Hanover Bancorp, Inc. /MD 10-K

ITEM 8. Financial Statements and Supplementary Data ​ 59 Table of Contents ​ ​ ​ ​ Crowe LLP ​ Independent Member Crowe Global ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Stockholders and 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, 2023 and 2022, 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, 2023 and 2022, 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 21, 2023 ​ ​ 60 Table of Contents HANOVER BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ ​ 2023 ​ 2022 ​ ASSETS ​ ​ ​ ​ ​ ​ Cash and non-interest-bearing deposits due from banks ​ $ 5,496 ​ $ 9,934 ​ Interest-bearing deposits due from banks ​ 186,614 ​ 139,559 ​ Federal funds sold ​ 514 ​ 454 ​ Total cash and cash equivalents ​ 192,624 ​ 149,947 ​ Securities: ​ ​ ​ ​ ​ ​ ​ Held to maturity (fair value of $ 3,760 and $ 4,095 , respectively) ​ 4,108 ​ 4,414 ​ Available for sale, at fair value ​ 10,889 ​ 12,285 ​ Total securities ​ ​ 14,997 ​ ​ 16,699 ​ Loans ​ 1,874,562 ​ 1,623,531 ​ Allowance for loan losses ​ ( 14,686 ) ​ ( 12,844 ) ​ Loans, net ​ 1,859,876 ​ 1,610,687 ​ Premises and equipment, net ​ 16,057 ​ 14,462 ​ Operating lease assets ​ ​ 10,193 ​ ​ — ​ Accrued interest receivable ​ 10,636 ​ 8,546 ​ Prepaid post retirement plan ​ 3,534 ​ 3,444 ​ Stock in Federal Home Loan Bank ("FHLB"), at cost ​ 10,547 ​ 6,280 ​ Goodwill ​ 19,168 ​ 19,168 ​ Other intangible assets ​ 327 ​ 399 ​ Loan servicing rights ​ 4,479 ​ 4,353 ​ Deferred income taxes, net ​ 1,509 ​ 2,508 ​ Other assets ​ 5,588 ​ 3,565 ​ TOTAL ASSETS ​ $ 2,149,535 ​ $ 1,840,058 ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ Deposits: ​ ​ ​ Non-interest-bearing demand ​ $ 185,731 ​ $ 219,225 ​ Savings, NOW and money market ​ 1,019,263 ​ 969,808 ​ Time ​ 530,076 ​ 339,073 ​ Total deposits ​ 1,735,070 ​ 1,528,106 ​ Borrowings ​ 179,849 ​ 101,752 ​ Subordinated debentures ​ 24,621 ​ 24,568 ​ Operating lease liabilities ​ 10,899 ​ — ​ Accrued interest payable ​ 1,821 ​ 915 ​ Other liabilities ​ 11,368 ​ 12,133 ​ TOTAL LIABILITIES ​ 1,963,628 ​ 1,667,474 ​ COMMITMENTS AND CONTINGENT LIABILITIES ​ ​ — ​ ​ — ​ STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ Preferred stock, Series A (par value $ 0.01 ; 15,000,000 shares authorized; issued and outstanding 150,000 and none , respectively) ​ ​ 2,963 ​ ​ — ​ Common stock (par value $ 0.01 ; 17,000,000 shares authorized; issued and outstanding 7,170,419 and 7,285,648 , respectively) ​ 72 ​ 73 ​ Surplus ​ 125,501 ​ 126,656 ​ Retained earnings ​ 58,693 ​ 46,475 ​ Accumulated other comprehensive loss, net of tax ​ ( 1,322 ) ​ ( 620 ) ​ TOTAL STOCKHOLDERS' EQUITY ​ 185,907 ​ 172,584 ​ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ​ $ 2,149,535 ​ $ 1,840,058 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 61 Table of Contents HANOVER BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ ​ 2023 2022 INTEREST INCOME ​ ​ ​ ​ Loans ​ $ 97,560 ​ $ 67,005 ​ Taxable securities ​ 806 ​ 484 ​ Other interest income ​ 6,677 ​ 940 ​ Total interest income ​ 105,043 ​ 68,429 ​ INTEREST EXPENSE ​ ​ ​ Savings, NOW and money market deposits ​ 32,647 ​ 3,166 ​ Time deposits ​ 11,204 ​ 2,209 ​ Borrowings ​ 6,700 ​ 1,800 ​ Total interest expense ​ 50,551 ​ 7,175 ​ Net interest income ​ 54,492 ​ 61,254 ​ Provision for loan losses ​ 3,432 ​ 4,450 ​ Net interest income after provision for loan losses ​ 51,060 ​ 56,804 ​ NON-INTEREST INCOME ​ ​ ​ Loan servicing and fee income ​ 2,709 ​ 2,885 ​ Service charges on deposit accounts ​ 275 ​ 232 ​ Gain on sale of loans held-for-sale ​ 4,093 ​ 5,143 ​ Gain on sale of securities available-for-sale ​ — ​ 105 ​ Other income ​ 1,771 ​ 507 ​ Total non-interest income ​ 8,848 ​ 8,872 ​ NON-INTEREST EXPENSE ​ ​ ​ Salaries and employee benefits ​ 20,652 ​ 19,665 ​ Occupancy and equipment ​ 6,359 ​ 5,633 ​ Data processing ​ 1,951 ​ 1,629 ​ Acquisition costs ​ — ​ 250 ​ Professional fees ​ 3,145 ​ 2,568 ​ Federal deposit insurance premiums ​ 1,259 ​ 368 ​ Other expenses ​ 6,355 ​ 5,068 ​ Total non-interest expense ​ 39,721 ​ 35,181 ​ Income before income tax expense ​ 20,187 ​ 30,495 ​ Income tax expense ​ 5,023 ​ 6,939 ​ NET INCOME ​ $ 15,164 ​ $ 23,556 ​ Earnings per share: ​ ​ ​ BASIC ​ $ 2.07 ​ $ 3.74 ​ DILUTED ​ $ 2.05 ​ $ 3.68 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 62 Table of Contents HANOVER BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ 2023 ​ 2022 Net income ​ $ 15,164 $ 23,556 Other comprehensive (loss) income, net of tax: ​ ​ ​ ​ Unrealized losses on investment securities available for sale: ​ ​ ​ ​ ​ ​ Change in unrealized loss on securities available for sale arising during the period, net of tax of ($ 293 ) and ($ 215 ), respectively ​ ​ ( 1,050 ) ​ ​ ( 795 ) Reclassification adjustment for gains realized in net income, net of tax of $ 0 and $ 24 , respectively ​ — ​ ( 81 ) Net change in unrealized gains (losses) on securities available for sale ​ ( 1,050 ) ​ ( 876 ) Unrealized gains on cash flow hedges: ​ ​ ​ ​ ​ ​ Change in unrealized gain on cash flow hedges arising during the period, net of tax of $ 97 and $ 0 , respectively ​ ​ 348 ​ ​ — Total other comprehensive loss, net of tax ​ ​ ( 702 ) ​ ​ ( 876 ) Total comprehensive income, net of tax ​ $ 14,462 ​ $ 22,680 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 63 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 ​ Preferred ​ Common ​ ​ ​ Retained ​ Comprehensive ​ Stockholders' ​ ​ (Shares) ​ Stock ​ Stock ​ Surplus ​ Earnings ​ (Loss) Income, Net ​ Equity Balance at October 1, 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 declared ($ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income — ​ — ​ — ​ — ​ 15,164 ​ — ​ 15,164 Other comprehensive loss, net of tax — ​ — ​ — ​ — ​ — ​ ( 702 ) ​ ( 702 ) Cash dividends declared ($ 0.10 per share) — ​ — ​ — ​ — ​ ( 2,946 ) ​ — ​ ( 2,946 ) Stock-based compensation — ​ — ​ 1 ​ 1,870 ​ — ​ — ​ 1,871 Stock awards granted, net of forfeitures ​ 32,901 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares received related to tax withholding ​ ( 8,744 ) ​ ​ — ​ ​ — ​ ​ ( 170 ) ​ ​ — ​ ​ — ​ ​ ( 170 ) Preferred stock issued in exchange for common stock ​ ( 150,000 ) ​ ​ 2,963 ​ ​ ( 2 ) ​ ​ ( 2,961 ) ​ ​ — ​ ​ — ​ ​ — Exercise of stock options 10,614 ​ — ​ — ​ 106 ​ — ​ — ​ 106 Balance at September 30, 2023 7,170,419 ​ $ 2,963 ​ $ 72 ​ $ 125,501 ​ $ 58,693 ​ $ ( 1,322 ) ​ $ 185,907 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 64 Table of Contents HANOVER BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ 2023 2022 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income ​ $ 15,164 ​ $ 23,556 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ Provision for loan losses ​ 3,432 ​ 4,450 Depreciation and amortization ​ 1,812 ​ 1,663 Amortization of right-of-use assets ​ ​ 1,608 ​ ​ — Net gain on sale of securities available-for-sale ​ — ​ ( 105 ) Stock-based compensation ​ 1,871 ​ 1,684 Net gain on sale of loans held-for-sale ​ ( 4,093 ) ​ ( 5,143 ) Net accretion of premiums, discounts and loan fees and costs ​ ( 748 ) ​ ( 3,570 ) Amortization of intangible assets ​ 72 ​ 81 Amortization of debt issuance costs ​ 53 ​ 55 Loan servicing rights valuation adjustments ​ 767 ​ 495 Deferred tax expense ​ 1,196 ​ 1,318 (Increase) decrease in accrued interest receivable ​ ( 2,090 ) ​ 817 Increase in other assets ​ ( 1,768 ) ​ ( 5 ) Increase (decrease) in accrued interest payable ​ 906 ​ ( 375 ) Increase (decrease) in other liabilities ​ ( 264 ) ​ 160 Payments on operating leases ​ ​ ( 1,517 ) ​ ​ — Net cash provided by operating activities ​ 16,401 ​ 25,081 Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Purchases of securities available-for-sale ​ — ​ ( 8,000 ) Purchases of restricted securities, net ​ ( 4,267 ) ​ ( 2,566 ) Proceeds from sales of securities available-for-sale ​ — ​ 2,105 Principal repayments of securities held to maturity ​ 302 ​ 4,191 Principal repayments of securities available-for-sale ​ 50 ​ 335 Proceeds from sales of loans ​ 50,359 ​ 85,420 Net increase in loans ​ ( 299,397 ) ​ ( 454,509 ) Purchases of premises and equipment ​ ( 3,407 ) ​ ( 1,122 ) Net cash used in investing activities ​ ( 256,360 ) ​ ( 374,146 ) Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Net increase in deposits ​ ​ 207,472 ​ ​ 364,519 Proceeds from term FHLB advances ​ 100,725 ​ — Repayments of term FHLB advances ​ ( 11,800 ) ​ ( 4,000 ) Repayments of Federal Reserve Bank borrowings ​ ( 4,768 ) ​ ( 108,710 ) (Repayments) proceeds of other short-term borrowings, net ​ ​ ( 6,000 ) ​ ​ 55,000 Payments related to tax withholding for equity awards ​ ( 170 ) ​ ( 28 ) Cash dividends paid ​ ( 2,929 ) ​ ( 2,042 ) Net proceeds from issuance of common stock ​ ​ — ​ ​ 27,729 Proceeds from exercise of stock options ​ 106 ​ — Net cash provided by financing activities ​ 282,636 ​ 332,468 Increase (decrease) in cash and cash equivalents ​ 42,677 ​ ( 16,597 ) Cash and cash equivalents, beginning of period ​ 149,947 ​ 166,544 Cash and cash equivalents, end of period ​ $ 192,624 ​ $ 149,947 Supplemental cash flow information: ​ ​ Interest paid ​ $ 49,645 ​ $ 7,550 Income taxes paid ​ 4,404 ​ 6,466 Supplemental non-cash disclosure: ​ ​ ​ ​ ​ ​ Transfers from portfolio loans to loans held-for-sale ​ $ 51,816 ​ $ 80,277 Preferred stock issued in exchange for common stock ​ ​ 2,963 ​ ​ — Lease liabilities arising from obtaining right-of-use assets ​ ​ 1,791 ​ ​ — Other assets received in satisfaction of a loan ​ 844 ​ — ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 65 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 is the holding company for Hanover Community Bank (the “Bank”). 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 and had no effect on prior year net income or stockholders’ equity. 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 The United States economy is currently experiencing a level of price inflation not experienced since the late 1970's and early 1980's. It is therefore difficult to predict the response of consumers and businesses to this level of inflation, and its impact on the economy. In addition, in order to attempt to control and reduce the level of inflation, the Federal Reserve has embarked on a series of interest rate increases along with quantitative tightening to further constrict economic conditions. It is unclear whether the Federal Reserve’s efforts will be successful, and what impact they may have on the United States’ economy. It is possible that that the combined effects of inflation and increases in market interest rates could cause the economy of the United States to enter a recession, which could negatively impact the businesses of our borrowers and their ability to repay their loans or need credit, which could negatively affect our results of operations. 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 3 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. ​ 66 Table of Contents 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. Dividend Restriction Banking regulations require maintaining certain capital levels and may limit the dividends paid by the bank to the holding company or by the holding company to shareholders. 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. 67 Table of Contents Loans Held for Sale Loans held for sale are carried at 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 are 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. ​ 68 Table of Contents 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 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. ​ 69 Table of Contents 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. 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. ​ 70 Table of Contents 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 ● 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. 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. ​ 71 Table of Contents 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 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 $ 2.0 million and $ 1.6 million for the years ended September 30, 2023 and 2022, 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. Foreclosed Assets Foreclosed assets are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through similar legal agreement. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed. 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 2 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. Leases Leases are classified as operating or finance leases at the lease commencement date. Currently, the Company does not have any leases classified as financing leases. The Company leases certain locations and equipment. The Company records leases on the Consolidated Statements of Financial Condition in the form of an operating lease liability for the present value of future minimum payments under the lease terms and a right-of-use asset equal to the lease liability adjusted for such items as deferred or prepaid rent, lease incentives, any impairment of the right-of-use asset. The discount rate used in determining the lease liability is based upon incremental borrowing rates the Company could obtain for similar loans as of the date of commencement or renewal. ​ 72 Table of Contents The Company does not record leases on the Consolidated Statements of Financial Condition that are classified as short term (12 months or less). Short-term lease payments are recognized in the income statement on a straight-line basis over the lease term. Certain leases may include one or more options to renew. The exercise of lease renewal options is typically at the Company’s discretion, and are included in the operating lease liability if it is reasonably certain that the renewal option will be exercised. Certain real estate leases may contain lease and non-lease components, such as common area maintenance charges, real estate taxes, and insurance, which are generally accounted for separately and are not included in the measurement of the lease liability since they are generally able to be segregated. The Company does not sublease any of its leased properties. The Company does not lease properties from any related parties. 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 . Loan Commitments and Related Financial Instruments Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Derivatives The Company records cash flow hedges at the inception of the derivative contract based on the Company’s intentions and belief as to likely effectiveness as a hedge. Cash flow hedges represent a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income (“OCI”) and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. The changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as non-interest income. Accrued settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Accrued settlements on derivatives that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged. ​ 73 Table of Contents The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended. When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods in which the hedged transactions will affect earnings. The Company is exposed to losses if a counterparty fails to make its payments under a contract in which the Company is in the net receiving position. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements. All the contracts to which the Company is a party settle monthly or quarterly. In addition, the Company obtains collateral above certain thresholds of the fair value of its derivatives for each counterparty based upon their credit standing and the Company has netting agreements with the dealers with which it does business. 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. Series A Preferred Stock Holders of the Company’s Series A preferred stock will be entitled to receive dividends when, as and if declared by the Company’s board of directors, in the same per share amount as the common stockholders. No dividends will be payable on the common stock unless a dividend identical to that paid on the common stock is paid at the same time on the Series A preferred stock. Therefore Series A preferred stock is treated as common stock for EPS calculations. Series A preferred stock has no voting rights. In the event of a dissolution of the Company, Series A preferred stock is entitled to the payment of any declared and unpaid dividend, and then will share in dissolution proceeds, if any, with the shares of common stock. 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 and unrealized gains and losses on cash flow hedges which are also recognized as separate components of stockholders’ equity. 74 Table of Contents Loss Contingencies Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements. 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 Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 16. 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. ​ 75 Table of Contents 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 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. Adoption of New Accounting Standards Standards Adopted in Fiscal Year 2023 On October 1, 2022, the Company adopted ASU No. 2016-02 “Leases (Topic 842)” and subsequent amendments thereto, which requires the Company to recognize most leases on the balance sheet. The Company adopted the standard under a modified retrospective approach as of the date of adoption and elected to apply several of the available practical expedients, including: 1) carryover of historical lease determination and lease classification conclusions, 2) carryover of historical initial direct cost balances for existing leases, and 3) accounting for lease and non-lease components in contracts in which the Company is a lessee as a single lease component. Adoption of the leasing standard resulted in the recognition of operating right-of-use assets, and operating lease liabilities of approximately $ 10 million as of October 1, 2022. These amounts were determined based on the present value of remaining minimum lease payments, discounted using the Company’s incremental borrowing rate as of the date of adoption. There was no material impact to the timing of expense or income recognition in the Company’s Consolidated Statements of Income. Prior periods were not restated and continue to be presented under legacy GAAP. Disclosures about the Company’s leasing activities are presented in Note 5. In December 2022, the Financial Accounting Standards Board (the “FASB”) issued ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848” that extends the period of time preparers can utilize the reference rate reform relief guidance. In 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on expectations of when LIBOR would cease being published. In 2021, the UK Financial Conduct Authority delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023. To ensure relief in Topic 848 covers the period of time during which a significant number of modifications may take place, ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. For all entities, the amendments in ASU 2022-06 are effective upon issuance. The Company adopted this ASU on July 1, 2023. The adoption of this standard did not have material effect on the Company’s operating results or financial condition. 76 Table of Contents Standards That Have Not Yet Been Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses Topic 326: Measurement of Credit Losses on Financial Instruments. The objective of the ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses, which is referred to as the current expected credit loss (“CECL”) methodology, and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates. In November 2019, the FASB adopted changes to delay the effective date of ASU 2016-13 to 2023 for certain entities, including certain Securities and Exchange Commission filers, public business entities, and private companies. As the Company is a smaller reporting company under SEC regulations, the Company is eligible for the delay and will adopt CECL effective October 1, 2023. The Company has reviewed the potential impact to our securities portfolio, which primarily consists of U.S. government sponsored entities, mortgage-backed securities and corporate bonds which have no history of credit loss and have strong credit ratings. The Company does not expect the standard to have a material impact on its financial statements as it relates to the Company’s securities portfolio. The Company is also currently evaluating the impact the CECL model will have on our accounting and allowance for loan losses. The Company has engaged a third-party to assist in the development of a CECL model for the calculation of the allowance for loan and lease losses in preparation for the change to the current expected credit loss model. The Company has also engaged a third-party to perform a model validation of its CECL model. The Company is also in the process of updating its policies, procedures and internal controls accordingly. The Company will adopt the ASU using the required modified retrospective method with a one-time cumulative effect adjustment to retained earnings, net of tax, as of the beginning of the reporting period. The Company is in the process of finalizing its CECL calculation for adoption. In March 2022, the FASB issued ASU 2022-02, which eliminates creditor accounting guidance for troubled debt restructurings (“TDRs”) for entities that have adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) and enhances Vintage Disclosures of Gross Writeoffs. This ASU eliminates Subtopic 310-40 guidance for TDRs, and requires creditors to apply the loan refinancing and restructuring guidance in Subtopic 310-20 when evaluating modifications granted to borrowers experiencing financial difficulty to determine whether the modification is considered a continuation of an existing loan or a new loan. The vintage disclosure component of the ASU requires entities to disclose current-period gross writeoffs by origination year for financing receivables and investment leases within the scope of Subtopic 326-20. The Company will adopt ASU 2022-02 concurrently with the adoption of ASU 2016-13. ​ 77 Table of Contents ​ ​ ​ ​ Note 2. 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, 2023 and 2022 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ Amortized Unrealized Unrealized ​ ​ (in thousands) ​ Cost ​ Gains ​ Losses ​ Fair Value Available for sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 322 ​ $ — ​ $ ( 180 ) ​ $ 142 Corporate bonds ​ ​ 12,700 ​ ​ — ​ ​ ( 1,953 ) ​ ​ 10,747 Total available for sale securities ​ $ 13,022 ​ $ — ​ $ ( 2,133 ) ​ $ 10,889 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ Amortized Unrecognized Unrecognized ​ ​ ​ ​ Cost ​ Gains ​ Losses ​ Fair Value Held to maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ 1,531 ​ $ — ​ $ ( 178 ) ​ $ 1,353 U.S. GSE commercial mortgage-backed securities ​ 2,577 ​ — ​ ( 170 ) ​ 2,407 Total held to maturity securities ​ $ 4,108 ​ $ — ​ $ ( 348 ) ​ $ 3,760 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ ​ ​ Gross Gross ​ ​ ​ ​ Amortized ​ Unrealized ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Gross ​ ​ ​ ​ Amortized ​ Unrecognized ​ Unrecognized ​ ​ ​ ​ ​ Cost ​ Gains ​ Losses ​ Fair Value 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 ​ ​ 78 Table of Contents ​ The amortized cost and fair value of investment securities at September 30, 2023, 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, 2023 ​ Amortized Fair (in thousands) ​ Cost ​ Value Securities available for sale: ​ ​ ​ ​ Five to ten years ​ $ 12,700 ​ $ 10,747 U.S. GSE residential mortgage-backed securities ​ 322 ​ 142 Total securities available for sale ​ ​ 13,022 ​ ​ 10,889 Securities held to maturity: ​ ​ U.S. GSE residential mortgage-backed securities ​ 1,531 ​ 1,353 U.S. GSE commercial mortgage-backed securities ​ 2,577 ​ 2,407 Total securities held to maturity ​ ​ 4,108 ​ ​ 3,760 Total investment securities ​ $ 17,130 ​ $ 14,649 ​ At September 30, 2023 and 2022, respectively, investment securities with a carrying amount of $ 2.0 million and $ 1.8 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, 2023 and 2022. The following table presents a summary of realized gains and losses from the sale of investment securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2023 2022 Proceeds from sales ​ $ — ​ $ 2,105 Gross realized gains on sales ​ $ — ​ $ 105 Gross realized losses on sales ​ ​ — ​ ​ — Total realized gains, net (1) ​ $ — ​ $ 105 (1) Amount does not include associated income tax of $ 0 and $ 24 for year ended September 30, 2023 and 2022, respectively. ​ 79 Table of Contents The following tables summarize gross unrealized and unrecognized 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 or unrecognized loss position at September 30, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ 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 ​ $ — ​ $ — ​ $ 142 ​ $ ( 180 ) ​ 5 ​ $ 142 ​ $ ( 180 ) Corporate bonds ​ ​ 1,080 ​ ​ ( 120 ) ​ ​ 9,667 ​ ​ ( 1,833 ) ​ 7 ​ ​ 10,747 ​ ​ ( 1,953 ) Total available-for-sale ​ $ 1,080 ​ $ ( 120 ) ​ $ 9,809 ​ $ ( 2,013 ) ​ 12 ​ $ 10,889 ​ $ ( 2,133 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than Twelve Months Twelve Months or Longer Total ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ Unrecognized ​ ​ ​ ​ Unrecognized ​ Number of ​ ​ ​ ​ Unrecognized ​ ​ Fair Value ​ Losses ​ Fair Value ​ Losses ​ Securities ​ Fair Value ​ Losses Held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. GSE residential mortgage-backed securities ​ $ — ​ $ — ​ $ 1,353 ​ $ ( 178 ) ​ 4 ​ $ 1,353 ​ $ ( 178 ) U.S. GSE commercial mortgage-backed securities ​ ​ — ​ ​ — ​ ​ 2,407 ​ ​ ( 170 ) ​ 1 ​ ​ 2,407 ​ ​ ( 170 ) Total held-to-maturity ​ $ — ​ $ — ​ $ 3,760 ​ $ ( 348 ) ​ 5 ​ $ 3,760 ​ $ ( 348 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than Twelve Months Twelve Months or Longer Total ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ Unrecognized ​ ​ ​ ​ Unrecognized ​ Number of ​ ​ ​ ​ Unrecognized ​ ​ Fair Value ​ Losses ​ Fair Value ​ Losses ​ Securities ​ Fair Value ​ Losses 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 ) ​ There was no other than temporary impairment loss recognized on any securities at September 30, 2023 or 2022. ​ 80 Table of Contents Unrealized losses on corporate bonds have not been recognized into income because the decline in fair value is largely due to changes in interest rates and other market conditions, 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. 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 Company does not consider these securities to be other-than-temporarily impaired at September 30, 2023 and 2022 ​ 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, 2023 and 2022. ​ Note 3. Loans The following table sets forth the major classifications of loans: ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2023 2022 Real estate: ​ ​ ​ ​ ​ Residential real estate $ 655,194 ​ $ 515,316 Multi-family 578,278 ​ 574,413 Commercial real estate 536,732 ​ 472,511 Commercial and industrial 85,450 ​ 45,758 Construction and land development 12,990 ​ 12,871 Consumer 336 ​ 22 Gross loans 1,868,980 ​ 1,620,891 Net deferred loan fees and costs 5,582 ​ 2,640 Total loans 1,874,562 ​ 1,623,531 Allowance for loan losses ( 14,686 ) ​ ( 12,844 ) Total loans, net $ 1,859,876 ​ $ 1,610,687 ​ The Company’s Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), loans outstanding, included in commercial and industrial (“C&I”) loans in the table above, totaled $ 4.8 million and $ 10.2 million at September 30, 2023 and 2022, respectively. SBA loans of $ 1.0 million and $ 4.9 million included in commercial real estate and C&I loans, respectively, in the table above were sold as of September 30, 2023 and settled in early October 2023. As of September 30, 2023 and 2022, the Company was servicing approximately $ 255.7 million and $ 246.0 million, respectively, of loans for others. In the years ended September 30, 2023 and 2022, the Company sold approximately $ 51.8 million and $ 80.3 million, respectively, of loans and recognized gains on the sales of loans of $ 4.1 million and $ 5.1 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, 2023 and 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2023 ​ 2022 (in thousands) ​ ​ ​ ​ ​ Commercial real estate $ — ​ $ 602 Commercial and industrial 128 ​ 629 Total recorded investment $ 128 ​ $ 1,231 ​ 81 Table of Contents The Company has recorded an allowance for loan losses of $ 0 and $ 50 thousand related to these loans at September 30, 2023 and 2022, respectively. During the year ended September 30, 2023, two purchased credit impaired loans acquired in the Savoy Bank acquisition totaling $ 457 thousand were charged off to the allowance for loan losses. 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 jeopardize 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 are considered to be pass rated loans. The following tables represent loans categorized by class and internally assigned risk grades. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ ​ ​ Special ​ ​ ​ ​ ​ ​ (in thousands) ​ Pass ​ Mention ​ Substandard ​ Doubtful ​ Total Real Estate: ​ ​ ​ ​ ​ Residential ​ $ 648,012 ​ $ 756 ​ $ 8,564 ​ $ — ​ $ 657,332 Multi-family ​ 576,443 ​ — ​ 2,452 ​ — ​ 578,895 Commercial ​ 518,508 ​ 9,444 ​ 9,362 ​ — ​ 537,314 Commercial and industrial ​ 86,110 ​ 540 ​ 925 ​ — ​ 87,575 Construction and land development ​ 13,021 ​ — ​ — ​ — ​ 13,021 Consumer ​ 425 ​ — ​ — ​ — ​ 425 Total ​ $ 1,842,519 ​ $ 10,740 ​ $ 21,303 ​ $ — ​ $ 1,874,562 ​ ​ 82 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ 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, 2023 and 2022 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, 2023 ​ Past Due Past Due Past Due ​ Non-accrual ​ Non-accrual Impaired (1) Current Loans Residential real estate ​ $ 2,314 ​ $ 668 ​ $ — ​ $ 5,750 ​ $ 8,732 ​ $ — ​ $ 648,600 ​ $ 657,332 Multi-family ​ — ​ — ​ — ​ 2,452 ​ 2,452 ​ — ​ 576,443 ​ 578,895 Commercial real estate ​ 3,765 ​ 858 ​ — ​ 6,119 ​ 10,742 ​ — ​ 526,572 ​ 537,314 Commercial and industrial ​ 1,444 ​ — ​ — ​ 612 ​ 2,056 ​ 128 ​ 85,391 ​ 87,575 Construction and land development ​ — ​ — ​ — ​ — ​ — ​ — ​ 13,021 ​ 13,021 Consumer ​ — ​ — ​ — ​ — ​ — ​ — ​ 425 ​ 425 Total ​ $ 7,523 ​ $ 1,526 ​ $ — ​ $ 14,933 ​ $ 23,982 ​ $ 128 ​ $ 1,850,452 ​ $ 1,874,562 ​ (1) Purchased credit impaired loans at September 30, 2023 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, 2022 ​ Past Due    Past Due Past Due Non-accrual ​ Non-accrual Impaired (1) Current Loans Residential real estate ​ $ 961 ​ $ 351 ​ $ — ​ $ 3,151 ​ $ 4,463 ​ $ — ​ $ 511,795 ​ $ 516,258 Multi-family ​ — ​ — ​ — ​ 2,348 ​ 2,348 ​ — ​ 572,713 ​ 575,061 Commercial real estate ​ 936 ​ — ​ — ​ 5,875 ​ 6,811 ​ 602 ​ 465,571 ​ 472,984 Commercial and industrial ​ 539 ​ 161 ​ — ​ 907 ​ 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) Purchased credit impaired loans at September 30, 2022 were greater than 89 days past due. ​ 83 Table of Contents The following table presents information related to impaired loans by portfolio segment as of and for the years ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ Unpaid ​ ​ ​ ​ Interest Average ​ ​ Principal ​ Recorded ​ Allowance ​ Income ​ Recorded ​ (in thousands) ​ Balance ​ Investment ​ Allocated ​ Recognized ​ Investment ​ With no related allowance recorded: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate $ 7,484 $ 7,477 $ — $ 105 $ 4,243 ​ Multi-family ​ 3,282 ​ 2,452 ​ — ​ 3 ​ 2,489 ​ Commercial real estate ​ 6,118 ​ 6,119 ​ — ​ — ​ 5,761 ​ Commercial and industrial ​ 846 ​ 612 ​ — ​ 23 ​ 431 ​ Total ​ $ 17,730 ​ $ 16,660 ​ $ — ​ $ 131 ​ $ 12,924 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ 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 $ 5,394 $ 5,392 $ — $ 124 $ 4,646 Multi-family ​ 2,348 ​ 2,348 ​ — ​ — ​ 1,066 Commercial ​ 5,950 ​ 5,875 ​ — ​ — ​ 3,627 Commercial and industrial ​ 908 ​ 907 ​ — ​ 77 ​ 389 Total ​ $ 14,600 ​ $ 14,522 ​ $ — ​ $ 201 ​ $ 9,728 ​ 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 six and seven loans that are classified as a troubled debt restructurings at September 30, 2023 and 2022 with a total recorded investment of $ 1.7 million and $ 2.3 million, respectively. The Company has no t allocated any specific reserves for these loans at September 30, 2023 and 2022. The Company had no commitment to lend additional funds to these debtors at September 30, 2023 and 2022. There are no troubled debt restructurings for which there was a payment default during 2023 and 2022 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 days contractually past due under the modified terms. There were no new troubled debt restructurings recorded for the year ended September 30, 2023. ​ 84 Table of Contents The following table presents loans modified as troubled debt restructurings that occurred during the year ended 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 ​ 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. ​ The following tables represent the activity in the allowance for loan losses by portfolio segment for the years ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ $ 3,951 ​ $ 4,308 ​ $ 3,707 ​ $ 761 ​ $ 115 ​ $ 2 ​ $ 12,844 Charge-offs ​ — ​ ( 959 ) ​ — ​ ( 734 ) ​ — ​ ​ — ​ ( 1,693 ) Recoveries ​ — ​ — ​ — ​ 103 ​ — ​ — ​ 103 Provision (credit) for loan losses ​ 827 ​ 857 ​ ( 510 ) ​ 2,238 ​ ( 11 ) ​ 31 ​ 3,432 Ending Balance ​ $ 4,778 ​ $ 4,206 ​ $ 3,197 ​ $ 2,368 ​ $ 104 ​ $ 33 ​ $ 14,686 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ 85 Table of Contents ​ 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, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ 4,778 ​ 4,206 ​ 3,197 ​ 2,368 ​ 104 ​ 33 ​ 14,686 Purchased-credit impaired ​ — ​ — ​ — ​ — ​ — ​ — ​ — Total allowance for loan losses ​ $ 4,778 ​ $ 4,206 ​ $ 3,197 ​ $ 2,368 ​ $ 104 ​ $ 33 ​ $ 14,686 Loans: ​ ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 7,477 ​ $ 2,452 ​ $ 6,119 ​ $ 612 ​ $ — ​ $ — ​ $ 16,660 Collectively evaluated for impairment ​ 649,855 ​ 576,443 ​ 531,195 ​ 86,835 ​ 13,021 ​ 425 ​ 1,857,774 Purchased-credit impaired ​ — ​ — ​ — ​ 128 ​ — ​ — ​ 128 Total loans held for investment ​ $ 657,332 ​ $ 578,895 ​ $ 537,314 ​ $ 87,575 ​ $ 13,021 ​ $ 425 ​ $ 1,874,562 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ ​ ​ Note 4. Premises and Equipment The following table details the components of premises and equipment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2023 2022 Land ​ $ 1,600 ​ $ 1,600 Buildings and improvements ​ 10,868 ​ 10,862 Leasehold improvements ​ 4,247 ​ 2,615 Furniture, fixtures and equipment ​ 7,491 ​ 5,978 Construction in progress ​ — ​ 111 ​ ​ 24,206 ​ 21,166 Less: Accumulated depreciation and amortization ​ ( 8,149 ) ​ ( 6,704 ) Premises and equipment, net ​ $ 16,057 ​ $ 14,462 ​ Depreciation and amortization was $ 1.8 million and $ 1.7 million for the years ended September 30, 2023 and 2022, respectively. ​ 86 Table of Contents Note 5. Leases Operating Leases The Company enters into leases in the normal course of business primarily for branch locations, back-office operations locations, business development offices, and equipment. The Company’s leases have remaining terms ranging from 2 to 10 years , some of which include renewal or termination options to extend the lease for up to 5 years and some include options to terminate the lease upon notification. The Company’s lease agreements do not contain any material residual value guarantees, restrictions or covenants. The Company has no leases that are subject to sublease agreements. As of September 30, 2023, the Company had lease liabilities totaling $ 10.9 million and right-of-use assets totaling $ 10.2 million. As of September 30, 2023, the weighted average remaining lease term was 7 years and the weighted average discount rate was 4.5 %. Total lease costs for the year ended September 30, 2023 was $ 2.1 million. Future undiscounted lease payments for operating leases with initial terms of one year or more as of September 30, 2023 are as follows: ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ Years Ending September 30, ​ ​ ​ 2024 ​ $ 2,149 2025 ​ 2,157 2026 ​ 1,988 2027 ​ 1,582 2028 ​ 1,372 Thereafter ​ 3,494 Total undiscounted lease payments ​ ​ 12,742 Less: imputed interest ​ ​ 1,843 Net lease liability ​ $ 10,899 ​ ​ Note 6. Deposits The following table details the components of deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2023 2022 Non-interest bearing: ​ ​ ​ ​ ​ ​ Demand ​ $ 185,731 ​ $ 219,225 Interest-bearing: ​ ​ NOW ​ 503,704 ​ 582,457 Money market ​ 461,057 ​ 258,424 Savings ​ 54,502 ​ 128,927 Time deposits $250,000 and greater ​ 106,888 ​ 87,904 Time deposits less than $250,000 ​ 423,188 ​ 251,169 Total interest-bearing ​ 1,549,339 ​ 1,308,881 Total deposits ​ $ 1,735,070 ​ $ 1,528,106 ​ 87 Table of Contents The scheduled maturities of time deposits are as follows: ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2023 2024 ​ $ 489,975 2025 ​ 31,889 2026 ​ 2,930 2027 ​ 4,257 2028 ​ 776 Thereafter ​ 249 Total ​ $ 530,076 ​ ​ ​ Note 7. Borrowings Federal Home Loan Bank (“FHLB”) Advances ​ At September 30, 2023 and 2022, FHLB term borrowings outstanding were $ 126.7 million and $ 37.8 million, respectively, all of which were fixed rate. ​ At September 30, 2023 and 2022, the Company had FHLB overnight borrowings outstanding of $ 49.0 million and $ 55.0 million at the rate of 5.59 % and 3.29 %, respectively. ​ The following table sets forth the contractual maturities in the next five years of the balance sheet date and weighted average interest rates of the Company’s fixed rate FHLB advances (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, ​ ​ ​ 2023 ​ ​ ​ ​ ​ ​ Weighted ​ Contractual Maturity Amount Average Rate ​ Overnight ​ $ 49,000 ​ 5.59 % ​ ​ ​ ​ ​ ​ ​ 2024, rates from 0.39 % to 2.53 % ​ ​ 18,860 ​ 0.98 % 2025, rates from 0.56 % to 0.59 % ​ ​ 7,080 ​ 0.58 % 2026, rates from 4.29 % to 4.98 % ​ ​ 40,475 ​ 4.50 % 2027, rates from 4.13 % to 4.74 % ​ ​ 40,250 ​ 4.32 % 2028, rates from 3.99 % to 4.58 % ​ 20,000 4.18 % Total term advances ​ ​ 126,665 ​ 3.65 % Total FHLB advances ​ $ 175,665 4.19 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 % ​ Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. The advances were collateralized by residential and commercial mortgage loans under a blanket lien arrangement at September 30, 2023 and 2022, 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 $ 291.2 million at September 30, 2023. 88 Table of Contents Federal Reserve Borrowings At September 30, 2023 and 2022, the Company’s borrowings from the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) were $ 4.1 million and $ 9.0 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. Correspondent Bank Borrowings At September 30, 2023, approximately $ 92 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, 2023 and 2022. ​ 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 bear interest, payable semi-annually, at the rate of 5.00 % per annum, until October 15, 2025. From and including October 15, 2025 through maturity, 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, 2023 and 2022, the unamortized issuance costs of the Notes were $ 0.4 million and $ 0.4 million, respectively. For each of the years ended September 30, 2023 and 2022, $ 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. Derivatives Cash Flow Hedges of Interest Rate Risk As part of its asset liability management, the Company utilizes interest rate swap agreements to help manage its interest rate risk position. The notional amount of the interest rate swap does not represent the amount exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The Company executed its first interest rate swap agreement in June 2023 and two additional in September 2023. Interest rate swaps with notional amounts totaling $ 75.0 million as of September 30, 2023 were designated as cash flow hedges of certain Brokered Certificates of Deposit. The swaps were determined to be fully effective during the periods presented and therefore no amount of ineffectiveness has been included in net income. The aggregate fair value of the swaps is recorded in other assets/(other liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining term of the swaps. ​ 89 Table of Contents The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the consolidated statements of income relating to the cash flow derivative instruments for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2023 2022 Gain recognized in other comprehensive income ​ $ 348 ​ $ — Gain (loss) recognized in interest expense ​ 104 ​ — ​ The following table reflects the cash flow hedges included in the consolidated statements of financial condition as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 September 30, 2022 ​ ​ ​ Fair Fair ​ ​ Fair Fair ​ ​ Notional ​ Value ​ Value ​ Notional ​ Value ​ Value (in thousands) ​ Amount ​ Asset ​ Liability ​ Amount ​ Asset ​ Liability Included in other assets/(liabilities): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swaps related to Brokered Certificates of Deposit $ 75,000 $ 445 $ — ​ $ — $ — $ — ​ Credit-Risk-Related Contingent Features The Company has minimum collateral posting thresholds with certain of its derivative counterparties. If the termination value of derivatives is a net liability position, the Company is required to post collateral against its obligations under the agreements. However, if the termination value of derivatives is a net asset position, the counterparty is required to post collateral to the Company. At September 30, 2023, the Company received $ 0.7 million in collateral from its counterparties under the agreements in a net asset position. ​ Note 10. 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) 2023 2022 Goodwill at beginning of period ​ $ 19,168 ​ $ 19,168 Acquisition ​ — ​ — Measurement period adjustment for previous acquisition ​ — ​ — Goodwill at end of period ​ $ 19,168 ​ $ 19,168 Other intangible assets at beginning of period ​ $ 399 ​ $ 480 Acquisition ​ — ​ — Amortization ​ ( 72 ) ​ ( 81 ) Other intangible assets at end of period ​ $ 327 ​ $ 399 ​ The Company has identified the reporting unit for purposes of testing goodwill for impairment, the Bank, which is a component of the operating segment. ​ 90 Table of Contents In assessing impairment, the Company has the option to perform a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If, after assessing the totality of such events or circumstances, the Company determines it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company would not be required to perform a quantitative impairment test. Due to recent declines in bank stock prices and events impacting the banking industry, the Company performed a quantitative impairment analysis at August 31, 2023. The annual quantitative assessment of goodwill for the reporting unit was performed utilizing a discounted cash flow analysis (“income approach”) and estimates of selected market information (“market approaches”). The income approach measures the fair value of an interest in a business by discounting expected future cash flows to present value. The market approaches take into consideration fair values of comparable companies operating in similar lines of business that are potentially subject to similar economic and environmental factors and could be considered reasonable investment alternatives. The result of the income approach was weighted 50% and the results of the market approaches comprised the remaining 50% in determining the fair value of the reporting unit. The results of the annual quantitative impairment analysis indicated that the fair value exceeded the carrying value of the reporting unit. No impairment charges were required to be recorded in the years ended September 30, 2023 and 2022. 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) 2023 2022 Gross carrying amount ​ $ 517 ​ $ 517 Accumulated amortization ​ ( 190 ) ​ ( 118 ) Net book value ​ $ 327 ​ $ 399 ​ At September 30, 2023, the weighted-average remaining life of the Company’s other intangible assets was 3.73 years. The following table presents estimated future amortization expense for other intangible assets: ​ ​ ​ ​ ​ (in thousands) ​ ​ 2024 ​ $ 63 2025 ​ 55 2026 ​ 49 2027 ​ 43 2028 ​ 38 Thereafter ​ 79 Total ​ $ 327 ​ ​ 91 Table of Contents ​ Note 11. Income Taxes The following table details the components of income tax expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2023 2022 Current: ​ ​ ​ ​ ​ ​ Federal ​ $ 2,997 ​ $ 5,081 State ​ 830 ​ 540 Total current ​ 3,827 ​ 5,621 Deferred: ​ ​ ​ ​ ​ ​ Federal ​ 1,135 ​ 1,055 State ​ 260 ​ 735 Total deferred ​ 1,395 ​ 1,790 Change in valuation allowance ​ ( 199 ) ​ ( 472 ) Total income tax expense ​ $ 5,023 ​ $ 6,939 ​ ​ 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, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ 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 $ 4,239 21.0 % $ 6,404 21.0 % State taxes, net of federal benefit ​ 705 3.5 % ​ 1,156 3.8 % Salaries deduction limitation ​ 31 0.2 % ​ — — % Non-deductible expenses ​ 2 — % ​ ( 1 ) — % Other ​ 245 1.2 % ​ ( 148 ) ( 0.5 ) % Change in valuation allowance ​ ( 199 ) ( 1.0 ) % ​ ( 472 ) ( 1.5 ) % Income tax expense ​ $ 5,023 24.9 % $ 6,939 22.8 % ​ 92 Table of Contents The following table summarizes the composition of deferred tax assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2023 2022 Deferred tax assets: ​ ​ ​ ​ ​ ​ Allowance for loan losses and other contingent liabilities ​ $ 4,544 ​ $ 4,014 Operating lease liability ​ ​ 3,334 ​ ​ — Net operating loss carryforwards ​ 2,758 ​ 2,415 Compensation and related benefit obligations ​ ​ 1,278 ​ ​ 1,323 Accrued SERP ​ 1,081 ​ 1,062 Unrealized loss on securities AFS ​ ​ 463 ​ ​ 170 Purchase accounting fair value adjustments ​ 379 ​ 727 Organizational costs ​ 12 ​ 63 Total deferred tax assets ​ 13,849 ​ 9,774 Deferred tax liabilities: ​ ​ ​ ​ ​ ​ Deferred fees and costs ​ ( 4,383 ) ​ ( 2,718 ) Operating lease asset ​ ​ ( 3,118 ) ​ ​ — Depreciation ​ ( 1,354 ) ​ ( 951 ) Unrealized gain on derivatives ​ ​ ( 97 ) ​ ​ — Mortgage servicing rights ​ ( 14 ) ​ ( 15 ) Other ​ ( 149 ) ​ ( 158 ) Total deferred tax liabilities ​ ( 9,115 ) ​ ( 3,842 ) Total ​ 4,734 ​ 5,932 Valuation allowance ​ ( 3,225 ) ​ ( 3,424 ) Net deferred tax asset ​ $ 1,509 ​ $ 2,508 ​ The Company does no t have net operating loss carryforwards available for federal income tax purposes as of September 30, 2023. The Company has net operating loss carryforwards available for state income tax purposes of approximately $ 35.1 million. For state purposes, $ 12.4 million expires in 2025 with the remaining balance of $ 22.7 million will begin to expire in 2036. The Company has net operating loss carryforwards for city income tax purposes of approximately $ 8.8 million, of which $ 0.5 million will expire in 2025 and the remaining balance of $ 8.3 million will begin to expire in 2037. 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 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 2019. 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. ​ 93 Table of Contents Note 12. 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 276,127 shares remain available for issuance at September 30, 2023. Of the total 346,000 shares of common stock approved for issuance under the 2018 Plan, 21,784 shares remain available for issuance at September 30, 2023. 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, 2022 227,406 ​ $ 9.50 ​ $ 2,298 2.45 years Granted — ​ — ​ ​ ​ Exercised ( 10,614 ) ​ 10.00 ​ ​ ​ Forfeited ( 18,459 ) ​ 16.25 ​ ​ ​ Outstanding, September 30, 2023 (1) 198,333 ​ $ 8.85 ​ $ 1,864 1.19 years (1) All outstanding options are fully vested and exercisable The following table presents information related to the stock option plan for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) ​ 2023 2022 Intrinsic value of options exercised $ 103 ​ $ — Cash received from option exercises ​ 106 ​ — Tax benefit from option exercises ​ 36 ​ — ​ There was no compensation expense attributable to stock options for the years ended September 30, 2023 and 2022, respectively. Restricted Stock Awards During the year ended September 30, 2023, restricted stock awards of 50,580 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. 94 Table of Contents A summary of restricted stock awards activity follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ Number of ​ Grant Date Fair ​ Shares Value Unvested, October 1, 2022 ​ 284,263 ​ $ 19.78 Granted 50,580 ​ 19.73 Vested ( 72,160 ) ​ 19.96 Forfeited ( 17,679 ) ​ 19.86 Unvested, September 30, 2023 245,004 ​ $ 19.71 ​ Compensation expense attributable to restricted stock awards was $ 1.7 million and $ 1.5 million for the years ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there was $ 3.6 million of total unrealized compensation cost related to unvested restricted stock, expected to be recognized over a weighted-average term of 3.41 years. The total fair value of shares vested during the years ended September 30, 2023 and 2022 was $ 1.4 million and $ 0.9 million, respectively. ​ Restricted Stock Units Long Term Incentive Plan ​ Restricted stock units (“RSU”s) 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 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, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ Number of ​ Grant Date Fair ​ Shares Value Unvested, October 1, 2022 ​ 47,676 ​ $ 19.73 Granted — ​ — Vested — ​ — Forfeited ( 9,405 ) ​ 19.73 Unvested, September 30, 2023 38,271 ​ $ 19.73 ​ No RSUs were granted during the year ended September 30, 2023. Performance-based RSUs granted in 2022 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 years ended September 30, 2023 and 2022. As of September 30, 2023, there was $ 0.3 million of total unrecognized compensation cost related to non-vested RSUs. The cost is expected to be recognized over a weighted-average period of 1.39 years. ​ ​ 95 Table of Contents Note 13. 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 2023 were as follows: ​ ​ ​ ​ ​ (in thousands) ​ Beginning balance, October 1, 2022 $ 2,736 New loans ​ 1,000 Repayments ​ ( 884 ) Ending balance, September 30, 2023 ​ $ 2,852 ​ Deposits from principal officers, directors and their affiliates at September 30, 2023 and 2022 were $ 28.5 million and $ 12.8 million, respectively. ​ ​ Note 14. 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 contractual amounts of financial instruments with off-balance sheet risk were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2023 2022 (in thousands) ​ Fixed Rate ​ Variable Rate ​ Fixed Rate ​ Variable Rate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Standby letters of credit ​ $ 488 ​ $ — ​ $ 817 ​ $ — Loan commitments outstanding ​ — ​ 42,973 ​ 9,992 ​ 17,184 Unused lines of credit ​ 4,561 ​ 72,078 ​ — ​ 45,920 ​ ​ Commitments to make loans are generally made for periods of 180 days or less. The fixed rate loan commitments have interest rates ranging from 4.75 % to 7.50 % and maturities ranging from 10 years to 30 years . ​ ​ ​ ​ 96 Table of Contents ​ Note 15. 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 effects of accumulated other comprehensive income or loss is not included in computing regulatory capital. Management believes as of September 30, 2023, 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 2023 and 2022, 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, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital to risk-weighted assets ​ $ 205,786 14.60 % $ 112,755 8.00 % $ 147,991 10.50 % $ 140,944 10.00 % Tier 1 capital to risk-weighted assets ​ 190,928 13.55 % 84,566 6.00 % 119,802 8.50 % 112,755 8.00 % Common equity tier 1 capital to risk-weighted assets ​ 190,928 13.55 % 63,425 4.50 % 98,661 7.00 % 91,613 6.50 % Tier 1 capital to average total assets ​ 190,928 9.16 % 83,338 4.00 % N/A N/A ​ 104,173 5.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 % ​ ​ Dividend restrictions - The Company’s principal source of funds for dividend and debt service payments is dividends received from the Bank. During 2023 the Bank paid $ 5.3 million in 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, 2023, the Bank had $ 53.0 million of retained net income available for dividends to the Company, without obtaining regulatory approval. ​ 97 Table of Contents Note 16. 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, 2023 ​ ​ ​ ​ 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 ​ $ 142 ​ $ — ​ $ 142 ​ $ — Corporate bonds ​ 10,747 ​ — ​ 10,747 ​ — Loan servicing rights ​ ​ 4,479 ​ ​ — ​ ​ — ​ ​ 4,479 Derivatives ​ 445 ​ — ​ 445 ​ — Total ​ $ 15,813 ​ $ — ​ $ 11,334 ​ $ 4,479 98 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ ​ ​ ​ 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 ​ $ 242 ​ $ — ​ $ 242 ​ $ — Corporate bonds ​ 12,043 ​ — ​ 12,043 ​ — Loan servicing rights ​ 4,353 ​ — ​ — ​ 4,353 Total ​ $ 16,638 ​ $ — ​ $ 12,285 ​ $ 4,353 ​ 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. Derivatives represent interest rate swaps for which the estimated fair values are based on valuation models using observable market data as of the measurement date resulting in a Level 2 classification. 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, 2023 was determined based on discounted expected future cash flows using discount rates ranging from 12.9 % to 15.4 %, prepayment speed of 26.25 % and a weighted average life ranging from 1.2 to 2.8 years. Fair value at September 30, 2022 for mortgage servicing rights 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. The fair value of loan servicing rights for SBA loans at September 30, 2023 was determined based on discounted expected future cash flows using discount rates ranging from 10.09 % to 41.62 %, prepayment speeds ranging from 8.29 % to 29.26 % and a weighted average life ranging from 1.17 to 5.81 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 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) ​ 2023 2022 Balance at beginning of period $ 4,353 ​ $ 3,690 Additions ​ 893 ​ 1,158 Adjustment to fair value ​ ( 767 ) ​ ( 495 ) Balance at end of period ​ $ 4,479 ​ $ 4,353 ​ 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, 2023 and 2022 and for the years then ended. 99 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, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ ​ ​ ​ ​ 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 ​ $ 192,624 ​ $ 192,624 ​ $ — ​ $ — ​ $ 192,624 Securities held-to-maturity ​ 4,108 ​ — ​ 3,760 ​ — ​ 3,760 Loans, net ​ 1,859,876 ​ — ​ — ​ 1,798,916 ​ 1,798,916 Accrued interest receivable ​ 10,636 ​ — ​ 729 ​ 9,907 ​ 10,636 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ Time deposits ​ 530,076 ​ — ​ 525,198 ​ — ​ 525,198 Demand and other deposits ​ 1,204,994 ​ 1,204,994 ​ — ​ — ​ 1,204,994 Borrowings ​ 179,849 ​ — ​ 176,693 ​ — ​ 176,693 Subordinated debentures ​ 24,621 ​ — ​ 26,355 ​ — ​ 26,355 Accrued interest payable ​ 1,821 ​ 53 ​ 1,768 ​ — ​ 1,821 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ — ​ — ​ 1,549,171 ​ 1,549,171 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 ​ ​ 100 Table of Contents ​ ​ Note 17. 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) 2023 2022 ASSETS ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 729 ​ $ 304 Investment in Bank ​ 209,554 ​ 197,290 Other assets ​ 845 ​ 141 Total Assets ​ $ 211,128 ​ $ 197,735 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ Subordinated debentures ​ $ 24,621 ​ $ 24,568 Accrued interest payable ​ 573 ​ 573 Accrued expenses and other liabilities ​ 27 ​ 10 Total Liabilities ​ 25,221 ​ 25,151 Total Stockholders' Equity ​ 185,907 ​ 172,584 Total Liabilities and Stockholders' Equity ​ $ 211,128 ​ $ 197,735 ​ Condensed Statements of Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2023 2022 Dividends received from Bank ​ $ 5,300 ​ $ 400 Interest expense ​ ( 1,304 ) ​ ( 1,331 ) Non-interest expense ​ ( 159 ) ​ ( 18 ) Income (loss) before income taxes and equity in undistributed earnings of the Bank ​ 3,837 ​ ( 949 ) Income tax benefit ​ 232 ​ 253 Equity in undistributed earnings of the Bank ​ 11,095 ​ 24,252 Net income ​ $ 15,164 ​ $ 23,556 ​ ​ 101 Table of Contents ​ Condensed Statements of Cash Flows ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2023 2022 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income ​ $ 15,164 ​ $ 23,556 Adjustments to reconcile net income to net cash used in operating activities: ​ ​ ​ ​ ​ ​ Equity in undistributed earnings of the Bank ​ ( 11,095 ) ​ ( 24,252 ) Amortization of debt issuance costs ​ 53 ​ 55 (Increase) decrease in other assets ​ ( 704 ) ​ 909 Decrease in accrued interest payable ​ — ​ ( 3 ) Decrease in other liabilities ​ — ​ ( 191 ) Net cash provided by operating activities ​ ​ 3,418 ​ ​ 74 ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Investment in Bank ​ — ​ ( 26,000 ) Net cash used in investing activities ​ ​ — ​ ​ ( 26,000 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Proceeds from exercise of stock options ​ 106 ​ — Net proceeds from issuance of common stock ​ — ​ 27,729 Payments related to tax withholding for equity awards ​ ​ ( 170 ) ​ ​ ( 28 ) Cash dividends paid ​ ​ ( 2,929 ) ​ ​ ( 2,042 ) Net cash (used in) provided by financing activities ​ ​ ( 2,993 ) ​ ​ 25,659 ​ ​ ​ ​ ​ ​ ​ Net increase (decrease) in cash and due from banks ​ ​ 425 ​ ​ ( 267 ) Cash and due from banks, beginning of period ​ 304 ​ 571 Cash and due from banks, end of period ​ $ 729 ​ $ 304 ​ ​ 102 Table of Contents ​ Note 18. 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 restricted stock awards granted by the Company contain non-forfeitable rights to dividends and therefore are considered participating securities. 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) 2023 2022 ​ ​ ​ ​ ​ ​ ​ Net income available to common stockholders ​ $ 15,164 ​ $ 23,556 Less: Dividends paid and earnings allocated to participating securities ​ ​ ( 561 ) ​ ​ ( 903 ) Income attributable to common stock ​ $ 14,603 ​ $ 22,653 Weighted average common shares outstanding, including participating securities ​ ​ 7,319,040 ​ ​ 6,302,328 Less: Weighted average participating securities ​ ​ ( 278,211 ) ​ ​ ( 237,259 ) Weighted average common shares outstanding ​ 7,040,829 ​ 6,065,069 Basic EPS ​ $ 2.07 ​ $ 3.74 ​ ​ ​ ​ ​ ​ ​ Income attributable to common stock ​ $ 14,603 ​ $ 22,653 Weighted average common shares outstanding ​ 7,040,829 ​ 6,065,069 Weighted average common equivalent shares outstanding ​ ​ 80,118 ​ ​ 92,977 Weighted average common and equivalent shares outstanding ​ ​ 7,120,947 ​ ​ 6,158,046 Diluted EPS ​ $ 2.05 ​ $ 3.68 ​ There were no stock options that were antidilutive at September 30, 2023 and 2022. ​ Note 19. Accumulated Other Comprehensive (Loss) Income The following presents changes in accumulated other comprehensive (loss) income by component, net of tax, for the years ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized Gains and ​ Gains and ​ ​ ​ ​ Losses on Available- ​ Losses on ​ ​ ​ ​ for-Sale Debt ​ Cash Flow ​ ​ (in thousands) ​ Securities ​ Hedges ​ Total Balance at October 1, 2022 ​ $ ( 620 ) ​ $ — ​ $ ( 620 ) Other comprehensive (loss) income, before reclassification ​ ( 1,050 ) ​ 348 ​ ( 702 ) Amount reclassified from accumulated other comprehensive loss ​ ​ — ​ ​ — ​ ​ — Net current period other comprehensive (loss) income ​ ( 1,050 ) ​ 348 ​ ( 702 ) Balance at September 30, 2023 ​ $ ( 1,670 ) ​ $ 348 ​ $ ( 1,322 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized Gains and ​ Gains and ​ ​ ​ ​ Losses on Available- ​ Losses on ​ ​ ​ ​ for-Sale Debt ​ Cash Flow ​ ​ (in thousands) ​ Securities ​ Hedges ​ Total Balance at October 1, 2021 ​ $ 256 ​ $ — ​ $ 256 Other comprehensive loss, before reclassification ​ ( 795 ) ​ — ​ ( 795 ) Amount reclassified from accumulated other comprehensive income ​ ​ ( 81 ) ​ ​ — ​ ​ ( 81 ) Net current period other comprehensive loss ​ ( 876 ) ​ — ​ ( 876 ) Balance at September 30, 2022 ​ $ ( 620 ) ​ $ — ​ $ ( 620 ) ​ 103 Table of Contents The following represents the reclassification out of accumulated other comprehensive (loss) income for the years ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ September 30, ​ Affected Line Item in Consolidated (in thousands) 2023 ​ 2022 Statements of Income Unrealized gains and losses on available-for-sale securities ​ ​ ​ ​ ​ ​ ​ ​ Realized gains on securities available-for-sale ​ $ — ​ $ 105 ​ Gain on sale of investment securities available-for-sale, net Tax effect ​ — ​ 24 Income tax expense Net of tax ​ $ — ​ $ 81 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gains and losses on cash flow hedges ​ ​ ​ ​ ​ ​ ​ ​ Interest rate contracts ​ $ — ​ $ — ​ Interest income (expense) Tax effect ​ ​ — ​ — ​ Income tax (expense) or benefit Net of tax ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ Total reclassifications for the period, net of tax ​ $ — ​ $ 81 ​ ​ ​ ​ ​ Note 20. 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) 2023 2022 Loan servicing and fee income (1) ​ $ 2,709 ​ $ 2,885 Service charges on deposit accounts ​ 275 ​ 232 Net gain on sale of loans held-for-sale (1) ​ 4,093 ​ 5,143 Net gain on sale of investments available-for-sale (1) ​ — ​ 105 Other income (2) ​ 1,771 ​ 507 Total non-interest income ​ $ 8,848 ​ $ 8,872 (1) Not included within the scope of ASC 606 (2) Other income includes merchant card processing fees of $ 47 and $ 33 for the year ended September 30, 2023 and 2022, respectively, which are included in the scope of ASC 606 and loan related fee income, recoveries on acquired loans and miscellaneous income totaling $ 1,724 and $ 474 for 2023 and 2022, respectively, which are not included in the scope of ASC 606. The Company settled ongoing litigation and received a settlement payment of $ 975 in 2023. ​ 104 Table of Contents 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. ​ ​ Note 21. Subsequent Events On October 26, 2023 the Company’s Board of Directors declared a quarterly cash dividend of $ 0.10 per share on the Company’s common and preferred stock. The dividend was paid on November 15, 2023 to shareholders of record on November 8, 2023. ​ On October 25, 2023, the Company’s Board of Directors approved a change in the Company’s fiscal year end from September 30 to December 31. Accordingly, the Company will report a transition quarter that runs from October 1, 2023 through December 31, 2023 (Stub Period). The Company’s next full fiscal year will be the calendar year January 1, 2024 through December 31, 2024. ​ On October 5, 2023, the Company announced that its Board of Directors approved a Share Repurchase Program. Under this program, the Company may purchase up to 366,050 shares, or approximately 5 % of its outstanding common stock, in the open market or in private transactions. The Company has not made any repurchases of its common stock through the issuance date of this report. ​ ​ ​ ​ ​ 105 Table of Contents Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. ​