What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-05-06 · 104 added, 61 removed, 196 unchanged (46% of the section changed)

57 unchanged sentences

The Company's non-interest expense primarily consists of employee compensation, administration, and other operating expenses.

At March 31, 2026, we had total assets of $2.21 billion, and total equity of $335.6 million.

Net income available to common shareholders for the three months ended March 31, 2026 was $11.8 million.

At June 30, 2026, we had total assets of $2.30 billion, and total equity of $346.1 million.

Net income available to common shareholders for the three and six months ended June 30, 2026 was $12.2 million, and $24.1 million, respectively.

Results of Operations

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Our net income available to common shareholders for the three months ended March 31, 2026 increased $4.1 million, or 52.3%, to $11.8 million, compared to $7.8 million for the three months ended March 31, 2025.

Earnings per share were $1.01 per basic common share and $0.99 per diluted common share for the three months ended March 31, 2026, compared to $0.66 per basic common share and $0.65 per diluted common share for the same period last year.

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025

Our net income available to common shareholders for the three months ended June 30, 2026 increased $4.0 million, or 47.8%, to $12.2 million, compared to $8.3 million for the three months ended June 30, 2025.

Earnings per share were $1.04 per basic common share and $1.03 per diluted common share for the three months ended June 30, 2026, compared to $0.70 per basic common share and $0.69 per diluted common share for the same period last year.

The increase was primarily due to an increase in net interest income and a decrease in the provision for credit losses, partially offset by an increase in non-interest expense.

Net Interest Income :

Our net interest income was $23.0 million for the second quarter of 2026 compared to $17.9 million for the second quarter of 2025, an increase of $5.1 million, or 28.8%.

Net interest income increased during the three months ended June 30, 2026, primarily due to an increase in interest and fees on loans, and a decrease in interest expense on deposits and borrowings, partially offset by a decrease in interest on deposits with banks.

Interest income increased $3.4 million, or 9.8%, during the three months ended June 30, 2026 as compared to the same period in the prior year.

The increase in interest income was primarily due to an increase of $4.2 million in interest and fees on loans, due to higher loan balances and market interest rates.

Interest from deposits with banks decreased $0.8 million during the three months ended June 30, 2026 as compared to the same period in the prior year, primarily due to lower average cash balances held at the Federal Reserve Bank ("FRB") and lower interest earning rates.

The increase in net interest income was also due to a decrease in interest expense on deposits during the three months ended June 30, 2026 of $1.4 million, or 9.3%, primarily due to a decrease in interest rates, partially offset by an increase in balances outstanding.

Interest expense on borrowings decreased during the three months ended June 30, 2026, by $0.3 million, or 31.3%, as compared to the same period in the prior year, due to a decrease in interest rates paid on borrowings, partially offset by an increase in balances outstanding.

Provision for credit losses :

For the three months ended June 30, 2026, the provision for credit losses was $0.7 million, compared to a provision for credit losses of $1.0 million for the three months ended June 30, 2025, a decrease of $0.3 million.

The decrease in the provision for credit losses for the three months ended June 30, 2026, was due to a decrease in loan balance during the three months ended June 30, 2026, as compared to an increase in loan balances during the same period in 2025, partially offset by an increase in charge-offs during the three months ended June 30, 2026.

The increase in charge-offs was primarily due to one Commercial Non-owner Occupied, distressed office building, which was repossessed and transferred to Other Real Estate Owned.

Non-interest Income :

Our non-interest income was $0.9 million for the three months ended June 30, 2026, an increase of $61.0 thousand, compared to $0.8 million for the three months ended June 30, 2025.

The increase is primarily attributable to an increase in bank owned life insurance ("BOLI") income, compared to the same period in 2025.

Non-interest Expense :

Our non-interest expense increased $0.2 million, or 3.6%, for the three months ended June 30, 2026, from the three months ended June 30, 2025 , to $6.9 million.

The increase was primarily driven by an increase in compensation and benefits of $0.3 million, and an increase in other operating expense of $0.1 million, partially offset by a decrease in data processing expense of $0.2 million, for the three months ended June 30, 2026, compared to the same period in 2025.

Income tax expense was $4.0 million on income before taxes of $16.3 million for the three months ended June 30, 2026, resulting in an effective tax rate of 24.9%, compared to income tax expense of $2.7 million on income before taxes of $11.0 million for the same period of 2025, resulting in an effective tax rate of 24.9%.

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

Our net income available to common shareholders for the six months ended June 30, 2026 increased $8.0 million, or 50.0%, to $24.1 million, compared to $16.1 million for the six months ended June 30, 2025.

Earnings per share were $2.05 per basic common share and $2.02 per diluted common share for the six months ended June 30, 2026, compared to $1.36 per basic common share and $1.34 per diluted common share for the same period last year.

The increase was primarily due to an increase in net interest income and a decrease in provision for credit losses, partially offset by an increase in non-interest expense.

Net Interest Income :

Our net interest income was $22.1 million for the first quarter of 2026 compared to $16.6 million for the first quarter of 2025, an increase of $5.5 million, or 33.3%.

Net interest income increased during the three months ended March 31, 2026, primarily due to an increase in interest and fees on loans, and a decrease in interest expense on deposits and borrowings, partially offset by a decrease in interest on deposits with banks.

Interest income increased $3.1 million, or 9.1%, during the three months ended March 31, 2026 as compared to the same period in the prior year.

Our net interest income was $45.1 million for the six months ended June 30, 2026 compared to $34.5 million for the six months ended June 30, 2025, an increase of $10.7 million, or 30.9%.

Net interest income increased during the six months ended June 30, 2026, primarily due to an increase in interest and fees on loans, and a decrease in interest expense on deposits and borrowings, partially offset by a decrease in interest on deposits with banks.

Interest income increased $6.5 million, or 9.5%, during the six months ended June 30, 2026 as compared to the same period in the prior year.

The increase in interest income was primarily due to an increase of $8.6 million in interest and fees on loans, due to higher loan balances and market interest rates.

Interest from deposits with banks decreased $1.3 million during the three months ended March 31, 2026 as compared to the same period in the prior year, primarily due to lower average cash balances held at the Federal Reserve Bank ("FRB") and lower interest earning rates.

The increase in net interest income was also due to a decrease in interest expense on deposits during the three months ended March 31, 2026 of $1.7 million, or 11.5%, primarily due to a decrease in interest rates.

Interest expense on borrowings decreased during the three months ended March 31, 2026, by $0.7 million, or 33.3%, as compared to the same period in the prior year, due to a decrease in average balances outstanding and a decrease in interest rates paid on borrowings.

Interest from deposits with banks decreased $2.0 million during the six months ended June 30, 2026 as compared to the same period in the prior year, primarily due to lower average cash balances held at the Federal Reserve Bank ("FRB") and lower interest earning rates.

The increase in net interest income was also due to a decrease in interest expense on deposits during the six months ended June 30, 2026 of $3.1 million, or 10.4%, primarily due to a decrease in interest rates, partially offset by an increase in balances outstanding.

Interest expense on borrowings decreased during the six months ended June 30, 2026, by $1.0 million, or 24.4%, as compared to the same period in the prior year, due to a decrease in interest rates paid on borrowings and, to a lesser extent, a decrease in the average borrowings during the period.

Provision for credit losses :

For the three months ended March 31, 2026, the provision for credit losses was $0.2 million, compared to a provision for credit losses of $0.6 million for the three months ended March 31, 2025, a decrease of $0.4 million.

The decrease in the provision for credit losses for the three months ended March 31, 2026, was primarily due to lower growth in loans during the three months ended March 31, 2026, compared to the same period in 2025.

For the six months ended June 30, 2026, the provision for credit losses was $0.9 million, compared to a provision for credit losses of $1.6 million for the six months ended June 30, 2025, a decrease of $0.7 million.

The decrease in the provision for credit losses for the six months ended June 30, 2026, was primarily due to a decrease in loan balances from December 31, 2025, partially offset by an increase in charge-offs during the six months ended June 30, 2026.

Non-interest Income :

Our non-interest income was $0.9 million for the three months ended March 31, 2026, an increase of $32.0 thousand, compared to $0.8 million for the three months ended March 31, 2025.

Our non-interest income was $1.7 million for the six months ended June 30, 2026, an increase of $0.1 million, compared to $1.6 million for the six months ended June 30, 2025.

The increase is primarily attributable to an increase in bank owned life insurance ("BOLI") income, compared to the same period in 2025.

Non-interest Expense :

Our non-interest expense increased $0.7 million, or 10.4%, for the three months ended March 31, 2026, from the three months ended March 31, 2025 , to $7.2 million.

The increase was primarily driven by an increase in compensation and benefits of $0.4 million, and an increase in other operating expense of $0.4 million, partially offset by a decrease in professional services of $0.1 million, for the three months ended March 31, 2026, compared to the same period in 2025.

Income tax expense was $3.7 million on income before taxes of $15.6 million for the three months ended March 31, 2026, resulting in an effective tax rate of 23.9%, compared to income tax expense of $2.5 million on income before taxes of $10.3 million for the same period of 2025, resulting in an effective tax rate of 24.5%.

Our non-interest expense increased $0.9 million, or 6.9%, for the six months ended June 30, 2026, from the six months ended June 30, 2025 , to $14.1 million.

The increase was primarily driven by an increase in compensation and benefits of $0.7 million, and an increase in other operating expense of $0.5 million, partially offset by a decrease in data processing expense of $0.3 million, for the six months ended June 30, 2026, compared to the same period in 2025.

Income tax expense was $7.8 million on income before taxes of $31.9 million for the six months ended June 30, 2026, resulting in an effective tax rate of 24.4%, compared to income tax expense of $5.3 million on income before taxes of $21.3 million for the same period of 2025, resulting in an effective tax rate of 24.7%.

Net Interest Income

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The following tables presents the average daily balances of assets, liabilities and equity and the respective interest earned or paid on interest-earning assets and interest-bearing liabilities, as well as average annualized rates, for the periods indicated.

For the Three Months Ended March 31,

For the Three Months Ended June 30,

(Dollars in thousands)

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Includes balances of FHLBNY and ACBB stock.

For the Six Months Ended June 30,

(Dollars in thousands)

Investment securities**

Interest bearing deposits

Total interest-earning assets

Allowance for credit losses

Liabilities and Shareholders’ Equity

Interest bearing deposits:

Money markets

Time deposits

Brokered certificates of deposit

Total interest-bearing deposits

Total interest-bearing liabilities

Non-interest bearing deposits

Other liabilities

Total non-interest bearing liabilities

Total liabilities and shareholders’ equity

Net interest income

Interest rate spread

Net interest margin

The average balance of loans includes loans on nonaccrual.

Includes balances of FHLBNY and ACBB stock.

Financial Condition

At March 31, 2026, the Company’s total assets were $2.21 billion, a decrease of $36.5 million, or 1.60%, from December 31, 2025.

The decrease in total assets was primarily attributable to a decrease in cash and cash equivalents of $46.0 million, partially offset by an increase in net loans of $7.8 million.

Cash and cash equivalents decreased $46.0 million, or 29.3%, primarily due to a decrease in deposits of $59.9 million, and the increase in loans of $7.8 million, partially offset by an increase in FHLBNY borrowings of $10.0 million.

Total liabilities were $1.88 billion at March 31, 2026.

This represented a $47.5 million, or 2.5%, decrease, from $1.92 billion at December 31, 2025.

The decrease in total liabilities was primarily due to a decrease in total deposits of $59.9 million, or 3.4%, to $1.70 billion at March 31, 2026, partially offset by an increase in FHLBNY borrowings of $10.0 million, or 7.7%, to $140.0 million.

The decrease in deposits was primarily driven by a decrease in non-interestbearing deposits of $32.4 million, time deposits of $24.0 million, brokered time deposits of $14.0 million, and interest-bearing demand deposits of $12.6 million, partially offset by an increase in money market deposits of $22.6 million.

Total equity was $335.6 million and $324.5 million at March 31, 2026 and December 31, 2025, respectively, an increase of $11.1 million from December 31, 2025.

At June 30, 2026, the Company’s total assets were $2.30 billion, an increase of $53.6 million, or 2.40%, from December 31, 2025.

The increase in total assets was primarily attributable to an increase in cash and cash equivalents of $47.9 million, and an increase in other real estate owned of $3.9 million, partially offset by a decrease in net loans of $3.8 million.

Cash and cash equivalents increased $47.9 million, or 30.5%, primarily due to an increase in FHLBNY borrowings of $34.0 million, and the decrease in gross loans of $3.9 million.

Total liabilities were $1.96 billion at June 30, 2026.

This represented a $32.1 million, or 1.7%, increase, from $1.92 billion at December 31, 2025.

The increase in total liabilities was primarily due to an increase in FHLBNY borrowings of $34.0 million, or 26.2%, to $164.0 million at June 30, 2026.

Total equity was $346.1 million and $324.5 million at June 30, 2026 and December 31, 2025, respectively, an increase of $21.6 million from December 31, 2025.

The increase was primarily due to the retention of earnings, partially offset by the payment of $4.5 million of cash dividends.

The following table presents certain key condensed balance sheet data as of March 31, 2026 and December 31, 2025:

The following table presents certain key condensed balance sheet data as of June 30, 2026 and December 31, 2025:

(Dollars in thousands)

9 unchanged sentences

Cash and cash equivalents

Cash and cash equivalents decreased $46.0 million to $110.9 million at March 31, 2026 from $156.9 million at December 31, 2025, a decrease of 29.3%.

The decrease was primarily due to an increase in loans, and a decrease in primarily non-interest bearing and brokered deposit balances, partially offset by an increase in FHLBNY borrowings.

Cash and cash equivalents increased $47.9 million to $204.7 million at June 30, 2026 from $156.9 million at December 31, 2025, an increase of 30.5%.

The increase was primarily due to an increase in FHLBNY borrowings, and a decrease in gross loan balance.

Investment securities

Total investment securities decreased to $13.1 million at March 31, 2026, from $13.5 million at December 31, 2025, a decrease of $0.4 million or 2.9%.

The decrease was attributed to normal pay downs of securities.

Total investment securities increased to $14.3 million at June 30, 2026, from $13.5 million at December 31, 2025, an increase of $0.8 million or 5.7%.

The increase was attributed to the purchase of a $1.5 million security for CRA purposes, partially offset by normal pay downs of securities.

For detailed information on the composition and maturity distribution of our investment portfolio, see NOTE 3 - Investment Securities in the notes to the unaudited consolidated financial statements.

15 unchanged sentences

Loans receivable :

Loans receivable increased to $2.04 billion at March 31, 2026, from $2.04 billion at December 31, 2025, an increase of $8.1 million, or 0.4%.

The increase was primarily due to increases in the residential - multifamily and construction loan portfolios, partially offset by a decrease in the residential - 1 to 4 family and residential - 1 to 4 family investment loan portfolios.

Loans receivable as of March 31, 2026 and December 31, 2025, consisted of the following:

March 31, 2026

Loans receivable decreased to $2.03 billion at June 30, 2026, from $2.04 billion at December 31, 2025, a decrease of $3.9 million, or 0.2%.

The decrease was primarily due to decreases in the residential - 1 to 4 family, and residential 1 to 4 family investment loan portfolios, partially offset by an increase in the residential - multifamily loan portfolio.

Loans receivable as of June 30, 2026 and December 31, 2025, consisted of the following:

June 30, 2026

December 31, 2025

11 unchanged sentences

Residential – Multifamily

At March 31, 2026, total deposits decreased to $1.70 billion from $1.76 billion at December 31, 2025, a decrease of $59.9 million, or 3.4%.

The decrease in deposits was primarily due to a decrease in time deposits of $38.0 million, of which $14.0 million were brokered deposits, $32.4 million of noninterest-bearing deposits, and $12.6 million in checking deposits, of which $12.5 million were brokered deposits.

The decrease was partially offset by a $22.6 million increase in money market deposits, resulting from an increase of $21.7 million in municipal deposits.

At June 30, 2026, total deposits increased to $1.76 billion from $1.76 billion at December 31, 2025, an increase of $0.9 million, or 0.1%.

The increase in deposits was primarily due to an increase in money market deposits of $49.3 million, of which $13.1 million were brokered deposits, partially offset by decrease in time deposits of $34.5 million, $9.4 million in checking deposits, and $3.3 million in noninterest-bearing deposits.

(Dollars in thousands)

5 unchanged sentences

Total brokered deposits

Total borrowings were $153.4 million at March 31, 2026 and $143.4 million at December 31, 2025.

The increase in borrowings during the first quarter of 2026 is due to an increase of $10.0 million in FHLBNY advances.

At March 31, 2026, all of the outstanding FHLBNY advances had short-term maturities.

Total equity increased to $335.6 million at March 31, 2026 from $324.5 million at December 31, 2025, an increase of $11.0 million, or 3.4%, primarily due to the retention of earnings from the period, partially offset by the payment of $2.1 million of cash dividends.

Total borrowings were $177.4 million at June 30, 2026 and $143.4 million at December 31, 2025.

The increase in borrowings during 2026 is due to an increase of $34.0 million in FHLBNY advances.

At June 30, 2026, all of the outstanding FHLBNY advances had short-term maturities.

Total equity increased to $346.1 million at June 30, 2026 from $324.5 million at December 31, 2025, an increase of $21.6 million, or 6.6%, primarily due to the retention of earnings from the period, partially offset by the payment of $4.5 million of cash dividends.

Liquidity and Capital Resources

Liquidity is a measure of our ability to generate cash to support asset growth, meet deposit withdrawals, satisfy other contractual obligations, and otherwise operate on an ongoing basis.

At March 31, 2026, our cash position was $110.9 million.

At June 30, 2026, our cash position was $204.7 million.

We invest cash that is in excess of our immediate operating needs primarily in our interest-bearing account at the Federal Reserve.

6 unchanged sentences

The Bank primarily utilizes brokered relationships with Wells Fargo, Piper Sandler, and Stonecastle.

As of March 31, 2026, the Company had $156.6 million of brokered deposits resulting from these relationships.

As of June 30, 2026, the Company had $194.5 million of brokered deposits resulting from these relationships.

For an additional source of brokered liquidity, the Bank joined the IntraFi Financial Network.

IntraFi provides the Bank an additional source of external funds through their weekly CDARS ® settlement process, as well as their ICS ® money market product.

As of March 31, 2026, the Company had $35.0 million sourced from IntraFi.

As of June 30, 2026, the Company had $50.1 million sourced from IntraFi.

While deposit accounts comprise the vast majority of our funding needs, we maintain secured borrowing lines with the FHLBNY and the Federal Reserve Bank ("FRB").

As of March 31, 2026, the Company had lines of credit with the FHLBNY of $651.6 million, of which $140.0 million was outstanding, and an additional $100.0 million from a letter of credit for securing public funds, of which zero was outstanding as of March 31, 2026.

The remaining borrowing capacity was $411.6 million at March 31, 2026.

As of March 31, 2026, the Company had a borrowing capacity through the FRB discount window of $400.0 million.

There were no borrowings outstanding from the FRB as of March 31, 2026.

Our diversity of funding capacity results in the Bank's ability to cover 138.7% of estimated uninsured deposits at March 31, 2026.

We had outstanding loan commitments of $143.2 million at March 31, 2026.

As of June 30, 2026, the Company had lines of credit with the FHLBNY of $659.2 million, of which $164.0 million was outstanding, and an additional $110.0 million from a letter of credit for securing public funds, of which zero was outstanding as of June 30, 2026.

The remaining borrowing capacity was $385.2 million at June 30, 2026.

As of June 30, 2026, the Company had a borrowing capacity through the FRB discount window of $390.6 million.

There were no borrowings outstanding from the FRB as of June 30, 2026.

Our diversity of funding capacity results in the Bank's ability to cover 132.8% of estimated uninsured deposits at June 30, 2026.

We had outstanding loan commitments of $184.3 million at June 30, 2026.

Our loan commitments are normally originated with the full amount of collateral.

1 unchanged sentence

The funding requirements for such commitments occur on a measured basis over time and would be funded by normal deposit growth.

The following is a discussion of our cash flows for the three months ended March 31, 2026 and 2025.

Cash provided by operating activities was $13.0 million during the three months ended March 31, 2026, compared to $7.0 million for the same period in the prior year.

The increase in operating cash flow was primarily due to the increase in net income, and the increase in accrued interest payable and other accrued liabilities, partially offset by the increase in accrued interest receivable and other assets.

Cash used in investing activities was $8.2 million during the three months ended March 31, 2026, compared to cash used in investing activities of $13.1 million in the same period last year.

The decrease in cash used in the investing activities during the three months ended March 31, 2026, was primarily due to the decrease in cash outflow from the origination of loans, and the decrease in the net purchase of FHLBNY restricted stock.

Cash used in financing activities was $50.8 million during the three months ended March 31, 2026, compared to cash used in financing activities of $6.4 million in the same period last year.

The increase in cash used in financing activities during the three months ended March 31, 2026, was primarily due to a decrease in noninterest-bearing deposits, and a decrease in interest-bearing deposits, partially offset by an increase in FHLBNY borrowings.

The following is a discussion of our cash flows for the six months ended June 30, 2026 and 2025.

Cash provided by operating activities was $19.3 million during the six months ended June 30, 2026, compared to $13.8 million for the same period in the prior year.

The increase in operating cash flow was primarily due to the increase in net income, partially offset by the increase in accrued interest receivable and other assets and the decrease in accrued interest payable and other accrued liabilities.

Cash used in investing activities was $3.7 million during the six months ended June 30, 2026, compared to cash used in investing activities of $64.2 million in the same period last year.

The decrease in cash used in the investing activities during the six months ended June 30, 2026, was primarily due to the decrease in cash outflow from the origination of loans, and the decrease in the net purchase of FHLBNY restricted stock.

Cash provided by financing activities was $32.2 million during the six months ended June 30, 2026, compared to $13.2 million in the same period last year.

The increase in cash provided by financing activities during the six months ended June 30, 2026, was primarily due to an increase in FHLBNY borrowings, partially offset by a decrease in noninterest-bearing deposits, and a decrease in the growth of interest-bearing deposits.

Capital Adequacy

5 unchanged sentences

We also use other means to manage our capital.

Total equity increased $11.0 million at March 31, 2026, from December 31, 2025, primarily from the Company’s net income of $11.8 million for the period, net of common and preferred stock dividends of $2.1 million.

Total equity increased $21.6 million at June 30, 2026, from December 31, 2025, primarily from the Company’s net income of $24.1 million for the period, net of common and preferred stock dividends of $4.5 million.

Banks and bank holding companies are subject to various regulatory capital requirements administered by federal banking agencies.

4 unchanged sentences

Under the capital rules issued by the Federal banking agencies, the Company and the Bank elected to exclude the effects of certain Accumulated Other Comprehensive Income (“AOCI”) items from its regulatory capital calculation.

At March 31, 2026, the Bank and the Company were both considered “well capitalized”.

The following table presents the tier 1 regulatory capital leverage ratios of the Company and the Bank at March 31, 2026:

At June 30, 2026, the Bank and the Company were both considered “well capitalized”.

The following table presents the tier 1 regulatory capital leverage ratios of the Company and the Bank at June 30, 2026:

(Dollars in thousands except ratios)

23 unchanged sentences

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