. The allowance for loan losses consists of the following components: 1) Specific allowances are established for impaired loans, generally defined by the Company to be all nonaccrual loans, loans risk rated 8 (Substandard), 9 (Doubtful) or 10 (Loss), and all loans subject to a TDR. The amount of impairment provided for as an allowance is represented by the deficiency, if any, between the present value of expected future cash flows discounted at the original loan’s effective interest rate or the underlying collateral value (less estimated costs to sell) if the loan is collateral dependent, and the carrying value of the loan. Impaired loans that have no impairment losses are not considered for general valuation allowances described below. 2) General allowances are established for loan losses on a portfolio basis for loans that do not meet the definition of impaired. The portfolio is grouped into similar risk characteristics, primarily by loan segment and internal credit risk ratings. Historical loss experience is applied to each loan group using a three-year lookback period. The loss experience is adjusted, as appropriate, for the environmental factors discussed below. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and market conditions. Actual loan losses may be significantly more than the allowance for loan losses we have established, which could have a material negative effect on the Company’s financial results. In underwriting a loan secured by real property, the Company requires an appraisal (or an automated valuation model) of the property by an independent licensed appraiser approved by the Company’s Board of Directors. The appraisal is subject to review by an independent third party hired by the Company. Management reviews and inspects properties before disbursement of funds during the term of a construction loan. Generally, management obtains updated appraisals when a loan is deemed impaired. These appraisals may be more limited than those prepared for the underwriting of a new loan. In addition, when the Company acquires other real estate owned, it generally obtains a current appraisal to substantiate the net carrying value of the asset at the time of foreclosure. As noted above, the adjustments to the Company’s loss experience is based on management’s evaluation of several environmental factors, including: ● changes in local, regional, national, and international economic and business conditions and developments that affect the collectability of the loan portfolio, including the condition of various market segments; ● changes in the nature and volume of the Company’s portfolio and in the terms of the Company’s loans; ● changes in the experience, ability, and depth of lending management and other relevant staff; ● changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans; ● changes in the quality of the Company’s loan review system; ● changes in lending policies, procedures and strategies; ● changes in the value of underlying collateral for collateral-dependent loans; ● the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and 67 Table of Contents ● the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company’s existing portfolio. While management uses available information to recognize probable and reasonably estimable losses on loans, future additions to the allowance may be necessary based upon changes in economic, market or other conditions. Changes in estimates could result in a material change in the allowance. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. A loan modification is deemed a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty; and 2) a concession is made by the Company that would not otherwise be considered for a borrower or collateral with similar credit risk characteristics. Once an obligation has been restructured, it continues to be considered restructured until paid in full or otherwise settled, sold or charged off. The Company records an impairment charge equal to the difference between the present value of estimated future cash flows under the restructured terms discounted at the original loan’s effective interest rate, or the underlying collateral value less costs to sell, if the loan is collateral dependent. The allowance for loan and lease losses related to purchased credit impaired loans is based on an analysis that is performed each period to estimate the expected cash flows for each of the loan pools. To the extent that the expected cash flows of a loan pool have decreased since the acquisition date, the Company establishes an allowance for loan losses. Loan Modifications Under the CARES Act On March 27, 2020, the President of the United States signed the CARES Act, which provides entities with optional temporary relief from certain accounting and financial reporting requirements under GAAP. The CARES Act allows financial institutions to suspend application of certain current TDR accounting guidance under ASC 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of December 31, 2021 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. This relief can be applied to loan modifications for borrowers that were not more than 30 days past due as of December 31, 2019 and to loan modifications that defer or delay the payment of principal or interest or change the interest rate on the loan. In April 2020, federal banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (e.g., six months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40. The Company continues to prudently work with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing an appropriate allowance for loan and lease losses on its loan portfolio. The Company approved total loan modifications under the CARES Act of $ 220.4 million, of which $ 283 thousand and $ 19.5 million remain as of September 30, 2022 and 2021, respectively. Servicing Rights The Company originates and sells mortgage loans in the secondary market and may retain the servicing of these loans. When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. Servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion 68 Table of Contents of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported within non-interest expense on the income statement. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. Fees earned for servicing loans are reported on the statements of income as loan servicing income when the related mortgage loan payments are collected. The amortization of loan servicing rights is netted against loan servicing fee income. Servicing fees totaled $ 1.6 million and $ 0.6 million for the years ended September 30, 2022 and 2021, respectively. Late fees and ancillary fees related to loan servicing are not material. Transfers of Financial Assets Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation and amortization. Land is carried at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets, which are 39 years for buildings and two to 10 years for furniture, fixtures and equipment. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Repairs and maintenance costs are recorded as a component of non-interest expense as incurred. Goodwill and Other Intangible Assets Goodwill arises from business combinations and is generally determined as the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. The Company has selected August 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the balance sheet. Other intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Core deposit intangible assets are amortized on an accelerated method over their estimated useful life of 10 years . Debt Issuance Costs The costs attributable to issuing a debt instrument are reported on the Consolidated Statements of Financial Condition as a deduction from the face amount of the note and amortized as interest expense over the term of the note. Earnings Per Share (“EPS”) Basic EPS is net income attributable to common shareholders divided by the weighted average number of common shares outstanding during the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation. Diluted EPS includes the dilutive effect of additional potential common shares issuable under stock options. Potentially dilutive common shares are excluded from the computation of dilutive EPS in the periods in which the effect would be anti-dilutive. 69 Table of Contents Comprehensive Income Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale which are also recognized as separate components of stockholders’ equity. Income Taxes Income tax expense is comprised of two components, current and deferred. The current component reflects taxes payable or refundable for a current period based on applicable tax laws, and the deferred component represents the tax effects of temporary differences between amounts recognized for financial accounting and tax purposes. Deferred tax assets and liabilities reflect the tax effects of such differences that are anticipated to result in taxable or deductible amounts in the future, when the temporary differences reverse. Deferred tax assets are recognized if it is more likely than not they will be realized, and may be reduced by a valuation allowance if it is more likely than not that all or some portion will not be realized. Tax positions that are uncertain but meet a more likely than not recognition threshold are initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position meets the more likely than not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. The Company recognizes interest expense and penalties on uncertain tax positions as a component of income tax expense and recognizes interest income on refundable income taxes as a component of other non-interest income. Fair Value Measurements The Company measures certain assets and liabilities on a fair value basis, in accordance with Accounting Standards Codification (ASC) Topic 820, " Fair Value Measurement. " Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 15. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates. Revenue From Contracts With Customers Revenue from contracts with customers generally comprises deposit service fees, which are included as a component of other non-interest income in the accompanying Consolidated Statements of Income. The Company identifies the performance obligations included in the contracts with customers, determines the transaction price, allocates the transaction price to the performance obligations, as applicable, and recognizes revenue when performance obligations are satisfied, which is generally at the point services are performed for the customer. Operating Segments While management monitors the revenue streams of the Company’s various products and services, the identifiable segments are not material and operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all the financial service operations are considered by management to be aggregated in one reportable operating segment. Stock Compensation Plans Compensation cost is recognized for stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) issued to employees and directors based upon the fair value of these awards at the date of grant. A Black-Scholes 70 Table of Contents model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used to estimate the fair value for RSAs and RSUs. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company’s accounting policy is to recognize forfeitures as they occur. Supplemental Executive Retirement Plan In connection with the previous acquisition of Chinatown Federal Savings Bank (“CFSB”), the assets of the CFSB Supplemental Executive Retirement Plan (“CFSB SERP”) are included in the Consolidated Statements of Financial Condition. The CFSB SERP provides benefits to two former executives of CFSB and the assets of the CFSB SERP are held in a Rabbi Trust which was fully funded prior to the acquisition of CFSB by the Company. The Company has no further liability or obligation with respect to the CFSB SERP assets other than record keeping. No ongoing valuation of the assets will be obtained and the amount of plan assets will continue to be equal to the liability reflected on the Consolidated Statement of Financial Condition. The SERP liability is included in other liabilities on the Consolidated Statement of Financial Condition. Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases. The amendments in this update primarily replace the existing accounting requirements for operating leases for lessees. Lessee accounting requirements for finance leases and lessor accounting requirements for operating leases and sales type and direct financing leases (sales-type and direct financing leases were both previously referred to as capital leases) are largely unchanged. The amendments require the lessee of an operating lease to record a balance sheet gross-up upon lease commencement by recognizing a right-of-use asset and lease liability equal to the present value of the lease payments. The right-of-use asset and lease liability should be derecognized in a manner that effectively yields a straight-line lease expense over the lease term. In addition to the changes to the lessee operating lease accounting requirements, the amendments also change the types of costs that can be capitalized related to a lease agreement for both lessees and lessors. The amendments also require additional disclosures for all lease types for both lessees and lessors. The FASB has subsequently issued additional ASUs intended to clarify guidance, provide implementation support, and provide an additional transition election. The amendments are effective on October 1, 2022, with early adoption permitted. The amendments must be applied on a modified retrospective basis. The Company adopted Topic 842 in the first fiscal quarter of 2023. The Company elected the transition option that will allow us to record a cumulative adjustment at the beginning of the period of adoption on October 1, 2022. The effect of adopting this standard was an approximate $ 10 million increase in assets and liabilities in the Company’s Consolidated Statements of Financial Condition as a result of recognizing right-of-use assets and lease liabilities. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments introduce an impairment model that is based on current expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (i.e. loans and held to maturity securities), including certain off-balance sheet financial instruments (i.e. commitments to extend credit and standby letters of credit that are not unconditionally cancellable). The CECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. Financial instruments with similar risk characteristics may be grouped together when estimating credit losses. The allowance for credit losses for purchased financial assets with a more-than- insignificant amount of credit deterioration since origination that are measured at amortized cost basis is determined in a similar manner to other financial assets measured at amortized cost basis; however, the initial estimate of expected credit loss would be recognized through an allowance for credit losses with an offset (i.e. increase) to the purchase price at acquisition. Only subsequent changes in the allowance for credit losses are recorded as provision for loan losses for these assets. The ASU also amends the current available for sale security impairment model for debt securities whereby credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses. The amendments will be applied through a modified retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of 71 Table of Contents the beginning of the first reporting period in which the guidance is effective. As the Company is a smaller-reporting company under SEC regulations, the Company will adopt CECL on October 1, 2023. The Company is currently evaluating the potential impact the adoption of this ASU will have on its consolidated financial statements. ​ In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The ASU made certain targeted amendments specific to troubled debt restructurings (TDRs) by creditors and vintage disclosure related to gross write-offs. Upon adoption, the Company will be required to apply the loan and refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan, rather than applying the recognition and measurement guidance for TDRs. The ASU also requires companies to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within scope of Subtopic 326-20. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022 for entities that have adopted ASU 2016-13, otherwise effective date is the same as ASU 2016-13. The Company will adopt ASU 2016-13 effective October 1, 2023 and will simultaneously implement ASU 2022-02. ​ 72 Table of Contents Note 2. Business Combinations On May 26, 2021, the Company completed its previously announced acquisition of Savoy Bank pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of August 27, 2020, as amended, between the Company, the Bank and Savoy. Pursuant to the Merger Agreement, Savoy was merged with and into the Bank, with the Bank surviving, in a two-step transaction (collectively, the “Merger”). The purchase price in the transaction was based upon the tangible book values of each of the Company and Savoy as of April 30, 2021 and calculated in accordance with the terms of the Merger Agreement. At the effective time of the Merger, each share of Savoy common stock, $ 1.00 par value (“Savoy Common Stock”) was converted into the right to receive (i) $ 3.246 in cash and (ii) 0.141 shares of the Company’s common stock. The final aggregate purchase price was $ 65.5 million, or $ 6.49 per Savoy share. A final summary of the fair value of assets received and liabilities assumed are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As Recorded Fair Value As Recorded (in thousands) ​ by Savoy ​ Adjustments ​ by Hanover Assets ​ ​ ​ ​ ​ Cash and due from banks ​ $ 59,155 ​ $ — $ 59,155 Investment securities available-for-sale ​ 239 ​ — 239 Loans held for sale ​ 3,883 ​ — 3,883 Loans held for investment ​ 569,251 ​ 8,612 (a) 577,863 Premises and equipment, net ​ 234 ​ ( 22 ) (b) 212 Core deposit intangible ​ — ​ 490 (c) 490 Accrued interest receivable ​ 5,171 ​ ( 650 ) (d) 4,521 Other assets ​ 10,432 ​ ( 2,925 ) (e) 7,507 Total assets acquired ​ $ 648,365 ​ $ 5,505 ​ 653,870 Liabilities ​ ​ Deposits ​ $ 340,215 ​ $ 2,527 (f) ​ 342,742 Borrowings ​ 258,247 ​ 301 (g) 258,548 Accrued interest payable ​ 1,050 ​ — 1,050 Other liabilities and accrued expenses ​ 3,817 ​ ( 342 ) (h) 3,475 Total liabilities assumed ​ $ 603,329 ​ $ 2,486 605,815 Net assets acquired ​ ​ 48,055 Total consideration ​ ​ 65,512 Goodwill ​ ​ $ 17,457 (a) Represents the fair value adjustments on net book value of loans, which includes an interest rate mark and credit mark adjustment, the write-off of deferred fees/costs and premiums and the elimination of Savoy’s allowance for loan losses. (b) Represents the fair value adjustments to reflect the fair value of premises and equipment. (c) Represents the fair value of core deposit intangible recorded, which is amortized on an accelerated basis over the estimated average life of the deposit base. (d) Represents an adjustment to accrued interest receivable acquired. (e) Represents an adjustment to other assets acquired. The largest adjustment was the net deferred tax assets resulting from the fair value adjustment related to the acquired assets, liabilities assumed and identifiable intangible assets recorded. (f) Represents the fair value adjustments on time deposits, which is treated as a reduction of interest expense over the remaining term of the time deposits. (g) Represents the fair value adjustments on an FHLB borrowing, which is treated as a reduction to interest expense over the life of the borrowing. (h) Represents an adjustment to other liabilities assumed. ​ 73 Table of Contents ​ A summary of total consideration paid is as follows: ​ ​ ​ ​ ​ (in thousands, except share data) ​ Common stock issued ( 1,357,567 shares issued) ​ $ 31,252 Rollover options ​ ​ 1,269 Cash payments to common shareholders ​ 32,991 Total consideration paid ​ $ 65,512 ​ With the Savoy acquisition, the Company significantly expanded its commercial banking and SBA lending capabilities. None of the goodwill associated with this acquisition is deductible for income tax purposes. All goodwill related to this acquisition was allocated to the Company’s only reporting unit, which is the Company as a whole. The Company engaged a third-party specialist to develop the fair value estimate of Savoy’s loan portfolio as of the acquisition date in accordance with ASC 820. Inputs and assumptions used in the fair value estimate of the loan portfolio, include interest rate, servicing, credit and liquidity risk, and required equity return. The fair value of loans was calculated using a discounted cash flow analysis based on the remaining maturity and repricing terms. Cash flows were adjusted by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans. There was no carryover of Savoy’s allowance for loan losses associated with the loans that were acquired, as the loans were initially recorded at fair value as of the acquisition date. The core deposit intangible asset recognized is being amortized over its estimated useful life of approximately 10 years and the amortization is based on dollar weighted deposit runoff on an annualized basis. The fair value of retail demand and interest-bearing deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of time deposits was estimated by discounting the contractual future cash flows using market rates offered for time deposits of similar remaining maturities. Other borrowed funds include a borrowing from the FHLB. The fair value of this borrowing was estimated by discounting the contractual future cash flows using FHLB rates offered of similar maturities. During the fiscal fourth quarter of 2021, the Company revised its initial estimates and assumptions regarding the valuation of acquired deferred tax assets. Because such revision occurred during the first 12 months following the date of acquisition and was not the result of an event that occurred subsequent to the acquisition date, the Company has increased goodwill recorded by $ 1.1 million to reflect this change in estimate. Acquisition costs are expensed as incurred as a component of non-interest expense and primarily include, but are not limited to, severance costs, professional services, data processing fees, and marketing and advertising expenses. The Company incurred total acquisition costs of $ 250 thousand and $ 4.4 million during the years ended September 30, 2022 and 2021, respectively. The Company has determined the above noted acquisition constitutes a business combination as defined by ASC Topic 805, which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired and the liabilities assumed. The Company has recorded the assets purchased and liabilities assumed at their estimated fair value in accordance with ASC Topic 805. ​ 74 Table of Contents ​ The following is a summary of the loans accounted for in accordance with ASC 310-30 that were acquired in the Savoy acquisition as of the merger date: ​ ​ ​ ​ ​ (in thousands) ​ ​ Contractually required principal and interest at acquisition ​ $ 14,416 Contractual cash flows not expected to be collected (non-accretable discount) ​ ( 3,467 ) Expected cash flows at acquisition ​ 10,949 Interest component of expected cash flows (accretable discount) ​ ( 540 ) Fair value of acquired purchased credit impaired loans ​ $ 10,409 ​ ​ ​ ​ Note 3. Investment Securities The following table summarizes the amortized cost and fair value of securities available for sale and securities held to maturity at September 30, 2022 and 2021 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ Amortized Gross Unrealized Gross Unrealized ​ ​ (in thousands) ​ Cost ​ Gains ​ Losses ​ Fair Value Available for sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 375 ​ $ — ​ $ ( 133 ) ​ $ 242 Corporate bonds ​ ​ 12,700 ​ ​ — ​ ​ ( 657 ) ​ ​ 12,043 Total available for sale securities ​ $ 13,075 ​ $ — ​ $ ( 790 ) ​ $ 12,285 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 1,778 ​ $ — ​ $ ( 160 ) ​ $ 1,618 U.S. GSE commercial mortgage-backed securities ​ 2,636 ​ — ​ ( 159 ) ​ 2,477 Total held to maturity securities ​ 4,414 ​ — ​ ( 319 ) ​ 4,095 Total investment securities ​ $ 17,489 ​ $ — ​ $ ( 1,109 ) ​ $ 16,380 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ ​ ​ Gross Gross ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ ​ ​ (in thousands) ​ Cost ​ Gains ​ Losses ​ Fair Value Available for sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 722 ​ $ 112 ​ $ ( 1 ) ​ $ 833 Corporate bonds ​ 6,700 ​ 214 ​ — ​ 6,914 Total available for sale securities ​ $ 7,422 ​ $ 326 ​ $ ( 1 ) ​ $ 7,747 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held to maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 2,417 ​ $ 74 ​ $ — ​ $ 2,491 U.S. GSE commercial mortgage-backed securities ​ 2,694 ​ 175 ​ — ​ 2,869 Corporate bonds ​ 3,500 ​ 9 ​ ( 4 ) ​ 3,505 Total held to maturity securities ​ 8,611 ​ 258 ​ ( 4 ) ​ 8,865 Total investment securities ​ $ 16,033 ​ $ 584 ​ $ ( 5 ) ​ $ 16,612 ​ ​ 75 Table of Contents The amortized cost and fair value of investment securities at September 30, 2022, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single date are shown separately. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ Amortized Fair (in thousands) ​ Cost ​ Value Securities available for sale: ​ ​ ​ ​ Five to ten years ​ $ 12,700 ​ $ 12,043 U.S. GSE residential mortgage-backed securities ​ 375 ​ 242 Total securities available for sale ​ ​ 13,075 ​ ​ 12,285 Securities held to maturity: ​ ​ One to five years ​ ​ — ​ ​ — Five to ten years ​ — ​ — U.S. GSE residential mortgage-backed securities ​ 1,778 ​ 1,618 U.S. GSE commercial mortgage-backed securities ​ 2,636 ​ 2,477 Total securities held to maturity ​ ​ 4,414 ​ ​ 4,095 Total investment securities ​ $ 17,489 ​ $ 16,380 ​ At September 30, 2022 and 2021, respectively, investment securities with a carrying amount of $ 1.8 million and $ 5.1 million were pledged to secure public deposits and for other purposes required or permitted by law. There were no holdings of securities of any one issuer in an amount greater than 10% of stockholders’ equity at September 30, 2022 and 2021. The following table presents a summary of realized gains and losses from the sale of investment securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2022 2021 Proceeds from sales ​ $ 2,105 ​ $ 3,240 Gross realized gains on sales ​ $ 105 ​ $ 240 Gross realized losses on sales ​ ​ — ​ ​ — Total realized gains, net (1) ​ $ 105 ​ $ 240 (1) Amount does not include associated income tax of $ 24 and $ 49 for year ended September 30, 2022 and 2021, respectively. ​ 76 Table of Contents The following tables summarizes gross unrealized losses and fair values of investment securities aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at September 30, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ Less than Twelve Months Twelve Months or Longer Total ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ Unrealized ​ ​ ​ ​ Unrealized ​ Number of ​ ​ ​ ​ Unrealized (in thousands, except number of securities) ​ Fair Value ​ Losses ​ Fair Value ​ Losses ​ Securities ​ Fair Value ​ Losses Available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 152 ​ $ ( 126 ) ​ $ 90 ​ $ ( 7 ) ​ 6 ​ $ 242 ​ $ ( 133 ) Corporate bonds ​ ​ 10,843 ​ ​ ( 657 ) ​ ​ — ​ ​ — ​ 6 ​ ​ 10,843 ​ ​ ( 657 ) Total available-for-sale ​ $ 10,995 ​ $ ( 783 ) ​ $ 90 ​ $ ( 7 ) ​ 12 ​ $ 11,085 ​ $ ( 790 ) Held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 1,618 ​ $ ( 160 ) ​ $ — ​ $ — ​ 4 ​ $ 1,618 ​ $ ( 160 ) U.S. GSE commercial mortgage-backed securities ​ ​ 2,477 ​ ​ ( 159 ) ​ ​ — ​ ​ — ​ 1 ​ ​ 2,477 ​ ​ ( 159 ) Total held-to-maturity ​ $ 4,095 ​ $ ( 319 ) ​ $ — ​ $ — ​ 5 ​ $ 4,095 ​ $ ( 319 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ ​ Less than Twelve Months Twelve Months or Longer Total ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ Unrealized ​ ​ ​ ​ Unrealized ​ Number of ​ ​ ​ ​ Unrealized (in thousands, except number of securities) ​ Fair Value ​ Losses ​ Fair Value ​ Losses ​ Securities ​ Fair Value ​ Losses Available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 143 ​ $ ( 1 ) ​ $ — ​ $ — ​ 6 ​ $ 143 ​ $ ( 1 ) Total available-for-sale ​ $ 143 ​ $ ( 1 ) ​ $ — ​ $ — ​ 6 ​ $ 143 ​ $ ( 1 ) Held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate bonds ​ $ 1,496 ​ $ ( 4 ) ​ $ — ​ $ — ​ 1 ​ $ 1,496 ​ $ ( 4 ) Total held-to-maturity ​ $ 1,496 ​ $ ( 4 ) ​ $ — ​ $ — ​ 1 ​ $ 1,496 ​ $ ( 4 ) ​ There was no other than temporary impairment loss recognized on any securities at September 30, 2022 or 2021. ​ Unrealized losses on corporate bonds have not been recognized into income because the issuers’ bonds are of high credit quality (rated AA or higher), management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity. ​ The mortgage-backed securities held by the Company were issued by U.S government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2022 and 2021. ​ 77 Table of Contents Note 4. Loans The following table sets forth the major classifications of loans: ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2022 2021 Real estate: ​ ​ Residential real estate $ 515,316 ​ $ 444,011 Multi-family 574,413 ​ 266,294 Commercial real estate 472,511 ​ 348,641 Commercial and industrial 45,758 ​ 172,274 Construction and land development 12,871 ​ 15,374 Consumer 22 ​ 11 Gross loans 1,620,891 ​ 1,246,605 Net deferred loan fees and costs 2,640 ​ 520 Total loans 1,623,531 ​ 1,247,125 Allowance for loan losses ( 12,844 ) ​ ( 8,552 ) Total loans, net $ 1,610,687 ​ $ 1,238,573 ​ The Company was a participant in the Paycheck Protection Program (“PPP”), administered by the Small Business Administration under the CARES Act, to provide guaranteed loans to qualifying businesses and organizations. These loans carry a fixed rate of 1.00 % and a term of two years (loans made before June 5, 2020, subject to extension to five years with the consent of the lender) or five years (loans made on or after June 5, 2020), if not forgiven, in whole or in part. As of September 30, 2022, borrowers had received forgiveness or had made payments on $ 355.9 million in PPP loans. The Company’s PPP loans outstanding, included in commercial and industrial loans in the table above, totaled $ 10.2 million and $ 140.4 million at September 30, 2022 and 2021, respectively. As of September 30, 2022 and 2021, the Company was servicing approximately $ 246.0 million and $ 233.2 million, respectively, of loans for others. The Company had no loans held for sale as of September 30, 2022 and 2021. In the years ended September 30, 2022 and 2021, the Company sold approximately $ 80.3 million and $ 46.6 million, respectively, of loans and recognized gains on the sales of loans of $ 5.1 million and $ 1.3 million, respectively. Purchased Credit Impaired Loans The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount for those loans at September 30, 2022 and 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2022 ​ 2021 (in thousands) ​ ​ ​ ​ ​ Commercial real estate $ 602 ​ $ 8,324 Commercial and industrial 629 ​ 1,917 Total recorded investment $ 1,231 ​ $ 10,241 ​ The Company has recorded an allowance for loan losses of $ 50 thousand and $ 0 related to these loans at September 30, 2022 and 2021, respectively. 78 Table of Contents The following table presents a summary of changes in accretable difference on purchased loans accounted for under ASC 310-30: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) ​ 2022 ​ 2021 Balance at beginning of period $ 346 $ — Accretable differences acquired ​ ​ — ​ ​ 540 Accretion ​ ​ ( 1,822 ) ​ ​ ( 194 ) Adjustments to accretable difference due to changes in expected cash flows ​ ​ 1,019 ​ ​ — Other changes, net ​ ​ 537 ​ ​ — Ending balance $ 80 $ 346 ​ The Company continuously monitors the credit quality of its loan receivables. Credit quality is monitored by reviewing certain credit quality indicators. Management has determined that internally assigned credit risk ratings by loan segment are the key credit quality indicators that best assist management in monitoring the credit quality of the Company’s loan receivables. The Company has adopted a credit risk rating system as part of the risk assessment of its loan portfolio. The Company’s lending officers are required to assign a credit risk rating to each loan in their portfolio at origination. When the lender learns of important financial developments, the risk rating is reviewed and adjusted if necessary. In addition, the Company engages a third-party independent loan reviewer that performs quarterly reviews of a sample of loans, validating the credit risk ratings assigned to such loans. The credit risk ratings play an important role in the establishment of the loan loss provision and to confirm the adequacy of the allowance for loan losses. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. The Company uses the following definitions for risk ratings: Special Mention: The loan has potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects for the asset or in the Company’s credit position at some future date. Substandard: The loan is inadequately protected by current sound worth and paying capacity of the obligor or collateral pledged, if any. Loans classified as Substandard must have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful: The loan has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing factors, conditions, and values, highly questionable and improbable. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “pass” rated loans. Loans listed as “not rated” are homogenous residential and consumer type loans which are evaluated based on payment performance as previously disclosed in the aging of past due loans. 79 Table of Contents The following tables represent loans categorized by class and internally assigned risk grades. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ ​ ​ Special ​ ​ ​ ​ ​ ​ (in thousands) ​ Pass ​ Mention ​ Substandard ​ Doubtful ​ Total Real Estate: ​ ​ ​ ​ ​ Residential ​ $ 512,595 ​ $ 512 ​ $ 3,151 ​ $ — ​ $ 516,258 Multi-family ​ 571,128 ​ — ​ 3,933 ​ — ​ 575,061 Commercial ​ 453,321 ​ 8,085 ​ 11,578 ​ — ​ 472,984 Commercial and industrial ​ 43,314 ​ 540 ​ 2,431 ​ — ​ 46,285 Construction and land development ​ 10,499 ​ 2,408 ​ — ​ — ​ 12,907 Consumer ​ 36 ​ — ​ — ​ — ​ 36 Total ​ $ 1,590,893 ​ $ 11,545 ​ $ 21,093 ​ $ — ​ $ 1,623,531 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ ​ ​ Special ​ ​ ​ ​ ​ ​ (in thousands) ​ Pass ​ Mention ​ Substandard ​ Doubtful ​ Total Real Estate: ​ ​ ​ ​ ​ Residential ​ $ 433,433 ​ $ 5,114 ​ $ 5,590 ​ $ 3 ​ $ 444,140 Multi-family ​ 263,400 ​ 2,856 ​ 458 ​ — ​ 266,714 Commercial ​ 316,894 ​ 16,274 ​ 15,639 ​ — ​ 348,807 Commercial and industrial ​ 167,906 ​ 540 ​ 3,631 ​ — ​ 172,077 Construction and land development ​ 13,607 ​ 1,767 ​ — ​ — ​ 15,374 Consumer ​ 13 ​ — ​ — ​ — ​ 13 Total ​ $ 1,195,253 ​ $ 26,551 ​ $ 25,318 ​ $ 3 ​ $ 1,247,125 ​ ​ 80 Table of Contents Past Due and Nonaccrual Loans The following table represents the aging of the recorded investment in past due and non-accrual loans as of September 30, 2022 and 2021 by portfolio segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ Past Due and Non-Accrual ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30 - 59 ​ 60 - 89 ​ Greater than ​ ​ ​ ​ Total past ​ Purchased ​ ​ ​ ​ ​ ​ ​ ​ Days ​ Days ​ 89 Days ​ ​ ​ due and ​ Credit ​ ​ ​ ​ Total September 30, 2022 ​ Past Due ​ Past Due ​ Past Due ​ Non-accrual ​ Non-accrual ​ Impaired (5) ​ Current ​ Loans Residential real estate ​ $ 961 ​ $ 351 ​ $ — ​ $ 3,151 (1) $ 4,463 ​ $ — ​ $ 511,795 ​ $ 516,258 Multi-family ​ — ​ — ​ — ​ 2,348 (2) 2,348 ​ — ​ 572,713 ​ 575,061 Commercial real estate ​ 936 ​ — ​ — ​ 5,875 (3) 6,811 ​ 602 ​ 465,571 ​ 472,984 Commercial and industrial ​ 539 ​ 161 ​ — ​ 907 (4) 1,607 ​ 629 ​ 44,049 ​ 46,285 Construction and land development ​ — ​ — ​ — ​ — ​ — ​ — ​ 12,907 ​ 12,907 Consumer ​ — ​ — ​ — ​ — ​ — ​ — ​ 36 ​ 36 Total ​ $ 2,436 ​ $ 512 ​ $ — ​ $ 12,281 ​ $ 15,229 ​ $ 1,231 ​ $ 1,607,071 ​ $ 1,623,531 ​ (1) Of the residential real estate non-accrual loans, $ 1,227 were not past due and $ 1,924 were greater than 89 days past due. (2) Multi-family non-accrual loans at September 30, 2022 were greater than 89 days past due. (3) Commercial real estate non-accrual loans at September 30, 2022 were greater than 89 days past due. (4) Commercial and industrial non-accrual loans at September 30, 2022 were greater than 89 days past due. (5) Purchased credit impaired loans at September 30, 2022 were greater than 89 days past due. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ Past Due and Non-Accrual ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30 - 59 ​ 60 - 89 ​ Greater than ​ ​ ​ ​ Total past ​ Purchased ​ ​ ​ ​ ​ ​ ​ ​ Days ​ Days ​ 89 Days ​ ​ ​ due and ​ Credit ​ ​ ​ ​ Total September 30, 2021 ​ Past Due ​ Past Due ​ Past Due ​ Non-accrual ​ Non-accrual ​ Impaired (4) ​ Current ​ Loans Residential real estate ​ $ 1,032 ​ $ 1,601 ​ $ — ​ $ 5,554 (1) $ 8,187 ​ $ — ​ $ 435,953 ​ $ 444,140 Multi-family ​ — ​ — ​ — ​ 458 (2) 458 ​ — ​ 266,256 ​ 266,714 Commercial real estate ​ 1,939 ​ — ​ — ​ 1,016 (3) 2,955 ​ 8,324 ​ 337,528 ​ 348,807 Commercial and industrial ​ 3,641 ​ — ​ — ​ — ​ 3,641 ​ 1,917 ​ 166,519 ​ 172,077 Construction and land development ​ — ​ — ​ — ​ — ​ — ​ — ​ 15,374 ​ 15,374 Consumer ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 13 ​ ​ 13 Total ​ $ 6,612 ​ $ 1,601 ​ $ — ​ $ 7,028 ​ $ 15,241 ​ $ 10,241 ​ $ 1,221,643 ​ $ 1,247,125 (1) Of the residential real estate non-accrual loans, $ 1,026 were 61 days past due and $ 4,528 were greater than 89 days past due. (2) Multi-family non-accrual loans at September 30, 2021 were greater than 89 days past due. (3) Commercial real estate non-accrual loans at September 30, 2021 were greater than 89 days past due. (4) Of the total $ 10,241 purchased credit impaired loans, $ 2,519 were greater than 89 days past due. ​ 81 Table of Contents The following table presents information related to impaired loans by portfolio segment as of and for the years ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ ​ Unpaid ​ ​ ​ ​ Interest Average ​ ​ ​ Principal ​ Recorded ​ Allowance ​ Income ​ Recorded ​ (in thousands) ​ Balance ​ Investment ​ Allocated ​ Recognized ​ Investment ​ With no related allowance recorded: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate $ 5,394 $ 5,392 $ — $ 124 $ 4,646 ​ Multi-family ​ 2,348 ​ 2,348 ​ — ​ — ​ 1,066 ​ Commercial real estate ​ 5,950 ​ 5,875 ​ — ​ — ​ 3,627 ​ Commercial and industrial ​ 908 ​ 907 ​ — ​ 77 ​ 389 ​ Total ​ $ 14,600 ​ $ 14,522 ​ $ — ​ $ 201 ​ $ 9,728 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ Unpaid ​ ​ ​ ​ Interest Average ​ ​ Principal ​ Recorded ​ Allowance for ​ Income ​ Recorded (in thousands) ​ Balance ​ Investment ​ Loan Losses ​ Recognized ​ Investment With no related allowance recorded: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential $ 7,382 $ 7,198 $ — $ 103 $ 4,994 Multi-family ​ 382 ​ 458 ​ — ​ 7 ​ 177 Commercial ​ 522 ​ 517 ​ — ​ 3 ​ 197 Commercial and industrial ​ 535 ​ 500 ​ — ​ — ​ 173 Total ​ $ 8,821 ​ $ 8,673 ​ $ — ​ $ 113 ​ $ 5,541 ​ Accrual basis income recognized on impaired loans approximates cash basis income. The recorded investment in loans excludes accrued interest receivable due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs. Troubled Debt Restructurings A restructuring constitutes a troubled debt restructuring when the restructuring includes a concession by the Bank and the borrower is experiencing financial difficulty. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed to determine if that borrower is currently in payment default under any of its obligations or whether there is a probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The Company has seven and six loans that are classified as a troubled debt restructuring at September 30, 2022 and 2021 with a total recorded investment of $ 2.3 million and $ 1.6 million, respectively. The Company has no t allocated any specific reserves for these loans at September 30, 2022 and 2021. The Company had no commitment to lend additional funds to these debtors at September 30, 2022 and 2021. There are no troubled debt restructurings for which there was a payment default during 2022 and 2021 for loans that were modified during the twelve- month period prior to default. A loan is considered to be in payment default once it is 90 day s contractually past due under the modified terms. The following table presents loans modified as troubled debt restructurings that occurred during the year ending September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pre-Modification ​ Post-Modification ​ ​ ​ ​ Outstanding ​ Outstanding ​ ​ Number of ​ Recorded ​ Recorded (Dollars in thousands) loans Investment Investment ​ ​ ​ ​ ​ ​ ​ ​ ​ Troubled Debt Restructurings: ​ ​ ​ ​ ​ ​ ​ Residential real estate 2 ​ $ 1,011 ​ $ 1,011 82 Table of Contents ​ There was no increase in the allowance for loan losses and no charge-offs during the year ended September 30, 2022 for the troubled debt restructurings described above. ​ There were no new troubled debt restructurings recorded for the year ended September 30, 2021. ​ The following tables represent the activity in the allowance for loan losses by portfolio segment for the years ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ Construction ​ ​ ​ ​ ​ ​ ​ ​ Residential ​ Multi- ​ Commercial ​ and ​ and Land ​ ​ ​ ​ ​ ​ ​ Real Estate Family Real Estate Industrial Development Consumer ​ ​ ​ ​ Loans ​ Loans ​ Loans ​ Loans ​ Loans ​ Loans ​ Total (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning Balance ​ $ 4,155 ​ $ 2,433 ​ $ 1,884 ​ $ 79 ​ $ — ​ $ 1 ​ $ 8,552 Charge-offs ​ — ​ ( 66 ) ​ — ​ ( 92 ) ​ — ​ ​ — ​ ( 158 ) Recoveries ​ — ​ — ​ — ​ — ​ — ​ — ​ — Provision (credit) for loan losses ​ ( 204 ) ​ 1,941 ​ 1,823 ​ 774 ​ 115 ​ 1 ​ 4,450 Ending Balance ​ $ 3,951 ​ $ 4,308 ​ $ 3,707 ​ $ 761 ​ $ 115 ​ $ 2 ​ $ 12,844 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ Construction ​ ​ ​ ​ ​ ​ ​ ​ Residential ​ Multi- ​ Commercial ​ and ​ and Land ​ ​ ​ ​ ​ ​ ​ ​ Real Estate ​ Family ​ Real Estate ​ Industrial ​ Development ​ Consumer ​ ​ ​ ​ Loans Loans Loans Loans Loans Loans Total (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning Balance ​ $ 5,103 ​ $ 1,506 ​ $ 1,221 ​ $ 38 ​ $ — ​ $ 1 ​ $ 7,869 Charge-offs ​ ( 267 ) ​ ( 32 ) ​ ( 30 ) ​ — ​ — ​ — ​ ( 329 ) Recoveries ​ — ​ — ​ — ​ 12 ​ — ​ — ​ 12 Provision (credit) for loan losses ​ ( 681 ) ​ 959 ​ 693 ​ 29 ​ — ​ — ​ 1,000 Ending Balance ​ $ 4,155 ​ $ 2,433 ​ $ 1,884 ​ $ 79 ​ $ — ​ $ 1 ​ $ 8,552 ​ The following table represents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment evaluation method: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ Construction ​ ​ ​ ​ ​ ​ ​ ​ Residential ​ Multi- ​ Commercial ​ and ​ and Land ​ ​ ​ ​ ​ ​ (in thousands) Real Estate Family Real Estate Industrial Development Consumer Total Allowance for loan losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — Collectively evaluated for impairment ​ 3,951 ​ 4,308 ​ 3,707 ​ 711 ​ 115 ​ 2 ​ 12,794 Purchased-credit impaired ​ — ​ — ​ — ​ 50 ​ — ​ — ​ 50 Total allowance for loan losses ​ $ 3,951 ​ $ 4,308 ​ $ 3,707 ​ $ 761 ​ $ 115 ​ $ 2 ​ $ 12,844 Loans: ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 5,392 ​ $ 2,348 ​ $ 5,875 ​ $ 907 ​ $ — ​ $ — ​ $ 14,522 Collectively evaluated for impairment ​ 510,866 ​ 572,713 ​ 466,507 ​ 44,749 ​ 12,907 ​ 36 ​ 1,607,778 Purchased-credit impaired ​ — ​ — ​ 602 ​ 629 ​ — ​ — ​ 1,231 Total loans held for investment ​ $ 516,258 ​ $ 575,061 ​ $ 472,984 ​ $ 46,285 ​ $ 12,907 ​ $ 36 ​ $ 1,623,531 ​ ​ 83 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ Construction ​ ​ ​ ​ ​ ​ ​ ​ Residential ​ Multi- ​ Commercial ​ and ​ ​ and Land ​ ​ ​ ​ ​ ​ (in thousands) Real Estate Family Real Estate Industrial Development Consumer Total Allowance for loan losses: ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — Collectively evaluated for impairment ​ 4,155 ​ 2,433 ​ 1,884 ​ 79 ​ — ​ 1 ​ 8,552 Purchased-credit impaired ​ — ​ — ​ — ​ — ​ — ​ — ​ — Total allowance for loan losses ​ $ 4,155 ​ $ 2,433 ​ $ 1,884 ​ $ 79 ​ $ — ​ $ 1 ​ $ 8,552 Loans: ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 7,198 ​ $ 458 ​ $ 517 ​ $ 500 ​ $ — ​ $ — ​ $ 8,673 Collectively evaluated for impairment ​ 436,942 ​ 266,256 ​ 339,966 ​ 169,660 ​ 15,374 ​ 13 ​ 1,228,211 Purchased-credit impaired ​ — ​ — ​ 8,324 ​ 1,917 ​ — ​ — ​ 10,241 Total loans held for investment ​ $ 444,140 ​ $ 266,714 ​ $ 348,807 ​ $ 172,077 ​ $ 15,374 ​ $ 13 ​ $ 1,247,125 ​ ​ ​ ​ Note 5. Premises and Equipment The following table details the components of premises and equipment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2022 2021 Land ​ $ 1,600 ​ $ 1,600 Buildings and improvements ​ 10,862 ​ 9,974 Leasehold improvements ​ 2,615 ​ 2,354 Furniture, fixtures and equipment ​ 5,978 ​ 5,269 Construction in progress ​ 111 ​ 1,124 ​ ​ 21,166 ​ 20,321 Less: Accumulated depreciation and amortization ​ ( 6,704 ) ​ ( 5,318 ) Premises and equipment, net ​ $ 14,462 ​ $ 15,003 ​ Depreciation and amortization was $ 1.7 million and $ 1.4 million for the years ended September 30, 2022 and 2021, respectively. ​ Note 6. Deposits The following table details the components of deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2022 2021 Non-interest bearing: ​ ​ ​ ​ ​ ​ Demand ​ $ 219,225 ​ $ 191,537 Interest-bearing: ​ ​ NOW ​ 582,457 ​ 353,977 Money market ​ 258,424 ​ 181,148 Savings ​ 128,927 ​ 60,164 Time deposits $250,000 and greater ​ 87,904 ​ 60,242 Time deposits less than $250,000 ​ 251,169 ​ 317,594 Total interest-bearing ​ 1,308,881 ​ 973,125 Total deposits ​ $ 1,528,106 ​ $ 1,164,662 ​ 84 Table of Contents The scheduled maturities of time deposits are as follows: ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2022 2023 ​ $ 170,497 2024 ​ 133,445 2025 ​ 25,526 2026 ​ 3,882 2027 ​ 4,734 Thereafter ​ 989 Total ​ $ 339,073 ​ ​ ​ Note 7. Borrowings Federal Home Loan Bank (“FHLB”) Advances ​ At September 30, 2022 and 2021, FHLB term borrowings outstanding were $ 37.8 million and $ 42.0 million, respectively, all of which were fixed rate. ​ At September 30, 2022, the Company had $ 55.0 million in FHLB overnight borrowings outstanding at a rate of 3.29 %. There were no overnight borrowings outstanding at September 30, 2021. ​ The following table sets forth the contractual maturities and weighted average interest rates of the Company’s fixed rate FHLB overnight and term advances: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ Weighted ​ Contractual Maturity Amount Average Rate ​ Overnight ​ $ 55,000 ​ 3.29 % ​ ​ ​ ​ ​ ​ ​ 2023, rates from 0.37 % to 2.96 % ​ ​ 11,860 ​ 2.23 % 2024, rates from 0.39 % to 2.53 % ​ ​ 18,860 ​ 0.98 % 2025, rates from 0.56 % to 0.59 % ​ 7,080 0.58 % Total term advances ​ ​ 37,800 ​ 1.30 % Total FHLB advances ​ $ 92,800 2.48 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, ​ ​ ​ 2021 ​ ​ ​ ​ ​ ​ Weighted ​ Contractual Maturity Amount Average Rate ​ Overnight ​ $ — ​ — % ​ ​ ​ ​ ​ ​ ​ 2022, rates from 2.01 % to 2.05 % ​ ​ 4,000 ​ 2.02 % 2023, rates from 0.37 % to 2.96 % ​ ​ 12,040 ​ 2.23 % 2024, rates from 0.39 % to 2.53 % ​ ​ 18,860 ​ 0.98 % 2025, rates from 0.56 % to 0.59 % ​ 7,080 0.58 % Total term advances ​ 41,980 1.37 % Total FHLB advances ​ $ 41,980 1.37 % ​ ​ Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. The advances were collateralized by $ 822.2 million and $ 432.7 million of residential and commercial mortgage loans under a blanket lien arrangement at September 30, 2022 and 2021, respectively. Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow up to an additional total of $ 183.6 million at September 30, 2022. 85 Table of Contents Federal Reserve Borrowings At September 30, 2022 and 2021, the Company’s borrowings from the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) were $ 9.0 million and $ 117.7 million, respectively. The borrowings have a rate of 0.35 % and the maturity date will equal the maturity date of the underlying PPP loan pledged to secure the extension of credit. The maturity date of a PPP loan is either two or five years from origination date. The Company utilized the PPPLF to fund PPP loan production. The borrowings are fully secured by pledged PPP loans as of September 30, 2022 and 2021. Correspondent Bank Borrowings At September 30, 2022, approximately $ 65 million in unsecured lines of credit extended by correspondent banks were available to be utilized for short-term funding purposes. No borrowings were outstanding under lines of credit with correspondent banks at September 30, 2022 and 2021. ​ Note 8. Subordinated Debentures In October 2020, the Company completed the private placement of $ 25.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2030 (the “Notes”) to certain qualified institutional buyers and accredited investors. The Notes will initially bear interest, payable semi-annually, at the rate of 5.00 % per annum, until October 15, 2025. From and including October 15, 2025, the interest rate applicable to the outstanding principal amount due will reset quarterly to the then current three-month secured overnight financing rate (“SOFR”) plus 487.4 basis points. The Company may, at its option, beginning with the interest payment date of October 15, 2025 but not generally prior thereto, and on any scheduled interest payment date thereafter, redeem the Notes, in whole or in part, subject to the receipt of any required regulatory approval. The Notes are not subject to redemption at the option of the holder. The portion of the proceeds of these subordinated notes contributed to the Bank are included as a component of the Bank’s Tier 1 capital for regulatory reporting. At September 30, 2022 and 2021, the unamortized issuance costs of the Notes were $ 0.4 million and $ 0.5 million, respectively. For each of the years ended September 30, 2022 and 2021, $ 0.1 million of issuance costs were recorded in interest expense. The Notes are presented net of unamortized issuance costs in the Company’s Consolidated Statements of Financial Condition. ​ Note 9. Goodwill and Other Intangible Assets FASB ASC 350, Intangibles - Goodwill and Other , requires a company to perform an impairment test on goodwill annually, or more frequently if events or changes in circumstance indicate that the asset might be impaired, by comparing the fair value of such goodwill to its recorded or carrying amount. If the carrying amount of goodwill exceeds the fair value, an impairment charge must be recorded in an amount equal to the excess. The following table presents activity for goodwill and other intangible assets, which consist of core deposit intangibles: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2022 2021 Goodwill at beginning of period ​ $ 19,168 ​ $ 1,901 Acquisition ​ — ​ 17,457 Measurement period adjustment for previous acquisition ​ — ​ ( 190 ) Goodwill at end of period ​ $ 19,168 ​ $ 19,168 Other intangible assets at beginning of period ​ $ 480 ​ $ 22 Acquisition ​ — ​ 490 Amortization ​ ( 81 ) ​ ( 32 ) Other intangible assets at end of period ​ $ 399 ​ $ 480 86 Table of Contents ​ The Company has identified one reporting unit for purposes of testing goodwill for impairment, which is the Company as a whole. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. At August 31, 2022, the Company’s reporting unit had positive equity and the Company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of the reporting unit exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment. The following table presents the gross carrying amount and accumulated amortization for the Company’s other intangible assets, which consist of core deposit intangibles: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2022 2021 Gross carrying amount ​ $ 517 ​ $ 517 Accumulated amortization ​ ( 118 ) ​ ( 37 ) Net book value ​ $ 399 ​ $ 480 ​ At September 30, 2022, the weighted-average remaining life of the Company’s other intangible assets was 4.06 years. The following table presents estimated future amortization expense for other intangible assets: ​ ​ ​ ​ ​ (in thousands) ​ ​ 2023 ​ $ 72 2024 ​ 63 2025 ​ 55 2026 ​ 49 2027 ​ 43 Thereafter ​ 117 Total ​ $ 399 ​ ​ ​ Note 10. Income Taxes The following table details the components of income tax expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2022 2021 Current: ​ ​ ​ ​ ​ ​ Federal ​ $ 5,081 ​ $ 2,594 State ​ 540 ​ 242 Total current ​ 5,621 ​ 2,836 Deferred: ​ ​ ​ ​ ​ ​ Federal ​ 1,055 ​ 394 State ​ 735 ​ ( 383 ) Total deferred ​ 1,790 ​ 11 Change in valuation allowance ​ ( 472 ) ​ 354 Total income tax expense ​ $ 6,939 ​ $ 3,201 ​ ​ 87 Table of Contents The following table reflects a reconciliation of reported income tax expense to the amount that would result from applying the federal statutory rate of 21 %: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ Percentage ​ ​ ​ ​ Percentage ​ ​ ​ ​ ​ ​ of Pre-tax ​ ​ ​ ​ of Pre-tax ​ (in thousands) ​ Amount ​ Earnings ​ Amount ​ Earnings Federal income tax expense computed by applying the statutory rate to income before income taxes $ 6,404 21.0 % $ 2,951 21.0 % State taxes, net of federal benefit ​ 1,156 3.8 % ​ 48 0.3 % Non-deductible transaction costs ​ ( 1 ) — % ​ 204 1.5 % Other ​ ( 148 ) ( 0.5 ) % ​ ( 356 ) ( 2.5 ) % Change in valuation allowance ​ ( 472 ) ( 1.5 ) % ​ 354 2.5 % Income tax expense ​ $ 6,939 22.8 % $ 3,201 22.8 % ​ The following table summarizes the composition of deferred tax assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2022 2021 Deferred tax assets: ​ ​ ​ ​ ​ ​ Allowance for loan losses and other contingent liabilities ​ $ 4,014 ​ $ 2,654 Net operating loss carryforwards ​ 2,415 ​ 2,443 Compensation and related benefit obligations ​ ​ 1,323 ​ ​ 775 Accrued SERP ​ 1,062 ​ 1,288 Purchase accounting fair value adjustments ​ 727 ​ 2,034 Unrealized loss on securities AFS ​ ​ 170 ​ ​ — Organizational costs ​ 63 ​ 153 Mortgage servicing rights ​ — ​ 45 Total deferred tax assets ​ 9,774 ​ 9,392 Deferred tax liabilities: ​ ​ ​ ​ ​ ​ Deferred fees and costs ​ ( 2,718 ) ​ ( 883 ) Depreciation ​ ( 951 ) ​ ( 771 ) Mortgage servicing rights ​ ( 15 ) ​ — Tax bad debt reserve ​ — ​ ( 204 ) Unrealized gain on securities AFS ​ ​ — ​ ​ ( 70 ) Other ​ ( 158 ) ​ ( 10 ) Total deferred tax liabilities ​ ( 3,842 ) ​ ( 1,938 ) Total ​ 5,932 ​ 7,454 Valuation allowance ​ ( 3,424 ) ​ ( 3,896 ) Net deferred tax asset ​ $ 2,508 ​ $ 3,558 ​ The Company does no t have net operating loss carryforwards available for federal income tax purposes as of September 30, 2022. The Company has net operating loss carryforwards available for state income tax purposes of approximately $ 31.0 million. For state purposes, $ 12.4 million expires in 2025 and the remaining $ 18.6 million will begin to expire in 2036. The Company has net operating loss carryforwards available for city income tax purposes of approximately $ 7.3 million, of which $ 0.5 million will expire in 2025 and the remaining $ 6.8 million will begin to expire in 2037. ASC 740, Income Taxes , provides for the recognition of deferred tax assets if realization of such assets is more likely than not. The Company has recorded a federal deferred tax asset as, based upon an analysis of the evidence, it is more likely than not that such federal deferred tax asset will be recoverable. In March of 2014, New York State adopted legislation that benefited small community banks with less than $8 billion in average assets. Specifically, this legislation provides for a state and city subtraction modification for which the Company qualifies. This subtraction modification causes the Company to consistently generate net operating losses for New York State and New York City purposes and it 88 Table of Contents will continue to do so for the foreseeable future. Accordingly, the Company has recorded a valuation allowance against the New York State and New York City portions of the deferred tax asset, as it is not more likely than not that such deferred tax assets will be recoverable. Management reassesses the need for a valuation allowance on an annual basis, or more frequently if warranted. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of the states of Connecticut, New Jersey and New York and the city of New York. The Company is no longer subject to examination by taxing authorities for years before 2018. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination. The Company has no unrecorded tax benefits, and the Company does not expect the total amount of unrecognized income tax benefits to significantly increase in the next twelve months. ​ ​ Note 11. Equity Compensation Plans The Company’s 2021 and 2018 Equity Compensation Plans (the “2021 Plan” and the “2018 Plan”, respectively), provide for the grant of stock-based compensation awards to members of management, including employees and management officials, and members of the Board. Under the 2021 Plan, a total of 427,500 shares of the Company’s common stock or equivalents were approved for issuance, of which 284,472 shares remain available for issuance at September 30, 2022. Of the total 346,000 shares of common stock approved for issuance under the 2018 Plan, 36,935 shares remain available for issuance at September 30, 2022. Hanover assumed the 2013 Savoy Bank Stock Option Plan solely in connection with options to purchase Savoy common stock held by the former Chief Executive Officer of Savoy and which, under the terms of the Agreement and Plan of Merger between the Company and Savoy, were converted into options to purchase 71,900 shares of Hanover common stock. Stock Options Stock options are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant, and generally with vesting periods of three years and contractual terms of ten years . All stock options fully vest upon a change in control. The fair value of stock options is estimated on the date of grant using a closed form option valuation (Black-Scholes) model. Expected volatilities are based on historical volatilities of the common stock of the Company’s peers. The Company uses historical data to estimate option exercise and post-vesting termination behavior. Expected terms are based on historical data and represent the periods in which the options are expected to be outstanding. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. A summary of stock option activity follows (aggregate intrinsic value in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ ​ Average ​ Aggregate ​ Remaining ​ ​ Number of ​ Exercise ​ Intrinsic ​ Contractual ​ Options Price Value Term Outstanding, October 1, 2021 227,406 ​ $ 9.50 ​ $ 2,043 3.51 years Granted — ​ — ​ ​ ​ Exercised — ​ — ​ ​ ​ Forfeited — ​ — ​ ​ ​ Outstanding, September 30, 2022 (1) 227,406 ​ $ 9.50 ​ $ 2,298 2.45 years (1) All outstanding options are fully vested and exercisable There was no compensation expense attributable to stock options for the years ended September 30, 2022 and 2021, respectively. 89 Table of Contents Restricted Stock Awards During the year ended September 30, 2022, restricted stock awards of 44,642 shares were granted with a three-year vesting period and 234,288 shares were granted with a five-year vesting period. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. A summary of restricted stock awards activity follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ Number of ​ Grant Date Fair ​ Shares Value Unvested, October 1, 2021 ​ 75,833 ​ $ 19.87 Granted 278,930 ​ 19.73 Vested ( 45,835 ) ​ 19.62 Forfeited ( 24,665 ) ​ 19.71 Unvested, September 30, 2022 284,263 ​ $ 19.78 ​ Compensation expense attributable to restricted stock awards was $ 1.5 million and $ 0.9 million for the years ended September 30, 2022 and 2021, respectively. As of September 30, 2022, there was $ 4.7 million of total unrealized compensation cost related to unvested restricted stock, expected to be recognized over a weighted-average term of 3.93 years. The total fair value of shares vested during the years ended September 30, 2022 and 2021 was $ 0.9 million and $ 0.9 million, respectively. ​ Restricted Stock Units Long Term Incentive Plan ​ Restricted stock units (RSUs) represent an obligation to deliver shares to a grantee at a future date if certain vesting conditions are met. RSUs are subject to a time-based vesting schedule, and/or the satisfaction of performance conditions, and are settled in shares of the Company's common stock. RSUs do not provide voting rights and RSUs may accrue dividends from the date of grant. ​ The following table summarizes the unvested performance-based RSU activity for the year ended September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ Number of ​ Grant Date Fair ​ Shares Value Unvested, October 1, 2021 ​ — ​ $ — Granted 51,097 ​ 19.73 Vested — ​ — Forfeited ( 3,421 ) ​ 19.73 Unvested, September 30, 2022 47,676 ​ $ 19.73 ​ During the year ended September 30, 2022, the Company granted 51,097 RSUs. These performance-based RSUs cliff vest after three years and are subject to the achievement of the Company's pre-defined performance goals for the three-year period ending December 31, 2024. ​ Compensation expense attributable to RSUs was $ 0.2 million for the year ended September 30, 2022. There was no compensation expense related to RSUs for the year ended September 30, 2021, as no RSUs were granted in 2021. As of September 30, 2022, there was $ 0.7 million of total unrecognized compensation cost related to non-vested RSUs. The cost is expected to be recognized over a weighted-average period of 2.39 years. ​ ​ 90 Table of Contents Note 12. Related Party Transactions The Company has had, and may be expected to have in the future, banking transactions in the ordinary course of business with its executive officers, directors, their immediate families and their affiliated companies (commonly referred to as related parties). Loans to related parties during 2022 were as follows: ​ ​ ​ ​ ​ (in thousands) ​ Beginning balance, October 1, 2021 $ 2,490 New loans ​ 874 Repayments ​ ( 628 ) Ending balance, September 30, 2022 ​ $ 2,736 ​ Deposits from principal officers, directors and their affiliates at September 30, 2022 and 2021 were $ 12.8 million and $ 20.0 million, respectively. ​ Note 13. Commitments and Contingent Liabilities Loan Commitments and Other Related Activities Some financial instruments such as loan commitments, credit lines, letters of credit, and overdraft protection are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk of credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. The following represents commitments outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2022 2021 (in thousands) ​ Fixed Rate ​ Variable Rate ​ Fixed Rate ​ Variable Rate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Standby letters of credit ​ $ — ​ $ 817 ​ $ — ​ $ 786 Loan commitments outstanding ​ 9,992 ​ 17,184 ​ 61,375 ​ 19,665 Unused lines of credit ​ — ​ 45,920 ​ — ​ 24,639 ​ Leases The Company is obligated to make minimum annual rental payments under non-cancelable operating leases. Projected minimum rentals under the existing leases are as follows: ​ ​ ​ ​ ​ (in thousands) Total 2023 ​ $ 1,921 2024 ​ 1,948 2025 ​ 1,951 2026 ​ 1,775 2027 ​ 1,361 Thereafter ​ 3,532 Total ​ $ 12,488 ​ The leases contain certain renewal options and rent escalation clauses which are included in the table above. In addition, the leases provide for additional payments based upon real estate taxes, interest and other charges. Rent expense under operating leases for the years ended September 30, 2022 and 2021 approximated $ 1.9 million and $ 1.7 million, respectively. 91 Table of Contents ​ Note 14. Regulatory Matters The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate regulatory action. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of September 30, 2022, the Bank meets all capital adequacy requirements to which it is subject. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized or worse, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2022 and 2021, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category. Under a policy of the Federal Reserve applicable to bank holding companies with less than $3.0 billion in consolidated assets, the Company is not subject to consolidated regulatory capital requirements. The following table sets forth the Bank’s actual and required capital amounts (in thousands) and ratios under current regulations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum Capital ​ Minimum to Be Well ​ ​ ​ ​ ​ ​ Adequacy Requirement ​ Capitalized Under ​ ​ ​ ​ Minimum Capital ​ with Capital ​ Prompt Corrective ​ ​ Actual Capital ​ Adequacy Requirement ​ Conservation Buffer ​ Action Provisions ​ Amount Ratio Amount Ratio Amount Ratio Amount Ratio September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital to risk-weighted assets ​ $ 191,355 16.32 % $ 93,796 8.00 % $ 123,107 10.50 % $ 117,245 10.00 % Tier 1 capital to risk-weighted assets ​ 178,340 15.21 % 70,347 6.00 % 99,658 8.50 % 93,796 8.00 % Common equity tier 1 capital to risk-weighted assets ​ 178,340 15.21 % 52,760 4.50 % 82,071 7.00 % 76,209 6.50 % Tier 1 capital to average total assets ​ 178,340 10.90 % 65,429 4.00 % N/A N/A ​ 81,786 5.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital to risk-weighted assets ​ $ 132,554 15.59 % $ 68,040 ​ 8.00 % $ 89,303 10.50 % $ 85,050 10.00 % Tier 1 capital to risk-weighted assets ​ 123,666 14.54 % ​ 51,030 ​ 6.00 % ​ 72,293 8.50 % ​ 68,040 8.00 % Common equity tier 1 capital to risk-weighted assets ​ 123,666 14.54 % ​ 38,273 ​ 4.50 % ​ 59,535 7.00 % ​ 55,283 6.50 % Tier 1 capital to average total assets ​ 123,666 9.45 % ​ 52,338 ​ 4.00 % ​ N/A N/A ​ ​ 65,423 5.00 % ​ ​ Dividend restrictions - The Company’s principal source of funds for dividend payments is dividends received from the Bank. During 2022 the Bank made $ 0.4 million cash dividends to the Holding Company. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. As of September 30, 2022, the Bank had $ 42.2 million of retained net income available for dividends to the Company, without obtaining regulatory approval. The Holding Company made capital contributions of $ 26.0 million to the Bank. ​ 92 Table of Contents ​ Note 15. Fair Value Measurements FASB ASC No. 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined using quoted market prices. However, in many instances, quoted market prices are not available. In such instances, fair values are determined using appropriate valuation techniques. Various assumptions and observable inputs must be relied upon in applying these techniques. Accordingly, categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. As such, the fair value estimates may not be realized in an immediate transfer of the respective asset or liability. FASB ASC 820-10 also establishes a fair value hierarchy and describes three levels of inputs that may be used to measure fair values. The three levels within the fair value hierarchy are as follows: ● Level 1: Valuation is based upon unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. ● Level 2: Fair value is calculated using significant inputs other than quoted market prices that are directly or indirectly observable for the asset or liability. The valuation may rely on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, rate volatility, prepayment speeds, credit ratings) or inputs that are derived principally or corroborated by market data, by correlation, or other means. ● Level 3: Inputs for determining the fair value of the respective assets or liabilities are not observable. Level 3 valuations are reliant upon pricing models and techniques that require significant management judgment or estimation. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. Assets Measured at Fair Value on a Recurring Basis The following table summarizes assets measured at fair value on a recurring basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ ​ ​ ​ Fair Value Measurements Using: ​ ​ ​ ​ Quoted Prices In ​ ​ ​ Significant ​ ​ Active Markets Significant Other Unobservable ​ ​ Carrying ​ for Identical Assets ​ Observable Inputs ​ Inputs (in thousands) ​ Amount ​ (Level 1) ​ (Level 2) ​ (Level 3) Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 242 ​ $ — ​ $ 242 ​ $ — Corporate bonds ​ 12,043 ​ — ​ 12,043 ​ — Loan servicing rights ​ 4,353 ​ — ​ — ​ 4,353 Total ​ $ 16,638 ​ $ — ​ $ 12,285 ​ $ 4,353 93 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ ​ ​ ​ Fair Value Measurements Using: ​ ​ ​ ​ Quoted Prices In ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ ​ ​ Significant ​ ​ for Identical Significant Other Unobservable ​ ​ Carrying ​ Assets ​ Observable Inputs ​ Inputs (In thousands) ​ Amount ​ (Level 1) ​ (Level 2) ​ (Level 3) Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 833 ​ $ — ​ $ 833 ​ $ — Corporate bonds ​ 6,914 ​ — ​ 6,914 ​ — Loan servicing rights ​ 3,690 ​ — ​ — ​ 3,690 Total ​ $ 11,437 ​ $ — ​ $ 7,747 ​ $ 3,690 ​ The fair value for the securities available-for-sale were obtained from an independent broker based upon matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. The Company has determined these are classified as Level 2 inputs within the fair value hierarchy. The fair value of mortgage servicing rights are based on a valuation model that calculates the present value of estimated future servicing income. The valuation model utilizes interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future net servicing income. Fair value of loan servicing rights related to residential mortgage loans at September 30, 2022 was determined based on discounted expected future cash flows using discount rates ranging from 12.0 % to 14.5 %, prepayment speed of 26.25 % and a weighted average life ranging from 1.2 to 3.0 years. Fair value at September 30, 2021 for mortgage servicing rights was determined based on discounted expected future cash flows using discount rates ranging from 12.0 % to 14.5 %, prepayment speeds ranging from 24.18 % to 24.33 % and a weighted average life ranging from 1.96 to 3.3 years. The fair value of loan servicing rights for SBA loans at September 30, 2022 was determined based on discounted expected future cash flows using discount rates ranging from 5.78 % to 26.72 %, prepayment speeds ranging from 8.42 % to 24.00 % and a weighted average life ranging from 1.47 to 5.79 years. The fair value of loan servicing rights for SBA loans at September 30, 2021 was determined based on discounted expected future cash flows using discount rates ranging from 4.64 % to 21.81 %, prepayment speeds ranging from 11.87 % to 26.26 % and a weighted average life ranging from 0.39 to 5.85 years. The Company has determined these are mostly unobservable inputs and considers then Level 3 inputs within the fair value hierarchy. The following table presents the changes in loan servicing rights for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) ​ 2022 2021 Balance at beginning of period $ 3,690 ​ $ 155 Loan servicing rights obtained from acquisition of Savoy ​ — ​ 3,777 Additions ​ 1,158 ​ 10 Adjustment to fair value ​ ( 495 ) ​ ( 252 ) Balance at end of period ​ $ 4,353 ​ $ 3,690 ​ Assets Measured at Fair Value on a Non-recurring Basis There were no assets or liabilities measured at fair value on a non-recurring basis as of September 30, 2022 and 2021 and for the years then ended. 94 Table of Contents Financial Instruments Not Measured at Fair Value The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments not carried at fair value at September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ ​ ​ ​ ​ Fair Value Measurements Using: ​ ​ ​ ​ Quoted Prices In ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ ​ ​ ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ for Identical ​ Significant Other ​ Unobservable ​ ​ ​ ​ ​ Carrying ​ Assets ​ Observable Inputs ​ Inputs ​ Total Fair (In thousands) ​ Amount ​ (Level 1) ​ (Level 2) ​ (Level 3) ​ Value Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 149,947 ​ $ 149,947 ​ $ — ​ $ — ​ $ 149,947 Securities held-to-maturity ​ 4,414 ​ — ​ 4,095 ​ — ​ 4,095 Loans, net ​ 1,610,687 ​ — ​ — ​ 1,564,991 ​ 1,564,991 Accrued interest receivable ​ 8,546 ​ — ​ 219 ​ 8,327 ​ 8,546 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ Time deposits ​ 339,073 ​ — ​ 328,964 ​ — ​ 328,964 Demand and other deposits ​ 1,189,033 ​ 1,189,033 ​ — ​ — ​ 1,189,033 Borrowings ​ 101,752 ​ — ​ 99,597 ​ — ​ 99,597 Subordinated debentures ​ 24,568 ​ — ​ 24,199 ​ — ​ 24,199 Accrued interest payable ​ 915 ​ 1 ​ 914 ​ — ​ 915 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ ​ ​ ​ ​ Fair Value Measurements Using: ​ ​ ​ ​ ​ ​ ​ ​ Quoted Prices In ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ ​ ​ ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ for Identical ​ Significant Other ​ Unobservable ​ ​ ​ ​ ​ Carrying ​ Assets ​ Observable Inputs ​ Inputs ​ Total Fair (In thousands) ​ Amount ​ (Level 1) ​ (Level 2 ) ​ (Level 3 ) ​ Value Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents $ 166,544 $ 166,544 $ — $ — $ 166,544 Securities held-to-maturity ​ 8,611 ​ — ​ 8,865 ​ — ​ 8,865 Loans, net ​ 1,238,573 ​ — ​ — ​ 1,278,056 ​ 1,278,056 Accrued interest receivable ​ 9,363 ​ — ​ 211 ​ 9,152 ​ 9,363 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ Time deposits ​ 377,836 ​ — ​ 378,333 ​ — ​ 378,333 Demand and other deposits ​ 786,826 ​ 786,826 ​ — ​ — ​ 786,826 Borrowings ​ 159,642 ​ — ​ 159,608 ​ — ​ 159,608 Subordinated debentures ​ ​ 24,513 ​ ​ — ​ ​ 27,092 ​ ​ — ​ ​ 27,092 Accrued interest payable ​ 1,290 ​ 1 ​ 713 ​ 576 ​ 1,290 ​ ​ 95 Table of Contents ​ ​ Note 16. Parent Company Only Condensed Financial Information Condensed parent company only financial statements of Hanover Bancorp, Inc. are as follows: Condensed Balance Sheets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2022 2021 ASSETS ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 304 ​ $ 571 Investment in Bank ​ 197,290 ​ 146,232 Other assets ​ 141 ​ 1,050 Total Assets ​ $ 197,735 ​ $ 147,853 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ Subordinated debentures ​ $ 24,568 ​ $ 24,513 Accrued interest payable ​ 573 ​ 576 Accrued expenses and other liabilities ​ 10 ​ 235 Total Liabilities ​ 25,151 ​ 25,324 Total Stockholders' Equity ​ 172,584 ​ 122,529 Total Liabilities and Stockholders' Equity ​ $ 197,735 ​ $ 147,853 ​ Condensed Statements of Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2022 2021 Dividends received from Bank ​ $ 400 ​ $ — Interest expense ​ ( 1,331 ) ​ ( 1,361 ) Non-interest expense ​ ( 18 ) ​ — Loss before income taxes and equity in undistributed earnings of the Bank ​ ( 949 ) ​ ( 1,361 ) Income tax benefit ​ 253 ​ 296 Equity in undistributed earnings of the Bank ​ 24,252 ​ 11,916 Net income ​ $ 23,556 ​ $ 10,851 ​ ​ 96 Table of Contents ​ Condensed Statements of Cash Flows ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2022 2021 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income ​ $ 23,556 ​ $ 10,851 Adjustments to reconcile net income to net cash used in operating activities: ​ ​ ​ ​ ​ ​ Equity in undistributed earnings of the Bank ​ ( 24,252 ) ​ ( 11,916 ) Amortization of debt issuance costs ​ 55 ​ 72 Decrease (increase) in other assets ​ 909 ​ ( 295 ) (Decrease) increase in accrued interest payable ​ ( 3 ) ​ 542 (Decrease) increase in other liabilities ​ ( 223 ) ​ 235 Net cash provided by (used in) operating activities ​ ​ 42 ​ ​ ( 511 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Investment in Bank ​ ( 26,000 ) ​ ( 9,000 ) Net cash used in investing activities ​ ​ ( 26,000 ) ​ ​ ( 9,000 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Proceeds from issuance of subordinated debentures, net of issuance costs ​ — ​ 24,455 Repayment of note payable ​ — ​ ( 15,000 ) Net proceeds from issuance of common stock ​ 27,771 ​ 113 Payments related to tax withholding for equity awards ​ ​ ( 28 ) ​ ​ — Cash dividends paid to common stockholders ​ ​ ( 2,052 ) ​ ​ — Net cash provided by financing activities ​ ​ 25,691 ​ ​ 9,568 ​ ​ ​ ​ ​ ​ ​ Net (decrease) increase in cash and due from banks ​ ​ ( 267 ) ​ ​ 57 Cash and due from banks, beginning of period ​ 571 ​ 514 Cash and due from banks, end of period ​ $ 304 ​ $ 571 ​ ​ ​ ​ ​ ​ ​ Supplemental non-cash disclosures: ​ ​ ​ ​ ​ ​ Common stock issued in acquisition ​ $ — ​ $ 31,252 Stock options rolled over in acquisition ​ — ​ 1,269 ​ ​ 97 Table of Contents ​ Note 17. Earnings Per Share The two-class method is used in the calculation of basic and diluted earnings per share (“EPS”). Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared and participation rights in undistributed earnings. The Company’s basic and diluted EPS calculations are presented in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands, except share and per share data) ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Net income available to common stockholders ​ $ 23,556 ​ $ 10,851 Less: Dividends paid and earnings allocated to participating securities ​ ​ ( 903 ) ​ ​ ( 218 ) Income attributable to common stock ​ $ 22,653 ​ $ 10,633 Weighted average common shares outstanding, including participating securities ​ ​ 6,302,328 ​ ​ 4,669,009 Less: Weighted average participating securities ​ ​ ( 237,259 ) ​ ​ ( 93,799 ) Weighted average common shares outstanding ​ 6,065,069 ​ 4,575,210 Basic EPS ​ $ 3.74 ​ $ 2.32 ​ ​ ​ ​ ​ ​ ​ Income attributable to common stock ​ $ 22,653 ​ $ 10,633 Weighted average common shares outstanding ​ 6,065,069 ​ 4,575,210 Weighted average common equivalent shares outstanding ​ ​ 92,977 ​ ​ 89,660 Weighted average common and equivalent shares outstanding ​ ​ 6,158,046 ​ ​ 4,664,870 Diluted EPS ​ $ 3.68 ​ $ 2.28 ​ There were no stock options that were antidilutive at September 30, 2022 and 2021. ​ Note 18. Accumulated Other Comprehensive Income (Loss) The following presents changes in accumulated other comprehensive income (loss) by component, net of tax, for the years ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ Unrealized Gains and ​ ​ Losses on Available- ​ ​ for-Sale Debt (in thousands) ​ Securities Balance at October 1, 2021 ​ $ 256 Other comprehensive loss, before reclassification ​ ( 795 ) Amount reclassified from accumulated other comprehensive income ​ ​ ( 81 ) Net current period other comprehensive loss ​ ( 876 ) Balance at September 30, 2022 ​ $ ( 620 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized Gains and ​ ​ Losses on Available- ​ ​ for-Sale Debt (in thousands) ​ Securities Balance at October 1, 2020 ​ $ 156 Other comprehensive income, before reclassification ​ 291 Amount reclassified from accumulated other comprehensive income ​ ​ ( 191 ) Net current period other comprehensive income ​ 100 Balance at September 30, 2021 ​ $ 256 ​ ​ 98 Table of Contents The following represents the reclassification out of accumulated other comprehensive income for the years ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ September 30, ​ Affected Line Item in Consolidated (in thousands) 2022 ​ 2021 Statements of Income Realized gains on securities available-for-sale ​ $ 105 ​ $ 240 ​ Gain on sale of investment securities available-for-sale, net Tax effect ​ 24 ​ 49 Income tax expense Net of tax ​ $ 81 ​ $ 191 ​ ​ ​ ​ Note 19. Revenue from Contracts with Customers All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within Non-Interest Income. The following table presents the Company’s sources of non-interest income. Items outside the scope of ASC 606 are noted as such. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2022 2021 Loan servicing and fee income (1) ​ $ 2,885 ​ $ 1,207 Service charges on deposit accounts ​ 232 ​ 127 Net gain on sale of loans held-for-sale (1) ​ 5,143 ​ 1,307 Net gain on sale of investments available-for-sale (1) ​ 105 ​ 240 Other income (2) ​ 507 ​ 468 Total non-interest income ​ $ 8,872 ​ $ 3,349 (1) Not included within the scope of ASC 606 (2) Other income includes merchant card processing fees of $ 33 and $ 9 for the year ended September 30, 2022 and 2021, respectively, which are included in the scope of ASC 606 and loan related fee income, recoveries on acquired loans and miscellaneous income totaling $ 474 and $ 459 for 2022 and 2021, respectively, which are not included in the scope of ASC 606. A description of the Company’s revenue streams included in the scope of ASC 606 is as follows: Service Char g es on Deposit Accounts: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Service-based fees, which include services such as ATM use fees, stop payment charges, wire transfers, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills its performance obligation to the customer. Account maintenance fees, which primarily relate to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies its performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on customer accounts are withdrawn from the customer’s account balance. ​ ​ 99 Table of Contents Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. ​