What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-14 compared with 2024-03-28 · 137 added, 174 removed, 495 unchanged (39% of the section changed)

17 unchanged sentences

Our ratio of non-performing assets to total assets was 0.25%, 0.33%, and 0.10%, at December 31, 2024, 2023 and 2022, respectively.

We attribute this credit quality to a conservative credit culture and an effective credit risk management environment.

We attribute this credit quality to a

conservative credit culture and an effective credit risk management environment.

We have an experienced team of credit professionals, well-defined and implemented credit policies and procedures, what we believe to be conservative loan underwriting criteria, and active credit monitoring policies and procedures.

Our senior management team also

spends substantial time conducting construction site visits and visiting regularly with community leaders and borrowers in our high absorption communities, which enables us to understand the needs of our communities and to stay informed as to matters affecting those communities.

Our senior management team also spends substantial time conducting construction site visits and visiting regularly with community leaders and borrowers in our high absorption communities, which enables us to understand the needs of our communities and to stay informed as to matters affecting those communities.

Continuing to grow our non-interest bearing deposit accounts through the maintenance of low customer fees and charges.

We believe that as a community bank we should maintain the fees and charges we charge our customers as low as possible.

By doing so, we have been able to attract and retain food service and other businesses as customers of the Bank and at the same time increase the amount of our non-interest bearing business accounts.

By doing so, we have been able to attract and retain supermarkets and other businesses as customers of the Bank and at the same time increase the amount of our non-interest bearing business accounts.

Expanding our franchise through de novo branching or branch acquisitions.

As the communities we serve continue to grow and expand into new areas, we believe there will be branch expansion opportunities within our market area and in the newly developing communities expanding outward from existing high absorption, homogeneous communities where our branches are currently located.

To this end, we opened a new branch office in Sullivan County, New York during the year ended December 31, 2022.

We intend to explore additional opportunities as they arise to expand our branch network.

We intend to continue to explore opportunities as they arise to expand our branch network.

Expanding our employee base, infrastructure and technology, as necessary, to support future growth.

11 unchanged sentences

Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Accounting Pronouncements Adopted in 2023:

Effective January 1, 2023, the Company adopted Accounting Standards Topic 326, “Financial Instruments – Credit Losses” which replaced the previously existing U.S.

GAAP “incurred loss” approach to “expected credit losses” approach, which is referred as Current Expected Credit Losses (“CECL”).

CECL measures the credit loss associated with financial assets carried at amortized cost, including loan receivables, held-to-maturity debt securities, off balance sheet credit exposures.

The company adopted Topic 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balances sheet exposures.

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

Upon adoption, we recorded a cumulative-effect adjustment totaling $134,000, or $99,000, net of tax, to reduce retained earnings.

The transition adjustment includes the adoption and changes to the three applicable components of the allowance for credit losses (“ACL”):

a decrease of $1.6 million in the allowance for credit losses related to loans, an increase of $132,000 in the allowance for credit losses related to held-to-maturity debt securities, and an increase of $1.6 million in the allowance for credit losses related to off-balance sheet items.

The following table illustrates the impact of adopting ASC 326:

January 1, 2023

Adoption Impact

(In Thousands)

ACL on debt securities held-to-maturity

Municipal Bonds

ACL on loan receivables

Residential real estate

Non-residential real estate

Commercial and industrial

ACL for off-balance sheet exposure

Allowance for Credit Losses - Loans

14 unchanged sentences

Such segments include residential real estate, non-residential real estate, construction, commercial and industrial business, and consumer.

For most segments the Company calculates estimated credit losses using a probability of

default and loss given default methodology, the results of which are applied to each individual loan within the segment.

For most segments, the Company calculates estimated credit losses using a probability of default and loss given default methodology, the results of which are applied to each individual loan within the segment.

The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount.

12 unchanged sentences

If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan.

Allowance for Credit Losses – Held-to-Maturity Debt Securities

The allowance for credit losses related to held-to-maturity debt securities is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of held-to-maturity debt securities to present the net amount expected to be collected on the held-to-maturity debt securities.

Losses, or portions thereof, are charged off against the ACL when they are deemed uncollectible.

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

The Company has elected to exclude accrued interest receivable from the measurement of its ACL.

When an investment is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.

Allowance for Credit Losses Related to 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 that obligation is unconditionally cancellable by the Company.

The allowance for credit losses related to off-balance sheet credit exposures is adjusted through credit loss expense.

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 its estimated life.

Based on management’s comprehensive analysis of the loan portfolio, the applicable held-to-maturity debt securities portfolio, and the off-balance sheet credit exposures, management believes the allowance for credit losses is appropriate as of December 31, 2023.

Balance Sheet Analysis

Total assets increased by $339.2 million, or 23.8%, to $1.8 billion at December 31, 2023, from $1.4 billion at December 31, 2022.

The increase in assets was primarily due to an increase in net loans of $369.6 million, partially offset by decreases in cash and cash equivalents of $26.6 million and securities held-to-maturity of $10.5 million.

Cash and cash equivalents decreased by $26.6 million, or 27.9%, to $68.7 million at December 31, 2023 from $95.3 million at December 31, 2022.

The decrease in cash and cash equivalents was a result of an increase of $369.6 million in net loans and stock repurchases of $28.7 million, partially offset by an increase in deposits of $278.1 million, an increase in borrowings of $43.0 million and a decrease in securities held-to-maturity of $10.5 million.

Equity securities increased by $61,000, or 0.3%, to $18.1 million at December 31, 2023 from $18.0 million at December 31, 2022.

The increase in equity securities was attributable to market appreciation of $61,000 due to market interest rate volatility during the year ended December 31, 2023.

Securities held-to-maturity decreased by $10.5 million, or 39.9%, to $15.9 million at December 31, 2023 from $26.4 million at December 31, 2022 due to the maturity of $10.0 million in U.S.

Treasury holdings, the establishment of $137,000 in an allowance for credit losses for held-to-maturity securities, and to maturities and pay-downs of various investment securities.

The allowance for credit losses for held-to-maturity securities totaling $137,000 was established pursuant to the adoption in 2023 of the current expected credit losses model (“CECL”) on held-to-maturity investment securities loss exposures.

In this regard, we recognized a one-time credit of $132,000 due to the adoption of CECL at January 1, 2023 and a provision for credit loss totaling $5,000 during the year ended December 31, 2023.

Loans, net of the allowance for credit losses, increased by $369.6 million, or 30.5%, to $1.6 billion at December 31, 2023 from $1.2 billion at December 31, 2022.

Total assets increased $245.4 million, or 13.9%, to $2.0 billion at December 31, 2024, from $1.8 billion at December 31, 2023.

The increase in assets was primarily due to increases in net loans of $226.0 million, cash and cash equivalents of $9.6 million, equity securities of $3.9 million, real estate owned of $3.7 million, and other assets of $3.5 million.

Cash and cash equivalents increased $9.6 million, or 14.0%, to $78.3 million at December 31, 2024 from $68.7 million at December 31, 2023.

The increase in cash and cash equivalents was a result of an increase in deposits of $270.3 million, partially offset by a decrease in borrowings of $64.0 million, an increase of $227.0 million in net loans, dividends to shareholders of $8.7 million, and stock repurchases of $2.4 million.

Equity securities increased $3.9 million, or 21.5%, to $22.0 million at December 31, 2024 from $18.1 million at December 31, 2023.

The increase in equity securities was attributable to the purchase of $4.0 million in equity securities during the second half of 2024, offset by market depreciation of $109,000 due to market interest rate volatility during the year ended December 31, 2024.

Securities held-to-maturity decreased $1.3 million, or 7.8%, to $14.6 million at December 31, 2024 from $15.9 million at December 31, 2023 due to $1.3 million in maturities and pay-downs of various investment securities, partially offset by a decrease of $10,000 in the allowance for credit losses for held-to-maturity securities.

Loans, net of the allowance for credit losses, increased $226.0 million, or 14.3%, to $1.8 billion at December 31, 2024 from $1.6 billion at December 31, 2023.

The increase in loans, net of the allowance for credit losses, was primarily due to loan originations of $656.0 million during the year ended December 31, 2024, consisting primarily of $573.8 million in construction loans with respect to which approximately 36.3% of the funds were disbursed at loan closings, with the remaining funds to be disbursed over the terms of the construction loans.

In addition, during the year ended December 31, 2023, we originated $70.7 million in multi-family loans, $26.6 million in commercial and industrial loans, $11.3 million in mixed-use loans, and $3.8 million in non-residential loans.

Loan originations during 2023 resulted in a net increase of $288.8 million in construction loans, $75.5 million in multi-family loans, $7.7 million in mixed-use loans, $1.0 million in commercial and industrial loans, and $694,000 in consumer loans.

The increase in our loan portfolio was partially offset by decreases of $4.2 million in non-residential loans, and $215,000 in residential loans, coupled with normal pay-downs and principal reductions.

In addition, during the year ended December 31, 2024, we originated $54.9 million in commercial and industrial loans, $14.0 million in non-residential loans, $12.6 million in multi-family loans, and $600,000 in mixed-use loans.

We also originated $9.2 million in letters of credit.

Loan originations during the year ended December 31, 2024 resulted in a net increase of $206.8 million in construction loans, $7.6 million in commercial and industrial loans, $8.3 million in non-residential loans, $7.7 million in multi-family loans, and $409,000 in consumer loans.

The increase in our loan portfolio was partially offset by decreases of $3.1 million in mixed-use loans and $1.8 million in residential loans, coupled with normal pay-downs and principal reductions.

The allowance for credit losses related to loans decreased to $4.8 million as of December 31, 2024, from $5.1 million as of December 31, 2023.

The decrease in the allowance for credit losses related to loans was due to a one-time decrease of $1.6 million due to the adoption of CECL at January 1, 2023 and charge-offs of $313,000, partially offset by provision for credit losses totaling $1.5 million.

Premises and equipment decreased by $611,000, or 2.3%, to $25.5 million at December 31, 2023 from $26.1 million at December 31, 2022 primarily due to the depreciation of fixed assets.

Investments in Federal Home Loan Bank stock decreased by $309,000, or 25.0%, to $929,000 at December 31, 2023 from $1.2 million at December 31, 2022 due primarily to the mandatory redemption of Federal Home Loan Bank stock in connection with the maturity of $7.0 million in advances in 2023.

Bank owned life insurance (“BOLI”) decreased by $814,000, or 3.1%, to $25.1 million at December 31, 2023 from $25.9 million at December 31, 2022 due to two death claims totaling $1.8 million on BOLI policies, partially offset by increases in the BOLI cash value.

Accrued interest receivable increased by $3.7 million, or 43.2%, to $12.3 million at December 31, 2023 from $8.6 million at December 31, 2022 due to an increase in the loan portfolio and interest rate increases in 2023 that resulted in an increase in the interest rates on loans in our construction loan portfolio.

The agreement to sell all of the Bank’s assets relating to Harbor West Wealth Management Group to a third party was executed in December 2023, with the transaction closing in January 2024.

As a result, goodwill decreased to zero at December 31, 2023 from $200,000 at December 31, 2022.

Foreclosed real estate was $1.5 million at both December 31, 2023 and December 31, 2022.

Right of use assets — operating increased by $2.3 million, or 97.5%, to $4.6 million at December 31, 2023 from $2.3 million at December 31, 2022, primarily due to the leasing of additional space to support the current and anticipated future operations of the Company.

Other assets increased by $2.7 million, or 50.7%, to $8.0 million at December 31, 2023 from $5.3 million at December 31, 2022 due to an increase in tax assets of $2.2 million and an increase in suspense accounts of $484,000.

Total deposits increased by $278.1 million, or 24.8%, to $1.4 billion at December 31, 2023 from $1.1 billion at December 31, 2022.

The increase in deposits was due to the Bank offering competitive interest rates to attract deposits.

This resulted in a shift in deposits whereby certificates of deposit increased by $378.8 million, or 98.7% and NOW/money market accounts increased by $56.7 million, or 64.3%, partially offset by decreases in savings account balances of $81.2 million, or 29.7%, and non-interest bearing demand deposits of $76.1 million, or 20.2%.

Federal Home Loan Bank advances decreased by $7.0 million, or 33.3%, to $14.0 million at December 31, 2023 from $21.0 million at December 31, 2022 due to the maturity of borrowings in 2023.

Federal Reserve Bank borrowings increased to $50.0 million at December 31, 2023 from no such borrowings outstanding at December 31, 2022.

Advance payments by borrowers for taxes and insurance decreased by $349,000, or 14.7%, to $2.0 million at December 31, 2023 from $2.4 million at December 31, 2022 due primarily to remittance of real estate tax payments for our borrowers.

Lease liability – operating increased by $2.3 million, or 95.7%, to $4.6 million at December 31, 2023 from $2.4 million at December 31, 2022, primarily due to the leasing of additional space to support the current and anticipated future operations of the Company.

Accounts payable and accrued expenses decreased by $1.2 million, or 8.1%, to $13.6 million at December 31, 2023 from $14.8 million at December 31, 2022 due primarily to a decrease in suspense accounts for loan closings of $2.7 million and a decrease in accounts payable of $132,000, partially offset by increases in the allowance for credit losses for off-balance sheet commitments of $1.0 million, deferred compensation of $102,000, accrued interest expense of $102,000, and accrued expense of $89,000.

The allowance for credit losses for off-balance sheet commitments was $1.0 million at December 31, 2023 due to a one-time credit of $1.6 million resulting from the adoption of CECL at January 1, 2023, partially offset by a provision for credit loss reduction totaling $548,000 during the year ended December 31, 2023.

Stockholders’ equity increased by $17.3 million, or 6.6% to $279.3 million at December 31, 2023, from $262.0 million at December 31, 2022.

The increase in stockholders’ equity was due to net income of $46.3 million for the year ended December 31, 2023, $1.7 million in the amortization of restricted stock and stock options granted under the Company’s 2022 Equity Incentive Plan, a reduction of $869,000 in unearned employee stock ownership plan shares coupled with an increase of $445,000 in earned employee stock ownership plan shares, and $161,000 in other

comprehensive income, partially offset by stock repurchases totaling $28.7 million, dividends paid and declared of $3.3 million, and a one-time adjustment to retained earnings of $99,000 due to the adoption of CECL.

The decrease in the allowance for credit losses related to loans was due to charge-offs totaling $1.3 million, offset by provision for credit losses totaling $1.1 million.

Premises and equipment decreased $647,000, or 2.5%, to $24.8 million at December 31, 2024 from $25.5 million at December 31, 2023 primarily due to the depreciation of fixed assets.

Investments in Federal Home Loan Bank stock decreased $532,000, or 57.3%, to $397,000 at December 31, 2024 from $929,000 at December 31, 2023.

The decrease was due primarily to the mandatory redemption of Federal Home Loan Bank stock totaling $630,000 in connection with the maturity of $14.0 million in advances in 2024, offset by purchases of Federal Home Loan Bank stock totaling $98,000 due to the growth of our mortgage loan portfolio.

Bank owned life insurance (“BOLI”) increased $656,000, or 2.6%, to $25.7 million at December 31, 2024 from $25.1 million at December 31, 2023 due to increases in the BOLI cash value.

Accrued interest receivable increased $1.2 million, or 9.5%, to $13.5 million at December 31, 2024 from $12.3 million at December 31, 2023 due to an increase in the loan portfolio.

Real estate owned increased $3.7 million, or 251.6%, to $5.1 million at December 31, 2024 from $1.5 million at December 31, 2023 due to foreclosure of a property, with a book value of $4.4 million, located in the Bronx, New York, offset by charge-offs totaling $689,000 resulting from a decrease in the estimated fair value of a foreclosed property located in Pittsburgh, Pennsylvania.

Right of use assets — operating decreased $565,000, or 12.4%, to $4.0 million at December 31, 2024 from $4.6 million at December 31, 2023, primarily due to amortization.

Other assets increased $3.5 million, or 44.0%, to $11.6 million at December 31, 2024 from $8.0 million at December 31, 2023 due to increases of $3.1 million in tax assets, $476,000 in suspense accounts, and $6,000 in miscellaneous assets, partially offset by decreases of $40,000 in prepaid expenses and $2,000 in securities receivables.

Total deposits increased $270.3 million, or 19.3%, to $1.7 billion at December 31, 2024 from $1.4 billion at December 31, 2023.

The increase in deposits was primarily due to the Bank offering competitive interest rates to attract deposits.

This resulted in a shift in deposits whereby certificates of deposit increased $239.7 million, or 31.5%, and NOW/money market accounts increased $98.0 million, or 67.4%, partially offset by decreases in savings account balances of $54.3 million, or 28.2%, and non-interest bearing demand deposits of $14.7 million, or 4.9%.

Federal Reserve Bank borrowings of $50.0 million at December 31, 2023 and Federal Home Loan Bank advances of $14.0 million at December 31, 2023 were paid-off during the year ended December 31, 2024.

Advance payments by borrowers for taxes and insurance decreased $402,000, or 19.9%, to $1.6 million at December 31, 2024 from $2.0 million at December 31, 2023 due primarily to real estate tax payments for borrowers.

Lease liability – operating decreased $517,000, or 11.2%, to $4.1 million at December 31, 2024 from $4.6 million at December 31, 2023, primarily due to amortization.

Accounts payable and accrued expenses increased $972,000, or 7.2%, to $14.5 million at December 31, 2024 from $13.6 million at December 31, 2023 due primarily to increases in dividends payable and other payables of $856,000 and deferred compensation of $729,000, partially offset by decreases in accrued interest expense of $102,000, suspense account for loan closings of $99,000, and accrued expense of $79,000.

The allowance for credit losses for off-balance sheet commitments decreased $334,000, or 32.1%, to $704,000 at December 31, 2024 from $1.0 million at December 31, 2023.

Stockholders’ equity increased $39.0 million, or 14.0% to $318.3 million at December 31, 2024, from $279.3 million at December 31, 2023.

The increase in stockholders’ equity was due to net income of $47.1 million for the year ended December 31, 2024, the amortization expense of $2.0 million relating to restricted stock and stock options granted under the Company’s 2022 Equity Incentive Plan, an increase of $1.3 million in earned employee stock ownership plan shares coupled with a reduction of $475,000 in unearned employee stock ownership plan shares, and an exercise of stock options totaling $14,000, partially offset by dividends paid and declared of $8.7 million, stock repurchases and stock repurchase excise taxes totaling $2.5 million, awarding restricted stock totaling $725,000.

and $93,000 in other comprehensive income.

Our loan portfolio consists primarily of construction loans, commercial and industrial loans, multifamily and mixed-use residential real estate loans and non-residential real estate loans.

10 unchanged sentences

Allowance for credit losses

Deferred loan costs, net

Deferred loan (fees) costs, net

Loan Maturity .

The following table sets forth certain information at December 31, 2024 regarding the dollar amount of loan principal repayments becoming due during the periods indicated.

The tables do not include any estimate of prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience

to differ from that shown below.

The tables do not include any estimate of prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below.

Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less.

46 unchanged sentences

As of December 31, 2024 and 2023, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $346.9 million and $344.8 million, respectively.

In addition, as of December 31, 2023, the aggregate amount of all our uninsured certificates of deposit was $178.1 million.

In addition, as of December 31, 2024, the aggregate amount of all our uninsured certificates of

deposit was $187.2 million.

We have no deposits that are uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance.

12 unchanged sentences

Non-accrual loans were included in the computation of average balances.

The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to

interest income or interest expense.

Deferred loan fees totaled $176,000 and $372,000 for the years ended December 31, 2023 and 2022, respectively.

The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

Deferred loan fees totaled $49,000 and deferred loan costs totaled $176,000 for the years ended December 31, 2024 and 2023, respectively.

Loan balances exclude loans held for sale.

52 unchanged sentences

Net income for the year ended December 31, 2024 was $47.1 million compared to net income of $46.3 million for the year ended December 31, 2023.

Net income for the year ended December 31, 2023 was greater than the year ended December 31, 2022 primarily due to an increase in net interest income and an increase in non-interest income, partially offset by an increase in provision for credit losses expense, an increase in non-interest expenses, and an increase in income tax expense.

Net income for the year ended December 31, 2024 was greater than the year ended December 31, 2023 primarily due to an increase in net interest income and provision for credit losses reduction, partially offset by a decrease in non-interest income, an increase in non-interest expenses, and an increase in income tax expense.

Summary Income Statements

12 unchanged sentences

Net interest income totaled $102.8 million for the year ended December 31, 2024, as compared to $97.2 million for the year ended December 31, 2023.

The increase in net interest income of $33.3 million, or 52.2%, was primarily

due to an increase in interest income that exceeded an increase in interest expense in a manner consistent with the increase in interest rates attributable to the Federal Reserve’s rate increases during the year ended December 31, 2023.

The increase in net interest income was also due to increases in the average balances of loans, partially offset by decreases in the average balances of interest-earning deposits at other financial institutions, investment securities, and Federal Home Loan Bank stock as we continued to grow the Company by leveraging the proceeds raised in our July 2021 second-step conversion.

The increase in market interest rates in 2023 also caused an increase in our interest expense.

As a result, the increase in interest expense for the year ended December 31, 2023 was due to an increase in the cost of funds on our deposits and our borrowed money.

The increase in interest expense was also due to increases in the average balances on our certificates of deposits, our savings and club deposits, and our borrowed money, offset by a decrease in the average balances on our interest-bearing demand deposits.

Total interest and dividend income increased by $60.5 million, or 84.0%, to $132.5 million for the year ended December 31, 2023 from $72.0 million for the year ended December 31, 2022.

The increase in interest and dividend income was due to an increase in the average balance of interest earning assets of $316.2 million, or 26.3%, to $1.5 billion for the year ended December 31, 2023 from $1.2 billion for the year ended December 31, 2022 and an increase in the yield on interest earning assets by 273 basis points from 6.00% for the year ended December 31, 2022 to 8.73% for the year ended December 31, 2023.

Interest expense increased by $27.2 million, or 334.3%, to $35.3 million for the year ended December 31, 2023 from $8.1 million for the year ended December 31, 2022.

The increase in interest expense was due to an increase in the cost of interest bearing liabilities by 232 basis points from 1.26% for the year ended December 31, 2022 to 3.58% for the year ended December 31, 2023, and an increase in average interest bearing liabilities of $341.2 million, or 52.9%, to $986.3 million for the year ended December 31, 2023 from $645.1 million for the year ended December 31, 2022.

The increase in the cost of interest bearing liabilities was also partially due to a shift to interest bearing certificates of deposits and savings accounts from interest bearing demand deposits as the average balances of interest bearing certificates of deposits increased by $329.1 million, or 115.1%, from $286.0 million for the year ended December 31, 2022 to $615.1 million for the year ended December 31, 2023 and the average balances of savings accounts increased by $19.9 million, or 8.7%, from $228.8 million for the year ended December 31, 2022 to $248.7 million for the year ended December 31, 2023.

During the same time period, the average balances of interest bearing demand deposits decreased by $14.7 million, or 13.7%, from $108.1 million for the year ended December 31, 2022 to $93.4 million for the year ended December 31, 2023.

The increase in the average balances of interest bearing certificates of deposits was primarily due to the funding of the loan portfolio growth.

In addition, the average balances of our non-interest bearing demand deposits decreased by $32.9 million, or 9.3%, from $355.1 million for the year ended December 31, 2022 to $322.2 million for the year ended December 31, 2023.

Net interest margin increased by 109 basis points, or 20.5%, for the year ended December 31, 2023 to 6.41% compared to 5.32% for the year ended December 31, 2022.

The increase in the net interest margin was due to an increase in the net interest income of $33.3 million, or 52.2%, partially offset by an increase in the average balance of interest earning assets of $316.2 million, or 26.3%.

The increase in net interest income of $5.6 million, or 5.8%, was primarily due to an increase in interest income that exceeded an increase in interest expense.

The increase in interest income is attributable to increases in loans and interest-bearing deposits, partially offset by decreases in investment securities and FHLB stock.

The increase in interest income is also attributable to the Federal Reserve’s interest rate increases during 2023 that continued until September 2024.

However, the Federal Reserve’s decrease of interest rates starting in September 2024 impacted the yield on our interest earning assets.

The increase in market interest rates in 2023 that continued until September 2024 also caused an increase in our interest expense.

As a result, the increase in interest expense for the year ended December 31, 2024 was due to an increase in the cost of funds on our deposits and borrowed money.

The increase in interest expense was also due to increases in the average balances on our certificates of deposits, our interest-bearing demand deposits, and our borrowed money, offset by a decrease in the average balance of our savings and club deposits.

Total interest and dividend income increased $27.5 million, or 20.8%, to $160.0 million for the year ended December 31, 2024 from $132.5 million for the year ended December 31, 2023.

The increase in interest and dividend income was due to an increase in the average balance of interest earning assets of $312.3 million, or 20.6%, to $1.8 billion for the year ended December 31, 2024 from $1.5 billion for the year ended December 31, 2023 and an increase in the yield on interest earning assets by two basis points from 8.73% for the year ended December 31, 2023 to 8.75% for the year ended December 31, 2024.

Interest expense increased $21.9 million, or 62.1%, to $57.2 million for the year ended December 31, 2024 from $35.3 million for the year ended December 31, 2023.

The increase in interest expense was due to an increase in the cost of interest bearing liabilities by 77 basis points from 3.58% for the year ended December 31, 2023 to 4.35% for the year ended December 31, 2024, and an increase in average interest bearing liabilities of $328.9 million, or 33.3%, to $1.3 billion for the year ended December 31, 2024 from $986.3 million for the year ended December 31, 2023.

The increase in the cost of interest bearing liabilities was also partially due to a shift to interest bearing certificates of deposits and interest bearing demand deposits from savings accounts as the average balances of interest bearing certificates of deposits increased by $302.5 million, or 49.2%, from $615.1 million for the year ended December 31, 2023 to $917.7 million for the year ended December 31, 2024 and the average balances of interest bearing demand deposits increased by $116.6 million, or 124.8%, from $93.4 million for the year ended December 31, 2023 to $210.0 million for the year ended December 31, 2024.

During the same time period, the average balances of savings accounts decreased by $94.3 million, or 37.9%, from $248.8 million for the year ended December 31, 2023 to $154.4 million for the year ended December 31, 2024.

The increase in the average balances of interest bearing certificates of deposits and interest bearing demand deposits were used primarily to fund the loan portfolio growth and decreases in savings and club deposits and non-interest bearing demand deposits.

The average balances of our non-interest bearing demand deposits decreased by $44.2 million, or 13.7%, from $322.2 million for the year ended December 31, 2023 to $278.0 million for the year ended December 31, 2024.

Net interest margin decreased by 79 basis points, or 12.3%, for the year ended December 31, 2024 to 5.62% compared to 6.41% for the year ended December 31, 2023.

The decrease in the net interest margin was due to an increase in the average balance of interest earning assets of $312.3 million or 20.6% that outpaced an increase in the net interest income of $5.6 million, or 5.8%.

Credit Loss Expense.

A provision for credit losses of $972,000 was recorded for the year ended December 31, 2023 as compared to $439,000 for the year ended December 31, 2022.

A credit loss expense of $740,000 was recorded for the year ended December 31, 2024 as compared to a credit loss expense of $972,000 for the year ended December 31, 2023.

The credit loss expense of $740,000 for the year ended December 31, 2024 was comprised of a credit loss expense for loans of $1.0 million, partially offset by a credit loss expense reduction for off-balance sheet commitments of $334,000 and a credit loss expense reduction for held-to-maturity investment securities of $10,000.

The credit loss expense for loans of $1.0 million for the year ended December 31, 2024 was primarily attributed to charge-offs totaling $1.3 million, partially offset by favorable trends in the economy.

The credit loss expense reduction for off-balance sheet commitments of $334,000 for the year ended December 31, 2024 was primarily attributed to a reduction of $157.6 million in the level of off-balance sheet commitments.

The credit loss expense reduction for held-to-maturity investment securities of $10,000 for the year ended December 31,

2024 was primarily attributed to a reduction of $708,000 in the level of applicable held-to-maturity investment securities.

The credit loss expense of $972,000 for the year ended December 31, 2023 was comprised of credit loss expense for loans of $1.5 million and credit loss expense for held-to-maturity investment securities of $5,000, partially offset by a credit loss expense reduction for off-balance sheet commitments of $548,000.

The credit loss expense of $439,000 for the year ended December 31, 2022 was primarily attributable to the charge-offs totaling $414,000 against the sale of four loans and charge-offs of $34,000 against various unpaid overdrafts in our demand deposit accounts.

We charged-off $313,000 during the year ended December 31, 2023 as compared to charge-offs of $449,000 during the year ended December 31, 2022.

The charge-offs of $313,000 during the year ended December 31, 2023 were comprised of a charge-off of $159,000 related to three performing construction loans on the same project whereby we

sold the loans to a third-party at a loss of $159,000, as well as charge-offs of $154,000 against various unpaid overdrafts in our demand deposit accounts.

The charge-offs of $449,000 during the year ended December 31, 2022 were comprised of a $328,000 charge-off against one construction project in connection with the sale of the project’s two non-performing loans to a third party precipitated by legal action between the two partners/borrowers in the project, an $86,000 charge-off against two mixed-use loans to a borrower in connection with the sale of the two performing troubled debt restructured loans to a third party, and $35,000 charge-offs against various unpaid overdrafts in our demand deposit accounts.

We recorded no recoveries from previously charged-off loans during the year ended December 31, 2023 compared to recoveries of $242,000 during the year ended December 31, 2022, which was comprised of $146,000 from a previously charged-off loan secured by a multi-family property, $53,000 from a previously charged-off loan secured by a non-residential property, and $43,000 regarding a previously charged-off loan secured by a mixed-use property.

We charged-off $1.3 million during the year ended December 31, 2024 as compared to charge-offs of $313,000 during the year ended December 31, 2023.

The charge-offs of $1.3 million during the year ended December 31, 2024 were comprised of a complete charge-off of $1.0 million against a potential non-performing commercial and industrial loan whereby the borrower pleaded guilty and faces incarceration due to loan fraud not related to our commercial and industrial loan and charge-offs totaling $347,000 against various unpaid overdrafts in our demand deposit accounts.

The charge-offs of $313,000 during the year ended December 31, 2023 were comprised of a charge-off of $159,000 related to three performing construction loans on the same project whereby we sold the loans to a third-party at a loss of $159,000.

The remaining charge-offs of $154,000 for the 2023 period were against various unpaid overdrafts in our demand deposit accounts.

We recorded no recoveries from previously charged-off loans during the year ended December 31, 2024 and 2023.

Based on a review of our loan portfolio, held-to-maturity investment securities, and off-balance sheet commitments at December 31, 2024, management believes that the allowance is maintained at a level that represents its best estimate of expected future losses in the loan portfolio, held-to-maturity investment securities, and off-balance sheet commitments that were both probable and reasonably estimable.

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Other loan fees and service charges

(Loss) gain on disposition of equipment

Gain (loss) on disposition of equipment

Earnings on bank-owned life insurance

Investment advisory fees

Realized and unrealized gain (loss) on equity securities

The increase in total non-interest income was primarily due to an increase of $1.9 million in unrealized gain in our equity securities, an increase of $409,000 in BOLI income, and an increase of $19,000 in other non-interest income.

These were partially offset by a decrease of $116,000 in gain/loss on sale of fixed assets, a decrease of $103,000 in loan fees and service charges, and a decrease of $16,000 in investment advisory fees.

The increase of $1.9 million in unrealized gain on equity was due to an unrealized gain of $294,000 on equity securities during the year ended December 31, 2023 compared to an unrealized loss of $1.6 million on equity securities during the year ended December 31, 2022.

The unrealized gain of $294,000 on equity securities during 2023 was due to market interest rate volatility during the year ended December 31, 2023.

The increase of $409,000 in BOLI income was primarily due to two death claims totaling $1.8 million on BOLI policies that resulted in additional BOLI income of $404,000 during the year ended December 31, 2023.

The increase of $19,000 in other non-interest income was due to an increase in miscellaneous income from our branch operations.

The decrease of $116,000 in gain/loss on sale of fixed assets was due to a loss of $18,000 on sale of fixed assets in 2023 compared to a gain of $98,000 on sale of fixed assets in 2022.

The decrease of $103,000 in other loan fees and service charges was due to a decrease of $174,000 in other loan fees and loan servicing fees and a decrease of $10,000 in deposit account fees, partially offset by an increase of $81,000 in ATM/debit card/ACH fees.

The decrease in investment advisory fees was due to a decrease in assets under management of Harbor West, our former wealth management division, and a decrease in commission income from Harbor West due to market conditions.

Realized and unrealized (loss) gain on equity securities

The decrease in total non-interest income of $960,000, or 25.6%, was primarily due to decreases of $458,000 in investment advisory fees, $403,000 in unrealized gains (losses) on equity securities, and $357,000 in BOLI income, partially offset by increases of $207,000 in other loan fees and service charges, $40,000 from sale/disposition of fixed assets, and $11,000 in miscellaneous other non-interest income.

The decrease in investment advisory fees was due to the disposition in January 2024 of the Bank’s assets relating to the Harbor West Wealth Management Group.

As a result of the transaction, the Bank no longer generates investment advisory fees.

The decrease in unrealized gain (loss) on equity securities was due to an unrealized loss of $109,000 on equity securities during the year ended December 31, 2024 compared to an unrealized gain of $294,000 on equity securities during the year ended December 31, 2023.

The unrealized loss of $109,000 on equity securities during the 2024 period was due to market interest rate volatility during the year ended December 31, 2024.

The decrease in BOLI income was primarily due to two death claims totaling $1.8 million on BOLI policies that resulted in additional BOLI income of $404,000 in the year ended December 31, 2023.

The increase of $207,000 in other loan fees and service charges was due to increases of $148,000 in other loan fees and loan servicing fees, $51,000 in ATM/debit card/ACH fees, and $7,000 in deposit account fees.

Regarding the sale/disposition of fixed assets, we recorded gains of $22,000 during the year ended December 31, 2024 compared to losses of $18,000 during the year ended December 31, 2023.

Non-Interest Expense

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Outside data processing

Impairment loss on goodwill

Loss on disposition of business

Real estate owned expense

Non-interest expense increased by $4.5 million, or 14.8%, to $35.2 million for the year ended December 31, 2023 from $30.7 million for the year ended December 31, 2022.

The increase resulted primarily from increases of $3.3 million in salaries and employee benefits, $1.4 million in other operating expense, $324,000 in outside data processing expense, $222,000 in advertising expense, $167,000 in occupancy expense, and $138,000 in loss on the disposition of the Bank’s assets relating to the Harbor West Wealth Management Group, partially offset by decreases of $530,000 in real estate owned expense, $451,000 in goodwill impairment charges, and $52,000 in equipment expense.

Salaries and employee benefits increased by $3.3 million, or 21.2%, to $18.8 million in 2023 from $15.5 million in 2022 primarily due to the hiring of additional personnel to support the growth of the Company, the amortization of expenses related to the 2022 Equity Incentive Plan awards of restricted stocks and options, and a decrease in loan origination expenses related to loan origination fees due to a decrease in loan originations.

Other non-interest expense increased by $1.4 million, or 17.0%, to $9.8 million in 2023 from $8.3 million in 2022 due mainly to increases of $1.2 million in miscellaneous other non-interest expense, $331,000 in service contracts expense, $216,000 in directors compensation, $62,000 in telephone expense, $30,000 in office supplies, and $24,000 in insurance expense.

These increases were partially offset by decreases of $170,000 in consulting fees, $148,000 in legal fees, $69,000 in audit and accounting fees, $63,000 in expenses related to the hiring of personnel, and $7,000 in directors, officers, and employee expenses.

The increase of $1.2 million in miscellaneous other non-interest expense was mainly due to an increase of $1.0 million in regulatory insurance premiums and assessments due to an increase in our total assets and an increase of $242,000 in dues and subscriptions.

Non-interest expense increased $3.8 million, or 10.9%, to $39.1 million for the year ended December 31, 2024 from $35.2 million for the year ended December 31, 2023.

The increase resulted primarily from increases of $2.1 million in salaries and employee benefits, $879,000 in other operating expense, $638,000 in real estate owned expense, $394,000 in outside data processing expense, and $233,000 in occupancy expense, partially offset by decreases of $165,000 in equipment expense, $138,000 in loss on the disposition of the Bank’s assets relating to the Harbor West Wealth Management Group, and $103,000 in advertising expense.

Salaries and employee benefits increased by $2.1 million, or 11.2%, to $20.9 million in 2024 from $18.8 million in 2023 primarily due to the hiring of additional personnel to support the growth of the Company, an increase in personnel compensation in order to remain competitive in recruiting and retaining personnel, an increase in the ESOP compensation cost due to an increase in the value of the Company’s stock, an increase in the amortization of expenses related to the 2022 Equity Incentive Plan awards of restricted stocks and options, and a decrease in loan origination expenses related to loan origination fees due to a decrease in loan originations.

Other non-interest expense increased by $879,000 or 9.0%, to $10.6 million in 2024 from $9.8 million in 2023 due mainly to increases of $448,000 in miscellaneous other non-interest expense, $310,000 in service contracts expense, $252,000 in directors compensation, $59,000 in directors, officers, and employee expenses, $40,000 in audit and accounting fees, $29,000 in office supplies, $26,000 in expenses related to the hiring of personnel, and $17,000 in insurance expense.

These increases were partially offset by decreases of $222,000 in legal fees, $44,000 in consulting fees, and $36,000 in telephone expense.

The increase of $448,000 in miscellaneous other non-interest expense was mainly due to an increase of $384,000 in regulatory insurance premiums and assessments due to an increase in our total assets, an increase of $43,000 in dues and subscriptions and $21,000 in other non-interest expense.

Real estate owned expense increased by $638,000, or 686.0%, to $731,000 in 2024 from $93,000 in 2023 due to the write down of $689,000 in the value of a Pittsburgh, Pennsylvania foreclosed property in 2024, partially offset by a decrease of $50,000 in operating expenses to maintain that real estate owned property in 2024.

The write down of $689,000 on the fair market value of the Pittsburgh, Pennsylvania foreclosed property in 2024 was due to the decrease in demand for office space in that area.

Outside data processing expense increased by $394,000, or 17.8%, to $2.6 million in 2024 from $2.2 million in 2023 due to an increase in transactions and additional services required in 2024 to support the Company’s expansion.

Advertising expense increased by $222,000, or 74.2%, to $521,000 in 2023 from $299,000 in 2022 due mainly to the resumption of advertising to promote interest rates offered on our deposit products.

Occupancy expense increased by $233,000, or 9.0%, to $2.8 million in 2024 from $2.6 million in 2023 primarily as a result of the increased cost of operating office space.

Real estate owned expense decreased by $530,000, or 85.1%, to $93,000 in 2023 from $623,000 in 2022 due to the write down of $540,000 in the value of the one foreclosed property in 2022, partially offset by an increase of $10,000 in operating expenses to maintain the one real estate owned property in 2023.

The write down of $540,000 on the fair market value of a foreclosed property in 2022 was due to the increase in interest rates resulting in an increase in the capitalization rate thereby reducing the calculated fair market value of the property.

Equipment expense decreased by $52,000, or 4.7%, to $1.1 million in 2023 from $1.1 million in 2022 due to a reduced need to purchase additional equipment in 2023.

There was no goodwill impairment expense in 2023 compared to a goodwill impairment expense of $451,000 in 2022.

The goodwill was recorded in connection with the acquisition of Harbor West Financial Planning Wealth Management Group in 2007, which then operated as a division of the Bank until January 2024, when the Bank sold all assets related to Harbor West and discontinued offering wealth management services.

The goodwill impairment in 2022 was caused primarily by the expected decrease in revenue from this division due to a decrease in clients and the resulting decrease in assets under management.

Equipment expense decreased by $165,000, or 15.6%, to $890,000 in 2024 from $1.1 million in 2023 due to a reduced need to purchase additional equipment in 2024.

Advertising expense decreased by $103,000, or 19.8%, to $418,000 in 2024 from $521,000 in 2023 due mainly to a decrease in promotional products.

There was no disposition of a business segment in 2024 compared to a loss of $138,000 in the disposition of Harbor West in 2023.

Income Taxes.

The Company recorded income tax expense of $18.7 million and $18.5 million for the years ended December 31, 2024 and 2023, respectively.

For the year ended December 31, 2023, the Company had approximately $1.1 million in tax exempt income, compared to approximately $740,000 in tax exempt income for the year ended December 31, 2022.

The Company’s effective income tax rates were 28.5% and 27.8% for the years ended December 31, 2023 and 2022, respectively.

For the year ended December 31, 2024, the Company had approximately $802,000 in tax exempt income, compared to $1.1 million in tax exempt income for the year ended December 31, 2023.

The decrease in tax exempt income was due to two death claims totaling $1.8 million on BOLI policies during the year ended December 31, 2023.

Our effective income tax rates were 28.4% and 28.5% for the year ended December 31, 2024 and 2023, respectively.

Risk Management

13 unchanged sentences

Our credit risk management strategy also emphasizes diversification at the borrower level as well as regular credit examinations, continuous site visits by executive management and management reviews of large credit exposures and credits that might experience deterioration of credit quality.

As part of its risk management process, the Bank conducts stress testing on its commercial real estate portfolio, performs a global cash flow analysis for loans associated with multiple properties and/or guarantors and also operates a loan review program for all real estate loans (including construction loans) with terms more than 12 months.

loan review program for all real estate loans (including construction loans) with terms more than 12 months.

In addition, we track our board approved limits for each commercial real estate category on a monthly basis.

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FDIC regulations and our Asset Classification Policy provide that loans and other assets considered to be of lesser quality be classified as “substandard,” “doubtful” or “loss” assets.

An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the

collateral pledged, if any.

An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.

“Substandard” assets include those characterized by the “distinct possibility” that the institution will sustain “some loss” if the deficiencies are not corrected.

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Total non-performing assets to total assets

During the year ended December 31, 2023, non-performing assets increased by $4.4 million, or 301.2%, to $5.8 million from $1.5 million as of December 31, 2022.

At December 31, 2023, we had two non-performing, non-accrual construction loans totaling $4.4 million secured by the same project located in the Bronx, New York.

At December 31, 2022, we had no non-performing, non-accrual loans.

The other non-performing assets consisted of one foreclosed property at December 31, 2023 and December 31, 2022.

During the year ended December 31, 2024, non-performing assets decreased by $721,000, or 12.3%, to $5.1 million as of December 31, 2024 from $5.8 million as of December 31, 2023.

At December 31, 2023, we had two non-performing construction loans totaling $4.4 million secured by the same project located in the Bronx, New York.

We successfully foreclosed on these two loans on October 21, 2024 and the balances were transferred to foreclosed real estate.

As a result, at December 31, 2024, we had two non-performing assets consisting of two foreclosed properties, with one foreclosed property totaling $4.4 million located in the Bronx, New York and one foreclosed property totaling $767,000 located in Pittsburgh, Pennsylvania.

In 2024, we collected no interest income from loans that were in non-accrual status in 2024.

In 2023, we collected no interest income from loans that were in non-accrual status in 2023.

From time to time, as part of our loss mitigation strategy, we may modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reduction.

From time to time, as part of our loss mitigation strategy, we may modify loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reduction.

When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

There were no new loan modifications to borrowers experiencing financial difficulties during the years ended December 31, 2023 and December 31, 2022.

At December 31, 2023, we had no loans modified to borrowers experiencing financial difficulty.

At December 31, 2022, we had two modified loans with an aggregate balance of $855,000 to one borrower and secured by two adjacent mixed-use properties but were performing in accordance with their restructured terms for the requisite period of time (generally at least six consecutive months) to be returned to accrual status.

We subsequently sold these two loans to a third party in January 2023 at a loss of $86,000.

There were no new loan modifications to borrowers experiencing financial difficulties during the years

ended December 31, 2024 and December 31, 2023.

At December 31, 2024 and 2023, we had no loans modified to borrowers experiencing financial difficulty.

The following table summarizes classified and criticized assets of all portfolio types at the dates indicated:

5 unchanged sentences

Total criticized loans

On the basis of management’s review of our assets, we had two loans totaling $4.4 million classified as substandard at December 31, 2023 compared to two loans totaling $855,000 classified as substandard at December 31, 2022.

In addition, we had the same one loan classified as special mention at December 31, 2023 and December 31, 2022, with balances of $915,000 and $946,000, respectively.

On the basis of management’s review of our assets, we had one loan with a balance of $241,000 classified as substandard at December 31, 2024 compared to two loans totaling $4.4 million classified as substandard at December 31, 2023.

In addition, we had no loans classified as special mention at December 31, 2024 compared to one loan with a balance of $915,000 classified as special mention at December 31, 2023.

There were no assets classified as doubtful or loss at December 31, 2024 or 2023.

1 unchanged sentence

Not all classified assets constitute non-performing assets.

The increase in substandard assets was due to the addition of two non-performing, non-accrual construction loans totaling $4.4 million secured by the same project located in the Bronx, New York, partially offset by the sale to a third-party in January 2023 of two performing mixed-use mortgage loans totaling $855,000 that were classified as TDRs and as substandard.

The decrease in substandard assets was due to the addition of a performing commercial and industrial loan with a balance of $241,000 at December 31, 2024 that experienced a significant decline in sales revenue in 2024, offset by the successful foreclosure and transfer to real estate owned in 2024 of two non-performing, non-accrual construction loans totaling $4.4 million secured by the same project located in the Bronx, New York.

The decrease in special mention assets was due to the removal from special mention of one multi-family loan with a balance of $915,000 at December 31, 2023 that has been performing during 2024.

Delinquent Loans

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When additional allowances are necessary, a provision for credit losses is charged to earnings.

The ACL is maintained at a level that management considers adequate to provide for estimated losses and impairment based upon an evaluation of known and inherent risk in the loan portfolio.

The ACL is maintained at a level that management considers adequate to provide for estimated losses and impairment based upon an

evaluation of known and inherent risk in the loan portfolio.

The ACL consists of two elements:

25 unchanged sentences

Additionally, we reserve for certain inherent, but undetected, losses that are probable within the loan portfolio.

This is due to several factors, such as, but not limited to, inherent delays in obtaining information regarding a customer’s financial condition or changes in their unique business conditions and the interpretation of economic trends.

This is due to several factors, such as, but not limited to, inherent delays in obtaining

information regarding a customer’s financial condition or changes in their unique business conditions and the interpretation of economic trends.

While this analysis is conducted at least quarterly, we have the ability to revise the allowance factors whenever necessary to address improving or deteriorating credit quality trends or specific risks associated with a given loan pool classification.

19 unchanged sentences

Residential real estate loans

One- to four-family

Non-residential real estate loans

2 unchanged sentences

Consumer loans

Total general allowance

Total allowance for credit losses

2 unchanged sentences

(Dollars in thousands)

Total loans net of deferred fees

Total loans net of deferred (fees) costs

Average loans outstanding

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Credit Quality Ratios:

As a percentage of year-end loans, net of unearned income:

As a percentage of year-end loans, net of deferred fees:

Allowance for credit loss

4 unchanged sentences

The allowance for credit losses related to loans decreased by $263,000 to $4.8 million at December 31, 2024 from $5.1 million at December 31, 2023.

The decrease in the allowances for credit losses was due primarily to the adoption of CECL which reduced the allowance by $1.6 million and charge-offs totaling $313,000 that comprised of a charge-off of $159,000 related to three performing construction loans on the same project whereby we sold the loans to a third-party at a loss of $159,000 and charge-offs of $154,000 against various unpaid overdrafts in our demand deposit accounts, partially offset by provision for credit losses related to loans totaling $1.5 million at December 31, 2023.

The increase in the provision for credit losses related to loans was due to increases in the construction, multi-family mortgage, mixed-use mortgage, and commercial and industrial loan portfolio, partially offset by a decrease in the non-residential mortgage loan portfolio.

We had no recoveries in 2023 compared to recoveries totaling $241,000 in 2022.

The decrease in the allowances for credit losses was due primarily to the charge-offs of $1.3 million during the year ended December 31, 2024 that were comprised of a complete charge-off of $1.0 million against a potential non-performing commercial and industrial loan whereby the borrower pleaded guilty and faces incarceration due to loan fraud not related to our commercial and industrial loan and charge-offs totaling $347,000 against various unpaid overdrafts in our demand deposit accounts, partially offset by provision for credit losses related to loans totaling $1.0 million during 2024.

The increase in the provision for credit losses related to loans was due to increases in the construction, multi-family mortgage, non-residential mortgage, and commercial and industrial loan portfolio, partially offset by a decrease in the mixed-use mortgage loan portfolio.

We had no recoveries in 2024 and 2023.

Loans evaluated collectively totaled $1.8 billion at December 31, 2024 compared to $1.6 billion at December 31, 2023.

Loans evaluated individually totaled $4.4 million at December 31, 2023 compared to $855,000 at December 31, 2022.

The allowance for credit losses related to off-balance sheet commitments of $1.1 million comprised of the adoption of CECL totaling $1.6 million, partially offset by a credit loss expense reduction of $548,000 at December 31, 2023.

The allowance for credit losses related to held-to-maturity of debt securities of $137,000 comprised of the adoption of CECL totaling $132,000 and provision for credit loss expense of $5,000 at December 31, 2023.

Loans evaluated individually totaled $241,000 at December 31, 2024 compared to $4.4 million at December 31, 2023.

The allowance for credit losses related to off-balance sheet commitments decreased by $334,000 to $704,000 at December 31, 2024 from $1.0 million at December 31, 2023 due primarily to a decrease in the amount of off-balance sheet commitments.

The allowance for credit losses related to held-to-maturity of debt securities decreased by $10,000 to $126,000 at December 31, 2024 from $136,000 at December 31, 2023 due primarily to a decrease in the amount of applicable held-to-maturity debt securities.

Interest Rate Risk Management

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These two perspectives give rise to income simulation and economic value simulation, each of which presents a unique picture of our risk of any movement in interest rates.

Income simulation identifies the timing and magnitude of changes in income resulting from changes in prevailing interest rates over a short-term time horizon (usually one or two years).

Income simulation identifies the timing and magnitude of changes in income resulting from changes in prevailing interest rates over a short-term time horizon (usually one or

Economic value simulation reflects the interest rate sensitivity of assets and liabilities in a more comprehensive fashion, reflecting all future time periods.

It can identify the quantity of interest rate risk as a function of

the changes in the economic values of assets and liabilities, and the corresponding change in the economic value of equity of the Bank.

It can identify the quantity of interest rate risk as a function of the changes in the economic values of assets and liabilities, and the corresponding change in the economic value of equity of the Bank.

Both types of simulation assist in identifying, measuring, monitoring and controlling interest rate risk and are employed by management to ensure that variations in interest rate risk exposure will be maintained within policy guidelines.

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We have established an interest rate floor of zero percent for measuring interest rate risk.

The difference between the two results reflects the relatively long terms of a portion of our assets which is captured by the economic value at risk but has less impact on the one year net interest income sensitivity.

difference between the two results reflects the relatively long terms of a portion of our assets which is captured by the economic value at risk but has less impact on the one year net interest income sensitivity.

Overall, our December 31, 2024 results indicate that we are adequately positioned with an acceptable net interest income and economic value at risk and that all interest rate risk results continue to be within our policy guidelines.

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Cash received from the sales, calls, maturities and pay-downs on securities totaled $1.2 million and $11.2 million for the years ended December 31, 2024 and 2023, respectively.

We purchased $806,000 and $10.0 million in securities for the years ended December 31, 2023 and 2022, respectively.

We purchased $4.0 million and $806,000 in securities for the years ended December 31, 2024 and 2023, respectively.

Deposit flows are generally affected by the level of interest rates we offer, the interest rates and products offered by local competitors, and other factors.

Total deposits increased by $278.1 million at December 31, 2023 due to

increases in certificates of deposits and NOW/money market deposits, offset by decreases in savings account deposits, and non-interest bearing demand deposits.

Total deposits increased by $270.3 million at December 31, 2024 due to increases in certificates of deposits and NOW/money market deposits, offset by decreases in savings account deposits, and non-interest bearing demand deposits.

Liquidity management is both a daily and long-term function of business management.

2 unchanged sentences

We had an available borrowing limit of $18.2 million and $29.7 million from the Federal Home Loan Bank of New York as of December 31, 2024 and 2023, respectively.

Federal Home Loan Bank advances were $14.0 million and $21.0 million at December 31, 2023 and 2022, respectively.

We had no Federal Home Loan Bank advances at December 31, 2024 compared to $14.0 million in Federal Home Loan Bank advances at December 31, 2023.

The Federal Reserve Bank of New York (“FRBNY”) approved on August 30, 2023 the Bank’s eligibility to pledge loans under the Borrower-in-Custody program of the FRBNY thereby allowing the Bank to borrow from the Discount Window at the FRBNY.

As of December 31, 2023, we had $50.0 million in FRBNY borrowings and an available borrowing limit of $865.1 million.

We had an available borrowing limit of $834.7 million and $865.1 million from the FRBNY as of December 31, 2024 and 2023, respectively.

We had no FRBNY borrowings at December 31, 2024 compared to $50.0 million in FRBNY borrowings at December 31, 2023

In addition, we have a borrowing agreement with Atlantic Community Bankers Bank (“ACBB”) to provide short-term borrowings of $8.0 million at December 31, 2024 and 2023.

There were no outstanding borrowings with ACBB at December 31, 2024 and 2023.

At December 31, 2023, we had unfunded commitments on construction loans of $489.7 million, outstanding commitments to originate loans of $125.9 million, unfunded commitments under lines of credit of $103.0 million, and unfunded standby letters of credit of $9.5 million.

At December 31, 2024, we had unfunded commitments on construction loans of $399.6 million, unfunded commitments under lines of credit of $86.2 million, outstanding commitments to originate loans of $61.2 million, and unfunded standby letters of credit of $14.9 million.

At December 31, 2024, certificates of deposit scheduled to mature in less than one year totaled $918.4 million.

12 unchanged sentences

Impact of Inflation and Changing Prices

The consolidated financial statements and related notes of the Company have been prepared in accordance with GAAP, which generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation.

dollars without consideration for changes in the relative purchasing power of money over time due to inflation.

The primary impact of inflation is reflected in the increased cost of our operations.

Unlike industrial companies, our assets

and liabilities are primarily monetary in nature.

Unlike industrial companies, our assets and liabilities are primarily monetary in nature.

As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

4 unchanged sentences

The information required by this item is included herein beginning on page F-1.

CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISLCOSURE

CHANGES 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 7. Management’s Discussion and Analysis