PARKE BANCORP, INC. 10-Q

Item 1. Financial Statements Parke Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets (unaudited) (Dollars in thousands except per share data) March 31, 2025 December 31, 2024 Assets Cash and due from banks $ 6,414 $ 4,624 Interest bearing deposits with banks 202,622 216,903 Cash and cash equivalents 209,036 221,527 Investment securities available for sale, at fair value 5,236 5,551 Investment securities held to maturity, net of allowance for credit losses of $ 0 at March 31, 2025 and December 31, 2024 (fair value of $ 7,447 at March 31, 2025 and $ 7,492 at December 31, 2024) 9,104 9,209 Total investment securities 14,340 14,760 Loans, net of unearned income 1,883,175 1,868,153 Less: Allowance for credit losses ( 33,091 ) ( 32,573 ) Net loans 1,850,084 1,835,580 Accrued interest receivable 10,111 9,659 Premises and equipment, net 5,597 5,316 Restricted stock 6,807 8,619 Bank owned life insurance (BOLI) 29,235 29,070 Deferred tax asset 9,095 9,113 Other real estate owned (OREO) 1,562 1,562 Other 5,988 7,030 Total assets $ 2,141,855 $ 2,142,236 Liabilities and Shareholders' Equity Liabilities Deposits Noninterest-bearing deposits $ 185,348 $ 184,037 Interest-bearing deposits 1,481,333 1,447,013 Total deposits 1,666,681 1,631,050 FHLBNY borrowings 105,000 145,000 Subordinated debentures 43,348 43,300 Accrued interest payable 6,970 7,968 Other 13,914 14,845 Total liabilities 1,835,913 1,842,163 Shareholders' Equity Preferred stock, 1,000,000 shares authorized, $ 1,000 liquidation value Series B non-cumulative convertible; 325 shares outstanding at March 31, 2025 and December 31, 2024 325 325 Common stock, $ 0.10 par value; authorized 15,000,000 shares; Issued: 12,327,850 shares and 12,313,489 shares at March 31, 2025 and December 31, 2024, respectively 1,233 1,231 Additional paid-in capital 137,951 137,784 Retained earnings 173,995 168,347 Accumulated other comprehensive loss ( 285 ) ( 337 ) Treasury stock, 484,522 shares at March 31, 2025 and December 31, 2024, at cost ( 7,277 ) ( 7,277 ) Total shareholders’ equity 305,942 300,073 Total liabilities and shareholders' equity $ 2,141,855 $ 2,142,236 See accompanying notes to the unaudited consolidated financial statements 1 Parke Bancorp Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (unaudited) (Dollars in thousands except per share data) For the Three Months Ended March 31, 2025 2024 Interest income: Interest and fees on loans $ 31,476 $ 28,083 Interest and dividends on investments 288 249 Interest on deposits with banks 2,082 1,145 Total interest income 33,846 29,477 Interest expense: Interest on deposits 15,169 13,457 Interest on borrowings 2,070 1,966 Total interest expense 17,239 15,423 Net interest income 16,607 14,054 Provision for credit losses 590 204 Net interest income after provision for credit losses 16,017 13,850 Non-interest income Service fees on deposit accounts 308 379 Other loan fees 178 238 Bank owned life insurance income 165 160 Other 170 285 Total non-interest income 821 1,062 Non-interest expense Compensation and benefits 3,291 3,218 Professional services 714 445 Occupancy and equipment 687 641 Data processing 421 366 FDIC insurance and other assessments 350 331 OREO expense 127 353 Other operating expense 948 1,181 Total non-interest expense 6,538 6,535 Income before income tax expense 10,300 8,377 Income tax expense 2,522 2,226 Net income attributable to Company 7,778 6,151 Less: Preferred stock dividend ( 5 ) ( 6 ) Net income available to common shareholders $ 7,773 $ 6,145 Earnings per common share Basic $ 0.66 $ 0.51 Diluted $ 0.65 $ 0.51 Weighted average common shares outstanding Basic 11,836,384 11,958,776 Diluted 12,006,965 12,138,613 See accompanying notes to the unaudited consolidated financial statements 2 Parke Bancorp Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) (Dollars in thousands) For the Three Months Ended March 31, 2025 2024 Net income attributable to the Company $ 7,778 $ 6,151 Unrealized gain (loss) on investment securities 70 ( 35 ) Tax impact on unrealized (gain) loss ( 18 ) 9 Total unrealized gain (loss) on investment securities 52 ( 26 ) Comprehensive income attributable to the Company $ 7,830 $ 6,125 See accompanying notes to the unaudited consolidated financial statements 3 Parke Bancorp, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF EQUITY (unaudited) (Dollars in thousands except share data) Three-months ended March 31, 2025 and 2024 Shares of Preferred Stock Outstanding Preferred Stock Shares of Common Stock issued Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Shareholders' Equity Three Months Ended Balance, December 31, 2023 375 $ 375 12,240,821 $ 1,224 $ 136,700 $ 149,437 $ ( 404 ) $ ( 3,015 ) $ 284,317 Net income attributable to the company — — — — — 6,151 — — 6,151 Common stock options exercised — — 6,522 1 55 — — — 56 Other comprehensive loss — — — — — — ( 26 ) — ( 26 ) Stock compensation expense — — — — 46 — — — 46 Dividend on preferred stock ($ 15.00 per share) — — — — — ( 6 ) — — ( 6 ) Dividend on common stock ($ 0.18 per share) — — — — — ( 2,152 ) — — ( 2,152 ) Balance, March 31, 2024 375 $ 375 12,247,343 $ 1,225 $ 136,801 $ 153,430 $ ( 430 ) $ ( 3,015 ) $ 288,386 Three Months Ended Balance, December 31, 2024 325 $ 325 12,313,489 $ 1,231 $ 137,784 $ 168,347 $ ( 337 ) $ ( 7,277 ) $ 300,073 Net income attributable to the company — — — — — 7,778 — — 7,778 Common stock options exercised — — 14,361 2 97 — — — 99 Other comprehensive income — — — — — — 52 — 52 Stock compensation expense — — — — 70 — — — 70 Dividend on preferred stock ($ 15.00 per share) — — — — — ( 5 ) — — ( 5 ) Dividend on common stock ($ 0.18 per share) — — — — — ( 2,125 ) — — ( 2,125 ) Balance, March 31, 2025 325 $ 325 12,327,850 $ 1,233 $ 137,951 $ 173,995 $ ( 285 ) $ ( 7,277 ) $ 305,942 See accompanying notes to the unaudited consolidated financial statements 4 Parke Bancorp Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Dollars in thousands) For the Three Months Ended March 31, 2025 2024 Cash Flows from Operating Activities: Net income $ 7,778 $ 6,151 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 148 143 Provision for credit losses 590 204 Increase in value of bank owned life insurance ( 165 ) ( 160 ) Net accretion of purchase premiums and discounts on securities ( 10 ) ( 11 ) Stock based compensation 70 46 Net changes in: Decrease in accrued interest receivable and other assets 590 1,836 (Decrease) increase in accrued interest payable and other accrued liabilities ( 2,002 ) 141 Net cash provided by operating activities 6,999 8,350 Cash Flows from Investing Activities: Repayments and maturities of investment securities available for sale 380 415 Repayments and maturities of investment securities held to maturity 120 37 Net (increase) decrease in loans ( 15,021 ) 1,820 Purchases of bank premises and equipment ( 381 ) ( 18 ) Redemptions of restricted stock 3,387 3,600 Purchases of restricted stock ( 1,575 ) ( 2,262 ) Net cash (used in) provided by investing activities ( 13,090 ) 3,592 Cash Flows from Financing Activities: Cash dividends ( 2,130 ) ( 2,158 ) Proceeds from exercise of stock options 99 56 Decrease in FHLBNY long-term borrowings — ( 75,000 ) Net (decrease) increase in FHLBNY short-term borrowings ( 40,000 ) 45,000 Net increase (decrease) in noninterest-bearing deposits 1,311 ( 35,801 ) Net increase in interest-bearing deposits 34,320 46,678 Net cash used in financing activities ( 6,400 ) ( 21,225 ) Net decrease in cash and cash equivalents ( 12,491 ) ( 9,283 ) Cash and Cash Equivalents, January 1, 221,527 180,376 Cash and Cash Equivalents, March 31, $ 209,036 $ 171,093 Supplemental Disclosure of Cash Flow Information: Interest paid $ 18,237 $ 15,171 Income taxes paid $ 210 $ 237 Non-cash Investing and Financing Items Accrued dividends payable $ 2,137 $ 2,158 See accompanying notes to the unaudited consolidated financial statements 5 Notes to Consolidated Financial Statements (Unaudited) NOTE 1. ORGANIZATION Parke Bancorp, Inc. (the “Company, we, us, our”) is a bank holding company headquartered in Sewell, New Jersey. Through subsidiaries, the Company provides individuals, corporations and other businesses and institutions with commercial and retail banking services, principally loans and deposits. The Company was incorporated in January 2005 under the laws of the State of New Jersey for the sole purpose of becoming the holding company of Parke Bank (the "Bank"). The Bank is a commercial bank, which was incorporated on August 25, 1998, and commenced operations on January 28, 1999 . The Bank is chartered by the New Jersey Department of Banking and Insurance and its deposits are insured by the Federal Deposit Insurance Corporation. The Bank maintains its principal office at 601 Delsea Drive, Sewell, New Jersey, and has six additional branch office locations; 501 Tilton Road, Northfield, New Jersey, 567 Egg Harbor Road, Washington Township, New Jersey, 67 East Jimmie Leeds Road, Galloway Township, New Jersey, 1150 Haddon Avenue, Collingswood, New Jersey, 1610 Spruce Street, Philadelphia, Pennsylvania, and 1032 Arch Street, Philadelphia, Pennsylvania. The Bank also has a loan office located at 1817 East Venango Street, Philadelphia, Pennsylvania. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Statement Presentation: We prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Parke Bank (including certain partnership interests). Parke Capital Trust I, Parke Capital Trust II and Parke Capital Trust III are wholly-owned subsidiaries but are not consolidated as they do not meet the requirements for consolidation under applicable accounting guidance. We have eliminated inter-company balances and transactions. We have also reclassified certain prior year amounts to conform to the current year presentation, which did not have a material impact on our consolidated financial condition or results of operations. The accompanying interim financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. The accompanying interim financial statements for the three months ended March 31, 2025 and 2024 are unaudited. The balance sheet as of December 31, 2024, was derived from the audited financial statements. In the opinion of management, these financial statements include all normal and recurring adjustments necessary for a fair statement of the results for such interim periods. Results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results for the full year or any other period. Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the allowance for credit losses, the valuation of deferred income taxes, and the carrying value of other real estate owned ("OREO"). Segment Reporting: The Company operates one reportable segment of business, "community banking". Through its community banking segment, the Company provides a broad range of retail and community banking services. The accounting policies of the community banking segment are the same as those described in the summary of significant accounting policies. The Company's chief operating decision maker ("CODM") is the President, Chief Executive Officer and Director, who decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. 6 The following table presents segment profit and significant expenses. Community Banking Segment (Dollars in thousands) For the Three Months Ended March 31, 2025 2024 Total interest income $ 33,846 $ 29,477 Total interest expense 17,239 15,423 Provision for credit losses 590 204 Net interest income after provision for credit losses 16,017 13,850 Total non-interest income 821 1,062 Total non-interest expense 6,538 6,535 Income before income tax expense 10,300 8,377 Income tax expense 2,522 2,226 Net income attributable to the Company $ 7,778 $ 6,151 Reconciliation of profit or loss Adjustments and reconciling items — — Consolidated net income $ 7,778 $ 6,151 NOTE 3. INVESTMENT SECURITIES The following is a summary of the Company's investments in available for sale and held to maturity securities as of March 31, 2025 and December 31, 2024. None of the securities shown below required an allowance for credit losses. As of March 31, 2025 Amortized cost Gross unrealized gains Gross unrealized losses Fair value (Dollars in thousands) Available for sale: Residential mortgage-backed securities $ 5,620 $ 5 $ 389 $ 5,236 Total available for sale $ 5,620 $ 5 $ 389 $ 5,236 Held to maturity: Residential mortgage-backed securities $ 5,134 $ — $ 1,109 $ 4,025 States and political subdivisions 3,970 — 548 3,422 Total held to maturity $ 9,104 $ — $ 1,657 $ 7,447 7 As of December 31, 2024 Amortized cost Gross unrealized gains Gross unrealized losses Fair value (Dollars in thousands) Available for sale: Residential mortgage-backed securities $ 6,005 $ 2 $ 456 $ 5,551 Total available for sale $ 6,005 $ 2 $ 456 $ 5,551 Held to maturity: Residential mortgage-backed securities $ 5,256 $ — $ 1,205 $ 4,051 States and political subdivisions 3,953 3 515 3,441 Total held to maturity $ 9,209 $ 3 $ 1,720 $ 7,492 The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of March 31, 2025 are as follows: Amortized Cost Fair Value (Dollars in thousands) Available for sale: Due within one year $ — $ — Due after one year through five years 2,496 2,354 Due after five years through ten years 908 831 Due after ten years 2,216 2,051 Total available for sale $ 5,620 $ 5,236 Held to maturity: Due within one year $ — $ — Due after one year through five years 1,498 1,497 Due after five years through ten years 1,507 1,184 Due after ten years 6,099 4,766 Total held to maturity $ 9,104 $ 7,447 Expected maturities may differ from contractual maturities because the issuers of certain debt securities do have the right to call or prepay their obligations without any penalty. The Company did not sell any securities during the three months ended March 31, 2025 or 2024. The following tables show the gross unrealized losses and fair value of the Company's available for sale investments for which an allowance for credit losses has not been recorded, which are aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2025 and December 31, 2024: As of March 31, 2025 Less Than 12 Months 12 Months or Greater Total Description of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (Dollars in thousand) Available for sale: Residential mortgage-backed securities $ 32 $ — $ 4,710 $ 389 $ 4,742 $ 389 Total available for sale $ 32 $ — $ 4,710 $ 389 $ 4,742 $ 389 8 As of December 31, 2024 Less Than 12 Months 12 Months or Greater Total Description of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (Dollars in thousands) Available for sale: Residential mortgage-backed securities $ 80 $ 1 $ 4,973 $ 455 $ 5,053 $ 456 Total available for sale $ 80 $ 1 $ 4,973 $ 455 $ 5,053 $ 456 On at least a quarterly basis, we review all debt securities that are in an unrealized loss position for a credit loss. An investment security is deemed impaired if the fair value of the investment is less than its amortized cost. Amortized cost includes adjustments (if any) made to the cost basis of an investment for accretion, amortization, and previous other-than-temporary impairments. For individual debt securities classified as available for sale, we determine whether a decline in fair value below the amortized cost has resulted from a credit loss or other factors. If the decline in fair value is due to credit, we will record the portion of the impairment loss relating to credit through an allowance for credit losses. Impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes. The Company’s unrealized loss for the debt securities classified as available for sale is comprised of 5 securities in the less than 12 months loss position and 14 securities in the 12 months or greater loss position at March 31, 2025. These securities are mortgage-backed securities that had unrealized losses issued or guaranteed by the US government or US government sponsored entities. The unrealized losses associated with those mortgage-backed securities are generally driven by changes in interest rates and are not due to credit losses given the explicit or implicit guarantees provided by the U.S. government. Because the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, the Company does not consider the unrealized loss in these securities to be credit losses at March 31, 2025. The Company classifies the held-to-maturity debt securities into the following major security types: residential mortgage backed, and state and political subdivisions. These securities are highly rated with a history of no credit losses, and are assigned ratings based on the most recent data from ratings agencies depending on the availability of data for the security. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis. Based on the credit ratings of our held-to-maturity securities and our historical experience including no losses, we have determined that an allowance for credit loss on the held-to-maturity portfolio is not required. Because the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, the Company does not consider the unrealized loss in these securities to be credit losses at March 31, 2025. NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS At March 31, 2025 and December 31, 2024, the Company had $ 1.88 billion and $ 1.87 billion, respectively, in loans receivable outstanding. Outstanding balances include $ 1.3 million and $ 1.8 million at March 31, 2025 and December 31, 2024, respectively, for net deferred loan costs, and unamortized discounts. 9 The portfolio segments of loans receivable at March 31, 2025 and December 31, 2024, consist of the following: March 31, 2025 December 31, 2024 (Dollars in thousands) Commercial and Industrial $ 33,786 $ 35,381 Construction 126,462 149,346 Real Estate Mortgage: Commercial – Owner Occupied 175,156 160,441 Commercial – Non-owner Occupied 405,827 371,298 Residential – 1 to 4 Family 453,345 447,880 Residential – 1 to 4 Family Investment 505,418 524,167 Residential – Multifamily 178,477 174,756 Consumer 4,704 4,884 Total Loan receivable 1,883,175 1,868,153 Allowance for credit losses on loans ( 33,091 ) ( 32,573 ) Total loan receivable, net of allowance for credit losses on loans $ 1,850,084 $ 1,835,580 An age analysis of past due loans by class at March 31, 2025 and December 31, 2024 is as follows: March 31, 2025 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Total Past Due Current Total Loans (Dollars in Thousands) Commercial and Industrial $ — $ — $ 675 $ 675 $ 33,111 $ 33,786 Construction — — 1,091 1,091 125,371 126,462 Real Estate Mortgage: Commercial – Owner Occupied 177 — 400 577 174,579 175,156 Commercial – Non-owner Occupied 184 — 5,102 5,286 400,541 405,827 Residential – 1 to 4 Family 1,573 428 2,514 4,515 448,830 453,345 Residential – 1 to 4 Family Investment 624 — 1,603 2,227 503,191 505,418 Residential – Multifamily — — — — 178,477 178,477 Consumer 93 — — 93 4,611 4,704 Total Loans $ 2,651 $ 428 $ 11,385 $ 14,464 $ 1,868,711 $ 1,883,175 10 December 31, 2024 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Total Past Due Current Total Loans (Dollars in thousands) Commercial and Industrial $ — $ — $ 684 $ 684 $ 34,697 $ 35,381 Construction — — 1,091 1,091 148,255 149,346 Real Estate Mortgage: Commercial – Owner Occupied — — 400 400 160,041 160,441 Commercial – Non-owner Occupied — — 5,485 5,485 365,813 371,298 Residential – 1 to 4 Family 223 362 2,883 3,468 444,412 447,880 Residential – 1 to 4 Family Investment — 454 1,609 2,063 522,104 524,167 Residential – Multifamily — — — — 174,756 174,756 Consumer 34 — — 34 4,850 4,884 Total Loans $ 257 $ 816 $ 12,152 $ 13,225 $ 1,854,928 $ 1,868,153 The following table provides the amortized cost of loans on nonaccrual status: March 31, 2025 (amounts in thousands) Nonaccrual with no ACL Nonaccrual with ACL Total Nonaccrual Loans Past Due Over 90 Days Still Accruing Total Nonperforming Commercial and Industrial $ — $ 675 $ 675 $ — $ 675 Construction 1,091 — 1,091 — 1,091 Commercial - Owner Occupied 400 — 400 — 400 Commercial - Non-owner Occupied 1,024 3,806 4,830 272 5,102 Residential - 1 to 4 Family 2,133 381 2,514 — 2,514 Residential - 1 to 4 Family Investment 1,603 — 1,603 — 1,603 Residential - Multifamily — — — — — Consumer — — — — — Total $ 6,251 $ 4,862 $ 11,113 $ 272 $ 11,385 11 December 31, 2024 (amounts in thousands) Nonaccrual with no ACL Nonaccrual with ACL Total Nonaccrual Loans Past Due Over 90 Days Still Accruing Total Nonperforming Commercial and Industrial $ — $ 684 $ 684 $ — $ 684 Construction 1,091 — 1,091 — 1,091 Commercial - Owner Occupied 400 — 400 — 400 Commercial - Non-owner Occupied 1,389 3,806 5,195 290 5,485 Residential - 1 to 4 Family 2,048 746 2,794 89 2,883 Residential - 1 to 4 Family Investment 1,609 — 1,609 — 1,609 Residential - Multifamily — — — — — Consumer — — — — — Total $ 6,537 $ 5,236 $ 11,773 $ 379 $ 12,152 Allowance for Credit Losses on Off-Balance Sheet Credit Exposures The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted through the provision for 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. At March 31, 2025 and December 31, 2024, the allowance for credit losses on off-balance sheet credit exposures was $ 940.0 thousand and $ 867.0 thousand, respectively, on exposures totaling $ 186.7 million and $ 172.2 million, respectively. The provision for credit losses on off balance sheet exposures during the three month period ending March 31, 2025 and 2024 were $ 73.0 thousand and $ 439.0 thousand, respectively. Allowance for Credit Losses (ACL) The following tables present the information regarding the allowance for credit losses for the three months ended March 31, 2025 and 2024: Real Estate Mortgage Commercial and Industrial Construction Commercial Owner Occupied Commercial Non-owner Occupied Residential 1 to 4 Family Residential 1 to 4 Family Investment Residential Multifamily Consumer Total (Dollars in thousands) Three months ended March 31, 2025 December 31, 2024 $ 1,097 $ 3,037 $ 1,871 $ 6,300 $ 9,166 $ 8,832 $ 2,203 $ 67 $ 32,573 Charge-offs — — — — — — — — — Recoveries 1 — — — — — — — 1 Provisions (benefits) ( 50 ) ( 762 ) 599 1,061 ( 352 ) 23 ( 1 ) ( 1 ) 517 Ending Balance at March 31, 2025 $ 1,048 $ 2,275 $ 2,470 $ 7,361 $ 8,814 $ 8,855 $ 2,202 $ 66 $ 33,091 During the quarter, the increase to the Commercial Owner Occupied, and the Commercial Non-owner Occupied portfolio's was due to an increase in the portfolio balances that increased the loan exposure and also caused changes to the qualitative factors related to concentration levels within the portfolio segments. The provision benefit during the quarter to the Construction segment is due to a decrease in the portfolio balance that decreased the loan exposure and also caused changes to the qualitative factors related to concentration levels within the portfolio segments. 12 Real Estate Mortgage Commercial and Industrial Construction Commercial Owner Occupied Commercial Non-owner Occupied Residential 1 to 4 Family Residential 1 to 4 Family Investment Residential Multifamily Consumer Total (Dollars in thousands) Three months ended March 31, 2024 December 31, 2023 $ 926 $ 3,347 $ 1,795 $ 7,108 $ 9,061 $ 8,783 $ 1,049 $ 62 $ 32,131 Charge-offs — — — — — — — — — Recoveries 22 — — — — — — — 22 Provisions (benefits) 112 ( 314 ) ( 104 ) ( 1,722 ) 274 813 698 8 ( 235 ) Ending Balance at March 31, 2024 $ 1,060 $ 3,033 $ 1,691 $ 5,386 $ 9,335 $ 9,596 $ 1,747 $ 70 $ 31,918 During the quarter, the increase to the Residential Multifamily portfolio was due to an increase in the portfolio balance that increased the loan exposure and also caused changes to the qualitative factors related to concentration levels within the portfolio segments. The increase to the Residential 1 to 4 Family Investment portfolio is driven by changes to the qualitative factors related to concentration levels within the portfolio segments. The provision benefit during the quarter to the Commercial Non-owner Occupied segment was mainly due to a decrease in the problem loan balance as well as a decrease in the portfolio balance. Collateral-Dependent Loans The following table presents the collateral-dependent loans by portfolio segment and collateral type at March 31, 2025: (amounts in thousands) Real Estate Business Assets Other Commercial and Industrial $ 675 $ — $ — Construction 1,091 — — Commercial - Owner Occupied 400 — — Commercial - Non-owner Occupied 5,102 — — Residential - 1 to 4 Family 2,514 — — Residential - 1 to 4 Family Investment 1,603 — — Residential - Multifamily — — — Consumer — — — Total $ 11,385 $ — $ — 13 The following table presents the collateral-dependent loans by portfolio segment and collateral type at December 31, 2024: (amounts in thousands) Real Estate Business Assets Other Commercial and Industrial $ 684 $ — $ — Construction 1,091 — — Commercial - Owner Occupied 400 — — Commercial - Non-owner Occupied 5,195 — — Residential - 1 to 4 Family 2,794 — — Residential - 1 to 4 Family Investment 1,609 — — Residential - Multifamily — — — Consumer — — — Total $ 11,773 $ — $ — Credit Quality Indicators : As part of the on-going monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality indicators including trends related to the risk grades of loans, the level of classified loans, net charge-offs, nonperforming loans (see details above) and the general economic conditions in the region. The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 7. Grades 1 through 4 are considered “Pass”. A description of the general characteristics of the seven risk grades is as follows: 1. Good : Borrower exhibits the strongest overall financial condition and represents the most creditworthy profile. 2. Satisfactory (A) : Borrower reflects a well-balanced financial condition, demonstrates a high level of creditworthiness and typically will have a strong banking relationship with the Bank. 3. Satisfactory (B) : Borrower exhibits a balanced financial condition and does not expose the Bank to more than a normal or average overall amount of risk. Loans are considered fully collectable. 4. Watch List : Borrower reflects a fair financial condition, but there exists an overall greater than average risk. Risk is deemed acceptable by virtue of increased monitoring and control over borrowings. Probability of timely repayment is present. 5. Other Assets Especially Mentioned (OAEM) : Financial condition is such that assets in this category have a potential weakness or pose unwarranted financial risk to the Bank even though the asset value is not currently individually evaluated. The asset does not currently warrant adverse classification but if not corrected could weaken and could create future increased risk exposure. Includes loans that require an increased degree of monitoring or servicing as a result of internal or external changes. 6. Substandard : This classification represents more severe cases of #5 (OAEM) characteristics that require increased monitoring. Assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Assets are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral. Asset has a well-defined weakness or weaknesses that impairs the ability to repay debt and jeopardizes the timely liquidation or realization of the collateral at the asset’s net book value. 7. Doubtful : Assets which have all the weaknesses inherent in those assets classified #6 (Substandard) but the risks are more severe relative to financial deterioration in capital and/or asset value; accounting/evaluation techniques may be questionable and the overall possibility for collection in full is highly improbable. Borrowers in this category require constant monitoring, are considered work-out loans and present the potential for future loss to the Bank. 14 The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses, as of March 31, 2025. (Dollars in thousands) Term Loans Amortized Cost Basis by Origination Year Revolving Loans at Amortized Cost Basis As of March 31, 2025 2025 2024 2023 2022 2021 Prior Total Commercial and Industrial Pass $ 275 $ 1,250 $ 4,033 $ 908 $ 5 $ 5,862 $ 20,778 $ 33,111 OAEM — — — — — — — — Substandard — — — — — — 675 675 Doubtful — — — — — — — — $ 275 $ 1,250 $ 4,033 $ 908 $ 5 $ 5,862 $ 21,453 $ 33,786 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Construction Pass $ — $ 196 $ 313 $ 1,400 $ — $ 665 $ 122,797 $ 125,371 OAEM — — — — — — — — Substandard — — — — — 1,091 — 1,091 Doubtful — — — — — — — — $ — $ 196 $ 313 $ 1,400 $ — $ 1,756 $ 122,797 $ 126,462 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial – Owner Occupied Pass $ 15,515 $ 23,534 $ 33,072 $ 34,566 $ 11,849 $ 55,894 $ 326 $ 174,756 OAEM — — — — — — — — Substandard — — — — — 400 — 400 Doubtful — — — — — — — — $ 15,515 $ 23,534 $ 33,072 $ 34,566 $ 11,849 $ 56,294 $ 326 $ 175,156 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial – Non-owner Occupied Pass $ 24,253 $ 37,231 $ 15,102 $ 93,343 $ 30,966 $ 174,132 $ 14,191 $ 389,218 OAEM — — — — — — — — Substandard — — — — — 16,609 — 16,609 Doubtful — — — — — — — — $ 24,253 $ 37,231 $ 15,102 $ 93,343 $ 30,966 $ 190,741 $ 14,191 $ 405,827 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential – 1 to 4 Family Performing $ 11,076 $ 47,321 $ 52,100 $ 104,790 $ 54,002 $ 175,746 $ 5,709 $ 450,744 Nonperforming — — 572 359 — 1,670 — 2,601 $ 11,076 $ 47,321 $ 52,672 $ 105,149 $ 54,002 $ 177,416 $ 5,709 $ 453,345 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — 15 Residential – 1 to 4 Family Investment Performing $ 8,691 $ 56,814 $ 77,090 $ 124,486 $ 98,961 $ 137,596 $ — $ 503,638 Nonperforming — — 994 609 — 177 — 1,780 $ 8,691 $ 56,814 $ 78,084 $ 125,095 $ 98,961 $ 137,773 $ — $ 505,418 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential – Multifamily Pass $ 7,907 $ 4,668 $ 4,921 $ 92,603 $ 25,234 $ 43,144 $ — $ 178,477 OAEM — — — — — — — $ — Substandard — — — — — — — $ — Doubtful — — — — — — — — $ 7,907 $ 4,668 $ 4,921 $ 92,603 $ 25,234 $ 43,144 $ — $ 178,477 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Consumer Performing $ — $ 241 $ — $ — $ — $ 4,452 $ 11 $ 4,704 Nonperforming — — — — — — — — $ — $ 241 $ — $ — $ — $ 4,452 $ 11 $ 4,704 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Total Loan Receivable $ 67,717 $ 171,255 $ 188,197 $ 453,064 $ 221,017 $ 617,438 $ 164,487 $ 1,883,175 As of March 31, 2025, the Company was in the process of foreclosing on 22 residential 1 to 4 family loans with a principal balance of $ 4.7 million. The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses, as of December 31, 2024. (Dollars in thousands) Term Loans Amortized Cost Basis by Origination Year Revolving Loans at Amortized Cost Basis As of December 31, 2024 2024 2023 2022 2021 2020 Prior Total Commercial and Industrial Pass $ 1,351 $ 4,231 $ 654 $ 6 $ 658 $ 6,213 $ 21,584 $ 34,697 OAEM — — — — — — — — Substandard — — 407 — — — 277 684 Doubtful — — — — — — — — $ 1,351 $ 4,231 $ 1,061 $ 6 $ 658 $ 6,213 $ 21,861 $ 35,381 Current period gross charge-offs $ — $ — $ — $ — $ — $ 22 $ — $ 22 Construction Pass $ — $ 315 $ 1,800 $ — $ 193 $ — $ 145,947 $ 148,255 OAEM — — — — — — — — Substandard — — — — — 1,091 — 1,091 Doubtful — — — — — — — — $ — $ 315 $ 1,800 $ — $ 193 $ 1,091 $ 145,947 $ 149,346 16 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial – Owner Occupied Pass $ 21,893 $ 33,293 $ 34,831 $ 11,942 $ 6,705 $ 48,946 $ 2,431 $ 160,041 OAEM — — — — — — — — Substandard — — — — — 400 — 400 Doubtful — — — — — — — — $ 21,893 $ 33,293 $ 34,831 $ 11,942 $ 6,705 $ 49,346 $ 2,431 $ 160,441 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial – Non-owner Occupied Pass $ 38,697 $ 15,635 $ 75,261 $ 31,460 $ 23,780 $ 153,027 $ 16,494 $ 354,354 OAEM — — — — — 11,459 — 11,459 Substandard — — — — 249 4,946 290 5,485 Doubtful — — — — — — — — $ 38,697 $ 15,635 $ 75,261 $ 31,460 $ 24,029 $ 169,432 $ 16,784 $ 371,298 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential – 1 to 4 Family Performing $ 48,704 $ 53,018 $ 108,691 $ 56,027 $ 29,580 $ 145,467 $ 3,510 $ 444,997 Nonperforming — 644 375 — 602 1,262 — 2,883 $ 48,704 $ 53,662 $ 109,066 $ 56,027 $ 30,182 $ 146,729 $ 3,510 $ 447,880 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential – 1 to 4 Family Investment Performing $ 58,772 $ 79,266 $ 127,600 $ 103,343 $ 44,301 $ 109,276 $ — $ 522,558 Nonperforming — 995 614 — — — — $ 1,609 $ 58,772 $ 80,261 $ 128,214 $ 103,343 $ 44,301 $ 109,276 $ — $ 524,167 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential – Multifamily Pass $ 6,770 $ 4,942 $ 92,918 $ 25,410 $ 9,150 $ 35,566 $ — $ 174,756 OAEM — — — — — — — $ — Substandard — — — — — — — $ — Doubtful — — — — — — — — $ 6,770 $ 4,942 $ 92,918 $ 25,410 $ 9,150 $ 35,566 $ — $ 174,756 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Consumer Performing $ 246 $ — $ — $ — $ — $ 4,627 $ 11 $ 4,884 Nonperforming — — — — — — — — $ 246 $ — $ — $ — $ — $ 4,627 $ 11 $ 4,884 Current period gross charge-offs $ — $ — $ — $ — $ — $ 21 $ — $ 21 17 Total Loan Receivable $ 176,434 $ 192,338 $ 443,151 $ 228,189 $ 115,219 $ 522,571 $ 190,251 $ 1,868,153 Modifications to Borrowers Experiencing Financial Difficulty During the periods ended March 31, 2025 and 2024, the Company did not make any modifications to borrowers experiencing financial difficulty. NOTE 5. EARNINGS PER SHARE (“EPS”) The following tables set forth the calculation of basic and diluted EPS for the three-month periods ended March 31, 2025 and 2024. Three months ended March 31, 2025 2024 (Dollars in thousands except share and per share data) Basic earnings per common share Net income available to the Company $ 7,778 $ 6,151 Less: Dividend on series B preferred stock ( 5 ) ( 6 ) Net income available to common shareholders 7,773 6,145 Basic weighted-average common shares outstanding 11,836,384 11,958,776 Basic earnings per common share $ 0.66 $ 0.51 Diluted earnings per common share Net income available to common shares $ 7,773 $ 6,145 Add: Dividend on series B preferred stock 5 6 Net income available to diluted common shares 7,778 6,151 Basic weighted-average common shares outstanding 11,836,384 11,958,776 Dilutive potential common shares 170,581 179,837 Diluted weighted-average common shares outstanding 12,006,965 12,138,613 Diluted earnings per common share $ 0.65 $ 0.51 As of March 31, 2025 and December 31, 2024, there were 323,005 and 191,375 weighted average option shares outstanding, respectively, that were not included in the computation of diluted EPS because these shares were anti-dilutive. NOTE 6. FAIR VALUE Fair Value Measurements The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its assets and liabilities carried at fair value in three levels as follows: Level 1 Input: 1) Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 18 Level 2 Inputs: 1) Quoted prices for similar assets or liabilities in active markets. 2) Quoted prices for identical or similar assets or liabilities in markets that are not active. 3) Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (e.g., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.” Level 3 Inputs: 1) Prices or valuation techniques that require inputs that are both unobservable (i.e. supported by little or no market activity) and that are significant to the fair value of the assets or liabilities. 2) These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Fair Value on a Recurring Basis: The following is a description of the Company’s valuation methodologies for assets carried at fair value on a recurring basis. These methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes that its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting measurement date. Investments in Available for Sale Securities: Where quoted prices are available in an active market, securities or other assets are classified in Level 1 of the valuation hierarchy. If quoted market prices are not available for the specific security or available for sale loans, then fair values are provided by independent third-party valuation services. These valuation services estimate fair values using pricing models and other accepted valuation methodologies, such as quotes for similar securities and observable yield curves and spreads. As part of the Company’s overall valuation process, management evaluates these third-party methodologies to ensure that they are representative of exit prices in the Company’s principal markets. Securities in Level 2 are mortgage-backed securities. The table below presents the balances of assets and liabilities measured at fair value on a recurring basis. Financial Assets Level 1 Level 2 Level 3 Total (Dollars in thousands) Available for Sale Securities As of March 31, 2025 Residential mortgage-backed securities $ — $ 5,236 $ — $ 5,236 Total $ — $ 5,236 $ — $ 5,236 As of December 31, 2024 Residential mortgage-backed securities $ — $ 5,551 $ — $ 5,551 Total $ — $ 5,551 $ — $ 5,551 For the three months ended March 31, 2025, there were no transfers between the levels within the fair value hierarchy. There were no level 3 assets or liabilities held during the three months ended March 31, 2025 and 2024. Fair Value on a Non-recurring Basis: Certain assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). 19 Financial Assets Level 1 Level 2 Level 3 Total (Dollars in thousands) As of March 31, 2025 Collateral-dependent loans $ — $ — $ 5,266 $ 5,266 OREO — — 1,562 1,562 As of December 31, 2024 Collateral-dependent loans $ — $ — $ 5,189 $ 5,189 OREO — — 1,562 1,562 Collateral-dependent loans are those loans that are accounted for under ASC 326, Financial Instruments - Credit Losses ("ASC 326"), in which the Bank has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties that collateralize the loans. If the loan balance exceeds the fair value of the collateral, a specific reserve is applied and these assets are generally classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. OREO consists of real estate properties that are recorded at fair value based upon current appraised value, or agreements of sale, less estimated disposition costs using level 3 inputs. Properties are reappraised annually. Fair Value of Financial Instruments The Company discloses estimated fair values for its significant financial instruments in accordance with FASB ASC (Topic 825), “ Disclosures about Fair Value of Financial Instruments ”. The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument. These instruments include cash and cash equivalents, accrued interest receivable, bank owned life insurance, Federal Home Loan Bank of New York ("FHLBNY") restricted stock, demand and other non-maturity deposits and accrued interest payable, and they are considered to be level 1 measurements. The following table summarizes the carrying amounts and fair values for financial instruments that are not carried at fair value at March 31, 2025 and December 31, 2024: March 31, 2025 Carrying Amount Fair Value Total Level 1 Level 2 Level 3 (Dollars in thousands) Financial Assets: Investment securities HTM $ 9,104 $ 7,447 $ — $ 7,447 $ — Loans, net 1,850,084 1,854,772 — 1,829,272 25,500 Financial Liabilities: Time deposits $ 626,796 $ 627,812 $ — $ 627,812 $ — Borrowings 148,348 148,885 — 148,885 — 20 December 31, 2024 Carrying Amount Fair Value Total Level 1 Level 2 Level 3 (Dollars in thousands) Financial Assets: Investment securities HTM $ 9,209 $ 7,492 $ — $ 7,492 $ — Loans, net 1,835,580 1,834,007 — 1,822,203 11,804 Financial Liabilities: Time deposits $ 715,158 $ 716,904 $ — $ 716,904 $ — Borrowings 188,300 189,621 — 189,621 — NOTE 7. COMMITMENTS AND CONTINGENCIES The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheet. The contract or notional amounts of these instruments reflect the extent of the Company’s involvement in these particular classes of financial instruments. The Company’s exposure to the maximum possible credit risk in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Company evaluates each customer’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable; inventory; property, plant and equipment and income-producing commercial properties. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments to fund fixed-rate loans were immaterial at March 31, 2025. Variable-rate commitments are generally issued for less than one year and carry market rates of interest. Such instruments are not likely to be affected by annual rate caps triggered by rising interest rates. As of March 31, 2025 and December 31, 2024, unused commitments to extend credit amounted to approximately $ 137.5 million and $ 122.5 million, respectively. At March 31, 2025 and December 31, 2024, the allowance for credit losses on off-balance sheet credit exposures was $ 940.0 thousand and $ 867.0 thousand, respectively, an increase of $ 73.0 thousand, mainly due to the increase in the unused commitment balance. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. As of March 31, 2025 and December 31, 2024, standby letters of credit with customers were $ 0.6 million and $ 0.6 million, respectively. On March 31, 2025, the Bank entered into an agreement with the FHLBNY for a Municipal Letter of Credit ("MLOC") of $ 40.0 million. The MLOC is used to pledge against public deposits and the MLOC expires on June 30, 2025. There were no outstanding borrowings on the letters of credit as of March 31, 2025. The Company also has entered into an employment contract with the President of the Company, which provides for continued payment of certain employment salary and benefits prior to the expiration date of the agreement and in the event of a change in control, as defined. The Company has also entered in Change-in-Control Severance Agreements with certain officers which provide for the payment of severance in certain circumstances following a change in control. We provide banking services to customers that are licensed by various States to do business in the cannabis industry as growers, processors and dispensaries. Cannabis businesses are legal in these States, although they are not legal at the federal level. The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published guidelines in 2014 for financial institutions servicing state legal cannabis businesses. A financial institution that provides services to cannabis-related businesses can comply with Bank Secrecy Act (“BSA”) disclosure standards by following the FinCEN guidelines. We maintain stringent written policies and procedures related to the acceptance of such businesses and to the monitoring and maintenance of such 21 business accounts. We conduct a significant due diligence review of the cannabis business before the business is accepted, including confirmation that the business is properly licensed by the applicable state. Throughout the relationship, we continue monitoring the business, including site visits, to ensure that the business continues to meet our stringent requirements, including maintenance of required licenses and periodic financial reviews of the business. While we believe we are operating in compliance with the FinCEN guidelines, there can be no assurance that federal enforcement guidelines will not change. Federal prosecutors have significant discretion and there can be no assurance that the federal prosecutors will not choose to strictly enforce the federal laws governing cannabis. Any change in the Federal government’s enforcement position, could cause us to immediately cease providing banking services to the cannabis industry. At March 31, 2025 and December 31, 2024, deposit balances from cannabis customers were approximately $ 196.0 million and $ 151.9 million, or 11.8 % and 9.3 % of total deposits, respectively, with two customers accounting for 66.4 % and 59.3 % of the total at March 31, 2025 and December 31, 2024. At March 31, 2025 and December 31, 2024, there were cannabis-related loans in the amounts of $ 44.9 million and $ 43.4 million, respectively. 22