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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-06 · 256 added, 94 removed, 425 unchanged (45% of the section changed)

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

Management’s discussion and analysis of the financial condition at March 31, 2025 and December 31, 2024, and results of operations for the three months ended March 31, 2025 and 2024, is intended to assist in understanding the financial condition and results of operations of Ponce Financial Group, Inc.

Management’s discussion and analysis of the financial condition at June 30, 2025 and December 31, 2024, and results of operations for the three and six months ended June 30, 2025 and 2024, is intended to assist in understanding the financial condition and results of operations of Ponce Financial Group, Inc.

(the “Company”).

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Under the ECIP, Treasury provided investment capital directly to depository institutions that are CDFIs or MDIs or their holding companies, to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, in low-income and underserved communities.

No dividends will accrue or be due for the first two years after issuance.

No dividends accrued or were due for the first two years after issuance.

For years three through ten, depending upon the level of qualified and/or deep impact lending made in targeted communities, as defined in the ECIP guidelines, dividends will be at an annual rate of either 2.0%, 1.25% or 0.5% and, thereafter, will be fixed at one of the foregoing rates.

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Additionally, under the ECIP regulations, the Company cannot pay dividends or repurchase its common stock unless it meets certain income-based tests and has paid the required dividends on the Preferred Stock.

In June 2024, the ‎Company began paying dividends on its Preferred Stock in the amount of $0.3 million for the three months ended March 31, 2025 and $0.6 million for the year ended December 31, 2024.

In June 2024, the ‎Company began paying dividends on its Preferred Stock, which dividends were $0.6 million for the six months ended June 30, 2025 and $0.6 million for the year ended December 31, 2024.

On December 20, 2024, the Company entered into an ECIP Securities Purchase Option Agreement (the “Repurchase Agreement”) with Treasury.

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However, the Company does not currently meet any of the Threshold Conditions to exercise the purchase option, and there can be no assurance if and when the Threshold Conditions will be met.

The closing of the repurchase of the Preferred Stock, if consummated, would occur between thirty and ninety days following the satisfaction of the Threshold Condition and all other applicable conditions.

At present, the Company has reported 12 consecutive quarters for which it has met both the Deep Impact and Qualified Lending Conditions.

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As such, the Company expects it continue to emphasize its qualified Deep Impact Lending.

The purchase option granted under the agreement is a freestanding financial instrument under GAAP.

The Company analyzed the fair value of the repurchase option in accordance with ASC Topic 820 “Fair Value Measurements” and determined that the purchase option value is de minimis as of December 20, 2024, December 31, 2024 and June 30, 2025.

CDFI Financial Assistance Award

On February 6, 2025, the Bank received a $1.3 million grant from the U.S.

Treasury as part of the CDFI Financial Assistance Award Program.

This award is given to CDFI’s to support their operations and expand services in economically distressed communities.

Banking Development District

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Many of our customers have businesses in Florida or spend their winter months here, and the large Hispanic community fits one of our primary demographics.

Ponce Bank Plan of Conversion

On May 13, 2025, the Company announced that its wholly-owned subsidiary, Ponce Bank, which is currently a federally chartered stock savings association, has adopted a plan of conversion to convert to a national bank.

In connection with the conversion of Ponce Bank, the Company has filed an application with the Federal Reserve Board to become a bank holding company, which application is currently awaiting regulatory approval.

Ponce Bank is seeking to become a national bank in order to increase bank powers, including its eligibility to receive municipal deposits in New York.

However, the Company and Ponce Bank do not expect any material changes in their core business as a result of the Company becoming a bank holding company and Ponce Bank becoming a national bank.

Critical Accounting Policies

Accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change.

Critical accounting policies are defined as those involving significant judgments and assumptions by management

and that could have a material impact on the carrying value of certain assets, liabilities or on income under different assumptions or conditions.

Critical accounting policies are defined as those involving significant judgments and assumptions by management and that could have a material impact on the carrying value of certain assets, liabilities or on income under different assumptions or conditions.

Management believes that the most critical accounting policy relates to the allowance for credit losses.

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The Company continues its relationship with Raisin Solutions US LLC ("Raisin"), a fintech that focuses on gathering deposits for financial institutions through the Internet.

As of March 31, 2025, the Company had $611.9 million in such deposits, which the Company classifies as core deposits.

As of June 30, 2025 and December 31, 2024, the Company had $650.4 million and $574.1 million, respectively, in such deposits, which the Company classifies as core deposits.

Because the Company, through Ponce Bank, is an MDI and a CDFI, deposits made by other financial institutions may be treated as CRA credits by those depository institutions.

At December 31, 2018, the first year after our initial public offering, the Company had approximately $1.06 billion in assets, $918.5 million in loans, net of allowance for credit losses of $12.7 million, and $809.8 million in deposits.

The Company has since grown to $3.09 billion in assets, $2.37 billion in loans receivables, net of allowance for credit losses of $23.0 million, and $2.00 billion in deposits at March 31, 2025, all while investing in infrastructure, implementing digital banking and diversifying its product offering.

The Company has since grown to $3.15 billion in assets, $2.46 billion in loans receivables, net of allowance for credit losses of $24.1 million, and $2.04 billion in deposits at June 30, 2025, all while investing in infrastructure, implementing digital banking and diversifying its product offering.

Now, the Company believes that it is poised to enhance its presence, locally and in similar communities outside New York, as a leading CDFI and MDI financial institution holding company.

Comparison of Financial Condition at March 31, 2025 and December 31, 2024

Comparison of Financial Condition at June 30, 2025 and December 31, 2024

Total Assets .

Total consolidated assets increased $49.9 million, or 1.6%, to $3.09 billion at March 31, 2025 from $3.04 billion at December 31, 2024.

The increase in total assets is largely attributable to increases of $84.3 million in net loans receivable, $1.2 million in accrued interest receivable and $0.4 million in right of use assets, partially offset by decreases of $9.9 million in cash and cash equivalents, $9.9 million in held-to-maturity securities, $8.4 million in other assets, $3.4 million in FHLBNY stock, $2.2 million in mortgage loans held for sale, $1.4 million in available-for-sale securities, $0.4 million in deferred tax assets and $0.4 million in premises and equipment, net.

Total consolidated assets increased $113.9 million, or 3.7%, to $3.15 billion at June 30, 2025 from $3.04 billion at December 31, 2024.

The increase in total assets is largely attributable to increases of $172.1 million in net loans receivable, $1.7 million in other assets and $1.4 million in accrued interest receivable, partially offset by decreases of $31.1 million in held-to-maturity securities, $13.2 million in cash and cash equivalents, $8.4 million in available-for-sale securities, $5.0 million in mortgage loans held for sale and $2.6 million in FHLBNY stock.

Cash and Cash Equivalents .

Cash and cash equivalents decreased $9.9 million, or 7.1%, to $129.9 million at March 31, 2025, compared to $139.8 million at December 31, 2024.

Cash and cash equivalents decreased $13.2 million, or 9.4%, to $126.6 million at June 30, 2025, compared to $139.8 million at December 31, 2024.

The decrease in cash and cash equivalents was primarily the result of an increase of $179.5 million in net loans and a $60.0 million net repayment of borrowings.

The decrease in cash and cash equivalents was offset primarily by an increase of $120.1 million in net deposits, $13.6 million in proceeds from maturities, calls and principal repayment on securities, $3.4 million in net redemption of FHLB stock and $2.6 million in advance payments by borrowers.

The Company securities portfolio decreased $1.4 million in available-for-sale and $9.9 million in held-to-maturity during the three months ended March 31, 2025.

The decrease in the securities portfolio was primarily due to the call of one available-for-sale security in the amount of $1.0 million and changes in principal amount of the securities.

The decrease in cash and cash equivalents was offset primarily by an increase of $157.3 million in net deposits, $42.4 million in proceeds from maturities, calls and principal repayment on securities, $5.7 million from sale of loans and $2.6 million in net redemption of FHLBNY stock.

The Company securities portfolio decreased $8.4 million in available-for-sale and $31.1 million in held-to-maturity during the six months ended June 30, 2025.

The decrease in the securities portfolio was primarily due to the call of two available-for-sale securities in the total amount of $6.0 million, the maturity of one held-to-maturity security in the amount of $10.0 million and changes in principal amount of the securities.

Gross Loans Receivable.

The composition of gross loans receivable at March 31, 2025 and at December 31, 2024 and the percentage of each classification to total loans are summarized as follows:

March 31, 2025

The composition of gross loans receivable at June 30, 2025 and at December 31, 2024 and the percentage of each classification to total loans are summarized as follows:

June 30, 2025

December 31, 2024

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Construction and land loans increased $149.8 million, or 20.4%, when compared to December 31, 2024.

The majority of the $81.8 million growth in construction and land mortgage loans is related to funding of existing commitments prior to 2025 as opposed to new originations in 2025.

Our commitments to grant new mortgage loans decreased by $28.7 million as of March 31, 2025 compared to December 31, 2024.

The $149.8 million growth in construction and land mortgage loans is related to funding of existing commitments prior to 2025 and new commitments, offset by loans that were refinanced from construction and land loans to new permanent loan facilities.

Our commitments to grant new mortgage loans decreased by $127.2 million as of June 30, 2025 compared to December 31, 2024.

See Note 10 ("Commitments, Contingencies and Credit Risk") of Notes to the Consolidated Financial Statements.

Within the construction and land mortgage loans, as indicated in the composition of gross loans receivable table above, there are 64 projects as of March 31, 2025.

Of these 64 projects, 51 projects are more than 50% complete and 13 projects are less than 50% complete.

Of the 51 projects that are more than 50% complete, 22 projects have been issued a certificate of occupancy or a temporary certificate of occupancy, 29 projects are without certificate of occupancy or a temporary certificate of occupancy.

The Company had 76 construction and land mortgage loans with balances of $883.5 million as indicated in the table above.

Of those loans, 38 loans with aggregate balances of $622.5 million, or 70.5%, of the total, have a percentage of completion of 80% or more.

Within those 38 loans there are 22 loans with balances of $340.4 million that are 100% completed and the properties have received their certificates of occupancy.

Commercial real estate loans, as defined by applicable banking regulations, include multifamily residential, nonresidential properties, and construction and land mortgage loans.

At March 31, 2025 and December 31, 2024, approximately 3.3% and 3.5%, respectively, of the outstanding principal balance of the Bank’s commercial real estate mortgage loans were secured by owner-occupied commercial real estate.

At June 30, 2025 and December 31, 2024, approximately 3.6% and 3.5%, respectively, of the outstanding principal balance of the Bank’s commercial real estate mortgage loans were secured by owner-occupied commercial real estate.

Owner-occupied commercial real estate is similar in many ways to commercial and industrial lending in that these loans are generally made to businesses predominantly on the basis of the cash flows of the business rather than on valuation of the real estate.

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Both ratios are calculated by dividing certain types of loan balances for each of the two categories by the Bank’s total risk-based capital.

At March 31, 2025 and December 31, 2024, the Bank’s construction and land mortgage loans as a percentage of total risk-based capital was 159.1% and 145.0%, respectively.

Investor-owned commercial real estate mortgage loans as a percentage of total risk-based capital was 354.6% and 341.7% as of March 31, 2025 and December 31, 2024, respectively.

At March 31, 2025, the Bank was above the 100% guidelines established by the banking regulations and under the 200% guidelines set by the Bank for construction and land mortgage loans and above the 300% guideline established by banking regulators but under the 450% guidelines set by the Bank for investor owned commercial real estate mortgage loans.

At June 30, 2025 and December 31, 2024, the Bank’s construction and land mortgage loans as a percentage of total risk-based capital was 169.4% and 145.0%, respectively.

Investor-owned commercial real estate mortgage loans as a percentage of total risk-based capital was 366.0% and 341.7% as of June 30, 2025 and December 31, 2024, respectively.

At June 30, 2025, the Bank was above the 100% guidelines established by the banking regulations and under the 200% guidelines set by the Bank for construction and land mortgage loans and above the 300% guideline established by banking regulators but under the 450% guidelines set by the Bank for investor owned commercial real estate mortgage loans.

Management believes that it has established the appropriate level of controls to monitor the Bank’s lending in these areas.

Loans Held For Sale .

Loans held for sale, at fair value, at March 31, 2025 decreased $2.2 million, or 20.2%, to $8.6 million from $10.7 million at December 31, 2024.

The composition of deposits at March 31, 2025 and December 31, 2024 and changes in dollars and percentages are summarized as follows:

March 31, 2025

Loans held for sale, at fair value, at June 30, 2025 decreased $5.0 million, or 46.9%, to $5.7 million from $10.7 million at December 31, 2024.

The composition of deposits at June 30, 2025 and December 31, 2024 and changes in dollars and percentages are summarized as follows:

June 30, 2025

December 31, 2024

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Total deposits

(1) At March 31, 2025 and December 31, 2024, there were no individual listing service deposits amounting to $250,000 or more.

(1) At June 30, 2025 and December 31, 2024, there were no individual listing service deposits amounting to $250,000 or more.

There was one brokered certificates of deposit in the amount of $1.5 million amounting to $250,000 or more.

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The Company’s Interest Rate Risk Policy imposes limitations on overall wholesale funding and noncore funding reliance.

The overall reliance on wholesale funding and noncore funding were within those policy limitations as of March 31, 2025 and December 31, 2024.

The Management Asset/Liability Committee generally meets on a bi-weekly basis to review funding needs, if any, and to ensure the Company operates within the approved limitations.

The Bank had outstanding borrowings at March 31, 2025 and December 31, 2024 of $521.1 million and $571.1 million in term advances from the FHLBNY.

The Bank did not have any overnight line of credit advance at March 31, 2025 and had one overnight line of credit advance in the amount of $25.0 million from the FHLBNY at December 31, 2024.

Additionally, the Bank had two unsecured lines of credit in the amount of $75.0 million with two correspondent banks for both periods at March 31, 2025 and December 31, 2024.

The Bank did not have any term and overnight line of credit advances from the FRBNY at March 31, 2025 and December 31, 2024.

The overall reliance on wholesale funding and noncore funding were within those policy limitations as of June 30, 2025 and December 31, 2024.

The Management Asset/Liability Committee generally meets on a monthly basis to review funding needs, if any, and to ensure the Company operates within the approved limitations.

The Bank had outstanding borrowings at June 30, 2025 and December 31, 2024 of $521.1 million and $571.1 million in term advances from the FHLBNY.

The Bank had one overnight line of credit advance in the amount of $15.0 million from the FHLBNY at June 30, 2025 and had one overnight line of credit advance in the amount of $25.0 million from the FHLBNY at December 31, 2024.

Additionally, the Bank had two unsecured lines of credit in the amount of $75.0 million with two correspondent banks for

both periods at June 30, 2025 and December 31, 2024.

The Bank did not have any term and overnight line of credit advances from the FRBNY at June 30, 2025 and December 31, 2024.

Stockholders’ Equity .

The Company’s consolidated stockholders’ equity increased $8.4 million, or 1.7%, to $513.9 million as of March 31, 2025 from $505.5 million as of December 31, 2024.

The Company’s consolidated stockholders’ equity increased $15.6 million, or 3.1%, to $521.1 million as of June 30, 2025 from $505.5 million as of December 31, 2024.

The $15.6 million increase in stockholders’ equity was largely attributable to $12.1 million in net income, $2.3 million in other comprehensive income, $1.0 million impact to additional paid in capital as a result of share-based compensation and $0.9 million from release of ESOP shares, offset by $0.6 million in dividends on preferred shares.

Comparison of Results of Operations for the Three Months Ended March 31, 2025 and 2024

The discussion of the Company’s results of operations for the three months ended March 31, 2025 and 2024 are presented below.

Comparison of Results of Operations for the Three Months Ended June 30, 2025 and 2024

The discussion of the Company’s results of operations for the three months ended June 30, 2025 and 2024 are presented below.

The results of operations for interim periods may not be indicative of future results.

Net income available to common stockholders was $5.7 million for the three months ended March 31, 2025 compared to net income available to common stockholders of $2.4 million for the three months ended March 31, 2024.

Earnings per basic and diluted share was $0.25 for the three months ended March 31, 2025 compared to earnings per basic and diluted share of $0.11 for three months ended March 31, 2024.

The $3.3 million increase of net income available to common stockholders from the three months ended March 31, 2024, was due to increases of $3.4 million in net interest income, $0.7 million in non-interest income and $0.3 million in benefit for credit losses, partially offset by increases of $0.7 million in provision for income taxes, $0.3 million in dividends on preferred shares and $0.1 million in non-interest expense.

Net income for the three months ended March 31, 2025, which excludes $0.3 million in dividends on preferred shares, was $6.0 million.

There was no dividend on preferred shares for the three months ended March 31, 2024.

Net income available to common stockholders was $5.8 million for the three months ended June 30, 2025 compared to net income available to common stockholders of $3.1 million for the three months ended June 30, 2024.

Earnings per basic share was $0.26 and diluted share was $0.25 for the three months ended June 30, 2025 compared to earnings per basic and diluted share of $0.14 for the three months ended June 30, 2024.

The $2.7 million increase of net income available to common stockholders from the three months ended June 30, 2024, was due to an increase of $6.5 million in net interest income, partially offset by increases of $2.5 million in provision for credit losses, $0.7 million in provision for income taxes, $0.2 million in dividends on preferred shares and $0.2 million in non-interest expense and a decrease of $0.2 million in non-interest income.

Net income for the three months ended June 30, 2025 and 2024, which excludes $0.3 million and $0.1 million, respectively, in dividends on preferred shares, were $6.1 million and $3.2 million, respectively.

The following table presents the results of operations for the periods indicated:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Increase (Decrease)

3 unchanged sentences

Net interest income

Benefit for credit losses (1)

Net interest income after benefit for credit losses

Provision (benefit) for credit losses

Net interest income after provision (benefit) for credit losses

Non-interest income

4 unchanged sentences

Net income available to common stockholders

Earnings per share:

(1) For the three months ended June 30, 2024, benefit for contingencies in the amount of $0.5 million were reclassified from total non-interest expense to benefit for credit losses.

Interest and Dividend Income.

Interest and dividend income increased $7.1 million, or 18.2%, to $45.9 million for the three months ended June 30, 2025 from $38.8 million for the three months ended June 30, 2024.

Interest income on loans receivable, which is the Company’s primary source of income, increased $9.0 million, or 28.8%, to $40.3 million for the three months ended June 30, 2025 from $31.3 million for the three months ended June 30, 2024.

Total interest and dividend income on securities, FHLBNY stock and deposits due from banks decreased $1.9 million, or 25.9%, to $5.6 million for the three months ended June 30, 2025 from $7.5 million for the three months ended June 30, 2024.

The decrease was primarily attributable to a decrease of $1.2 million in interest on securities and $0.7 million in interest on deposits due from banks.

The following table presents interest income on loans receivable for the periods indicated:

For the Three Months Ended June 30,

(Dollars in thousands)

1-4 Family residential

Multifamily residential

Nonresidential properties

Construction and land

Business loans

Consumer loans

Total interest income on loans receivable

The following table presents interest and dividend income on securities and FHLBNY stock and deposits due from banks for the periods indicated:

For the Three Months Ended June 30,

(Dollars in thousands)

Interest on deposits due from banks

Interest on securities

Dividend on FHLBNY stock

Total interest and dividend income

Interest Expense.

Interest expense increased $0.5 million, or 2.6%, to $21.4 million for the three months ended June 30, 2025 from $20.9 million for the three months ended June 30, 2024.

The following table presents interest expense for the periods indicated

For the Three Months Ended June 30,

(Dollars in thousands)

Certificates of deposit

Advance payments by borrowers

Total interest expense

Net Interest Income.

Net interest income increased $6.5 million, or 36.4%, to $24.4 million for the three months ended June 30, 2025 from $17.9 million for the three months ended June 30, 2024.

The $6.5 million increase in net interest income for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was attributable to an increase of $7.1 million in total interest and dividend income primarily due to increases in average loans receivable, offset by an increase of $0.5 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities.

Net interest rate spread increased by 75 basis points to 2.47% for the three months ended June 30, 2025 from 1.72% for the three months ended June 30, 2024.

The increase in the net interest rate spread for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was primarily due to and an increase in the average yields on interest-earning assets of 44 basis points to 6.13% for the three months ended June 30, 2025 from 5.69% for the three months ended June 30, 2024, and a decrease in the average rates paid on interest-bearing liabilities of 31 basis points to 3.66% for the three months ended June 30, 2025 from 3.97% for the three months ended June 30, 2024.

Net interest margin increased 65 basis points for the three months ended June 30, 2025, to 3.27% from 2.62% for the three months ended June 30, 2024.

Non-Interest Income.

Non-interest income decreased $0.2 million, or 8.8%, to $2.1 million for the three months ended June 30, 2025 from $2.3 million for the three months ended June 30, 2024.

The $0.2 million decrease in non-interest income for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was largely attributable to decreases of $0.6 million in other non-interest income and $0.1 million in income on the sale of mortgage loans, partially offset by increases of $0.4 million in grant income from grants received from the CDFI and $0.1 million in late and prepayment charges.

The following table presents non-interest income for the periods indicated:

For the Three Months Ended June 30,

(Dollars in thousands)

Service charges and fees

Brokerage commissions

Late and prepayment charges

Income on sale of mortgage loans

Total non-interest income

Non-Interest Expense.

Non-interest expense increased $0.2 million, or 1.4%, to $16.9 million for the three months ended June 30, 2025 from $16.6 million for the three months ended June 30, 2024.

The $0.2 million increase in non-interest expense for the three months ended June 30, 2025, compared to the three months ended June 30, 2024 was mainly attributable to increases of $0.3 million in occupancy and equipment, $0.2 million in data processing expenses, $0.1 million in marketing and promotional expenses and $0.1 million in federal deposit insurance and regulatory assessment, partially offset by a decrease of $0.4 million in direct loan expenses.

The following table presents non-interest expense for the periods indicated:

For the Three Months Ended June 30,

(Dollars in thousands)

Compensation and benefits

Occupancy and equipment

Data processing expenses

Direct loan expenses

Insurance and surety bond premiums

Office supplies, telephone and postage

Professional fees

Microloans recoveries

Marketing and promotional expenses

Federal deposit insurance and regulatory assessment (2)

Other operating expenses (2)

Total non-interest expense (1)

(1) For the three months ended June 30, 2024, benefit for contingencies in the amount of $0.5 million were reclassified from total non-interest expense to benefit for credit losses.

(2) For the three months ended June 30, 2024, $0.3 million of federal deposit insurance was reclassified from other operating expenses to federal deposit insurance and regulatory assessments and $0.1 million of directors fees were reclassified from federal deposit insurance and regulatory assessments to other operating expenses.

Income Tax Provision.

The Company had a provision for income taxes of $1.9 million for the three months ended June 30, 2025 compared to a provision for income taxes of $1.2 million for the three months ended June 30, 2024.

Average Balance Sheets

The following table sets forth average outstanding balances, average yields and rates, and certain other information for the periods indicated.

No tax-equivalent yield adjustments have been made, as the effects would be immaterial.

Average balances are derived from average daily balances.

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.

For the Three Months Ended June 30,

Yield/Rate (1)

(Dollars in thousands)

Interest-earning assets:

Securities (3)

Total interest-earning assets

Non-interest-earning assets

Interest-bearing liabilities:

Certificates of deposit

Total deposits

Advance payments by borrowers

Total interest-bearing liabilities

Non-interest-bearing liabilities:

Non-interest-bearing demand

Other non-interest-bearing liabilities

Total non-interest-bearing liabilities

Total liabilities

Total liabilities and total equity

Net interest income

Net interest rate spread (5)

Net interest-earning assets (6)

Net interest margin (7)

Average interest-earning assets to interest-bearing liabilities

(1) Annualized where appropriate.

(2) Loans include loans and mortgage loans held for sale, at fair value.

(3) Securities include available-for-sale securities and held-to-maturity securities.

(4) Includes FHLBNY demand account and FHLBNY stock dividends and FRBNY demand deposits.

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

(6) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

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

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on the Company’s net interest income for the periods indicated.

The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).

The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume).

The total column represents the sum of the prior columns.

For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.

For the Three Months Ended June 30,

Increase (Decrease) Due to

Total Increase

(In thousands)

Interest-earning assets:

Securities (2)

Total interest-earning assets

Interest-bearing liabilities:

Certificates of deposit

Total deposits

Total interest-bearing liabilities

Change in net interest income

(1) Loans include loans and mortgage loans held for sale, at fair value.

(2) Securities include available-for-sale securities and held-to-maturity securities.

Comparison of Results of Operations for the Six Months Ended June 30, 2025 and 2024

The discussion of the Company’s results of operations for the six months ended June 30, 2025 and 2024 are presented below.

The results of operations for interim periods may not be indicative of future results.

Net income available to common stockholders was $11.5 million for the six months ended June 30, 2025 compared to net income available to common stockholders of $5.5 million for the six months ended June 30, 2024.

Earnings per basic share was $0.51 and diluted share was $0.50 for the six months ended June 30, 2025 compared to earnings per basic and diluted share of $0.25 for six months ended June 30, 2024.

The $6.0 million increase of net income available to common stockholders from the six months ended June 30, 2024, was due to increases of $9.9 million in net interest income and $0.5 million in non-interest income, partially offset by increases of $2.2 million in provision for credit losses, $1.4 million in provision for income taxes, $0.5 million in dividends on preferred shares and $0.3 million in non-interest expense.

Net income for the six months ended June 30, 2025 and 2024, which excludes $0.6 million and $0.1 million in dividends on preferred shares, was $12.1 million and $5.6 million, respectively.

The following table presents the results of operations for the periods indicated:

For the Six Months Ended June 30,

Increase (Decrease)

(Dollars in thousands)

Interest and dividend income

Interest expense

Net interest income

Provision (benefit) for credit losses (1)

Net interest income after provision (benefit) for credit losses

Non-interest income

Non-interest expense (1)

Income before income taxes

Provision for income taxes

Dividends on preferred shares

Net income available to common stockholders

Earnings per common share:

(1) For the three months ended March 31, 2024, provision for contingencies in the amount of $0.2 million were reclassified from total non-interest expense to benefit for credit losses.

(1) For the six months ended June 30, 2024, provision for contingencies in the amount of $0.3 million were reclassified from total non-interest expense to benefit for credit losses.

Interest and Dividend Income.

Interest and dividend income increased $4.3 million, or 10.9%, to $44.0 million for the three months ended March 31, 2025 from $39.7 million for the three months ended March 31, 2024.

Interest income on loans receivable, which is the Company’s primary source of income, increased $6.5 million, or 21.1%, to $37.1 million for the three months ended March 31, 2025 from $30.7 million for the three months ended March 31, 2024.

Total interest and dividend income on securities, FHLBNY stock and deposits due from banks decreased $2.1 million, or 23.8%, to $6.9 million for the three months ended March 31, 2025 from $9.0 million for the three months ended March 31, 2024.

The decrease was primarily attributable to decreases of $1.2 million in interest on deposits due from banks and $1.1 million in interest on securities, offset by an increase of $0.2 million in dividend on FHLBNY stock.

Interest and dividend income increased $11.4 million, or 14.5%, to $89.9 million for the six months ended June 30, 2025 from $78.5 million for the six months ended June 30, 2024.

Interest income on loans receivable, which is the Company’s primary source of income, increased $15.5 million, or 25.0%, to $77.4 million for the six months ended June 30, 2025 from $61.9 million for the six months ended June 30, 2024.

Total interest and dividend income on securities, FHLBNY stock and deposits due from banks decreased $4.1 million, or 24.7%, to $12.4 million for the six months ended June 30, 2025 from $16.5 million for the six months ended June 30, 2024.

The decrease was primarily attributable to decreases of $2.3 million in interest on securities and $2.0 million in interest on deposits due from banks, offset by an increase of $0.2 million in dividend on FHLBNY stock.

The following table presents interest income on loans receivable for the periods indicated:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(Dollars in thousands)

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The following table presents interest and dividend income on securities and FHLBNY stock and deposits due from banks for the periods indicated:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(Dollars in thousands)

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Interest Expense.

Interest expense increased $1.0 million, or 4.6%, to $21.8 million for the three months ended March 31, 2025 from $20.8 million for the three months ended March 31, 2024 .

Interest expense increased $1.5 million, or 3.6%, to $43.2 million for the six months ended June 30, 2025 from $41.7 million for the six months ended June 30, 2024.

The following table presents interest expense for the periods indicated:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(Dollars in thousands)

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Net Interest Income.

Net interest income increased $3.4 million, or 18.0%, to $22.2 million for the three months ended March 31, 2025 from $18.8 million for the three months ended March 31, 2024.

The $3.4 million increase in net interest income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was attributable to an increase of $4.3 million in total interest and dividend income primarily due to increases in average loans receivable, offset by an increase of $1.0 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities.

Net interest rate spread increased by 37 basis points to 2.19% for the three months ended March 31, 2025 from 1.82% for the three months ended March 31, 2024.

The increase in the net interest rate spread for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to and an increase in the average yields on interest-earning assets of 19 basis points to 5.90% for the three months ended March 31, 2025 from 5.71% for the three months ended March 31, 2024, and a decrease in the average rates paid on interest-bearing liabilities of 18 basis points to 3.71% for the three months ended March 31, 2025 from 3.89% for the three months ended March 31, 2024.

Net interest margin increased 27 basis points for the three months ended March 31, 2025, to 2.98% from 2.71% for three months ended March 31, 2024.

Net interest income increased $9.9 million, or 27.0%, to $46.6 million for the six months ended June 30, 2025 from $36.7 million for the six months ended June 30, 2024.

The $9.9 million increase in net interest income for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was attributable to an increase of $11.4 million in total interest and dividend income primarily due to increases in average loans receivable, offset by an increase of $1.5 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities.

Net interest rate spread increased by 56 basis points to 2.33% for the six months ended June 30, 2025 from 1.77% for the six months ended June 30, 2024.

The increase in the net interest rate spread for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was primarily due to and an increase in the average yields on interest-earning assets of 32 basis points to 6.02% for the six months ended June 30, 2025 from 5.70% for the six months ended June 30, 2024, and a decrease in the average rates paid on interest-bearing liabilities of 24 basis points to 3.69% for the six months ended June 30, 2025 from 3.93% for the six months ended June 30, 2024.

Net interest margin increased 45 basis points for the six months ended June 30, 2025, to 3.12% from 2.67% for six months ended June 30, 2024.

On September 18, 2024, the Federal Reserve announced that the target range for the federal funds rate decreased by 50 basis points to 4.75% to 5.00% effective on September 19, 2024.

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In November 2024, the Federal Reserve lowered the target range by 25 basis points to 4.50% to 4.75% and in December 2024 another 25 basis points to 4.25% to 4.50%.

The Federal Reserve left federal funds rate unchanged at 4.25% to 4.50% during its March 2025 meeting, though it is still anticipated that they may reduce interest rates by around 50bps this year.

The Federal Reserve left federal funds rate unchanged at 4.25% to 4.50% during its July 2025 meeting, though it is still anticipated that they may reduce interest rates by around 50bps this year.

Our net interest income may be positively impacted if the demand for loans increases due to the lower rates, alone or in tandem with lower inflation.

Non-Interest Income.

Non-interest income increased $0.7 million, or 39.5%, to $2.4 million for the three months ended March 31, 2025 from $1.7 million for the three months ended March 31, 2024.

The $0.7 million increase in non-interest income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was attributable to increases of $0.4 million in income on sale of SBA loans and $0.3 million in late and prepayment charges, partially offset by a decrease of $0.2 million in income on the sale of mortgage loans.

Non-interest income increased $0.5 million, or 12.0%, to $4.4 million for the six months ended June 30, 2025 from $4.0 million for the six months ended June 30, 2024.

The $0.5 million increase in non-interest income for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was attributable to increases of $0.4 million in income on sale of SBA loans, $0.4 million in grant income and $0.4 million in late and prepayment charges, partially offset by decreases of $0.6 million in other non-interest income and $0.3 million in income on the sale of mortgage loans.

The following table presents non-interest income for the periods indicated:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(Dollars in thousands)

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Non-Interest Expense.

Non-interest expense increased $0.1 million, or 0.6%, to $16.9 million for the three months ended March 31, 2025 from $16.8 million for the three months ended March 31, 2024.

The $0.1 million increase in non-interest expense for the three months ended March 31, 2025, compared to the three months ended March 31, 2024 was attributable to increases of $0.5 million in other operating expense and $0.2 million in occupancy and equipment, partially offset by decreases of $0.4 million in professional fees and $0.3 million in direct loan expenses.

Non-interest expense increased $0.3 million, or 1.0%, to $33.8 million for the six months ended June 30, 2025 from $33.4 million for the six months ended June 30, 2024.

The $0.3 million increase in non-interest expense for the six months ended June 30, 2025, compared to the six months ended June 30, 2024 was primarily attributable to increases of $0.6 million in occupancy and equipment, $0.4 million in other operating expense, $0.2 million in data processing expenses, partially offset by decreases of $0.7 million in direct loan expenses and $0.4 million in professional fee.

The following table presents non-interest expense for the periods indicated:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(Dollars in thousands)

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Marketing and promotional expenses

Directors' fees and regulatory assessment

Federal deposit insurance and regulatory assessment (2)

Other operating expenses (2)

Total non-interest expense (1)

(1) For the three months ended March 31, 2024, provision for contingencies in the amount of $0.2 million were reclassified from total non-interest expense to benefit for credit losses.

(1) For the six months ended June 30, 2024, benefit for contingencies in the amount of $0.3 million were reclassified from total non-interest expense to benefit for credit losses.

Income Tax Provision.

The Company had a provision for income taxes of $2.0 million for the three months ended March 31, 2025 compared to a provision for income taxes of $1.3 million for three months ended March 31, 2024.

The Company had a provision for income taxes of $3.9 million for the six months ended June 30, 2025 compared to a provision for income taxes of $2.5 million for six months ended June 30, 2024.

Credit Quality.

Total non-performing loans, including loans held for sale, were $27.3 million for both periods March 31, 2025 and December 31, 2024.

During the three months ended March 31, 2025, a credit loss benefit of $0.3 million on loans was recorded, consisting of $0.7 million charged on the funded portion and a benefit of $1.0 million on the unfunded portion on loans.

During the three months ended March 31, 2024, a credit loss benefit of $0.1 million on loans were recorded, consisting of $0.3 million benefit on the funded portion and a $0.2 million charged on the on unfunded portion on loans.

Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty, including loans held for sale, decreased $3.6 million to $28.5 million at June 30, 2025 from $32.1 million at December 31, 2024.

During the six months ended June 30, 2025, a credit loss provision of $1.3 million on loans was recorded, consisting of $2.1 million charged on the funded portion and a benefit of $0.7 million on the unfunded portion on loans.

During the six months ended June 30, 2024, a credit loss benefit of $0.7 million on loans were recorded, consisting of $0.4 million benefit on the funded portion and a benefit of $0.3 million on unfunded portion on loans.

Average Balance Sheets

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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.

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Yield/Rate (1)

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For the Three Months Ended March 31,

For the Six Months Ended June 30,

Increase (Decrease) Due to

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To limit interest rate risk, the Bank has policy guidelines for earnings risk which seek to limit the variance of net interest income in both gradual and instantaneous changes to interest

As of March 31, 2025, in the event of an instantaneous upward and downward change in rates from management's interest rate forecast over the next twelve months, assuming a static balance sheet, the following estimated changes are calculated:

As of June 30, 2025, in the event of an instantaneous upward and downward change in rates from management's interest rate forecast over the next twelve months, assuming a static balance sheet, the following estimated changes are calculated:

Net Interest Income

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In higher rate scenarios, any customer activity resulting in the replacement of low-cost or noninterest-bearing deposits with higher-yielding deposits or market-based funding would reduce the benefit in those scenarios.

At March 31, 2025, the earnings simulation model indicated that the Bank was in compliance with the Board of Directors approved Interest Rate Risk Policy.

At June 30, 2025, the earnings simulation model indicated that the Bank was in compliance with the Board of Directors approved Interest Rate Risk Policy.

Economic Value of Equity Model .

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The Interest Rate Risk Policy sets limits for those sensitivities.

At March 31, 2025, the EVE modeling calculated the following estimated changes in EVE due to instantaneous upward and downward changes in rates:

At June 30, 2025, the EVE modeling calculated the following estimated changes in EVE due to instantaneous upward and downward changes in rates:

EVE as a Percentage of Present

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Further, EVE does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, and changing product spreads that could alter the adverse impact of changes in interest rates.

At March 31, 2025, the EVE model indicated that the Bank was in compliance with the Board of Directors’ approved Interest Rate Risk Policy.

At June 30, 2025, the EVE model indicated that the Bank was in compliance with the Board of Directors’ approved Interest Rate Risk Policy.

Most Likely Earnings Simulation Models .

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In November 2024, the Federal Reserve lowered the target range by 25 basis points to 4.50% to 4.75% and in December 2024 another 25 basis points to 4.25% to 4.50%.

The Federal Reserve left federal funds rate unchanged at 4.25% to 4.50% during its March 2025 meeting, though it is still anticipated that they may reduce interest rates by around 50bps this year.

The Federal Reserve left federal funds rate unchanged at 4.25% to 4.50% during its July 2025 meeting, though it is still anticipated that they may reduce interest rates by around 50bps this year.

Our net interest income may also be positively impacted if the demand for loans increases due to the rate decreases, alone or in tandem with the concurrent inflationary pressures.

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A gap is considered positive when the amount of interest rate sensitive assets maturing or repricing during a period exceeds the amount of interest rate sensitive liabilities maturing or repricing during the same period, and a gap is considered negative when the amount of interest rate sensitive liabilities maturing or repricing during a period exceeds the amount of interest rate sensitive assets maturing or repricing during the same period.

The following table sets forth the Company’s interest-earning assets and its interest-bearing liabilities at March 31, 2025, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions.

The following table sets forth the Company’s interest-earning assets and its interest-bearing liabilities at June 30, 2025, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions.

The amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability.

The table sets forth an approximation of the projected repricing of assets and liabilities at March 31, 2025, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments.

The table sets forth an approximation of the projected repricing of assets and liabilities at June 30, 2025, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments.

The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and as a result of contractual rate adjustments on adjustable-rate loans.

March 31, 2025

June 30, 2025

Time to Repricing

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The levels of these assets are dependent on operating, financing, lending, and investing activities during any given period.

The Bank had $521.1 million and $571.1 million of outstanding term advances from FHLBNY at March 31, 2025 and December 31, 2024, respectively.

The Bank had no overnight line of credit advance from the FHLBNY at March 31, 2025 and $25.0 million of overnight line of credit advance from the FHLBNY at December 31, 2024.

Net cash provided by operating activities was $13.1 million and $1.5 million for the three months ended March 31, 2025 and 2024, respectively.

Net cash used in investing activities, which consists primarily of disbursements for loan originations, purchase of loans, net purchase and redemption of FHLBNY stock and purchase of equipment offset by principal collections on loans and proceeds from maturities, calls and principal repayments on securities was ($67.8) million and ($80.1) million for the three months ended March 31, 2025 and 2024, respectively.

Net cash provided by financing activities, consisting of activities in borrowing, deposit accounts and dividends paid on preferred stock, was $44.8 million and $74.2 million for the three months ended March 31, 2025 and 2024, respectively.

The Bank had $521.1 million and $571.1 million of outstanding term advances from FHLBNY at June 30, 2025 and December 31, 2024, respectively.

The Bank had $15.0 million of overnight line of credit advance from the FHLBNY at June 30, 2025 and $25.0 million of overnight line of credit advance from the FHLBNY at December 31, 2024.

Net cash provided by (used in) operating activities was $19.3 million and ($1.1) million for the six months ended June 30, 2025 and 2024, respectively.

Net cash used in investing activities, which consists primarily of disbursements for loan originations, purchase of loans, net purchase and redemption of FHLBNY stock and purchase of equipment offset by principal collections on loans and proceeds from maturities, calls and principal repayments on securities was ($129.2) million and ($129.4) million for the six months ended June 30, 2025 and 2024, respectively.

Net cash provided by financing activities, consisting of activities in borrowing, deposit accounts and dividends paid on preferred stock, was $96.8 million and $94.5 million for the six months ended June 30, 2025 and 2024, respectively.

The Bank’s management took steps to enhance the Company’s liquidity position by increasing its on balance sheet cash and cash equivalents position in order to meet unforeseen liquidity events and to fund upcoming funding needs.

At March 31, 2025 and December 31, 2024, all regulatory capital requirements were met, resulting in the Company and the Bank being categorized as well capitalized.

At June 30, 2025 and December 31, 2024, all regulatory capital requirements were met, resulting in the Company and the Bank being categorized as well capitalized.

Management is not aware of any conditions or events that would change this categorization.

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Such commitments are subject to the same credit policies and approval process accorded to loans originated.

At March 31, 2025 and December 31, 2024, the Company had outstanding commitments to originate loans and extend credit of $390.2 million and $411.5 million, respectively.

At June 30, 2025 and December 31, 2024, the Company had outstanding commitments to originate loans and extend credit of $359.8 million and $411.5 million, respectively.

It is anticipated that the Company will have sufficient funds available to meet its current lending commitments.

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Pursuant to the terms of its Preferred Stock, the Company is required to pay a quarterly dividend on its Preferred Stock, beginning during the quarter ended June 30, 2024.

The floor dividend rate is 0.50% and the ceiling dividend rate is 2.00%, based on achievement of certain qualified lending targets.

The floor dividend rate is 0.50% and the ceiling dividend rate

is 2.00%, based on achievement of certain qualified lending targets.

For quarterly dividends through June 15, 2025, the Company is required to pay quarterly dividends on the Preferred Stock at a rate of 0.50%.

The company paid and accrued $0.3 million for the three months ended March 31, 2025 and $0.6 million for the year ended December 31, 2024.

Other Material Cash Requirements.

In addition to contractual obligations, the Company’s material cash requirements also includes compensation and benefits expenses for its employees, which were $7.8 million for the three months ended March 31, 2025.

The Company also has material cash requirements for occupancy and equipment expenses, excluding depreciation and amortization of $0.5 million, related to rental expenses, general maintenance and cleaning supplies, guard services, software licenses and other miscellaneous expenses, which were $3.4 million for the three months ended March 31, 2025.

In addition to contractual obligations, the Company’s material cash requirements also includes compensation and benefits expenses for its employees, which were $15.4 million for the six months ended June 30, 2025.

The Company also has material cash requirements for occupancy and equipment expenses, excluding depreciation and amortization of $1.1 million, related to rental expenses, general maintenance and cleaning supplies, guard services, software licenses and other miscellaneous expenses, which were $6.8 million for the six months ended June 30, 2025.

Quantitative and Qualitati ve Disclosures About Market Risk.

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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-Q

Item 2. Management’s Discussion and Analysis