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Item 7. Management’s Discussion and Analysis

2025-03-14 compared with 2023-12-21 · 268 added, 189 removed, 277 unchanged (62% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our financial condition and results of our operations for the fiscal years ended September 30, 2023 and 2022, respectively.

In October 2023, the Company’s Board of Directors approved a change in the Company’s fiscal year end from September 30 to December 31.

As a result of the change in year end, the Company filed a Transition Report on Form 10-Q with the SEC on February 13, 2024, which included unaudited financial statements as of December 31, 2023 and for the three months then ended and for comparative purposes we presented financial statements for the three months ended December 31, 2022.

In this report, our discussion and analysis will present the more significant factors affecting our financial condition at December 31, 2024 and December 31, 2023.

For the results of operations, our discussion and analysis will present the more significant factors affecting the periods presented as follows:

● the calendar year ended December 31, 2024 (“calendar 2024”) compared to the fiscal year ended September 30, 2023 (“fiscal 2023”);

● the transition period from October 1, 2023 through December 31, 2023 (“transition period”) compared to the year earlier period October 1, 2022 through December 31, 2022.

The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from our consolidated financial statements.

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Business Overview

We are a New York corporation which became the holding company for the Bank in 2016.

We are currently a New York corporation which became the holding company for the Bank in 2016.

The Bank, a community commercial bank focusing on highly personalized and efficient services and products responsive to local needs, commenced operations in 2009 and was incorporated under the laws of the State of New York.

As a New York State chartered bank, the Bank is subject to regulation by the New York State DFS and the FDIC.

As a New York State chartered bank, the Bank is subject to regulation by the DFS and the FDIC.

As a bank holding company, we are subject to regulation and examination by the FRB.

The Bank offers a full range of financial services and employs a complete suite of consumer and commercial banking products and services, including multi-family and commercial mortgages, government guaranteed loans, residential loans, business loans and lines of credit.

The Bank offers a full range of financial services including a complete suite of consumer and commercial banking products and services, including multi-family and commercial mortgages, government guaranteed loans, residential loans, business loans and lines of credit.

The Bank also offers its customers, among other things, access to 24-hour ATM service with no fees, free checking with interest, telephone banking, advanced technologies in mobile and internet banking for its consumer and business customers and safe deposit boxes.

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Additional branches are located in Garden City Park, Hauppauge, Forest Hills, Flushing, Sunset Park, Manhattan and Chinatown, New York and Freehold, New Jersey.

We opened the Bank’s Hauppauge Business Banking Center in Hauppauge, Suffolk County, New York in May 2023.

In October 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 (the “Stub Period”).

The Company’s next full fiscal year will be the calendar year January 1, 2024 through December 31, 2024.

As a result, all references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to a quarter or year are to the Company’s historical fiscal quarter or fiscal year unless stated otherwise.

At September 30, 2023, on a consolidated basis we had $2.15 billion in total assets, $185.9 million in total stockholders’ equity, $1.87 billion in total loans, $1.74 billion in total deposits and 176 full-time equivalent employees.

The Bank has received regulatory approval to open a full-service branch in Port Jefferson, New York.

Business development staff have already joined the Bank in anticipation of the opening of this location.

The Bank expects this site to be fully operational in the first half of 2025.

At December 31, 2024, on a consolidated basis we had $2.31 billion in total assets, $196.6 million in total stockholders’ equity, $1.99 billion in total loans, $1.95 billion in total deposits and 185 full-time equivalent employees.

Critical Accounting Policies and Estimates

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Our significant accounting policies and effects of new accounting pronouncements are discussed in detail in Note 1, “Summary of Significant Accounting Policies” to the accompanying Consolidated Financial Statements contained in Item 8.

Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for loan losses and goodwill.

Allowance for Loan Losses

We establish an allowance for loan losses that represents management’s best estimate of probable credit losses inherent in the portfolio at the balance sheet date.

Estimates for loan losses are determined by management’s ongoing review and grading of the loan portfolio, consideration of historical loan loss and delinquency experience, trends in past due and nonaccrual loans, risk characteristics of the various classifications of loans, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect probable credit losses.

Because current economic conditions can change and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the appropriateness of the allowance for loan losses, could change significantly.

As an integral part of their examination process, various regulatory agencies also review the allowance for loan losses.

Such agencies may require additions to the allowance for loan losses or may require that certain loan balances be charged off or downgraded to criticized loan categories when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination.

See Note 1, “Summary of Significant Accounting Policies” and Note 3, “Loans” to the accompanying Consolidated Financial Statements contained in Item 8 for further details.

Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for credit losses and goodwill.

Allowance for Credit Losses

On October 1, 2023, the Company adopted ASU 2016-13 (Topic 326), which replaced the incurred loss methodology with CECL for financial instruments measured at amortized cost and other commitments to extend credit.

The allowance for credit losses is a valuation allowance for management’s estimate of expected credit losses in the loan portfolio.

The process to determine expected credit losses utilizes analytic tools and judgment and is reviewed on a quarterly basis.

When management is reasonably certain that a loan balance is not fully collectable, an analysis is completed and an allowance may be established or a full or partial charge off could be recorded against the allowance.

Subsequent recoveries, if any, are credited to the allowance.

Management estimates the allowance balance via a quantitative analysis which considers available information from internal and external sources related to past loan loss and prepayment experience and current conditions, as well as the incorporation of reasonable and supportable forecasts.

Management evaluates a variety of factors including available published economic information in arriving at its forecast.

Expected credit losses are estimated over the contractual term of the loans and adjusted for expected prepayments when appropriate.

Also included in the allowance for credit losses are qualitative reserves that are expected, but, in management’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above.

Factors may include changes in lending policies and procedures, size and composition of the portfolio, experience and depth of lending management and the effect of external factors such as competition, legal and regulatory requirements, among others.

The allowance is available for any loan that, in management’s judgment, should be charged off.

Although management uses the best information available, the level of the allowance for credit losses remains an estimate, which is subject to significant judgment and short-term change.

Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for credit losses.

Such agencies may require the Company to make additional provisions for credit losses based upon information available to them at the time of their examination.

The Bank considers its primary lending area to be the New York metro area.

A substantial portion of the Bank’s loans are secured by real estate in this area.

Accordingly, the ultimate collectability of the loan portfolio is susceptible to changes in market and economic conditions in this region.

Future adjustments to the provision for credit losses and allowance for credit losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company’s control.

Goodwill represents the excess of the purchase price over the net fair value of the acquired businesses.

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Judgment is applied in determining the weightings that are most representative of fair value.

As of August 31, 2023, the Company elected to proceed to a quantitative calculation to compare the reporting unit's fair value with its carrying value.

As of November 30, 2024, the Company elected to proceed to a quantitative calculation to compare the reporting unit's fair value with its carrying value.

The results of the evaluation indicated that fair value exceeded the carrying value of the reporting unit.

Goodwill impairment testing is performed annually as of August 31 and no impairment charges were incurred.

Annual goodwill impairment testing was performed as of November 30 and no impairment charges were incurred.

Future unfavorable conditions could result in goodwill impairment.

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(1) general macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets;

(2) industry and market conditions such as a deterioration in the environment in which an entity operates, an increased competitive environment, a decline in market-dependent multiples or metrics (in both absolute terms and relative to peers), a change in the market for an entity’s products or services, or a regulatory or political development;

(2) industry and market conditions such as a deterioration in the environment in which we operate, an increased competitive environment, a decline in market-dependent multiples or metrics (in both absolute terms and relative to peers), a change in the market for our products or services, or a regulatory or political development;

(3) changes in cost factors such as increases in labor, or other costs that have a negative effect on earnings and cash flows;

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See Note 1, “Summary of Significant Accounting Policies” and Note 10, “Goodwill and Other Intangible Assets” to the accompanying Consolidated Financial Statements contained in Item 8 for further details.

Results of Operations for the year ended September 30, 2023 compared to the year ended September 30, 2022

For the year ended September 30, 2023, we recognized net income of $15.2 million, or $2.05 per diluted share (including Series A preferred shares), compared to net income of $23.6 million, or $3.68 per diluted share, for the year ended September 30, 2022.

The decline in net income recorded for the fiscal year ended September 30, 2023 from the comparable 2022 period resulted primarily from a decrease in net interest income, a decrease in gain on sale of loans due to a lower volume of SBA loan sales, zero residential loan sales in the current year and depressed secondary market premiums early in the year, a decrease in purchase accounting accretion and an increase in non-interest expense.

The increase in non-interest expense was primarily due to growth related increases in compensation and benefits, occupancy and equipment, data processing, professional fees, federal deposit insurance premiums and other expenses.

Results of Operations for the year ended December 31, 2024 (“calendar 2024”) compared to fiscal year ended September 30, 2023 (“fiscal 2023”)

For calendar 2024, we recognized net income of $12.3 million, or $1.66 per diluted share (including Series A preferred shares), compared to net income of $15.2 million, or $2.05 per diluted share (including Series A preferred shares) for fiscal 2023.

The decrease in net income recorded for calendar 2024 from fiscal 2023 resulted from a decrease in net interest income, an increase in the provision for credit losses and an increase in non-interest expense, which were partially offset by an increase in non-interest income.

The increase in the provision for credit losses was primarily related to the recording of a $4.0 million provision for credit losses in June 2024 that was mainly attributable to an ACL on an individually evaluated loan of $2.5 million and $1.1 million related to ongoing enhancements to the CECL model.

The increase in non-interest income is primarily related to the increases in the gain on sale of loans held-for-sale and loan servicing and fee income which were partially offset by a decrease in other operating income.

In September 2023, the Company settled ongoing litigation and received a settlement payment of $975 thousand which was recorded in other income.

The increase in non-interest expense was primarily attributed to additional staff for the SBA, C&I Banking and Operations teams.

Set forth below are our selected consolidated financial and other data.

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Total stockholders' equity

Year Ended September 30,

Three Months Ended

(transition period)

September 30,

(dollars in thousands)

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Net interest income

Provision for loan losses

Provision for credit losses

Total non-interest income

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Net interest income is affected by changes in interest rates and by the amount and composition of earning assets and interest-bearing liabilities, as well as the sensitivity of the balance sheet to changes in interest rates, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities, repricing frequencies, and loan prepayment behavior.

Net interest income for the year ended September 30, 2023 was $54.5 million, a decrease of 11.0% from $61.3 million for the year ended September 30, 2022 primarily due to compression of the Company’s net interest margin.

Net interest margin was 2.85% for the year ended September 30, 2023, a decrease of 133 basis points from 4.18% for the year ended September 30, 2022.

The Company’s total interest income increased by $36.6 million, or 53.5%, as the average yield on interest-earning assets for the year ended September 30, 2023 was 5.49%, an increase of 83 basis points from 4.66% for the year ended September 30, 2022.

However, total interest expense increased by $43.4 million, or 604.5%, reflecting the rapid and significant rise in interest rates driven by the Federal Reserve and, to a lesser extent, the Company’s decision to maintain increased liquidity as a result of recent industry events resulted in the higher cost of funds as the average rate on interest bearing liabilities increased to 3.18% from 0.62%.

Average interest-bearing liabilities were $1.59 billion for the year ended September 30, 2023, an increase of $430.5 million compared to $1.16 billion for the year ended September 30, 2022.

The increase was primarily attributable to growth in interest-bearing deposits and borrowings, which increased by $240.5 million and $78.1 million, respectively, during fiscal year 2023.

Net interest income for calendar 2024 was $53.1 million, a decrease of 2.6% from $54.5 million for fiscal 2023.

Net interest margin was 2.44% for calendar 2024, a decrease of 41 basis points from 2.85% for fiscal 2023.

The Company’s total interest income increased by $28.0 million, or 26.6%, as the average yield on interest-earning assets for calendar 2024 was 6.12%, an increase of 63 basis points from 5.49% for fiscal 2023.

However, total interest expense increased by $29.4 million, or 58.1%, as the average cost interest-bearing liabilities for calendar 2024 was 4.40%, an increase of 122 basis points, from 3.18% for fiscal 2023 due to the rapid and significant rise in market interest rates and the competitive deposit environment and, to a lesser extent, the Company’s decision to increase liquidity as a result of the industry events over the last two years.

Together, this resulted in the higher cost of funds.

The following table presents daily average balances, interest, yield/cost, and net interest margin on a fully tax-equivalent basis for the periods presented:

Year Ended September 30,

Year Ended December 31,

Fiscal Year Ended September 30,

(dollars in thousands)

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Total interest-earning assets

Non interest-earning assets:

Liabilities and stockholders' equity:

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(4) Net interest margin represents net interest income divided by average interest-earning assets.

Three Months Ended December 31,

(dollars in thousands)

Interest-earning assets

Investment securities (1)

Interest-earning balances and other

Total interest-earning assets

Non interest-earning assets:

Liabilities and stockholders' equity:

Interest-bearing liabilities:

Savings, NOW and money market deposits

Time deposits

Total interest-bearing deposits

Subordinated debentures

Total interest-bearing liabilities

Non-interest bearing deposits

Other liabilities

Total liabilities

Stockholders' equity

Total liabilities and stockholders' equity

Net interest rate spread (3)

Net interest income/margin (4)

(1) There is no income tax exempt interest recorded for loans or investment securities for the periods presented.

(2) Includes non-accrual loans.

(3) Net interest spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average interest-earning assets.

The following table details the variances in net interest income caused by changes in interest rates and volume for the periods presented:

Year Ended December 31, 2024 vs.

Fiscal Year Ended September 30, 2023

Increase (decrease) due to change in:

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Net increase (decrease) in net interest income

Provision for Loan Losses

The provision for loan losses was $3.4 million for the year ended September 30, 2023 compared to $4.5 million for the year ended September 30, 2022.

Total net charge-offs were $1.6 million and $0.2 million for the years ended September 30, 2023, and 2022, respectively.

Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management.

In evaluating the allowance for loan losses, management considers factors that include recent growth, composition and industry diversification of the portfolio, historical loan loss experience, current delinquency levels, adverse situations that may affect a borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions and other relevant factors.

See additional discussion under "

Asset Quality - Analysis of Allowance for Loan Losses ” section.

Three Months Ended December 31,

Increase (decrease) due to change in:

(in thousands)

Interest income

Investment securities

Interest-earning balances and other

Total interest income

Interest expense

Savings, NOW and money market deposits

Time deposits

Subordinated debentures

Total interest expense

Net increase (decrease) in net interest income

Provision for Credit Losses

The provision for credit losses was $4.9 million (including a $0.2 million provision for unfunded comments) for calendar 2024 compared to $3.4 million (including no provision for unfunded comments) for fiscal 2023.

Total net charge-offs were $1.6 million for both calendar 2024 and fiscal 2023.

See additional discussion under " Asset Quality - Allowance for Credit Losses ” section.

Non-Interest Income

Year Ended September 30,

Three Months Ended

(transition period)

September 30,

(in thousands)

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Total non-interest income

Non-interest income was $8.8 million for the year ended September 30, 2023, a slight decrease of $24 thousand from $8.9 million for the year ended September 30, 2022.

Net gain on the sale of loans held for sale decreased in 2023 due to a lower volume of SBA loan sales, zero residential loans sales in the current year and depressed secondary market premiums early in the year.

In addition, offsetting this decline, in September 2023, the Company settled ongoing litigation and received a settlement payment of $975 thousand recorded in Other income.

Non-interest income was $15.3 million for calendar 2024, an increase of $6.5 million from $8.8 million for fiscal 2023.

The increase in non-interest income is primarily related to the increases in the net gain on sale of loans held for sale and loan servicing and fee income which were partially offset by a decrease in other income.

In September 2023, the Company settled ongoing litigation and received a settlement payment of $975 thousand which was recorded in other income.

Non-Interest Expense

Year Ended September 30,

Three Months Ended

(transition period)

September 30,

(in thousands)

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Data processing

Acquisition costs

Professional fees

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Total non-interest expense

Non-interest expense was $39.7 million for the year ended September 30, 2023, an increase of $4.5 million from $35.2 million for the year ended September 30, 2022.

At the beginning of the year, the FDIC instituted a 2bps increase in the base deposit insurance assessment rate which accounted for approximately 31% of the increase in our deposit insurance premiums year over year.

Income tax expense was $5.0 million for the year ended September 30, 2023, a decrease from $6.9 million for the year ended September 30, 2022.

The decline in income tax expense reflects lower net income in 2023.

The effective income tax rate for the years ended September 30, 2023 and 2022 was 24.9% and 22.8%, respectively.

Non-interest expense was $47.1 million for calendar 2024, an increase of $7.4 million from $39.7 million for fiscal 2023.

The increase in non-interest expense was primarily attributed to additional staff for the SBA, C&I Banking and Operations teams.

Income tax expense was $4.0 million for calendar 2024, a decrease from $5.0 million for fiscal 2023.

The decline in income tax expense reflects lower net income in calendar 2024.

The effective income tax rate for calendar 2024 was 24.6% compared to 24.9% for fiscal 2023.

Results of Operations for three months ended December 31, 2023 (transition period) compared to three months ended December 31, 2022

The comparison of the results for the three months ended December 31, 2023 with the results for the three months ended December 31, 2022 can be found in the “Management’s Discussion and Analysis” section in the Company’s Transition Report on Form 10-Q for the transition period from October 1, 2023 to December 31, 2023, filed with the SEC on February 13, 2024.

Analysis of Financial Condition

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The following table summarizes the amortized cost and fair value of investment securities:

Balance at December 31,

Balance at September 30,

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Amortized Cost

Investment securities available-for-sale:

Treasury securities

GSE residential mortgage-backed securities

GSE commercial mortgage-backed securities

Collateralized loan obligations

Corporate bonds

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GSE residential mortgage-backed securities

GSE commercial mortgage-backed

GSE commercial mortgage-backed securities

Total investment securities held-to-maturity

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These evaluations may cause us to change the level of funds we deploy into investment securities, change the composition of our investment securities portfolio, and change the proportion of investments made into the available-for-sale and held-to-maturity investment categories.

Our investment securities portfolio included no gross unrealized gains and gross unrealized losses of $2.5 million at September 30, 2023, compared to no gross unrealized gains and gross unrealized losses of $1.1 million at September 30, 2022.

Management believes that all of its unrealized losses on individual investment securities at September 30, 2023 and 2022 are the result of fluctuations in interest rates and do not reflect deterioration in the credit quality of these investments.

Our investment securities available-for-sale portfolio included gross unrealized gains of $0.3 million and gross unrealized losses of $1.6 million at December 31, 2024, compared to gross unrealized gains of $0.1 million and gross unrealized losses of $2.0 million at December 31, 2023.

Management believes that all of its unrealized losses on individual investment securities at December 31, 2024 and 2023 are the result of fluctuations in interest rates and do not reflect deterioration in the credit quality of these investments.

Accordingly, management considers these unrealized losses to be temporary in nature.

We do not have the intent to sell these investment securities with unrealized losses and, more likely than not, will not be required to sell these investment securities before fair value recovers to amortized cost.

The tables below illustrate the maturity distribution and weighted average yield and amortized cost of our investment securities as of September 30, 2023 and 2022, on a contractual maturity basis.

The tables below illustrate the maturity distribution and weighted average yield and amortized cost of our investment securities as of December 31, 2024 and 2023, on a contractual maturity basis.

Investment Securities Portfolio by Expected Maturities (1)

Balance at September 30, 2023

Balance at December 31, 2024

Available-for-Sale

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Due after one year through five years

Due after five years through ten years

Treasury securities

Due in one year or less

Collateralized loan obligations

Due after five years through ten years

Due after ten years

Corporate bonds

Due after one year through five years

Due after five years through ten years

Total investment securities

Balance at September 30, 2022

Balance at December 31, 2023

Available-for-Sale

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GSE commercial mortgage-backed securities

Due after one through five years

Due after one year through five years

Collateralized loan obligations

Due after five years through ten years

Due after ten years

Corporate bonds

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(1) There is no income tax exempt interest recorded for investment securities for the periods presented.

At September 30, 2023, our loan portfolio was $1.87 billion, an increase of $251.1 million from $1.62 billion at September 30, 2022.

Year over year growth was concentrated primarily in residential, commercial real estate and C&I loans.

For the year ended September 30, 2023, the Bank realized an increase in residential mortgage loans of $139.9 million, representing growth of approximately 27%.

Loans secured by commercial real estate properties increased by $64.2 million, representing growth of approximately 14%.

Commercial and industrial loans increased by $39.7 million, representing growth of approximately 87%.

At December 31, 2024, our loan portfolio totaled $1.99 billion, an increase of $28.3 million from $1.96 billion at December 31, 2023.

Growth was concentrated primarily in residential, SBA and C&I loans.

The following table provides the composition of the Company’s loan portfolio by type at the dates indicated:

At September 30,

At December 31,

At September 30,

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Commercial and industrial

Allowance for loan losses

Allowance for credit losses

Total loans, net

The following table provides information for the contractual maturities of our total loan portfolio at September 30, 2023.

The following table provides information of our total loan portfolio at December 31, 2024 by the earlier of the maturity or next repricing date.

Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

The table presents contractual maturities and does not reflect repricing or the effect of prepayments.

Maturities are based on the final contractual payment date and do not reflect the impact of prepayments and scheduled principal amortization.

Adjustable rate loans are included in the period which their interest rates are next scheduled to adjust.

The table does not reflect the impact of prepayments and scheduled principal amortization.

Time to Reprice/Mature

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After fifteen years

The following table presents the Company’s loans held for investment as of September 30, 2023 that are contractually due after September 30, 2024 according to rate type and loan category:

Due After September 30, 2024

The following table presents the Company’s loans held for investment as of December 31, 2024 with maturity or next repricing due after December 31, 2025 according to rate type and loan category:

Due After December 31, 2025

(in thousands)

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Commercial and industrial

Credit Policies and Procedures

Management uses the risk-grading program, as described under "Asset Quality,"

to facilitate evaluation of probable inherent loan losses and the adequacy of the allowance for loan losses.

In this program, risk grades are initially assigned by loan officers, reviewed by Credit Administration, and a sample of these loans are tested by the Company’s third-party independent loan reviewer.

The testing program includes an evaluation of a sample of both new and existing loans, including large loans, loans that are identified as having potential credit weaknesses, and loans past due 90 days or more and still accruing.

We strive to maintain the loan portfolio in accordance with our loan underwriting policies that result in loans specifically tailored to the needs of our market area.

Every effort is made to identify and minimize the credit risks associated with such lending strategies.

Generally, we do not engage in significant volumes of lease financing, highly leveraged transactions or loans to customers domiciled outside the United States.

Management follows a loan review program designed to evaluate the credit risk in our loan portfolio.

Through this loan review process we maintain an internally-classified, adversely-risk-rated loan list that helps management assess the overall quality of the loan portfolio and the adequacy of the allowance for loan losses.

In establishing the appropriate classification for specific assets, management considers, among other factors, the estimated value of the underlying collateral, the borrower’s ability to repay, the borrower’s payment history and the current delinquent status.

As a result of this process, certain loans are categorized as substandard, doubtful or loss and the allowance is allocated based on management’s judgment and historical experience.

Acquired loans are recorded at fair value as of the loan’s acquisition date and allowances are recorded for post-acquisition credit quality deterioration.

Subsequent to the acquisition date, recurring analyses are performed on the credit quality of acquired loans to determine if expected cash flows have changed.

Based upon the results of the individual loan reviews, revised impairment amounts are calculated which could result in additional allowance for loan losses.

A loan is considered to be impaired under GAAP when, based upon current information and events, it is probable we will be unable to collect all amounts due according to the contractual terms of the loan.

If applicable, the Company calculates a specific reserve for each loan that has been deemed impaired, which include nonaccrual loans and TDRs.

The amount of the reserve is based on the present value of expected cash flows discounted at the loan’s effective interest rate, and/or the value of collateral.

If foreclosure is probable or the loan is collateral dependent, impairment is measured using the fair value of the loan’s collateral, less estimated costs to sell.

At December 31, 2024, the Company’s residential loan portfolio (including home equity) amounted to $729.3 million, with an average loan balance of $483 thousand and a weighted average loan-to-value ratio of 57%.

Commercial real estate, multi-family and construction loans totaled $1.09 billion at December 31, 2024, with an average loan balance of $1.5 million and a weighted average loan-to-value ratio of 59%.

As will be discussed below, approximately 37% of the multifamily portfolio is subject to rent regulation.

The Company’s commercial real estate concentration ratio continued to improve, decreasing to 385% of capital at December 31, 2024 from 432% of capital at December 31, 2023, with loans secured by office space accounting for 2.45% of the total loan portfolio and totaling $48.7 million.

The Bank’s investments in diversification continue to deliver results, with the volume of SBA & USDA loans originated for sale and the volume of residential loans originated for sale sustaining momentum.

We expect the volume of activity to increase in 2025.

We originated $161.0 million and sold $111.7 million of SBA loans for the year ended December 31, 2024.

We originated $131.0 million and sold $38.0 million of residential loans for the year ended December 31, 2024.

Because we continue to prioritize the management of liquidity and capital, new business development with respect to residential and SBA & USDA lending is largely focused on originations for sale over portfolio growth.

Conversely, portfolio growth is the primary focus of our C&I Banking initiative, which continues to drive deposit and loan growth at our Hauppauge Business Banking Center and will expand with the pending launch of our Port Jefferson branch.

Commercial Real Estate Statistics

A significant portion of the Bank’s commercial real estate portfolio consists of loans secured by Multi-Family and CRE-Investor owned real estate that are predominantly subject to fixed interest rates for an initial period of 5 years.

The Bank’s exposure to Land/Construction loans is minor at $13.5 million, all at floating interest rates, and CRE-owner occupied loans have a mix of floating rates.

As shown below, 23% of the loan balances in these combined portfolios will mature in 2025 and 2026, with another 55% maturing in 2027.

Multi-Family Market Rent Portfolio Fixed Rate Reset/Maturity Schedule

Multi-Family Stabilized Rent Portfolio Fixed Rate Reset/Maturity Schedule

Calendar Period

Total O/S ($000's omitted)

Avg O/S ($000's omitted)

Avg Interest Rate

Calendar Period

Total O/S ($000's omitted)

Avg O/S ($000's omitted)

Avg Interest Rate

Floating Rate

CRE Investor Portfolio Fixed Rate Reset/Maturity Schedule

Calendar Period

Total O/S ($000's omitted)

Avg O/S ($000's omitted)

Avg Interest Rate

Floating Rate

Total CRE-Inv.

Rental breakdown of Multi-Family portfolio

The table below segments our portfolio of loans secured by Multi-Family properties based on rental terms and location.

As shown below, 63% of the combined portfolio is secured by properties subject to free market rental terms, which is the dominant tenant type.

Both the Market Rent and Stabilized Rent segments of our portfolio present very similar average borrower profiles.

The portfolio is primarily located in the New York City boroughs of Brooklyn, the Bronx and Queens.

Multi-Family Loan Portfolio - Loans by Rent Type

Outstanding Loan Balance

% of Total Multi-Family

Avg Loan Size

Avg # of Units

($000's omitted)

Office Property Exposure

The Bank’s exposure to the Office market is minor at $49 million.

This portfolio has a 2.27x weighted average DSCR, a 54% weighted average LTV and less than $400,000 of exposure in Manhattan.

Asset Quality

We consider asset quality to be of primary importance and employ a formal internal loan review process to ensure adherence to our lending policy as approved by our Board of Directors.

It is the responsibility of each lending officer to assign an appropriate risk grade to every loan originated.

The Company’s internal credit risk review function, through focused review and sampling, validates the accuracy of commercial loan risk grades.

Each loan risk grade corresponds to an estimated default probability.

In addition, as a given loan’s credit quality improves or deteriorates, the Company will update the borrower’s risk grade accordingly.

The function of determining the allowance for loan losses is fundamentally driven by the risk grade system.

In determining the allowance for loan losses and any resulting provision to be charged against earnings, particular emphasis is placed on the results of the loan review process.

Consideration is also given to historical loan loss experience, the value and adequacy of collateral, economic conditions in our market area and other factors.

For loans determined to be impaired, the allowance is based on discounted cash flows using the loan’s initial effective interest rate or the fair value of the collateral for certain collateral dependent loans.

This evaluation is inherently subjective, as it requires material estimates, including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change.

The allowance for loan losses represents management’s estimate of the appropriate level of reserve to provide for probable losses inherent in the loan portfolio.

Our policy regarding past due loans normally requires a prompt charge-off to the allowance for loan losses following timely collection efforts and a thorough review.

Further efforts are then pursued through various means available.

Loans carried in a nonaccrual status are generally collateralized and probable losses are considered in the determination of the allowance for loan losses.

Nonperforming Assets

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The Company did not own any repossessed property for the periods presented.

Balance at September 30,

Balance at December 31,

September 30,

(dollars in thousands)

1 unchanged sentence

Loans greater than 90 days past due

Total nonperforming assets

Performing TDRs

Nonaccrual loans as a percentage of loans held-for- investment

Total nonperforming loans/assets

Nonperforming loans as a percentage of loans held-for- investment

Non-performing assets as a percentage of total assets

Total nonaccrual loans were $14.9 million at September 30, 2023, an increase from total nonaccrual loans of $12.3 million at September 30, 2022.

At September 30, 2023, non-performing assets totaled $15.1 million of which $8.4 million represented legacy Savoy originated loans that were either written down to fair value at the acquisition date or are 100% guaranteed by the SBA.

Subsequent to September 30, 2023, a $1.1 million non-performing residential investor loan paid in full and $0.1 million in nonaccrual interest was collected.

Analysis of Allowance for Loan Losses

The allowance for loan losses is established through charges to earnings in the form of a provision for loan losses.

Management increases the allowance for loan losses by provisions charged to operations and by recoveries of amounts previously charged off.

The allowance is reduced by loans charged off.

Management evaluates the adequacy of the allowance at least monthly.

In addition, on a monthly basis our Board of Directors reviews the loan portfolio, conducts an evaluation of credit quality and reviews the computation of the loan loss allowance.

In evaluating the adequacy of the allowance, management considers the growth, composition and industry diversification of the portfolio, historical loan loss experience, current delinquency levels, adverse situations that may affect a borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions and other relevant factors deriving from our history of operations.

In addition to our history, management also considers the loss experience and allowance levels of other similar banks and the historical experience encountered by our management and senior lending officers prior to joining us.

In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to make additions for estimated losses based upon judgments different from those of management.

Management uses the risk-grading program, as described under "Asset Quality,"

to facilitate evaluation of probable inherent loan losses and the adequacy of the allowance for loan losses.

Generally, we do not engage in significant lease financing, highly leveraged transactions or loans to customers domiciled outside the United States.

Management follows a loan review program designed to evaluate the credit risk in our loan portfolio.

Through this loan review process, we maintain an internally classified watch list that helps management assess the overall quality of the loan portfolio and the adequacy of the allowance for loan losses.

As a result of this process, certain loans are categorized as substandard, doubtful or loss and the allowance is allocated based on management’s judgment and historical experience.

Acquired loans are recorded at fair value as of the loan’s acquisition date and allowances are recorded for post-acquisition credit quality deterioration.

Subsequent to the acquisition date, recurring analyses are performed on the credit quality of acquired loans to determine if expected cash flows have changed.

Based upon the results of the individual loan reviews, revised impairment amounts are calculated which could result in additional allowance for loan losses.

The Company calculates a specific reserve for each loan that has been deemed impaired, which include nonaccrual loans and TDRs.

The amount of the reserve is based on the present value of expected cash flows discounted at the loan’s effective interest rate, and/or the value of collateral.

If foreclosure is probable or the loan is collateral dependent, impairment is measured using the fair value of the loan’s collateral, less estimated costs to sell.

The allowance for loan losses was $14.7 million at September 30, 2023, an increase of $1.8 million from $12.8 million at September 30, 2022 due to growth in the loan portfolio.

The ratio of the allowance for loan losses to total portfolio loans was 0.78% and 0.79% at September 30, 2023, and 2022, respectively.

The Company experienced $1.6 million in net charge-offs during the year ended September 30, 2023, an increase compared to net charge-offs of $0.2 million during the year ended September 30, 2022.

The cumulative charge-offs of $1.2 million during the fourth fiscal quarter were primarily related to one multi-family loan for which the Bank had a specific reserve approximately equal to the charge-off for that loan.

The Company has recorded recoveries of $0.1 million and $0 during the years ended September 30, 2023 and 2022, respectively.

The following table presents the allocation of the allowance for loan losses by loan category for the periods presented:

Allowance for credit losses as a percentage of nonperforming loans

Total nonaccrual loans were $16.4 million at December 31, 2024, an increase from total nonaccrual loans of $14.5 million at December 31, 2023.

Reserve for Unfunded Commitments

The Company maintains a reserve, recorded in other liabilities, associated with unfunded loan commitments accepted by borrowers.

The amount of the reserve was $0.3 million at December 31, 2024 and $0.1 million at December 31, 2023.

This reserve is determined based upon the outstanding volume of loan commitments at the end of each period.

Any increases or reductions in this reserve are recognized in the provision for credit losses.

Allowance for Credit Losses

The allowance for credit losses was $22.8 million at December 31, 2024, an increase of $3.1 million from $19.7 million at December 31, 2023.

The ratio of the allowance for credit losses to total portfolio loans was 1.15% at December 31, 2024, inclusive of a $3.2 million allowance on individually analyzed loans, versus 1.00% at December 31, 2023, which does not include the aforementioned allowance for individually analyzed loans.

The Company experienced $1.6 million in net charge-offs both for calendar 2024 and fiscal 2023.

The Company has recorded recoveries of $18 thousand and $103 thousand for calendar 2024 and fiscal 2023, respectively.

The following table presents the allocation of the allowance for credit losses by loan category for the periods presented:

At December 31,

At September 30,

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Commercial and industrial

Total allowance for loan losses

The following table presents information related activity in the allowance for loan losses for the periods presented:

Year Ended September 30,

Total allowance for credit losses

The following table presents information related activity in the allowance for credit losses for the periods presented:

Three Months Ended

(transition period)

September 30,

(dollars in thousands)

Beginning balance

Provision for loan losses

Impact of adopting ASC 326

Provision for credit losses

Residential real estate

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Total recoveries

Total net charge-offs

Total net (charge-offs) recoveries

Ending balance

Allowance for loan losses to total loans held-for- investment (1)

Net charge-offs to average loans held-for-investment

(1) Includes loans acquired from Savoy that do not carry an allowance for loans losses as of September 30 2023 and 2022.

Allowance for credit losses to total loans held-for- investment

Net (charge-offs) recoveries to average loans held-for-investment

Sources of Funds and Liquidity

Liquidity management is defined as both our and the Bank’s ability to meet our financial obligations on a continuous basis without material loss or disruption of normal operations.

Liquidity management is defined as the ability of the Company and the Bank to meet their financial obligations on a continuous basis without material loss or disruption of normal operations.

These obligations include the withdrawal of deposits on demand or at their contractual maturity, the repayment of borrowings as they mature, funding new and existing loan commitments and the ability to take advantage of business opportunities as they arise.

Asset liquidity is provided by short-term investments, such as fed funds sold, the marketability of securities available-for-sale and interest-bearing deposits due from the Federal Reserve Bank of New York, Federal Home Loan Bank (the “FHLB”) and correspondent banks, which totaled $192.6 million and $149.9 million at September 30, 2023 and 2022, respectively.

Asset liquidity is provided by short-term investments, such as fed funds sold, the marketability of securities available-for-sale and interest-bearing deposits due from the Federal Reserve Bank of New York, Federal Home Loan Bank (the “FHLB”) and correspondent banks, which totaled $246.6 million and $238.6 million at December 31, 2024 and 2023, respectively.

These liquid assets may include assets that have been pledged primarily against municipal deposits or borrowings.

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These funds can be obtained by converting liquid assets to cash or by attracting new deposits or other sources of funding.

Many factors affect our ability to meet liquidity needs, including variations in the markets served, loan demand, asset/liability mix, reputation and credit standing in our markets and general economic conditions.

Many factors affect the Company’s ability to meet liquidity needs, including variations in the markets served, loan demand, its asset/liability mix, its reputation and credit standing in its markets and general economic conditions.

Borrowings and the scheduled amortization of investment securities and loans are more predictable funding sources.

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On a weekly basis, appropriate senior management receives a current liquidity position report and a ninety day forecasted cash flow to ensure that all short-term obligations will be met and there is sufficient liquidity available.

At September 30, 2023, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $534.7 million or approximately 204% of uninsured deposit balances.

As of December 31, 2024, we held $252.0 million of deposits that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit.

At December 31, 2024, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $713.1 million, or approximately 283% of uninsured deposit balances.

We provide a range of deposit services, including non-interest bearing demand accounts, interest-bearing demand and savings accounts, money market accounts and time deposits.

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Deposits continue to be our primary funding source.

Total deposits at September 30, 2023 were $1.74 billion, an increase of $207.0 million from total deposits of $1.53 billion at September 30, 2022.

Insured and collateralized deposits, which include municipal deposits, accounted for approximately 85% of total deposits at September 30, 2023.

The following is our average deposits and weighted-average interest rates paid thereon for the past two fiscal years:

Year Ended September 30,

Total deposits at December 31, 2024 were $1.95 billion, an increase of $49.7 million from total deposits of $1.90 billion at December 31, 2023.

Insured and collateralized deposits, which include municipal deposits, accounted for approximately 87% of total deposits at December 31, 2024.

Time deposits of $481.6 million are scheduled to mature within the next 12 months.

Based on historical experience, the Company expects to be able to replace a substantial portion of those maturing deposits with comparable deposit products.

The following is our average deposits and weighted-average interest rates paid thereon for the periods presented:

Year Ended December 31,

Three Months Ended December 31,

Fiscal Year Ended September 30,

2023 (transition period)

(dollars in thousands)

2 unchanged sentences

Total average deposits

The Company had municipal deposits of $313.2 million at September 30, 2023, which comprised 18.1% of total deposits, a decrease of $103.7 million or 24.9% from $416.9 million, at September 30, 2022.

Our sources of wholesale funding included brokered certificates of deposit, listing service certificates of deposit and insured cash sweep (“ICS”) reciprocal deposits in excess of 20% of total liabilities, whose balances totaled approximately $102.0 million, $15.9 million and $18.1 million, or 5.9%, 0.9% and 1.0% of total deposits, respectively, at September 30, 2023.

The Company had municipal deposits of $509.3 million at December 31, 2024, which comprised 26.1% of total deposits, a decrease of $18.8 million or 3.6% from $528.1 million at December 31, 2023.

Our sources of wholesale funding included brokered certificates of deposit, listing service certificates of deposit and insured cash sweep (“ICS”) reciprocal deposits in excess of 20% of total liabilities, which balances totaled approximately $85.0 million, $2.7 million and $5.5 million, or 4.4%, 0.1% and 0.3% of total deposits, respectively, at December 31, 2024.

We utilized brokered certificates of deposit and listing service certificates of deposit as alternatives to other forms of wholesale funding, including borrowings, when interest rates and market conditions favor the use of such deposits.

For a portion of our brokered certificates of deposit, we utilized interest rate swap contracts to effectively extend their duration and to fix their cost.

As of September 30, 2023 and 2022, we held $106.9 million and $87.9 million, respectively, of time deposits that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit.

The following table sets forth the maturity of time deposits exceeding the FDIC insurance limit as of September 30.

September 30,

As of December 31, 2024 and 2023, we held $106.4 million and $107.3 million, respectively, of time deposits that meet or exceed the FDIC insurance limit.

The following table sets forth the maturity of time deposits that meet or exceed the FDIC insurance limit of as of December 31, 2024:

(in thousands)

Three months or less

Over three months through six months

Over six months through 12 months

Over 12 months

Over three months through twelve months

Over one year through three years

Over three years

See Note 6, “Deposits” to the accompanying Consolidated Financial Statements contained in Item 8 for additional details.

The total carrying value of our borrowings was $204.5 million at September 30, 2023, an increase of $78.2 million from $126.3 million at September 30, 2022.

The total carrying value of our borrowings was $132.5 million at December 31, 2024, a decrease of $21.1 million from $153.6 million at December 31, 2023.

The Company added $100.7 million of extended duration FHLB term advances in March 2023 to provide additional liquidity and enhance the interest rate sensitivity profile.

At September 30, 2023, $67.9 million of these borrowings were classified as short-term, while the remaining was classified as long- term.

At December 31, 2024, $7.1 million of these borrowings were classified as short-term, while the remaining was classified as long- term.

Short-term borrowings are comprised of short-term FHLB advances.

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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 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.

1 unchanged sentence

The Company used a portion of the net proceeds to pay off an existing holding company note in October 2020 and used the remainder of the net proceeds for acquisition financing and general corporate purposes, including contributing equity capital to the Bank.

At September 30, 2023, the Company had $49.0 million in overnight borrowings and $126.7 million in term borrowings outstanding both with the FHLB.

At September 30, 2023, the Company had access to an additional $291.2 million in FHLB lines of credit.

At September 30, 2023, approximately $92.0 million in unsecured lines of credit extended by correspondent banks were also available to be utilized, if needed, for short-term funding purposes.

No borrowings were outstanding under lines of credit with correspondent banks at September 30, 2023.

At December 31, 2024, the Bank had a total borrowing capacity of $698.0 million at the FHLB, of which $492.1 million was used to collateralize municipal deposits and $107.8 million was utilized for term advances.

At December 31, 2024, the Bank had a $247.2 million collateralized line of credit from the Federal Reserve Bank of New York’s discount window with no outstanding borrowings.

At December 31, 2024, the Bank had access to approximately $92 million in unsecured lines of credit extended by correspondent banks, if needed, for short-term funding purposes.

No borrowings were outstanding under lines of credit with correspondent banks at December 31, 2024.

We utilize derivative instruments in the form of interest rate swaps to hedge our exposure to interest rate risk in conjunction with our overall asset/liability management process.

In accordance with accounting requirements, we formally designate all of our hedging relationships as either fair value hedges or cash flow hedges, and document the strategy for undertaking the hedge transactions and its method of assessing ongoing effectiveness.

At September 30, 2023, our derivative instruments were comprised of interest rate swaps with a total notional amount of $75.0 million.

These instruments are intended to manage the interest rate exposure relating to certain brokered certificates of deposit.

At December 31, 2024, our derivative instruments were comprised of interest rate swaps with a total notional amount of $125.0 million.

These instruments are intended to manage the interest rate exposure relating to certain brokered certificates of deposit and certain fixed rate residential mortgages.

Additional information regarding our use of interest rate derivatives is presented in Note 1 and Note 9 to Consolidated Financial Statements contained in Item 8.

4 unchanged sentences

The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the contract.

Commitments to extend credit are agreements to lend to customers provided there are no violations of material conditions established in the contract.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

3 unchanged sentences

Collateral required varies, but may include accounts receivable, inventory, equipment, real estate and income-producing commercial properties.

At September 30, 2023 and 2022, commitments to originate loans and commitments under unused lines of credit for which the Bank is obligated amounted to approximately $119.6 million and $73.1 million, respectively.

At December 31, 2024 and 2023, commitments to originate loans and commitments under unused lines of credit for which the Bank is obligated amounted to approximately $130.3 million and $143.4 million, respectively.

Letters of credit are conditional commitments guaranteeing payments of drafts in accordance with the terms of the letter of credit agreements.

Commercial letters of credit are used primarily to facilitate trade or commerce and are also issued to support public and private borrowing arrangements, bond financing and similar transactions.

Collateral may be required to support letters of credit based upon management’s evaluation of the creditworthiness of each customer.

Commercial letters of credit are used primarily to facilitate trade or commerce and are also issued to support public and private borrowing arrangements, bond financings and similar transactions.

Collateral may be

required to support letters of credit based upon management’s evaluation of the creditworthiness of each customer.

The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

At September 30, 2023 and 2022, letters of credit outstanding were approximately $0.5 million and $0.8 million, respectively.

At December 31, 2024 and 2023, letters of credit outstanding were approximately $0.8 million and $3.9 million, respectively.

Capital Resources

Total stockholders’ equity was $185.9 million at September 30, 2023, an increase of $13.3 million from stockholders’ equity of $172.6 million at September 30, 2022.

The increase was primarily due to net income earned for the year ended September 30, 2023, less cash dividends paid to shareholders.

Accumulated other comprehensive loss, net of tax, was $1.3 million, reflecting the relatively small size of the Company’s investment portfolio and representing approximately 0.71% of total capital at September 30, 2023.

Total stockholders’ equity was $196.6 million at December 31, 2024, an increase of $11.8 million from stockholders’ equity of $184.8 million at December 31, 2023.

The increase was primarily due to an increase of $9.4 million in retained earnings and a decrease of $1.1 million in accumulated other comprehensive loss.

The increase in retained earnings was due primarily to net income of $12.3 million for the year ended December 31, 2024, which was offset by $2.9 million of dividends declared.

The accumulated other comprehensive loss at December 31, 2024 was 0.68% of total equity and was comprised of a $1.0 million after tax net unrealized loss on the investment portfolio and a $0.3 million after tax net unrealized loss on derivatives.

We are subject to various regulatory capital requirements administered by the federal banking agencies.

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We use our capital primarily for our lending activities as well as acquisitions and expansions of our business and other operating requirements.

The Bank capital level is characterized as "well-capitalized"

under the Basel III Capital Rules.

In addition to establishing the minimum regulatory requirements, the regulations limit the Bank’s ability to pay dividends to the Company and to pay certain compensation to its executives if the Bank does not hold a capital conservation buffer consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.

The Bank’s capital conservation buffer was greater than 2.5% of risk-weighted assets at December 31, 2024.

The Bank capital level is characterized as "well-capitalized" under the Basel III Capital Rules.

A summary of the Bank’s regulatory capital amounts and ratios are presented below:

9 unchanged sentences

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.

On October 5, 2023, the Company announced that the Board of Directors approved a new stock repurchase program.

Under the new repurchase program, the Company may repurchase up to 366,050 shares of its common stock, or approximately 5% of its then outstanding shares.

On October 5, 2023, the Company announced that the Board of Directors approved a stock repurchase program.

Under the repurchase program, the Company may repurchase up to 366,050 shares of its common stock, or approximately 5% of its then outstanding shares.

The repurchase program permits shares to be repurchased in the open market as conditions allow, or in privately negotiated transactions, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission.

The Company has not made any stock repurchases under the program.

The remaining buyback authority under the share repurchase program remained at 366,050 shares as of December 21, 2023, the filing date of this Annual Report on Form 10-K.

Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information related to this item.

The remaining buyback authority under the share repurchase program therefore remained at 366,050 shares as of March 14, 2025, the filing date of this Annual Report on Form 10-K.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis