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Item 8. Financial Statements and Supplementary Data

2025-03-14 compared with 2023-12-21 · 689 added, 382 removed, 889 unchanged (55% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors of Hanover Bancorp, Inc.

Shareholders and the Board of Directors of Hanover Bancorp, Inc.

Mineola, New York

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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.

and Subsidiary (the "Company") as of December 31, 2024, December 31, 2023 and September 30, 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for years ended December 31, 2024 and September 30, 2023 and three months ended December 31, 2023, 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 December 31, 2024, December 31, 2023 and September 30, 2023, and the results of its operations and its cash flows for years ended December 31, 2024 and September 30, 2023 and three months ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph - Change In Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective October 1, 2023 due to the adoption of ASC 326, Financial Instruments – Credit Losses.

Basis for Opinion

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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.

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We believe that our audits provide a reasonable basis for our opinion.

/s/ Crowe LLP

We have served as the Company’s auditor since 2019.

Livingston, New Jersey

December 21, 2023

March 14, 2025

HANOVER BANCORP, INC.

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Total cash and cash equivalents

Held to maturity (fair value of $ 3,760 and $ 4,095 , respectively)

Available for sale, at fair value

Total securities

Allowance for loan losses

Securities held to maturity, fair value of $ 3,609 , $ 3,835 and $ 3,760 at December 31, 2024 and 2023 and September 30, 2023, respectively (net of allowance for credit losses of $ 0 at December 31, 2024 and 2023)

Securities available for sale, at fair value (net of allowance for credit losses of $ 0 at December 31, 2024 and 2023)

Loans held for sale

Allowance for credit losses (1)

Premises and equipment, net

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Prepaid post retirement plan

Stock in Federal Home Loan Bank ("FHLB"), at cost

Other intangible assets

Loan servicing rights

Deferred income taxes, net

Deferred income taxes

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Total deposits

Subordinated debentures

Subordinated debentures ($ 25,000 face amount less unamortized debt issuance costs of $ 311 , $ 365 and $ 379 at December 31, 2024 and 2023 and September 30, 2023, respectively)

Operating lease liabilities

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15,000,000 shares authorized;

issued and outstanding 150,000 and none , respectively)

issued and outstanding 275,000 at December 31, 2024 and 150,000 at December 31, 2023 and September 30, 2023)

Common stock (par value $ 0.01 ;

17,000,000 shares authorized;

issued and outstanding 7,170,419 and 7,285,648 , respectively)

issued and outstanding 7,152,127 , 7,195,012 and 7,170,419 at December 31, 2024, December 31, 2023 and September 30, 2023, respectively)

Retained earnings

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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

Commencing on October 1, 2023 the allowance calculation is based on the current expected credit loss methodology.

Prior to October 1, 2023 the calculation was based on the incurred loss methodology.

Refer to Note 1 for further discussion.

The accompanying notes are an integral part of these consolidated financial statements.

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(Dollars in thousands, except per share amounts)

Year Ended September 30,

Three Months Ended

(transition period)

September 30,

INTEREST INCOME

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Net interest income

Provision for loan losses

Net interest income after provision for loan losses

Provision for credit losses (1)

Net interest income after provision for credit losses

NON-INTEREST INCOME

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Data processing

Acquisition costs

Professional fees

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Earnings per share:

Commencing on October 1, 2023 the allowance calculation is based on the current expected credit loss methodology.

Prior to October 1, 2023 the calculation was based on the incurred loss methodology.

Refer to Note 1 for further discussion.

The accompanying notes are an integral part of these consolidated financial statements.

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(Dollars in thousands)

Year Ended September 30,

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

Three Months Ended

(transition period)

September 30,

Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on investment securities available for sale:

Change in unrealized gain (loss) on securities available for sale arising during the period, net of tax of $ 120 , $ 56 and ($ 293 ), respectively

Reclassification adjustment for gains realized in net income, net of tax of ($ 7 ), $ 0 and $ 0 , respectively

Net change in unrealized gains (losses) on securities available for sale

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

Total other comprehensive loss, net of tax

Unrealized gains (losses) on cash flow hedges:

Change in unrealized gain (loss) on cash flow hedges arising during the period, net of tax of $ 188 , ($ 369 ) and $ 97 , respectively

Total other comprehensive income (loss), net of tax

Total comprehensive income, net of tax

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Other comprehensive loss, net of tax

Issuance of common stock in lieu of directors' fees

Cash dividends declared ( $ 0.10 per share)

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Shares received related to tax withholding

Common stock issued in Initial Public Offering ("IPO"), net of costs

Preferred stock issued in exchange for common stock

Exercise of stock options

Balance at September 30, 2023

Cumulative effect adjustment for adoption of ASU 2016-13

Balance at October 1, 2023 (as adjusted for change in accounting principle)

Other comprehensive loss, net of tax

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Shares received related to tax withholding

Preferred stock issued in exchange for common stock

Exercise of stock options

Balance at September 30, 2023

Balance at December 31, 2023

Other comprehensive income, net of tax

Cash dividends declared ( $ 0.10 per share)

Stock-based compensation

Stock awards granted, net of forfeitures

Shares received related to tax withholding

Preferred stock issued in exchange for common stock

Exercise of stock options, net

Balance at December 31, 2024

The accompanying notes are an integral part of these consolidated financial statements.

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(Dollars in thousands)

Year Ended September 30,

Three Months Ended

(transition period)

September 30,

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan losses

Provision for credit losses (1)

Depreciation and amortization

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Net gain on sale of loans held-for-sale

Net accretion of premiums, discounts and loan fees and costs

Net amortization (accretion) of premiums, discounts and loan fees and costs

Amortization of intangible assets

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Deferred tax expense

(Increase) decrease in accrued interest receivable

Decrease (increase) in accrued interest receivable

Increase in other assets

Increase (decrease) in accrued interest payable

(Decrease) increase in accrued interest payable

Increase (decrease) in other liabilities

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Purchases of securities available-for-sale

Purchases of restricted securities, net

Repayments (purchases) of restricted securities, net

Proceeds from sales of securities available-for-sale

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Repayments of term FHLB advances

Proceeds from Federal Reserve Bank borrowings

Repayments of Federal Reserve Bank borrowings

(Repayments) proceeds of other short-term borrowings, net

Repayments of other short-term borrowings, net

Payments related to tax withholding for equity awards

Cash dividends paid

Net proceeds from issuance of common stock

Proceeds from exercise of stock options

Exercise of stock options, net

Net cash provided by financing activities

Increase (decrease) in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

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Other assets received in satisfaction of a loan

Commencing on October 1, 2023 the allowance calculation is based on the current expected credit loss methodology.

Prior to October 1, 2023 the calculation was based on the incurred loss methodology.

Refer to Note 1 for further discussion.

The accompanying notes are an integral part of these consolidated financial statements.

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Hanover Bancorp, Inc.

(the “Company”) is a New York corporation which is the holding company for Hanover Community Bank (the “Bank”).

(the “Company”) is currently 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.

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The Company is subject to regulation and examination by the Board of Governors of the FRB.

At the Company’s annual shareholder meeting held on March 5, 2024, the shareholders approved a change in its state of incorporation from the State of New York to the State of Maryland subject to regulatory approval, which has been received.

The Company is in the process of completing its reincorporation in Maryland.

Basis of Presentation

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.

The Company’s current fiscal year is the calendar year January 1, 2024 through December 31, 2024.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.

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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.

These reclassifications had an immaterial effect on the Company’s consolidated financial statements and had no effect on prior periods net income or stockholders’ equity.

Use of Estimates

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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

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Premiums are amortized and discounts accreted using the interest method over the remaining terms of the related securities.

Premiums on callable securities are amortized to their earliest call date.

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.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent.

Interest accrued but not received for a security placed on nonaccrual is reversed against interest income.

Allowance for Credit Losses – Held-to-Maturity Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type.

Accrued interest receivable on held-to-maturity debt securities was $ 9 thousand at both December 31, 2024 and 2023, respectively, and is excluded from the estimate of credit losses.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

Management classifies the held-to-maturity portfolio into the following major security types:

Mortgage backed:

residential and commercial.

All mortgage-backed:

residential and commercial securities held by the Company are issued by U.S.

government entities and agencies.

These securities are either explicitly or implicitly guaranteed by the U.S.

government, are highly rated by major rating agencies and have a long history of no credit losses.

Allowance for Credit Losses – Available-For-Sale Securities

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.

For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as credit loss expense (or reversal).

Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale debt securities totaled $ 0.6 million and $ 0.8 million at December 31, 2024 and 2023, respectively, and is excluded from the estimate of credit losses.

Federal Home Loan Bank Stock

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This stock does not have a readily determinable fair value and is carried at cost.

Both cash and stock dividends are reported as income.

Loans Held for Sale

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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.

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.

The loan portfolio is segmented into residential real estate, multi-family, commercial real estate, commercial and industrial, construction and land development, and consumer loans.

Accrued interest receivable totaled $ 10.9 million, $ 10.8 million and $ 9.9 million at December 31, 2024 and 2023 and September 30, 2023, respectively, and was reported in Accrued interest receivable on the Consolidated Statements of Financial Condition and is excluded from the estimate of credit losses.

Interest income on loans is accrued on the unpaid principal balance and credited to income as earned.

Interest income on loans is discontinued and placed on nonaccrual status at the time the loan is 90 days delinquent.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.

Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.

Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero.

Under the cash-basis method, interest income is recorded when the payment is received in cash.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Net loan origination fees and costs are deferred and accreted/amortized to interest income over the contractual life of loans using the level-yield method, adjusted for actual prepayments.

Allowance for Credit Losses - Loans

The allowance for credit losses (“ACL”)is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Historical credit loss experience provides the basis for the estimation of expected credit losses.

Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist.

Loans that do not share risk characteristics are evaluated on an individual basis.

Loans evaluated individually are not also included in the collective evaluation.

When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

The quantitative component of the estimate relies on the statistical relationship between the projected value of an economic indicator and the implied historical loss experience among a curated group of peers.

The Company utilized regression analyses of peer data, in which the Company was included, and where observed credit losses and selected economic factors were used to determine suitable loss drivers for modeling the lifetime rates of probability of default (PD).

A loss given default rate (LGD) is assigned to each pool for each period based on these PD outcomes.

The model primarily utilizes an expected discounted cash flow (DCF) analysis with a remaining life (RL) approach used limitedly and which does not have a material impact to the allowance.

Consumer loans uses RL and are immaterial to total ACL.

The DCF analysis is run at the instrument-level and incorporates an array of loan-specific data points and segment-implied assumptions to determine the lifetime expected loss attributable to each instrument.

An implicit "hypothetical loss" is derived for each period of the DCF, and helps establish the present value of future cash flows for each period.

The reserve applied to a specific instrument is the difference between the sum of the present value of future cash flows and the amortized cost basis of the loan at the measurement date.

The RL approach utilizes projected loss rates based on the remaining life of a loan pool.

It is utilized when a regression analysis could not provide adequate correlation of PD and external economic factors on which to base projected losses.

During the year ended December 31, 2024, the Company updated the model utilized for the commercial and industrial allowance for credit loss loan segment from RL to DCF.

The update was due to the strong statistical relationship now supporting the DCF calculation.

The change in methodology did not have a material impact to the allowance reserve for the commercial and industrial loan segment.

Portfolio segments are the level at which loss assumptions are applied to a pool of loans based on the similarity of risk characteristics inherent in the included instruments, relying on FFIEC Call Report codes.

The loss driver for each loan portfolio segment is derived from a readily available and reasonable economic forecast, chiefly the Federal Open Market Committee (“FOMC”) of the Federal Reserve's projections of civilian unemployment and year-over-year U.S.

Forecasts are applied over a four-quarter period and revert to the lookback period's historical mean for the economic indicator over a four-quarter horizon, thereafter on a straight-line basis.

The model incorporates qualitative factor adjustments in order to calibrate the model for risk in each portfolio segment that may not be captured through quantitative analysis.

Determinations regarding qualitative adjustments are reflective of management's expectation of loss conditions differing from those already captured in the quantitative component of the model.

Factors that the Company considers include a) changes in lending policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices;

b) changes in international, national, regional, and local conditions;

c) changes in the nature and volume of the portfolio and term loans;

d) changes in experience, depth, and ability of lending management;

e) changes in volume and severity of past due loans and other similar conditions;

f) changes in the quality of the Bank’s loan review system;

g) changes in the value of underlying collateral for collateral dependent loans;

h) the existence and effect of any concentrations of credit and changes in the levels of such concentrations;

and i) the effects of other external factors (i.e.

competition, legal and regulatory requirements) on the level of estimated credit losses.

Allowance for credit losses are aggregated for the major loan segments, with similar characteristics, summarized below.

However, for the purposes of calculating reserves, these segments may be further broken down into loan classes by risk characteristics that include but are not limited to FFIEC Call Report codes, industry type, geographic location, and collateral type.

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.

Adjustable-rate loans decrease the interest rate risk to the Bank that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default.

At the same time, the marketability of the underlying property may be adversely affected by higher interest rates.

Repayment risk can be affected by the overall health of the economy, including unemployment rates and housing prices.

Commercial real estate lending entails significant additional risks as compared with single-family residential property lending.

Commercial real estate lending entails 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.

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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 in this classification include income producing residential investment properties of five or more units.

Loans are made to established owners with a proven and demonstrable record of strong performance.

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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.

Credit risk arises with changes in economic conditions that could cause an increase in vacancy rates or decline in property value.

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.

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Therefore, the overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this loan class.

Allowance for Loan Losses

A loan is considered past due when it is not paid in accordance with its contractual terms.

The accrual of income on loans, including impaired loans, and other loans in the process of foreclosure, is generally discontinued when a loan becomes 90 days or more delinquent, or when certain factors indicate that the ultimate collection of principal and interest is in doubt.

Loans on which the accrual of income has been discontinued are designated as non-accrual loans.

All previously accrued interest is reversed against interest income, and income is recognized subsequently only in the period that cash is received, provided no principal payments are due and the remaining principal balance outstanding is deemed collectible.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The Company defines an impaired loan as a loan for which it is probable, based on current information, that the Company will not collect all amounts due in accordance with the contractual terms of the loan agreement.

The Company has defined the population of impaired loans to be all non-accrual loans, loans risk rated 9 (Doubtful) or 10 (Loss), and all loans subject to a troubled debt restructuring (“TDR”).

Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the expected future cash flows, discounted at the loan’s original effective interest rate, or the underlying collateral (less estimated costs to sell) if the loan is collateral dependent.

Impairments are recognized through a charge to the allowance for loan losses for the amount that the loan’s carrying value exceeds the discounted cash flow analysis or estimated fair value of collateral (less estimated costs to sell) if the loan is collateral dependent.

The allowance for loan losses is increased by the provision for loan losses charged against income and is decreased by charge-offs, net of recoveries.

Loan losses are recognized in the period the loans, or portion thereof, are deemed uncollectible.

Generally, the Company will record a loan charge-off (including a partial charge-off) to reduce a loan to the estimated fair value of the underlying collateral, less costs to sell, if it is determined that it is probable that recovery will come primarily from the sale of such collateral.

The provision for loan losses is based on management’s evaluation of the adequacy of the allowance which considers, among other things, impaired loans, past loan loss experience, known and inherent risks in the portfolio, existing adverse situations that may affect the borrower’s ability to repay, and estimated fair value of any underlying collateral securing loans.

Additionally, management evaluates changes, if any, in underwriting standards, collection, charge-off and recovery practices, the nature or volume of the portfolio, lending staff, concentration of loans, as well as current economic conditions, and other relevant factors.

Management believes the allowance for loan losses is adequate to provide for probable and reasonably estimable losses at the statement of condition date.

The allowance for loan losses consists of the following components:

1) Specific allowances are established for impaired loans, generally defined by the Company to be all nonaccrual loans, loans risk rated 8 (Substandard), 9 (Doubtful) or 10 (Loss), and all loans subject to a TDR.

The amount of impairment provided for as an allowance is represented by the deficiency, if any, between the present value of expected future cash flows discounted at the original loan’s effective interest rate or the underlying collateral value (less estimated costs to sell) if the loan is collateral dependent, and the carrying value of the loan.

Impaired loans that have no impairment losses are not considered for general valuation allowances described below.

2) General allowances are established for loan losses on a portfolio basis for loans that do not meet the definition of impaired.

The portfolio is grouped into similar risk characteristics, primarily by loan segment and internal credit risk ratings.

Historical loss experience is applied to each loan group using a three-year lookback period.

The loss experience is adjusted, as appropriate, for the environmental factors discussed below.

This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and market conditions.

Actual loan losses may be significantly more than the allowance for loan losses we have established, which could have a material negative effect on the Company’s financial results.

In underwriting a loan secured by real property, the Company requires an appraisal (or an automated valuation model) of the property by an independent licensed appraiser approved by the Company’s Board of Directors.

The appraisal is subject to review by an independent third party hired by the Company.

Management reviews and inspects properties before disbursement of funds during the term of a construction loan.

Generally, management obtains updated appraisals when a loan is deemed impaired.

These appraisals may be more limited than those prepared for the underwriting of a new loan.

In addition, when the Company acquires other real estate owned, it generally obtains a current appraisal to substantiate the net carrying value of the asset at the time of foreclosure.

As noted above, the adjustments to the Company’s loss experience is based on management’s evaluation of several environmental factors, including:

● changes in local, regional, national, and international economic and business conditions and developments that affect the collectability of the loan portfolio, including the condition of various market segments;

● changes in the nature and volume of the Company’s portfolio and in the terms of the Company’s loans;

● changes in the experience, ability, and depth of lending management and other relevant staff;

● changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;

● changes in the quality of the Company’s loan review system;

● changes in lending policies, procedures and strategies;

● changes in the value of underlying collateral for collateral-dependent loans;

● the existence and effect of any concentrations of credit, and changes in the level of such concentrations;

● 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.

Allowance for Credit losses on Off-Balance Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless the obligation is unconditionally cancellable by the Company.

The allowance for credit losses on off-balance sheet credit exposures is reported on the Consolidated Statements of Financial Condition in the other liabilities section and is adjusted through a provision for credit losses.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over the commitment’s estimated useful life.

Servicing Rights

3 unchanged sentences

Servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount.

Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount.

Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type.

5 unchanged sentences

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.

Servicing fees totaled $ 2.6 million and $ 2.0 million for the years ended December 31, 2024 and September 30, 2023, respectively, and $ 0.6 million for the three months ended December 31, 2023.

Late fees and ancillary fees related to loan servicing are not material.

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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.

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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.

The Company has selected November 30 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 .

3 unchanged sentences

Such financial instruments are recorded when they are funded.

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.

The Company records fair value hedges and 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.

Fair value hedges represent a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment.

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 fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings as fair value changes.

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.

5 unchanged sentences

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.

This documentation includes linking fair value or 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.

1 unchanged sentence

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income.

When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability.

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.

2 unchanged sentences

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.

In addition, the Company obtains collateral above certain thresholds of the fair value of its derivatives for each dealer counterparty based upon their credit standing and the Company has netting agreements with the dealers with which it does business.

Debt Issuance Costs

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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.

No dividend for any quarterly period 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.

22 unchanged sentences

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.

The Company has one reportable segment, "Community Banking." While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis.

Accordingly, all significant operating decisions are based upon analysis of the Company as one operating segment or unit.

Stock Compensation Plans

10 unchanged sentences

The SERP liability is included in other liabilities on the Consolidated Statement of Financial Condition.

Recent Accounting Pronouncements

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.

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 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, enhancing disclosure requirements for reportable segments of public business entities, focusing on significant expense categories and the amounts for each reportable segment, where significant expense categories are defined as those that are regularly reported to an entity’s chief operating decision maker and included in the segment’s reported measures of profit or loss.

ASU 2023-07 became effective for the Company on January 1, 2024.

The adoption of this standard did not have a material effect on the Company’s operating results or financial condition.

The Company adopted ASU 2016-13, Financial Instruments — Credit Losses (Topic 326) on October 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures.

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.

As the Company is a smaller reporting company under SEC regulations, the Company was eligible for and elected delayed adoption of the ASU until October 1, 2023.

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 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.

Results for reporting periods beginning after October 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

On October 1, 2023, the Company recognized a one-time cumulative effect adjustment to retained earnings, of $ 4.0 million, or $ 3.2 million, net of tax effects, of which $ 0.1 million reflected a reduction of allowance for credit losses on unfunded commitments, $ 4.1 million reflected additional allowance related to the loan portfolio, and no adjustment was recognized related to the securities portfolio.

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.

1 unchanged sentence

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.

The Company adopted ASU 2022-02 prospectively, beginning October 1, 2023, concurrently with the aforementioned ASU 2016-13.

The Company did not have any loans that were both experiencing financial difficulties and modified during the three months ended December 31, 2023.

Refer to Note 3 for reportable modifications made during the year ended December 31, 2024.

Standards That Have Not Yet Been Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvement to Income Tax Disclosures, which will require public business entities to disclose annually a tabular rate reconciliation, including specific items such as state and local income tax, tax credits, nontaxable or nondeductible items, among others, and a separate disclosure requiring disaggregation of reconciling items as described above which equal or exceed 5% of the product of multiplying income from continuing operations by the applicable statutory income tax rate.

The ASU is effective for all public business entities for annual periods beginning after December 15, 2024.

The adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.

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

The following tables summarize the amortized cost, fair value and allowance for credit losses of securities available for sale and securities held to maturity at December 31, 2024 and 2023 and September 30, 2023 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss and gross unrecognized gains and losses:

December 31, 2024

(in thousands)

Available for sale:

Treasury securities

GSE residential mortgage-backed securities

GSE commercial mortgage-backed securities

Collateralized loan obligations

Corporate bonds

4 unchanged sentences

Total held to maturity securities

December 31, 2023

(in thousands)

Available for sale:

GSE residential mortgage-backed securities

Collateralized loan obligations

Corporate bonds

Total available for sale securities

Held to maturity:

GSE residential mortgage-backed securities

GSE commercial mortgage-backed securities

Total held to maturity securities

September 30, 2023

8 unchanged sentences

Total held to maturity securities

The amortized cost and fair value of investment securities at September 30, 2023, by contractual maturity, are shown below.

The amortized cost and fair value of investment securities at December 31, 2024, 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

December 31, 2024

(in thousands)

Securities available for sale:

Due in one year or less

Due after one year through five years

Five to ten years

Beyond ten years

GSE residential mortgage-backed securities

GSE commercial mortgage-backed securities

Total securities available for sale

4 unchanged sentences

Total investment securities

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.

At December 31, 2024 and 2023 and September 30, 2023, investment securities with a carrying amount of $ 28.9 million, $ 2.0 million and $ 2.0 million, respectively, 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 December 31, 2024 and 2023 and September 30, 2023.

The following table presents a summary of realized gains and losses from the sale of investment securities:

Year Ended September 30,

Three Months Ended

(transition period)

September 30,

(in thousands)

3 unchanged sentences

Total realized gains, net (1)

(1) Amount does not include associated income tax of $ 0 and $ 24 for year ended September 30, 2023 and 2022, respectively.

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

(1) Amount does not include associated income tax of $ 7 for year ended December 31, 2024.

The following tables summarize securities available-for-sale in an unrealized loss position for which an allowance for credit losses has not been recorded at December 31, 2024 and 2023 and September 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position.

December 31, 2024

Less than Twelve Months

3 unchanged sentences

GSE residential mortgage-backed securities

GSE commercial mortgage-backed securities

Corporate bonds

Total available-for-sale

December 31, 2023

Less than Twelve Months

Twelve Months or Longer

Held-to-maturity:

(in thousands, except number of securities)

Available-for-sale:

GSE residential mortgage-backed securities

GSE commercial mortgage-backed securities

Total held-to-maturity

Collateralized loan obligations

Corporate bonds

Total available-for-sale

September 30, 2023

6 unchanged sentences

Total available-for-sale

Less than Twelve Months

Twelve Months or Longer

Held-to-maturity:

GSE residential mortgage-backed securities

GSE commercial mortgage-backed securities

Total held-to-maturity

There was no other than temporary impairment loss recognized on any securities at September 30, 2023 or 2022.

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

There was no other than temporary impairment loss recognized on any securities during the year ended September 30, 2023.

Assessment of Available for Sale Debt Securities for Credit Risk

Management assesses the decline in fair value of investment securities periodically.

Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer.

Management evaluates both qualitative and quantitative factors to assess whether an impairment exists.

The following is a discussion of the credit quality characteristics of portfolio segments carrying unrealized losses at December 31, 2024 and 2023.

Obligations of U.S.

Government agencies and sponsored entities

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.

The decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality.

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 considers these securities to carry zero loss estimates and no allowance for credit losses was recorded at December 31, 2024 and 2023.

Corporate bonds

The Company’s corporate bond portfolio is comprised of subordinated debt issues of community and regional banks.

Management considers the credit quality of each individual investment.

Management reviewed the collectability of these investments, considering such factors as the financial condition of the issuers, reported regulatory capital ratios, and credit ratings, when available, and other factors.

All corporate bond debt securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers.

The Company considers the potential credit risk of the issuers to be immaterial and has no t allocated an allowance for credit losses on its corporate bond portfolio as of December 31, 2024 and 2023.

Collateralized loan obligations (“CLO”)

The Company’s CLO portfolio is comprised of an actively managed portfolio of senior secured Class A Notes.

Management considers the credit quality of each individual investment.

Management reviewed the collectability of these investments, taking into account such factors as the financial condition of the issuers and credit ratings, when available and other factors.

All CLO securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers.

The Company considers the potential credit risk of the issuers to be immaterial and has no t allocated an allowance for credit losses on its CLO portfolio as of December 31, 2023.

The following table sets forth the major classifications of loans:

5 unchanged sentences

Construction and land development

Net deferred loan fees and costs

Allowance for loan losses

Allowance for credit losses

Total loans, net

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.

The Company had $ 11.0 million and $ 8.9 million of SBA loans held for sale at December 31, 2024 and 2023, respectively.

The Company had $ 1.4 million of residential real estate loans held for sale at December 31, 2024 and none at December 31, 2023.

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,

(in thousands)

Commercial real estate

Commercial and industrial

Total recorded investment

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.

As of December 31, 2024 and 2023 and September 30, 2023, the Company was servicing approximately $ 338.8 million, $ 262.8 million and $ 255.7 million, respectively, of loans for others.

In the years ended December 31, 2024 and September 30, 2023, the Company sold approximately $ 159.1 million and $ 51.8 million, respectively, of loans and recognized gains on the sales of loans of $ 10.9 million and $ 4.1 million, respectively.

For the three months ended December 31, 2023, the Company sold loans totaling approximately $ 29.7 million recognizing net gains of $ 2.3 million.

The Company continuously monitors the credit quality of its loan receivables.

4 unchanged sentences

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.

In addition, the Company engages a third-party independent loan reviewer that performs semi-annual 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 credit loss provision and to confirm the adequacy of the allowance for credit losses.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as:

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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

The following table summarizes the Company’s loans by year of origination and internally assigned credit risk at December 31, 2024 and gross charge-offs for the year ended December 31, 2024:

Term Loans Amortized Cost by Origination Year

(in thousands)

Residential real estate (1)

Special Mention

Total Residential real estate

Current period gross charge-offs

Special Mention

Total Multi-family

Current period gross charge-offs

Commercial real estate

Special Mention

Total Commercial real estate

Current period gross charge-offs

Commercial and industrial

Special Mention

Total Commercial and industrial

Current period gross charge-offs

Construction and land development

September 30, 2022

Special Mention

Total Construction and land development

Current period gross charge-offs

Special Mention

Total Consumer

Current period gross charge-offs

Gross charge-offs

Certain fixed rate residential mortgage loans are included in a fair value hedging relationship.

The amortized cost excludes a contra asset of $ 523,000 related to basis adjustments for loans in the closed portfolio under the portfolio layer method at December 31, 2024.

These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated.

See “Note 9 – Derivates” for more information on the fair value hedge.

The following table summarizes the Company’s loans by year of origination and internally assigned credit risk at December 31, 2023:

Term Loans Amortized Cost by Origination Year

(in thousands)

Residential real estate (1)

Special Mention

Total Residential real estate

Special Mention

Total Multi-family

Commercial real estate

Special Mention

Total Commercial real estate

Commercial and industrial

Special Mention

Total Commercial and industrial

Construction and land development

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:

Special Mention

Total Construction and land development

Special Mention

Total Consumer

Certain fixed rate residential mortgage loans are included in a fair value hedging relationship.

The amortized cost excludes a contra asset of $ 1,119,000 related to basis adjustments for loans in the closed portfolio under the portfolio layer method at December 31, 2023.

These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated.

See “Note 9 – Derivates” for more information on the fair value hedge.

The following table presents loans categorized by class and internally assigned risk grades at September 30, 2023.

September 30, 2023

(in thousands)

Past Due and Non-Accrual

Residential real estate

Commercial real estate

Commercial and industrial

Construction and land development

Allowance for Credit Losses on Unfunded Commitments

The Company has recorded an ACL for unfunded credit commitments, which is recorded in other liabilities.

The provision for credit losses on unfunded commitments is recorded within the provision for credit losses on the Company’s income statement for the year ended December 31, 2024.

The following table presents the allowance for credit losses for unfunded commitments for the periods indicated:

Three Months Ended

(transition period)

September 30,

(in thousands)

Balance at beginning of period

Provision for credit losses

Balance at end of period

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of December 31, 2024 and 2023:

December 31, 2024

(in thousands)

for Credit Loss

Still Accruing

Residential real estate

2 unchanged sentences

Construction and land development

(1) Purchased credit impaired loans at September 30, 2023 were greater than 89 days past due.

December 31, 2023

(in thousands)

Past Due and Non-Accrual

September 30, 2022

for Credit Loss

Still Accruing

Residential real estate

2 unchanged sentences

Construction and land development

(1) Purchased credit impaired loans at September 30, 2022 were greater than 89 days past due.

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

The Company recognized $ 205 thousand, $ 155 thousand and $ 131 thousand of interest income on nonaccrual loans during the year ended December 31, 2024, the three months ended December 31, 2023 and the fiscal year ended September 30, 2023, respectively.

Individually Analyzed Loans

Effective October 1, 2023, the Company began analyzing loans on an individual basis when management determined that the loan no longer exhibited risk characteristics consistent with the risk characteristics existing in its designed pool of loans, under the Company’s CECL methodology.

Loans individually analyzed include certain nonaccrual loans.

As of December 31, 2024, the amortized cost basis of individually analyzed loans amounted to $ 16.4 million, of which $ 15.6 million were considered collateral dependent.

For collateral dependent loans where foreclosure is probable or the borrower is experiencing financial difficulty and repayment is likely to be substantially provided through the sale or operation of the collateral, the ACL is measured based on the difference between the fair value of the collateral adjusted for sales costs and the amortized cost basis of the loan, at measurement date.

Certain assets held as collateral may be exposed to future deterioration in fair value, particularly due to changes in real estate markets or usage.

The following tables present the amortized cost basis and related allowance for credit loss of individually analyzed loans considered to be collateral dependent as of December 31,2024 and 2023.

December 31, 2024

(in thousands)

With no related allowance recorded:

Amortized Cost Basis

Related Allowance

Residential real estate (1)

Multi-family (2)

Commercial real estate (2)

Commercial and industrial (1) (2) (3)

Secured by residential real estate

Secured by commercial real estate

Secured by business assets

December 31, 2023

(in thousands)

Amortized Cost Basis

Related Allowance

Residential real estate (1)

Multi-family (2)

Commercial real estate (2)

Commercial and industrial (1)

Secured by residential real estate

Secured by commercial real estate

The following table presents information related to impaired loans by portfolio segment as of and for the fiscal year ended September 30,2023:

September 30, 2023

Allowance for

(in thousands)

With no related allowance recorded:

Residential real estate

Commercial real estate

Commercial and industrial

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.

The following table presents loans modified as troubled debt restructurings that occurred during the year ended September 30, 2022:

Pre-Modification

Post-Modification

(Dollars in thousands)

Troubled Debt Restructurings:

Past Due Loans

The following tables present the aging of the amortized cost basis in past due loans as of December 31, 2024 and 2023 by class of loans:

(in thousands)

December 31, 2024

Residential real estate

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 real estate

Commercial and industrial

Construction and land development

(in thousands)

Allowance for loan losses:

December 31, 2023

Residential real estate

Commercial real estate

Commercial and industrial

Construction and land development

At September 30, 2023, past due and non-accrual loans disaggregated by portfolio segment were as follows:

(in thousands)

Past Due and Non-Accrual

September 30, 2023

Residential real estate

Commercial real estate

Commercial and industrial

Construction and land development

(1) Purchased credit impaired loans at September 30, 2023 were greater than 89 days past due.

The Company adopted ASU 2022-02, Financial Instruments-Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) on October 1, 2023.

The Company may occasionally make modifications to loans where the borrower is considered to be in financial distress.

Types of modifications include principal reductions, significant payment delays, term extensions, interest rate reductions or a combination thereof.

The amount of principal reduction is charged-off against the allowance for credit losses.

The Company did no t have any loans that were both experiencing difficulties and modified during the three months ended December 31, 2023.

The Company had six loans that were classified as troubled debt restructurings under the old guidance, with a total recorded investment of $ 1.7 million at September 30, 2023.

There were no new troubled debt restructurings recorded for the fiscal year ended September 30, 2023.

The following table presents the amortized cost basis of loans at December 31, 2024 that were both experiencing financial difficulty and modified during the year ended December 31, 2024, by class and type of modification.

The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.

(in thousands)

Commercial and industrial

The Company had no commitment to lend additional funds to the borrowers included in the previous table.

The Company monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

No such loans that have been modified in the last 12 months were past due.

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended December 31, 2024.

(in thousands)

Commercial and industrial

Upon the Company’s determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

During the year ended December 31, 2024, no loans that were modified in the last 12 months to borrowers experiencing financial difficulty had a payment default.

There were no troubled debt restructurings for which there was a payment default during the fiscal year ended September 30, 2023 for loans that were modified during the twelve-month period prior to default.

The following tables present the activity in the allowance by portfolio segment for the periods indicated:

Year Ended December 31, 2024

(in thousands)

Allowance for credit losses:

Beginning balance

Provision (credit) for loan losses

Provision for credit losses (1)

Ending balance

Year Ended September 30, 2022

(1) Additional provision related to off-balance sheet exposure was a debit of $ 190 thousand for the year ended December 31, 2024.

Three Months Ended December 31, 2023 (transition period)

(in thousands)

Allowance for loan losses:

Beginning Balance

Provision (credit) for loan losses

Allowance for credit losses:

Beginning balance, prior to adoption of ASC 326

Impact of adopting ASC 326

Provision for credit losses

Ending balance

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

Fiscal Year Ended September 30, 2023

(in thousands)

Allowance for loan losses:

Individually evaluated for impairment

Collectively evaluated for impairment

Purchased-credit impaired

Total allowance for loan losses

Individually evaluated for impairment

Collectively evaluated for impairment

Purchased-credit impaired

Total loans held for investment

Beginning balance

Provision for loan losses

Ending balance

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment evaluation method as of September 30, 2023:

September 30, 2023

1 unchanged sentence

Allowance for loan losses:

Ending allowance balance attributable to loans:

Individually evaluated for impairment

1 unchanged sentence

Purchased credit-impaired

Total allowance for loan losses

Individually evaluated for impairment

Collectively evaluated for impairment

Total ending allowance balance

Loans individually evaluated for impairment

Loans collectively evaluated for impairment

Purchased credit-impaired

Total loans held for investment

Total ending loans balance

Premises and Equipment

5 unchanged sentences

Furniture, fixtures and equipment

Construction in progress

Accumulated depreciation and amortization

Accumulated depreciation

Premises and equipment, net

Depreciation and amortization was $ 1.8 million and $ 1.7 million for the years ended September 30, 2023 and 2022, respectively.

Depreciation was $ 1.8 million and $ 1.6 million for the years ended December 31, 2024 and September 30, 2023, respectively, and $ 0.5 million for the three months ended December 31, 2023.

Operating Leases

3 unchanged sentences

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:

As of December 31, 2024 and 2023 and September 30, 2023, the Company had lease liabilities totaling $ 9.0 million, $ 10.5 million and $ 10.9 million, respectively, and right-of-use assets totaling $ 8.3 million, $ 9.8 million and $ 10.2 million.

As of December 31, 2024, the weighted average remaining lease term was 6 years and the weighted average discount rate was 4.4 %.

Total lease costs for the year ended December 31, 2024 and September 30, 2023 was $ 2.2 million and $ 2.1 million, respectively, and $ 0.5 million for the three months ended December 31, 2023.

Future undiscounted lease payments for operating leases with initial terms of one year or more as of December 31, 2024 are as follows:

(dollars in thousands)

Years Ending September 30,

Years Ending December 31,

Total undiscounted lease payments

11 unchanged sentences

The scheduled maturities of time deposits are as follows:

September 30,

(in thousands)

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,

At December 31, 2024 and 2023 and September 30, 2023, FHLB term borrowings outstanding were $ 107.8 million, $ 126.7 million and $ 126.7 million, respectively, all of which were fixed rate.

There were no FHLB overnight borrowings outstanding at December 31, 2024 and 2023.

At September 30, 2023, the Company had FHLB overnight borrowings outstanding of $ 49.0 million at the fixed rate of 5.59 %.

The following tables set 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 December 31,

Contractual Maturity

3 unchanged sentences

2028, rates from 3.99 % to 4.58 %

Total term advances

Total FHLB advances

Balance at December 31,

Contractual Maturity

2024, rates from 0.39 % to 2.53 %

2025, rates from 0.56 % to 0.59 %

2026, rates from 4.29 % to 4.98 %

2027, rates from 4.13 % to 4.74 %

2028, rates from 3.99 % to 4.58 %

Total term advances

5 unchanged sentences

2026, rates from 4.29 % to 4.98 %

2027, rates from 4.13 % to 4.74 %

2028, rates from 3.99 % to 4.58 %

Total term advances

1 unchanged sentence

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.

The advances were collateralized by residential and commercial mortgage loans under a blanket lien arrangement at December 31, 2024 and 2023 and September 30, 2023.

Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow up to an additional total of $ 97.9 million, $ 187.1 million and $ 291.2 million at December 31, 2024 and 2023 and September 30, 2023, respectively.

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.

At December 31, 2024 and 2023 and September 30, 2023, the Company’s borrowings from the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”) were $ 0 , $ 2.3 million and $ 4.1 million, respectively.

The borrowings had a rate of 0.35 % and the maturity date equaled the maturity date of the underlying PPP loan pledged to secure the extension of credit.

The Company also pledges residential and commercial loans and investments to the Federal Reserve Bank of New York’s Discount Window.

Based on this collateral, the Company was eligible to borrow up to $ 247.2 million and $ 33.6 million as of December 31, 2024 and 2023, respectively.

The Company did no t have any outstanding borrowings against this line as of December 31, 2024 and 2023.

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.

At December 31, 2024, 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 December 31, 2024 and 2023 and September 30, 2023.

Subordinated Debentures

5 unchanged sentences

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.

At December 31, 2024 and 2023 and September 30, 2023, the unamortized issuance costs of the Notes were $ 0.3 million, $ 0.4 million and $ 0.4 million, respectively.

For each of the years ended December 31, 2024 and September 30, 2023, $ 0.1 million of issuance costs were recorded in interest expense.

For the three months ended December 31, 2023, $ 14 thousand 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.

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.

1 unchanged sentence

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 following sets forth information regarding the Company’s derivative financial instruments as of the dates indicated:

(in thousands)

Fair Value (1)

December 31, 2024

Cash flow hedges:

Interest rate swaps (Brokered Certificates of Deposit)

Fair value hedges:

Interest rate swaps (Loans)

December 31, 2023

Cash flow hedges:

Interest rate swaps (Brokered Certificates of Deposit)

Fair value hedges:

Interest rate swaps (Loans)

September 30, 2023

Cash flow hedges:

Interest rate swaps (Brokered Certificates of Deposit)

Fair value hedges:

Interest rate swaps (Loans)

Derivatives in a positive position are recorded as “Other assets” and derivatives in a negative position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling $ 75.0 million as of December 31, 2024 and 2023 and 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.

3 unchanged sentences

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,

Three Months Ended

(transition period)

September 30,

(in thousands)

Gain recognized in other comprehensive income

Gain (loss) recognized in interest expense

The following table reflects the cash flow hedges included in the consolidated statements of financial condition as of the dates indicated:

Gain (loss) recognized in other comprehensive income

Gain recognized in interest expense

Fair Value Hedges of Interest Rate Risk

On November 1, 2023, the Company entered into a three year interest rate swap with a notional amount totaling $ 50 million which was designated as a fair value hedge of certain fixed rate residential mortgages.

The Company pays a fixed rate of 4.56 % and receives a floating rate based on SOFR for the life of the agreement without an exchange of the underlying notional amount.

The hedge was determined to be effective during the year ended December 31, 2024 and the Company expects the hedge to remain effective during the remaining term of the swap.

The gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk is recognized in interest income.

The following table presents the effects of the Company’s derivative instruments designated as fair value hedges on the Consolidated Statements of Income for the year ended December 31, 2024 and the three months ended December 31, 2023 (transition period).

There were no fair value hedges for the year ended September 30, 2023.

Three Months Ended

(transition period)

September 30,

(in thousands)

Net gain on hedged items recorded in interest income on loans

Gain on hedge recorded in interest income on loans

The following amounts were recorded on the Statement of Financial Condition related to cumulative basis adjustment for fair value hedges as of the dates indicated.

September 30,

(in thousands)

Included in other assets/(liabilities):

Interest rate swaps related to Brokered Certificates of Deposit

Loans receivable:

Carrying amount of the hedged assets (1)

Fair value hedging adjustment included in the carrying amount of the hedged assets

This amount includes the amortized cost basis of the closed portfolios of loans receivable used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period.

At December 31, 2024 and 2023, the amortized cost basis of the closed portfolios used in the hedging relationships were $ 379.3 million and $ 410.3 million, respectively.

The cumulative basis adjustments associated with these hedging relationships were $ 0.5 million and $ 1.1 million, respectively, and the amounts of the designated hedged items were $ 50.0 million and $ 50.0 million, respectively.

Credit-Risk-Related Contingent Features

2 unchanged sentences

However, if the termination value of derivatives is a net asset position, the counterparty is required to post collateral to the Company.

At December 31, 2024 and 2023, the Company posted $ 0.7 million and $ 2.2 million, respectively, in collateral to its counterparties in a net liability position.

At September 30, 2023, the Company received $ 0.7 million in collateral from its counterparties under the agreements in a net asset position.

13 unchanged sentences

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 Company elected to perform a quantitative impairment analysis at November 30, 2024.

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”).

3 unchanged sentences

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.

No impairment charges were required to be recorded in the years ended December 31, 2024 and September 30, 2023 and the three months ended December 31, 2023.

The following table presents the gross carrying amount and accumulated amortization for the Company’s other intangible assets, which consist of core deposit intangibles:

4 unchanged sentences

Net book value

At September 30, 2023, the weighted-average remaining life of the Company’s other intangible assets was 3.73 years.

At December 31, 2024, the weighted-average remaining life of the Company’s other intangible assets was 3.29 years.

The following table presents estimated future amortization expense for other intangible assets:

(in thousands)

The following table details the components of income tax expense:

Year Ended September 30,

The following table details the components of income tax expense (benefit):

Three Months Ended

(transition period)

September 30,

(in thousands)

4 unchanged sentences

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,

Year Ended December 31,

Three Months Ended December 31,

Fiscal Year Ended September 30,

2023 (transition period)

(in thousands)

9 unchanged sentences

Deferred tax assets:

Allowance for loan losses and other contingent liabilities

Allowance for credit losses and other contingent liabilities

Operating lease liability

2 unchanged sentences

Unrealized loss on securities AFS

Unrealized loss on derivatives

Purchase accounting fair value adjustments

9 unchanged sentences

Net deferred tax asset

The Company does no t have net operating loss carryforwards available for federal income tax purposes as of September 30, 2023.

The Company does no t have net operating loss carryforwards available for federal income tax purposes as of December 31, 2024.

The Company has net operating loss carryforwards available for state income tax purposes of approximately $ 39.9 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.

For state purposes, $ 9.2 million expires in 2035 and the remaining balance of $ 30.7 million will begin to expire in 2036.

The Company has net operating loss carryforwards for city income tax purposes of approximately $ 9.2 million, of which $ 9.2 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.

5 unchanged sentences

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.

federal income tax as well as income tax of the states of Connecticut, Florida, New Jersey, New York and Pennsylvania and the city of New York.

The Company is no longer subject to examination by taxing authorities for years before 2020.

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.

The Company has unrecorded tax benefits, and the Company does no t expect the total amount of unrecognized income tax benefits to significantly increase in the next twelve months.

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.

Under the 2021 Plan, a total of 427,500 shares of the Company’s common stock or equivalents were approved for issuance, of which 230,966 , 276,127 and 276,127 shares remain available for issuance at December 31, 2024 and 2023 and September 30, 2023, respectively.

Of the total 346,000 shares of common stock approved for issuance under the 2018 Plan, 2,795 , 11,352 and 21,784 shares remain available for issuance at December 31, 2024 and 2023 and September 30, 2023, respectively.

Stock Options

7 unchanged sentences

Treasury yield curve in effect at the time of grant.

There were 99,392 stock options exercised resulting in the net issuance (after netting the value of the exercise price and/or certain tax liabilities) of 39,170 shares of common stock during the year ended December 31, 2024.

There were 33,400 and 10,614 stock options exercised during the three months ended December 31, 2023 and the year ended September 30, 2023, respectively.

A summary of stock option activity follows (aggregate intrinsic value in thousands):

Outstanding, October 1, 2023

Outstanding, September 30, 2023 (1)

Outstanding, December 31, 2023 (1)

Outstanding, December 31, 2024 (1)

(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,

Three Months Ended

(transition period)

September 30,

(in thousands)

2 unchanged sentences

Tax benefit from option exercises

There was no compensation expense attributable to stock options for the years ended September 30, 2023 and 2022, respectively.

There was no compensation expense attributable to stock options for the years ended December 31, 2024 and September 30, 2023 and the three months ended December 31, 2023.

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.

During the three months ended December 31, 2023, the year ended December 31, 2024 and the fiscal year ended September 30, 2023, restricted stock awards of 14,000 shares, 59,911 shares and 50,580 shares, respectively, 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.

3 unchanged sentences

Unvested, October 1, 2023

Unvested, September 30, 2023

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.

Unvested, December 31, 2023

Unvested, December 31, 2024

Compensation expense attributable to restricted stock awards was $ 1.4 million and $ 1.7 million for the years ended December 31, 2024 and September 30, 2023, respectively, and $ 0.3 million for the three months ended December 31, 2023.

As of December 31, 2024 and 2023 and September 30, 2023, there was $ 3.1 million, $ 3.5 million and $ 3.6 million of total unrealized compensation cost related to unvested restricted stock, expected to be recognized over a weighted-average term of 3.00 years, 3.32 years and 3.41 years, respectively.

The total fair value of shares vested during the years ended December 31, 2024 and September 30, 2023 was $ 1.3 million and $ 1.4 million, respectively, and $ 0.1 million during the three months ended December 31, 2023.

Restricted Stock Units

3 unchanged sentences

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:

The following table summarizes the unvested performance-based RSU activity for the three months ended December 31, 2023 and the year ended December 31, 2024:

Weighted-Average

1 unchanged sentence

Unvested, October 1, 2023

Unvested, September 30, 2023

No RSUs were granted during the year ended September 30, 2023.

Unvested, December 31, 2023

Unvested, December 31, 2024

No RSUs were granted during the three months ended December 31, 2023, the year ended December 31, 2024 and the fiscal 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.

Compensation expense attributable to RSUs were $ 0.2 million and $ 0.2 million for the years ended December 31, 2024 and September 30, 2023, respectively, and $ 0.1 million for the three months ended December 31, 2023.

As of December 31, 2024 and 2023 and September 30, 2023, there was $ 31 thousand, $ 0.3 million and $ 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 0.14 years, 1.14 years and 1.39 years, respectively.

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:

Loans to related parties were as follows:

(in thousands)

Beginning balance, October 1, 2023

Ending balance, September 30, 2023

Deposits from principal officers, directors and their affiliates at September 30, 2023 and 2022 were $ 28.5 million and $ 12.8 million, respectively.

Ending balance, December 31, 2023

Ending balance, December 31, 2024

Deposits from principal officers, directors and their affiliates at December 31, 2024 and 2023 and September 30, 2023 were $ 19.3 million, $ 22.6 million and $ 28.5 million, respectively.

Loan Commitments and Other Related Activities

9 unchanged sentences

Variable Rate

Standby letters of credit

2 unchanged sentences

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 .

The fixed rate loan commitments at December 31, 2024 have interest rates ranging from 6.625 % to 7.75 % and maturities ranging from 3 years to 30 years .

The fixed rate loan commitment at December 31, 2023 has an interest rate of 7.67 % and a maturity of 5 years .

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 adequacy regulations 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.

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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.

Management believes as of December 31, 2024, the Bank meets all capital adequacy requirements to which it is subject.

In addition to the minimum capital requirements discussed above, the Bank is also required to maintain a capital buffer above the requirements set forth in the capital adequacy regulations.

Failure to maintain the required buffer could impair the Bank’s ability to pay dividends to the Company and to pay certain compensation to its executives.

Prompt corrective action regulations provide five classifications:

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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.

At December 31, 2024 and 2023 and September 30, 2023, 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.

11 unchanged sentences

Action Provisions

September 30, 2023

December 31, 2024

Total capital to risk-weighted assets

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Tier 1 capital to average total assets

December 31, 2023

Total capital to risk-weighted assets

Tier 1 capital to risk-weighted assets

Common equity tier 1 capital to risk-weighted assets

Tier 1 capital to average total assets

September 30, 2023

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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.

During 2024 the Bank paid $ 5.1 million in cash dividends to the 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.

As of December 31, 2024, the Bank had $ 34.0 million of retained net income available for dividends to the Company, without obtaining regulatory approval, provided that the Bank satisfies the regulatory capital requirements, including the capital conservation buffer, disclosed above.

Fair Value Measurements

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The following table summarizes assets measured at fair value on a recurring basis:

September 30, 2023

December 31, 2024

Fair Value Measurements Using:

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Available-for-sale securities:

Treasury securities

GSE residential mortgage-backed securities

GSE commercial mortgage-backed securities

Collateralized loan obligations

Corporate bonds

Loan servicing rights

Financial liabilities:

December 31, 2023

Fair Value Measurements Using:

Quoted Prices In

Active Markets

for Identical

Significant Other

Observable Inputs

(In thousands)

Financial assets:

Available-for-sale securities:

GSE residential mortgage-backed securities

Collateralized loan obligations

Corporate bonds

Loan servicing rights

Financial liabilities:

September 30, 2023

11 unchanged sentences

Loan servicing rights

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 fair value for the securities available-for-sale was 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.

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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 of loan servicing rights related to residential mortgage loans at December 31, 2024 was determined based on discounted expected future cash flows using discount rates ranging from 13.0 % to 15.5 %, prepayment speeds ranging from 18.0 % to 19.4 % and a weighted average life ranging from 2.0 to 3.5 years.

Fair value at December 31, 2023 was determined based on discounted expected future cash flows using discount rates ranging from 12.4 % to 14.9 %, prepayment speed of 26.25 % and a weighted average life ranging from 1.6 to 2.8 years.

Fair value at September 30, 2023 for mortgage servicing rights 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.

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 December 31, 2024 was determined based on discounted expected future cash flows using discount rates ranging from 5.5 % to 43.4 %, prepayment speeds ranging from 9.3 % to 35.0 % and a weighted average life ranging from 0.8 to 5.1 years.

The fair value of loan servicing rights for SBA loans at December 31, 2023 was determined based on discounted expected future cash flows using discount rates ranging from 9.6 % to 41.5 %, prepayment speeds ranging from 8.9 % to 30.2 % and a weighted average life ranging from 1.1 to 5.7 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 10.1 % to 41.6 %, prepayment speeds ranging from 8.3 % to 29.3 % and a weighted average life ranging from 1.2 to 5.8 years.

The Company has determined these are mostly unobservable inputs and considers then Level 3 inputs within the fair value hierarchy.

The Company has determined these are mostly unobservable inputs and considers them 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,

Three Months Ended

(transition period)

September 30,

(in thousands)

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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.

There were no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2024 and September 30, 2023 and for the years then ended.

Financial assets measured at fair value on a non-recurring basis as of December 31, 2023 include certain individually evaluated loans reported at fair value of the underlying collateral if repayment is expected solely from the collateral.

December 31, 2023

Fair Value Measurements Using:

Quoted Prices In

Active Markets

Significant Other

for Identical Assets

Observable Inputs

(in thousands)

Individually evaluated loans - Multi-family

The fair value amounts shown in the table above are individually evaluated loans net of reserves allocated to said loans.

The total reserves allocated to these loans were $ 397 thousand at December 31, 2023.

The table below presents additional quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis at December 31, 2023:

December 31, 2023

Valuation Technique

Unobservable Input

(Weighted Average)

(Dollar in thousands)

Individually evaluated loans - Multi-family

Appraisal of collateral

Appraisal and

adjustments (1)

The appraisal of the underlying collateral property generally includes various significant unobservable inputs (level 3).

This was performed by certified general appraisers.

Management adjusted the appraisal downward for factors such as the condition of the property and liquidation expenses.

The range of other appraisal adjustments and liquidation expenses are shown as a percentage of the appraisal.

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

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments not carried at fair value at December 31, 2024 and 2023 and September 30, 2023:

December 31, 2024

Fair Value Measurements Using:

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Accrued interest payable

December 31, 2023

Fair Value Measurements Using:

Quoted Prices In

Active Markets

for Identical

Significant Other

Observable Inputs

(In thousands)

Financial assets:

Cash and cash equivalents

Securities held-to-maturity

Accrued interest receivable

Financial liabilities:

Time deposits

Demand and other deposits

Subordinated debentures

Accrued interest payable

September 30, 2023

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Condensed Statements of Income

Year Ended September 30,

Three Months Ended

(transition period)

September 30,

(in thousands)

2 unchanged sentences

Non-interest expense

Income (loss) before income taxes and equity in undistributed earnings of the Bank

Income before income taxes and equity in undistributed earnings of the Bank

Income tax benefit

1 unchanged sentence

Condensed Statements of Cash Flows

Year Ended September 30,

Three Months Ended

(transition period)

September 30,

(in thousands)

5 unchanged sentences

Decrease in accrued interest payable

Decrease in other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Investment in Bank

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from exercise of stock options

Net proceeds from issuance of common stock

Exercise of stock options, net

Payments related to tax withholding for equity awards

Cash dividends paid

Net cash (used in) provided by financing activities

Net cash used in financing activities

Net increase (decrease) in cash and due from banks

6 unchanged sentences

The Company’s basic and diluted EPS calculations are presented in the following table:

Year Ended September 30,

Three Months Ended

(transition period)

September 30,

(in thousands, except share and per share data)

9 unchanged sentences

Weighted average common and equivalent shares outstanding

There were no stock options that were antidilutive at September 30, 2023 and 2022.

There were no stock options that were antidilutive at December 31, 2024 and 2023 and September 30, 2023.

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:

The following presents changes in accumulated other comprehensive (loss) income by component, net of tax:

Unrealized Gains and

2 unchanged sentences

(in thousands)

Balance at January 1, 2024

Other comprehensive income, before reclassification

Amount reclassified from accumulated other comprehensive income

Net current period other comprehensive income

Balance at December 31, 2024

Unrealized Gains and

Losses on Available-

for-Sale Debt

(in thousands)

Balance at October 1, 2023

Other comprehensive (loss) income, before reclassification

Amount reclassified from accumulated other comprehensive loss

Net current period other comprehensive (loss) income

Balance at September 30, 2023

Other comprehensive income (loss), before reclassification

Amount reclassified from accumulated other comprehensive income (loss)

Net current period other comprehensive income (loss)

Balance at December 31, 2023

Unrealized Gains and

3 unchanged sentences

Balance at October 1, 2022

Other comprehensive loss, before reclassification

Amount reclassified from accumulated other comprehensive income

Net current period other comprehensive loss

Other comprehensive (loss) income, before reclassification

Amount reclassified from accumulated other comprehensive loss

Net current period other comprehensive (loss) income

Balance at September 30, 2023

The following represents the reclassification out of accumulated other comprehensive (loss) income for the years ended September 30, 2023 and 2022:

The following represents the reclassification out of accumulated other comprehensive (loss) income for the years ended December 31, 2024 and September 30, 2023 and the three months ended December 31, 2023:

Three Months Ended

(transition period)

September 30,

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Total reclassifications for the period, net of tax

Segment Information

The Company’s reportable segment is determined by the Chief Executive Officer, who is the designated chief operating decision maker (the “CODM”).

The Chief Executive Officer along with others in the Company’s executive management evaluates performance and allocates resources based upon analysis of the Company as one operating segment or unit.

The activities of the Company comprise one reportable segment, "Community Banking." All of the Company’s activities are interrelated, and each activity is dependent and assessed based on the manner in which it supports the other activities of the Company.

All the consolidated assets are attributable to the Community Banking segment.

The Company provides a range of community banking services, including commercial and consumer lending, personal and business banking, cash management services, and other financial services primarily to individuals, businesses, and municipalities in the New York metropolitan area.

The CODM is provided with the Company’s consolidated statements of financial condition and income and evaluates the Company’s operating results based on consolidated net interest income, non-interest income, non-interest expense, and net income, which can be seen on the consolidated statements of income.

These results are used to measure the Company against its competitors.

Other significant non-cash items assessed by the CODM are depreciation, amortization and provision for credit losses consistent with the reporting on the consolidated statements of cash flows.

Expenditures for long-lived assets are also evaluated and are consistent with the reporting on the consolidated statements

of cash flows.

Strategic plans and budget to actual monitoring are evaluated as one reportable segment.

The actual results are used in assessing performance of the segment and in establishing compensation.

All revenues are derived from banking operations within the United States, and for the year ended December 31, 2024, the three months ended December 31, 2023 and the fiscal year ended September 30, 2023, there was no customer that accounted for more than 10% of the Company's consolidated revenue.

Accounting policies of the Community Banking segment are the same as those described in Note 1.

Revenue from Contracts with Customers

2 unchanged sentences

Items outside the scope of ASC 606 are noted as such.

Year Ended September 30,

Three Months Ended

(transition period)

September 30,

(in thousands)

6 unchanged sentences

(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.

(2) Other income includes merchant card processing fees of $ 48 and $ 47 for the year ended December 31, 2024 and September 30, 2023, respectively, and $ 6 for the three months ended December 31, 2023, which are included in the scope of ASC 606 and loan related fee income, recoveries on acquired loans and miscellaneous income totaling $ 161 and $ 1,724 for the year ended December 31, 2024 and September 30, 2023, respectively, and $ 59 for the three months ended December 31, 2023, which are not included in the scope of ASC 606.

The Company settled ongoing litigation and received a settlement payment of $ 975 in the year ended September 30, 2023.

A description of the Company’s revenue streams included in the scope of ASC 606 is as follows:

6 unchanged sentences

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.

On January 29, 2025 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 February 19, 2025 to shareholders of record on February 12, 2025 .

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data