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What changed in Hanover Bancorp, Inc. /MD's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Hanover Bancorp, Inc. /MD's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+281 added−275 removedSource: 10-K (2023-12-21) vs 10-K (2022-12-23)

Top changes in Hanover Bancorp, Inc. /MD's 2023 10-K

281 paragraphs added · 275 removed · 201 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

59 edited+10 added−20 removed118 unchanged
Biggest changeA company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.07 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non-voting equity held by nonaffiliates). 17 Table of Contents Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.
Biggest changeWe have elected to comply with new or amended accounting pronouncements in the same manner as a private company. 17 Table of Contents A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.07 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non-voting equity held by nonaffiliates).
As a result of the Economic Growth Act, banking regulatory agencies adopted a revised definition of “well capitalized” for financial institutions and holding companies with assets of less than $10 billion and that are not determined to be ineligible by their primary federal regulator due to their risk profile, which is referred to as a Qualifying Community Bank.
As a result of the Economic Growth Act, banking regulatory agencies adopted a revised definition of “well capitalized” for financial institutions and holding companies with assets of less than $10 billion that are not determined to be ineligible by their primary federal regulator due to their risk profile, which is referred to as a Qualifying Community Bank.
Separate regulatory guidance provides for prior consultation with FRB staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition.
Separate regulatory guidance provides for prior consultation with FRB staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition.
In evaluating such notices, the FRB takes into consideration such factors as the financial resources, competence, experience and integrity of the acquirer, the future prospects the bank holding company involved and its subsidiary bank and the competitive effects of the acquisition. In January 2020, the Federal Reserve substantially revised its control regulations.
In evaluating such notices, the FRB takes into consideration such factors as the financial resources, competence, experience and integrity of the acquirer, the future prospects of the bank holding company involved and its subsidiary bank and the competitive effects of the acquisition. In January 2020, the Federal Reserve substantially revised its control regulations.
On May 26, 2021, the Company completed the acquisition of Savoy Bank (“Savoy”), a privately held commercial bank founded to provide banking services to small business owners in and around New York City. With the Savoy acquisition, we have expanded our commercial banking capabilities significantly, with a particular focus on small business clients and Small Business Administration (“SBA”) lending.
On May 26, 2021, the Company completed the acquisition of Savoy Bank (“Savoy”), a privately held commercial bank founded to provide banking services to small business owners in and around New York City. With the Savoy acquisition, we expanded our commercial banking capabilities significantly, with a particular focus on small business clients and Small Business Administration (“SBA”) lending.
We offer a variety of deposit accounts to both businesses and consumers through our branch network, which we believe complements our niche lending efforts. Additionally, we have expanded our deposit products to include a full line of municipal banking accounts, which has allowed us to capture additional customers in our operating footprint.
We offer a variety of deposit accounts to businesses and consumers through our branch network, which we believe complements our niche lending efforts. Additionally, we have expanded our deposit products to include a full line of municipal banking accounts, which has allowed us to capture additional customers in our operating footprint.
Our one- to four-family residential mortgage segment has a particular niche focus on non-conforming loans, primarily secured by both owner-occupied and investment properties. The segment has proven particularly appealing to Asian American borrowers in the New York City boroughs.
Our one- to four-family residential mortgage segment has a particular niche focus on non-conforming loans, primarily secured by owner-occupied and investment properties. The segment has proven particularly appealing to Asian American borrowers in the New York City boroughs.
The agencies intend, at a subsequent date, to incorporate explicit minimum requirements for interest rate risk into their risk-based capital standards and have proposed a supervisory model to be used together with bank internal models to gather data and hopefully propose, at a later date, explicit minimum requirements.
The agencies intend, at a subsequent date, to incorporate explicit minimum requirements for interest rate risk into their risk-based capital standards and have proposed a supervisory model to be used together with bank internal models to gather data and propose, at a later date, explicit minimum requirements.
Some state laws also protect the privacy of information of state residents and require adequate security for such data, and certain state laws may, and newly issued federal regulations do, in some circumstances, require the Bank to notify affected individuals of security breaches of computer databases that contain their personal information.
Some state laws also protect the privacy of information of state residents and require adequate security for such data, and certain state laws may, and issued federal regulations do, in some circumstances, require the Bank to notify affected individuals of security breaches of computer databases that contain their personal information.
We compete directly with other bank and nonbank institutions located within our markets, internet-based banks, out-of-market banks and bank holding companies that advertise or otherwise serve our markets, money market funds and other mutual funds, brokerage houses, and various other financial institutions.
We compete directly with other bank and nonbank institutions located within our markets, internet-based banks, out-of-market banks and bank holding companies that advertise in or otherwise serve our markets, money market funds and other mutual funds, brokerage houses, and various other financial institutions.
Some of the principal activities that the FRB has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing 15 Table of Contents personal or real property; (vi) making investments in corporations or projects designed primarily to promote community welfare; and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.
Some of the principal activities that the FRB has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed primarily to promote community welfare; and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.
We originate mainly non-qualified, alternative documentation, single-family residential mortgage loans through broker referrals or our branch network to accommodate the needs of diverse communities in the New York City MSA. We offer multiple products, including our Residential Investor Program (RIP), which is designed specifically for two- to four-family units.
We originate mainly non-qualified, alternative documentation, single-family residential mortgage loans through broker referrals or our branch network to accommodate the needs of diverse communities in the New York City MSA. We offer multiple products, including our Residential Investor Program (“RIP”), which is designed specifically for two- to four-family units.
In addition, such a failure could result in a restriction on our ability to pay certain cash bonuses to executive officers, negatively impacting our ability to retain key personnel. As of September 30, 2022, the Bank’s current capital levels exceeded the applicable minimum capital requirements, including the capital conservation buffer, as prescribed in the Basel III capital rules.
In addition, such a failure could result in a restriction on our ability to pay certain cash bonuses to executive officers, negatively impacting our ability to retain key personnel. As of September 30, 2023, the Bank’s current capital levels exceeded the applicable minimum capital requirements, including the capital conservation buffer, as prescribed in the Basel III capital rules.
Assessment rates (inclusive of possible adjustments) currently range from 1.5 to 30 basis points of each institution’s total assets less tangible capital.
Assessment rates (inclusive of possible adjustments) range from 1.5 to 30 basis points of each institution’s total assets less tangible capital.
We offer personal and commercial business loans on a secured and unsecured basis, SBA and USDA guaranteed loans, revolving lines of credit, commercial mortgage loans, and one- to four-family non-qualified mortgages secured by primary and secondary residences that may be owner occupied or investment properties, home equity loans, bridge loans and other personal purpose loans. 4 Table of Contents Residential real estate .
We offer personal and business loans on a secured and unsecured basis, SBA and USDA guaranteed loans, revolving lines of credit, commercial mortgage loans, and one- to four-family non-qualified mortgages secured by primary and secondary residences that may be owner occupied or investment properties, home equity loans, bridge loans and other personal purpose loans. Residential real estate .
You can request a copy of our Annual Report on Form 10-K free of charge by sending a written request to Hanover Bancorp, Inc., Attn: Corporate Secretary, 80 East Jericho Turnpike, Mineola, New York 11501. Please include your contact information with the request. ​
You can request a copy of our Annual Report on Form 10-K free of charge by sending a written request to Hanover Bancorp, Inc., Attn: Corporate Secretary, 80 East Jericho Turnpike, Mineola, New York 11501. Please include your contact information with the request. ​ 18 Table of Contents ​
There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions. 16 Table of Contents These regulatory policies may affect our ability to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.
There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions. These regulatory policies may affect our ability to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.
The Bank has adopted policies and procedures to comply with these requirements. 13 Table of Contents Privacy Laws The Bank is subject to a variety of federal and state privacy laws, which govern the collection, safeguarding, sharing and use of customer information, and require that financial institutions have in place policies regarding information privacy and security.
The Bank has adopted policies and procedures to comply with these requirements. Privacy Laws The Bank is subject to a variety of federal and state privacy laws, which govern the collection, safeguarding, sharing and use of customer information, and require that financial institutions have in place policies regarding information privacy and security.
Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, as will be the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, as is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
All such transactions are required to be on terms and conditions that are consistent with safe and sound banking practices and no transaction may involve the acquisition of any “low quality asset” from an affiliate unless certain 11 Table of Contents conditions are satisfied.
All such transactions are required to be on terms and conditions that are consistent with safe and sound banking practices and no transaction may involve the acquisition of any “low quality asset” from an affiliate unless certain conditions are satisfied.
An institution’s assessment rate depends upon the perceived risk of the institution to the DIF, with institutions deemed less risky paying lower rates. Currently, assessments for institutions of less than $10 billion of total assets are based on financial measures and supervisory ratings derived from statistical models estimating the probability of failure within three years.
An institution’s assessment rate depends upon the perceived risk of the institution to the DIF, with institutions deemed less risky paying lower rates. Assessments for institutions of less than $10 billion of total assets, such as the Bank, are based on financial measures and supervisory ratings derived from statistical models estimating the probability of failure within three years.
Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. We have elected to comply with new or amended accounting pronouncements in the same manner as a private company.
Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement.
Deposits serve as the primary source of funding for our interest-earning assets, but also generate non-interest revenue through insufficient funds fees, stop payment fees, safe deposit rental fees, foreign ATM fees and debit card interchange and other miscellaneous fees. Employees and Human Capital Resources As of September 30, 2022, we employed 162 full-time employees.
Deposits serve as the primary source of funding for our interest-earning assets, but also generate non-interest revenue through insufficient funds fees, stop payment fees, safe deposit rental fees, foreign ATM fees and debit card interchange and other miscellaneous fees. Employees and Human Capital Resources As of September 30, 2023, we employed 176 full-time employees.
Under prompt 10 Table of Contents corrective action requirements, insured depository institutions are required to meet the following in order to qualify as “well capitalized:” total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a common equity tier 1 capital ratio of 6.5% or greater, a leverage ratio of 5% or greater, and not be subject to any order or final capital directive by the FDIC to meet and maintain a specific capital level for any capital measure.
Under prompt corrective action requirements, insured depository institutions are required to meet the following in order to qualify as “well capitalized”: total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a common equity tier 1 capital ratio of 6.5% or greater, a leverage ratio of 5% or greater, and not be subject to any order or final capital directive by the FDIC to meet and maintain a specific capital level for any capital measure.
NOW accounts consist of both retail and business interest-bearing transaction accounts that have minimum balance requirements. Money market accounts consist of products that provide a market rate of interest to depositors. Our savings accounts consist of statement type accounts. Time deposits consist of certificates of deposit, including those held in IRA accounts, and brokered certificates of deposit.
NOW accounts consist of retail and business interest-bearing transaction accounts that have minimum balance requirements. Money market accounts consist of products that provide market rates of interest to depositors. Our savings accounts consist of statement type accounts. Time deposits consist of certificates of deposit, including those held in IRA accounts, and brokered certificates of deposit.
As a result of the pandemic, we also implemented flexible scheduling, which has allowed us to remain competitive. 6 Table of Contents Competition The financial services industry is highly competitive. We compete for loans, deposits, and financial services in all of our principal markets.
We also implemented flexible scheduling, which has allowed us to remain competitive. 6 Table of Contents Competition The financial services industry is highly competitive. We compete for loans, deposits, and financial services in all of our principal markets.
As of September 30, 2022, the Bank was a “well-capitalized” bank, as defined by its primary federal regulator.
As of September 30, 2023, the Bank was a “well-capitalized” bank, as defined by its primary federal regulator.
While the Bank is subject to the CFPB regulations, because it has less than $10 billion in total consolidated assets, the FDIC and the DFS are responsible for examining and supervising the Bank’s compliance with these consumer financial laws and regulations. In addition, the Bank is subject to certain state laws and regulations designed to protect consumers.
While the Bank is subject to the CFPB regulations, because it has less than $10 billion in total consolidated assets, the FDIC and the DFS are responsible for examining and supervising the Bank’s compliance with these consumer financial laws and regulations.
Following the 2012 recapitalization, the Bank adopted a strategic plan focused on providing differentiated consumer and commercial banking services to clients in the western Long Island markets and New York City boroughs, particularly the Queens and Brooklyn markets.
After incurring financial and regulatory setbacks, the Bank was recapitalized in 2012 (the “2012 Recapitalization”). Following the 2012 Recapitalization, the Bank adopted a strategic plan focused on providing differentiated consumer and commercial banking services to clients in the western Long Island markets and New York City boroughs, particularly the Queens and Brooklyn markets.
The Bank’s management team has utilized their strong local community ties, along with their experience with both federal and New York bank regulatory agencies, to create a bank that we believe emphasizes strong credit quality, a solid balance sheet, and a robust capital base.
The Bank’s management team has utilized its strong local community ties and experience with federal and New York bank regulatory agencies to create a bank that we believe emphasizes strong credit quality, a solid balance sheet, and a robust capital base. In 2019, we acquired Chinatown Federal Savings Bank (“CFSB”).
Among other things, Title III of the USA PATRIOT Act and the related regulations require: ● Establishment of anti-money laundering compliance programs that include policies, procedures, and internal controls; the designation of a BSA officer; a training program; and independent testing; ● Filing of certain reports with Financial Crimes Enforcement Network and law enforcement that are designated to assist in the detection and prevention of money laundering and terrorist financing activities; ● Establishment of a program specifying procedures for obtaining and maintaining certain records from customers seeking to open new accounts, including verifying the identity of customers; ● In certain circumstances, compliance with enhanced due diligence policies, procedures and controls designed to detect and report money- laundering, terrorist financing and other suspicious activity; ● Monitoring account activity for suspicious transactions; and ● A heightened level of review for certain high-risk customers or accounts.
Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act. ​ 13 Table of Contents Among other things, Title III of the USA PATRIOT Act and the related regulations require: ● Establishment of anti-money laundering compliance programs that include policies, procedures, and internal controls; the designation of a BSA officer; a training program; and independent testing; ● Filing of certain reports with Financial Crimes Enforcement Network and law enforcement that are designated to assist in the detection and prevention of money laundering and terrorist financing activities; ● Establishment of a program specifying procedures for obtaining and maintaining certain records from customers seeking to open new accounts, including verifying the identity of customers; ● In certain circumstances, compliance with enhanced due diligence policies, procedures and controls designed to detect and report money- laundering, terrorist financing and other suspicious activity; ● Monitoring account activity for suspicious transactions; and ● A heightened level of review for certain high-risk customers or accounts.
Our one- to four-family residential real estate portfolio is secured by real estate, the value of which may fluctuate significantly over a short period of time as a result of market conditions in the area in which the real estate is located.
Other one- to four-family credit products include home equity loans and first-time home buyer loans. Our one- to four-family residential real estate portfolio is secured by real estate, the value of which may fluctuate significantly over a short period of time as a result of market conditions in the area in which the real estate is located.
The Bank is required to pay an annual assessment to the DFS and FDIC to fund the agencies’ operations. 12 Table of Contents Community Reinvestment Act and Fair Lending Laws Federal Regulation Under the Community Reinvestment Act (“CRA”), as implemented by the FDIC, the Bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.
Community Reinvestment Act and Fair Lending Laws Federal Regulation Under the Community Reinvestment Act (“CRA”), as implemented by the FDIC, the Bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.
The Bank operates as a locally headquartered, community-oriented bank serving customers throughout the New York metro area from offices in Nassau, Queens, Kings (Brooklyn) and New York (Manhattan) Counties, New York, and Freehold, Monmouth County, New Jersey.
The Bank operates as a locally headquartered, community-oriented bank serving customers throughout the New York metro area from offices in Nassau, Suffolk, Queens, Kings (Brooklyn) and New York (Manhattan) Counties, New York, and Freehold, Monmouth County, New Jersey. We opened the Bank’s Hauppauge Business Banking Center in Hauppauge, Suffolk County, New York in May 2023.
The team and relationships we have allow us to compete throughout the Long Island market without the expense constraints of physical locations. As of September 30, 2022, we had $416.9 million in municipal deposits at an average rate of 1.19%.
The team and relationships we have allow us to compete throughout the Long Island market without the expense constraints of multiple physical locations. As of September 30, 2023, we had $313.2 million in municipal deposits at an average rate of 4.53%.
Except for vacant or abandoned property, the servicer of a federally-backed mortgage was prohibited from taking any foreclosure action, including any eviction or sale action, for not less than the 60-day period beginning March 18, 2020, which period has been subsequently been extended several times by federal mortgage-backing agencies. 14 Table of Contents Other Regulations The Bank’s operations are also subject to federal laws applicable to credit transactions, such as: ● The Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; ● The Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one-to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services; ● The Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● The Equal Credit Opportunity Act and other fair lending laws, prohibiting discrimination on the basis of race, religion, sex and other prohibited factors in extending credit; ● The Fair Credit Reporting Act, governing the use of credit reports on consumers and the provision of information to credit reporting agencies; ● Unfair or Deceptive Acts or Practices laws and regulations; ● The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and ● The rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
In addition, the Bank is subject to certain state laws and regulations designed to protect consumers. ​ 14 Table of Contents Other Regulations The Bank’s operations are also subject to federal laws applicable to credit transactions, such as: ● The Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; ● The Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one-to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services; ● The Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● The Equal Credit Opportunity Act and other fair lending laws, prohibiting discrimination on the basis of race, religion, sex and other prohibited factors in extending credit; ● The Fair Credit Reporting Act, governing the use of credit reports on consumers and the provision of information to credit reporting agencies; ● Unfair or Deceptive Acts or Practices laws and regulations; ● The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; ● The Coronavirus Aid, Relief and Economic Security Act; and ● The rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
We originate non-qualified one- to four-family residential mortgage loans both to sell and hold for investment. Single-family residential mortgage loans held for sale are generally sold with the servicing rights released. Historically, we have sold many of these non-qualified single-family residential mortgage loans to other financial institutions, including banks and non-banks.
We originate non-qualified one- to four-family residential mortgage loans both to sell and hold for investment. Single-family residential mortgage loans held for sale are generally sold with the servicing rights released.
Separately, the Superintendent of the DFS also has the authority to appoint a receiver or liquidator of any state-chartered bank or trust company under specified circumstances, including where (i) the bank is conducting its business in an unauthorized or unsafe manner, (ii) the bank has suspended payment of its obligations, or (iii) the bank cannot with safety and expediency continue to do business.
Separately, the Superintendent of the DFS also has the authority to appoint a receiver or liquidator of any state-chartered bank or trust company under specified circumstances, including where (i) the bank is conducting its business in an unauthorized or unsafe manner, (ii) the bank has suspended payment of its obligations, or (iii) the bank cannot with safety and expediency continue to do business. ​ 12 Table of Contents Federal Reserve System Under federal law and regulations, the Bank is required to maintain sufficient liquidity to ensure safe and sound banking practices.
Lending Activities Our lending strategy is to maintain a broadly diversified loan portfolio based on the type of customer (i.e., businesses versus individuals), type of loan product (e.g., owner occupied commercial real estate, commercial loans, etc.), geographic location and industries in which our business customers are engaged (e.g., manufacturing, retail, hospitality, etc.).
During the fourth calendar quarter of 2023, we have begun offering business banking services to the legal, licensed cannabis industry in New York state. ​ 4 Table of Contents Lending Activities Our lending strategy is to maintain a broadly diversified loan portfolio based on the type of customer (i.e., businesses versus individuals), type of loan product (e.g., owner occupied commercial real estate, commercial loans, etc.), geographic location and industries in which our business customers are engaged (e.g., manufacturing, retail, hospitality, etc.).
As of September 30, 2022, our commercial and industrial loans comprised $45.8 million, or 2.8%, of total loans held for investment. ​ 5 Table of Contents Small Business Administration Loans . Our SBA loans are secured by commercial real estate and/or business assets.
As of September 30, 2023, our commercial and industrial loans comprised $87.6 million, or 4.7%, of total loans held for investment. 5 Table of Contents Small Business Administration Loans . Our SBA loans are secured by commercial real estate and/or business assets. We offer mostly SBA 7(a) variable-rate loans.
Transactions with Affiliates and Insiders Sections 23A and 23B of the Federal Reserve Act govern transactions between an insured depository institution and its affiliates, which includes the Company. The FRB has adopted Regulation W, which implements and interprets Sections 23A and 23B, in part by codifying prior FRB interpretations.
Transactions with Affiliates and Insiders Sections 23A and 23B of the Federal Reserve Act govern transactions between an insured depository institution and its affiliates, which includes the Company.
The FDIC may increase or decrease the range of assessments uniformly, except that no adjustment can deviate more than two basis points from the base assessment rate without notice and comment rulemaking. 8 Table of Contents The FDIC has the authority to increase insurance assessments.
The FDIC may increase or decrease the range of assessments uniformly, except that no adjustment can deviate more than two basis points from the base assessment rate without notice and comment rulemaking. 8 Table of Contents By final rule adopted in October 2022, the FDIC increased the initial base deposit insurance assessment rates by 2 basis points beginning in the first quarterly assessment period of 2023.
A significant increase in insurance premiums would have an adverse effect on the operating expenses and results of operations of the Bank. We cannot predict what deposit insurance assessment rates will be in the future.
As a result, effective January 1, 2023, assessment rates for institutions of the Bank’s size ranged from 3.5 to 32 basis points. A significant increase in insurance premiums would have an adverse effect on the operating expenses and results of operations of the Bank. We cannot predict what deposit insurance assessment rates will be in the future.
We focus on what we believe to be high quality credits with acceptable loan-to-value ratios, income- producing properties with strong cash flow characteristics, and strong collateral profiles. Our loan-to-value policy limit is 75% for commercial real estate loans. The weighted average LTV was 61% for this portfolio as of September 30, 2022.
We focus on what we believe to be high quality credits with acceptable loan-to-value ratios, income- producing properties with strong cash flow and collateral profiles. The weighted average LTV was 60% for this portfolio as of September 30, 2023. Within the commercial real estate portfolio, multi-family loans are secured primarily by rent controlled/stabilized multi-family properties located in New York City.
The regulatory guidance also states that a bank holding company should consult with FRB supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the bank holding company is experiencing financial weaknesses or the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.
The regulatory guidance also states that a bank holding company should consult with FRB supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the bank holding company is experiencing financial weaknesses or the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. 16 Table of Contents There is a separate requirement that a bank holding company give the FRB prior written notice of any purchase or redemption of then outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth.
Prompt Corrective Regulatory Action Federal law requires that federal bank regulatory authorities take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For these purposes, the statute establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.
Prompt Corrective Regulatory Action Federal law requires that federal bank regulatory authorities take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements.
Permissible Activities A bank holding company is generally prohibited from engaging in non-banking activities or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities.
Among other things, the FRB has authority to restrict activities by a bank holding company that are deemed to pose a serious risk to the subsidiary bank. ​ 15 Table of Contents Permissible Activities A bank holding company is generally prohibited from engaging in non-banking activities or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities.
From time to time, we will also originate SBA 504 loans, which are real estate backed commercial mortgages where we have the first mortgage and the SBA has the second mortgage on the property.
From time to time, we will also originate SBA 504 loans, which are real estate backed commercial mortgages where we have first mortgages and the SBA has second mortgages on the properties. We also, from time-to-time, originate loans guaranteed by the United States Department of Agriculture (“USDA”), which have characteristics that are similar to those of SBA 7(a) loans.
Examinations and Assessments The Bank is required to file periodic reports with and is subject to periodic examination by the DFS and FDIC. Federal and state regulations generally require periodic on-site examinations for all depository institutions.
The FRB has indicated that it has no plans to re-impose reserve requirements but may do so in the future if conditions warrant. Examinations and Assessments The Bank is required to file periodic reports with and is subject to periodic examination by the DFS and FDIC. Federal and state regulations generally require periodic on-site examinations for all depository institutions.
Within the commercial real estate portfolio, multi-family loans are secured primarily by rent controlled/stabilized multi-family properties located in New York City. The real estate securing our existing non-owner occupied commercial real estate loans is primarily multi-family, mixed-use and commercial properties. Owner-occupied properties include a wide variety of property types, including offices, warehouses, retail centers, and hotels.
The real estate securing our existing non-owner occupied commercial real estate loans is primarily multi-family, mixed-use and commercial properties. Owner-occupied properties comprise a wide variety of property types, including offices, warehouses, retail centers, and hotels. Our construction portfolio is small, representing only $13.0 million in total balances at September 30, 2023.
The Company has not elected “financial holding company” status. Capitalization Bank holding companies are subject to consolidated regulatory capital requirements, which have historically been similar to, though less stringent than, those for the Bank.
The Company has not elected “financial holding company” status. Capitalization Bank holding companies are subject to consolidated regulatory capital requirements that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to depository institutions.
These loans are typically Prime-based and have maturities of fewer than 18 months. As of September 30, 2022, 100% of our real estate construction loan portfolio was secured by commercial properties. Commercial and industrial . We provide a mix of variable and fixed rate commercial and industrial loans, which we refer to as C&I loans.
Our construction and land development loans are comprised of commercial construction and land acquisition and development loans. Interest reserves are generally established on real estate construction loans. These loans are typically Prime-based and have maturities of fewer than 18 months. As of September 30, 2023, 100% of our real estate construction loan portfolio was secured by commercial properties.
The final rule that increased regulatory capital standards also adjusted the prompt corrective action tiers as of January 1, 2015 to conform to the revised capital standards. As described above, the Bank has not elected to follow the CBLR so the generally applicable prompt corrective action requirements remain applicable to the Bank.
As described above, the Bank has not elected to follow the CBLR so the generally applicable prompt corrective action requirements remain applicable to the Bank.
An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank.
The FRB has adopted Regulation W, which implements and interprets Sections 23A and 23B, in part by codifying prior FRB interpretations. ​ 11 Table of Contents An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank.
In March 2020, due to a change in its approach to monetary policy due to the COVID-19 pandemic, the FRB implemented a final rule to amend Regulation D requirements and reduce reserve requirement ratios to zero. The FRB has indicated that it has no plans to re-impose reserve requirements but may do so in the future if conditions warrant.
Regulation D, promulgated by the FRB, imposes reserve requirements on all depository institutions, including the Bank, which maintain transaction accounts or nonpersonal time deposits. In March 2020, due to a change in its approach to monetary policy due to the COVID-19 pandemic, the FRB implemented a final rule to amend Regulation D requirements and reduce reserve requirement ratios to zero.
Generally, lines of credit have maturities ranging from twelve to twenty- four months, and “term loans” have maturities ranging from five to ten years. C&I loans generally provide for floating interest rates, with interest only payments for lines of credit and monthly payments of both principal and interest for term loans.
C&I loans generally provide for floating interest rates, with interest only payments for lines of credit and monthly payments of both principal and interest for term loans. We expect C&I lending to be a key component of our growth going forward.
The loans are typically made to small and medium-sized businesses for working capital needs, business expansions and for trade financing. We extend commercial business loans on an unsecured and secured basis for working capital, accounts receivable and inventory financing, machinery and equipment purchases, and other business purposes.
We extend commercial business loans on an unsecured and secured basis for working capital, accounts receivable and inventory financing, machinery and equipment purchases, and other business purposes. Generally, lines of credit have maturities ranging from twelve to twenty- four months, and “term loans” have maturities ranging from five to ten years.
Federal legislation, however, required the FRB to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to depository institutions. As a result, consolidated regulatory capital requirements identical to those applicable to the subsidiary banks generally apply to bank holding companies.
As a result, consolidated regulatory capital requirements identical to those applicable to the subsidiary banks generally apply to bank holding companies.
The Bank was originally organized in 2009, with a focus on serving the South Asian community in Nassau County. After incurring financial and regulatory setbacks, the Bank was recapitalized in 2012 (the “2012 recapitalization”).
As of September 30, 2023, we had total assets of $2.15 billion, total loans of $1.87 billion, total deposits of $1.74 billion and total stockholders’ equity of $185.9 million. The Bank was originally organized in 2009, with a focus on serving the South Asian community in Nassau County.
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We have also received regulatory approval to open a branch in Hauppauge, Suffolk County, New York, which we expect to open in early 2023. As of September 30, 2022, we had total assets of $1.84 billion, total loans of $1.62 billion, total deposits of $1.53 billion and total stockholders’ equity of $172.6 million.
Added
In May 2022, the Company completed an initial public offering (“IPO”) of its common stock resulting in net proceeds of $27.7 million. The Company listed its shares on The Nasdaq Global Select Market in connection with the IPO.
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In 2019, we acquired Chinatown Federal Savings Bank (“CFSB”) for a total purchase price of $13.6 million. We acquired total assets of $141.3 million, total loans of $93.6 million and total deposits of $110.0 million, as well as three branches in Manhattan and Brooklyn, NY (one of which, the Canal Street branch, was subsequently closed).
Added
In October 2023, the Company’s Board of Directors approved a change in the Company’s fiscal year end from September 30 to December 31. Accordingly, the Company will report a transition quarter that runs from October 1, 2023 through December 31, 2023 (the “Stub Period”).
Removed
We principally focus our lending activities on loans that we originate to borrowers located in our market areas. We seek to be the premier provider of lending products and services in our market area, meeting the credit needs of high-quality business and individual borrowers in the communities that we serve.
Added
The Company’s next full fiscal year will be the calendar year January 1, 2024 through December 31, 2024. All references in Part I of this report to a quarter or year are to the Company’s historical fiscal quarter or fiscal year unless otherwise stated.
Removed
Other one- to four-family credit products include home equity loans and first-time home buyer loans. We take a comprehensive approach to mortgage underwriting, resulting in an average loan-to-value of the portfolio at origination of 56%.
Added
However, due to the pace of interest rate increases since 2022, the Bank’s secondary market sale activity remains less active, and the Bank continues originating residential loans for its own portfolio. Commercial real estate .
Removed
While our loan sales to date have been primarily to one financial institution, we expect to expand our network of purchasers that will acquire our one- to four-family loan products. Commercial real estate .
Added
Commercial and industrial . We provide a mix of variable and fixed rate commercial and industrial loans, which we refer to as C&I loans. The loans are typically made to small and medium-sized businesses for working capital needs, business expansions and trade financing.
Removed
Our owner-occupied lending efforts were significantly enhanced with the Savoy merger. Our construction portfolio is small, representing only $12.9 million in total balances at September 30, 2022. Our construction and land development loans are comprised of commercial construction and land acquisition and development loans. Interest reserves are generally established on real estate construction loans.
Added
We originate all such loans through our loan officers and brokers to borrowers located in, and secured by collateral located in, New York and New Jersey, our primary trade area, as well as in other states across the country. Deposits and Funding Checking accounts consist of retail and business demand deposit products.
Removed
We expect C&I lending to be a key component of our growth going forward. Prior to the acquisition of Savoy, we had a very limited portfolio of commercial and industrial loans. Savoy brought significant expertise in this area.
Added
For these purposes, the statute establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. ​ 10 Table of Contents The final rule that increased regulatory capital standards also adjusted the prompt corrective action tiers as of January 1, 2015 to conform to the revised capital standards.
Removed
Our participation in SBA lending, excluding activities related to the Paycheck Protection Program (“PPP”), were a direct result of the merger transaction with Savoy, including acquiring their SBA portfolio, employees and infrastructure. We offer mostly SBA 7(a) variable-rate loans.
Added
The Bank is required to pay an annual assessment to the DFS and FDIC to fund the agencies’ operations.
Removed
We also, from time-to-time, originate loans guaranteed by the United States Department of Agriculture (“USDA”), which have characteristics that are similar to those of SBA 7(a) loans. We originate all such loans through our loan officers and through brokers. Historically, we have primarily originated SBA and USDA guaranteed loans only in the New York metropolitan area.
Added
The banking regulatory agencies have recently substantially amended their regulations implementing the CRA to, among other things, move away from standards based upon the location of a bank’s branches and toward a focus on the location of its loans. These regulations are not yet effect, and management has not yet determined the impact of these new regulations on the Bank.
Removed
However, we intend to expand our guaranteed lending program and seek to become a national lender under these programs. As a first step, we have hired a lending team based in the Southeast, and will begin originating guaranteed loans referred by that team in 2023. Deposits and Funding Checking accounts consist of both retail and business demand deposit products.
Added
Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.
Removed
Federal Reserve System Under federal law and regulations, the Bank is required to maintain sufficient liquidity to ensure safe and sound banking practices. Regulation D, promulgated by the FRB, imposes reserve requirements on all depository institutions, including the Bank, which maintain transaction accounts or nonpersonal time deposits.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, we may incur greater risk on our SBA and other government guaranteed lending as we seek to expand our guaranteed lending activities outside of a primary market area. ● Our liquidity and capital needs, particularly given our growth strategy, may suffer if not managed effectively or if capital is not available on terms acceptable to us. ● Our ability to continue to grow will diminish if we are unable to continue to make commercially attractive acquisitions, or if we are unable to realize the benefits of prior or future acquisitions in a reasonable timeframe. ● We operate in a highly competitive market and face increasing competition from traditional and new financial services providers. ● We are dependent on key personnel and the unexpected loss of their services, or if we are unable to attract new personnel as we execute our growth strategy, will adversely impact our financial condition. 18 Table of Contents ● We operate in a highly regulated industry, and the current regulatory framework and any future legislative and regulatory changes, may have an adverse effect on our business, financial condition and results of operations. ● We are subject to risks associated with our dependency on our information technology and telecommunications systems and third-party servicers including exposures to systems failures, interruptions or breaches of security. ● Due to the limited public float and trading volume of our stock, our stock price may be volatile, which could result in substantial losses for investors. ● Anti-takeover provisions in our charter and under New York law could limit certain shareholder actions.
Biggest changeIn addition, we may incur greater risk on our SBA and other government guaranteed lending as we seek to expand our guaranteed lending activities outside of our primary market area. ● We have begun offering banking services to businesses in the state licensed cannabis industry, and this could expose us to liabilities and regulatory compliance costs. ● Our liquidity and capital needs, particularly given our growth strategy, may suffer if not managed effectively or if capital is not available on terms acceptable to us. ● Our ability to sustain growth will diminish if we are unable to continue to make commercially attractive acquisitions, or if we are unable to realize the benefits of prior or future acquisitions in a reasonable timeframe. ● We operate in a highly competitive market and face increasing competition from traditional and new financial services providers. ● We are dependent on key personnel and the unexpected loss of their services, or if we are unable to attract new personnel as we execute our growth strategy, will adversely impact our financial condition. ● We operate in a highly regulated industry, and the current regulatory framework and any future legislative and regulatory changes, may have an adverse effect on our business, financial condition and results of operations. ● We are subject to risks associated with our dependency on our information technology and telecommunications systems and third-party servicers including exposures to systems failures, interruptions or breaches of security. ● Due to the limited public float and trading volume of our stock, our stock price may be volatile, which could result in substantial losses for investors. ● Anti-takeover provisions in our charter and under New York and Federal law could limit certain shareholder actions. ​ 19 Table of Contents ECONOMIC, MARKET AND INVESTMENT RISKS Inflationary pressures and rising prices may affect our results of operations and financial condition.
However, an appraisal is only an estimate of the value of the property at the time the appraisal is made and, as real estate values may change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately describe the net value of the real property collateral after the loan is made.
However, an appraisal is only an estimate of the value of the property at the time the appraisal is made and, as real estate values may change significantly in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately describe the net value of the real property collateral after the loan is made.
Effective October 1, 2023, we will be required to adopt the Financial Accounting Standards Board (the “FASB”) Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments , commonly referred to as “CECL.” CECL changes the allowance for loan losses methodology from an incurred loss concept to an expected loss concept, which is more dependent on future economic forecasts, assumptions and models than previous accounting standards and could result in increases in, and add volatility to, our allowance for loan losses and future provisions for loan losses.
Effective October 1, 2023, we will be required to adopt the Financial Accounting Standards Board (the “FASB”) Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments , commonly referred to as “CECL.” CECL changes the allowance for loan losses methodology from an incurred loss concept to an expected loss concept, which is more dependent on future economic forecasts, assumptions and models than previous accounting standards and could result in increases in, and add volatility to, our allowance for credit losses and future provisions for credit losses.
These factors include, among other things: ● general economic conditions and overall market fluctuations; ● actual or anticipated fluctuations in our quarterly or annual operating results; ● changes in accounting standards, policies, guidance, interpretations or principles; ● the public reaction to our press releases, our other public announcements and our filings with the SEC; ● changes in financial estimates and recommendations by securities analysts following our stock; ● changes in earnings estimates by securities analysts or our ability to meet those estimates; ● the operating and stock price performance of other comparable companies; ● the trading volume of our common stock; ● new technology used, or services offered, by competitors; and ● changes in business, legal or regulatory conditions, or other developments affecting the financial services industry, participants in our industry, and publicity regarding our business or any of our significant customers or competitors ​ The realization of any of the risks described in Item 1A “Risk Factors” section could have a material adverse effect on the market price of our common stock.
These factors include, among other things: ● general economic conditions and overall market fluctuations; ● actual or anticipated fluctuations in our quarterly or annual operating results; ● changes in accounting standards, policies, guidance, interpretations or principles; ● the public reaction to our press releases, our other public announcements and our filings with the SEC; ● changes in financial estimates and recommendations by securities analysts following our stock; ● changes in earnings estimates by securities analysts or our ability to meet those estimates; ● the operating and stock price performance of other comparable companies; ● the trading volume of our common stock; ● new technology used, or services offered, by competitors; and ● changes in business, legal or regulatory conditions, or other developments affecting the financial services industry, participants in our industry, and publicity regarding our business or any of our significant customers or competitors. ​ The realization of any of the risks described in this Item 1A “Risk Factors” section could have a material adverse effect on the market price of our common stock.
These forecasts, assumptions, and models are inherently uncertain and are based upon management’s reasonable judgment in light of information currently available. Our allowance for loan losses may not be adequate to absorb actual credit losses, and future provisions for credit losses could materially and adversely affect our operating results. If our non-performing assets increase, our earnings will be adversely affected.
These forecasts, assumptions, and models are inherently uncertain and are based upon management’s reasonable judgment in light of information currently available. Our allowance for credit losses may not be adequate to absorb actual credit losses, and future provisions for credit losses could materially and adversely affect our operating results. If our non-performing assets increase, our earnings will be adversely affected.
If additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our non-performing assets, our losses and troubled assets could increase, which could have a material adverse effect on our financial condition and results of operations. 26 Table of Contents We are dependent on the use of data and modeling in our management’s decision-making, and faulty data or modeling approaches could negatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future.
If additional borrowers become delinquent and do not pay their loans, and we are unable to successfully manage our non-performing assets, our losses and troubled assets could increase, which could have a material adverse effect on our financial condition and results of operations. 27 Table of Contents We are dependent on the use of data and modeling in our management’s decision-making, and faulty data or modeling approaches could negatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future.
Similarly, the loss of key employees, either individually or as a group, could adversely affect our clients’ perception of our abilities and, accordingly, our reputation. ​ 30 Table of Contents REGULATORY AND COMPLIANCE RISKS We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us and our future growth.
Similarly, the loss of key employees, either individually or as a group, could adversely affect our clients’ perception of our abilities and, accordingly, our reputation. ​ 31 Table of Contents REGULATORY AND COMPLIANCE RISKS We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us and our future growth.
Summary of Risk Factors ● We are subject to risks associated with the COVID-19 pandemic, which could have an adverse effect on our business, financial condition and results of operations. ● Our one- to four- family residential mortgage lending and certain niche loan products could expose us to credit risks that may be different than would apply to a more diversified or traditional loan portfolio. ● Our business and operations are concentrated in the New York metropolitan area, and we are sensitive to adverse changes in the local economy. ● We are subject to the various risks associated with our banking business and operations, including, among others, credit, market, liquidity, interest rate and compliance risks, which may have an adverse effect on our business, financial condition and results of operations if we are unable to manage such risks. ● SBA and other government guaranteed lending is an increasingly important part of our business, and changes to the SBA programs, or the rules governing such programs or other government guaranteed lending programs, may adversely affect our profitability.
Summary of Risk Factors ● Our one- to four- family residential mortgage lending and certain niche loan products could expose us to credit risks that may be different than would apply to a more diversified or traditional loan portfolio. ● Our business and operations are concentrated in the New York metropolitan area, and we are sensitive to adverse changes in the local economy. ● We are subject to the various risks associated with our banking business and operations, including, among others, credit, market, liquidity, interest rate and compliance risks, which may have an adverse effect on our business, financial condition and results of operations if we are unable to manage such risks. ● SBA and other government guaranteed lending are an increasingly important part of our business, and changes to SBA or other government guaranteed lending programs, or the rules governing such programs or other government guaranteed lending programs, may adversely affect our profitability.
No assurance can be given that we will be successful in this strategy. 28 Table of Contents We may be challenged to successfully manage our business as a result of the strain on management and operations that may result from growth. The ability to manage growth will depend on our ability to continue to attract, hire and retain skilled employees.
No assurance can be given that we will be successful in this strategy. 29 Table of Contents We may be challenged to successfully manage our business as a result of the strain on management and operations that may result from growth. The ability to manage growth will depend on our ability to continue to attract, hire and retain skilled employees.
Accordingly, the ability to keep pace with technological change is important and the failure to do so could adversely affect our business, financial condition and results of operations. ​ 35 Table of Contents OPERATIONAL RISKS Many types of operational risks can affect our earnings negatively. We regularly assess and monitor operational risk in our businesses.
Accordingly, the ability to keep pace with technological change is important and the failure to do so could adversely affect our business, financial condition and results of operations. ​ 36 Table of Contents OPERATIONAL RISKS Many types of operational risks can affect our earnings negatively. We regularly assess and monitor operational risk in our businesses.
Our inability to compete successfully in the markets in which we operate could have an adverse effect on our business, financial condition or results of operations. 29 Table of Contents We need to invest in innovation, and the inability or failure to do so may affect our business and earnings negatively.
Our inability to compete successfully in the markets in which we operate could have an adverse effect on our business, financial condition or results of operations. 30 Table of Contents We need to invest in innovation, and the inability or failure to do so may affect our business and earnings negatively.
Economic downturns and other events that negatively impact our market areas could cause us to incur substantial credit losses that could negatively affect our financial condition and results of operations. ​ 25 Table of Contents Our allowance for loan losses may not be adequate to cover actual losses.
Economic downturns and other events that negatively impact our market areas could cause us to incur substantial credit losses that could negatively affect our financial condition and results of operations. ​ 26 Table of Contents Our allowance for loan losses may not be adequate to cover actual losses.
Such events could have a material adverse effect on our business, financial condition and results of operations. ​ 27 Table of Contents STRATEGIC RISKS If we do not effectively execute our strategic plans, we will not achieve our growth objectives and our business and results of operations may be negatively affected.
Such events could have a material adverse effect on our business, financial condition and results of operations. ​ 28 Table of Contents STRATEGIC RISKS If we do not effectively execute our strategic plans, we will not achieve our growth objectives and our business and results of operations may be negatively affected.
Regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of our business activities, require more oversight or change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans and achieve satisfactory 31 Table of Contents interest spreads and could expose us to additional costs, including increased compliance costs.
Regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of our business activities, require more oversight or change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans and achieve satisfactory interest spreads and could expose us to additional costs, including increased compliance costs.
In addition, if repurchase and indemnity demands increase on loans that we sell from our portfolio, our liquidity, results of operations and financial condition could be adversely affected. 22 Table of Contents We are expanding the geographic scope of our SBA, and other government guaranteed lending, and this may expose us to greater and additional risks than lending in our primary trade area.
In addition, if repurchase and indemnity demands increase on loans that we sell from our portfolio, our liquidity, results of operations and financial condition could be adversely affected. We are expanding the geographic scope of our SBA, and other government guaranteed lending, and this may expose us to greater and additional risks than lending in our primary trade area.
Compliance with these regulations has and may continue to result in additional operating and compliance costs that could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Federal and state regulatory agencies frequently adopt changes to their regulations or change the manner in which existing regulations are applied.
Compliance with these regulations has and may continue to result in additional operating and compliance costs that could have a material adverse effect on our business, financial condition, results of operations and growth prospects. ​ 32 Table of Contents Federal and state regulatory agencies frequently adopt changes to their regulations or change the manner in which existing regulations are applied.
Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior. COMMON STOCK AND TRADING RISKS The price of our common stock could be volatile.
Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior. ​ 40 Table of Contents COMMON STOCK AND TRADING RISKS The price of our common stock could be volatile.
In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and/or suffer damage to our reputation. We may be subject to environmental liabilities in connection with the real properties we own and the foreclosure on real estate assets securing our loan portfolio.
In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and/or suffer damage to our reputation. ​ 38 Table of Contents We may be subject to environmental liabilities in connection with the real properties we own and the foreclosure on real estate assets securing our loan portfolio.
There is also increased scrutiny of compliance with the sanctions programs and rules administered and enforced by the Treasury Department’s Office of Foreign Assets Control (“OFAC”). In order to comply with regulations, guidelines and examination procedures in this area, we have dedicated significant resources to our anti-money laundering program.
There is also increased scrutiny of compliance with the sanctions programs and rules administered and enforced by the Treasury Department’s Office of Foreign Assets Control (“OFAC”). 33 Table of Contents In order to comply with regulations, guidelines and examination procedures in this area, we have dedicated significant resources to our anti-money laundering program.
In addition, our failure to adequately oversee the actions of our third-party service providers could result in regulatory actions against the Bank, which could adversely affect our business, financial condition and results of operations. Pandemics, natural disasters, global climate change, acts of terrorism and global conflicts may have a negative impact on our business and operations.
In addition, our failure to adequately oversee the actions of our third-party service providers could result in regulatory actions against the Bank, which could adversely affect our business, financial condition and results of operations. ​ 39 Table of Contents Pandemics, natural disasters, global climate change, acts of terrorism and global conflicts may have a negative impact on our business and operations.
Political and electoral changes, developments, conflicts and conditions (such as fiscal policy changes proposed) have in the past introduced, and may in the future introduce, additional uncertainty that could also affect our operating results negatively. 21 Table of Contents LENDING ACTIVITIES RISKS Small Business Administration lending is an increasingly important part of our business.
Political and electoral changes, developments, conflicts and conditions (such as fiscal policy changes proposed) have in the past introduced, and may in the future introduce, additional uncertainty that could also affect our operating results negatively. LENDING ACTIVITIES RISKS Small Business Administration lending is an increasingly important part of our business.
A failure to effectively measure and manage the credit risk associated with our loan portfolio could lead to unexpected losses and have an adverse effect on our business, financial condition and results of operations. Our emphasis on one- to four- family residential mortgage loans involves risks that could adversely affect our financial condition and results of operations.
A failure to effectively measure and manage the credit risk associated with our loan portfolio could lead to unexpected losses and have an adverse effect on our business, financial condition and results of operations. 25 Table of Contents Our emphasis on one- to four- family residential mortgage loans involves risks that could adversely affect our financial condition and results of operations.
Although we held no OREO properties at September 30, 2022, it is possible that in future periods we may take title to OREO properties in the event of defaults on outstanding loans.
Although we held no OREO properties at September 30, 2023, it is possible that in future periods we may take title to OREO properties in the event of defaults on outstanding loans.
If material environmental problems are discovered before foreclosure, we generally will not foreclose on the related collateral or will transfer ownership of the loan to a subsidiary. It should be noted, however, that the transfer of the 37 Table of Contents property or loans to a subsidiary may not protect us from environmental liability.
If material environmental problems are discovered before foreclosure, we generally will not foreclose on the related collateral or will transfer ownership of the loan to a subsidiary. It should be noted, however, that the transfer of the property or loans to a subsidiary may not protect us from environmental liability.
Approximately 27.3% of our deposits are from municipal customers, although no single municipal customer represents a concentration risk. A prolonged economic downturn which adversely effects tax revenues or other governmental funding sources could have an adverse impact on our ability to gather cost efficient deposits, and fund our loans and other investments, thereby adversely affecting our results of operations.
Approximately 18.1% of our deposits are from municipal customers, although no single municipal customer represents a concentration risk. A prolonged economic downturn which adversely effects tax revenues or other governmental funding sources could have an adverse impact on our ability to gather cost efficient deposits, and fund our loans and other investments, thereby adversely affecting our results of operations.
To the extent that we issue additional debt obligations, the additional debt obligations will be of equal rank with, or senior to, our existing debt obligations and senior to our shares of common stock. Our dividend policy may change without notice and our future ability to pay dividends is subject to restrictions.
To the extent that we issue additional debt obligations, the additional debt obligations will be of equal rank with, or senior to, our existing debt obligations and senior to our shares of common stock. ​ 41 Table of Contents Our dividend policy may change without notice and our future ability to pay dividends is subject to restrictions.
As part of the bank regulatory process, the FDIC, the New York State DFS, and the FRB periodically conduct examinations of our businesses, including compliance with laws and regulations.
As part of the bank regulatory process, the FDIC, the New York State DFS, and the FRB periodically conduct examinations of our business, including compliance with laws and regulations.
The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans, which are typically considered to have a higher degree of risk and are less liquid than conforming residential mortgage 23 Table of Contents loans. We attempt to address this enhanced risk through our underwriting process, and by requiring three months principal, interest, taxes and insurance reserves.
The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans, which are typically considered to have a higher degree of risk and are less liquid than conforming residential mortgage loans. We attempt to address this enhanced risk through our underwriting process, and by generally requiring three months principal, interest, taxes and insurance reserves.
In addition, we rely on appraisals and other valuation techniques to establish the value of our other real estate owned (“OREO”) and personal property that we acquire through foreclosure proceedings and to determine 20 Table of Contents certain loan impairments.
In addition, we rely on appraisals and other valuation techniques to establish the value of our other real estate owned (“OREO”) and personal property that we acquire through foreclosure proceedings and to determine certain loan impairments.
An economic recession or a downturn in various markets could have one or more of the following adverse effects on our business: ● a decrease in the demand for our loans and other products we offer; ● a decrease in our deposit balances due to overall reductions in the number or value of client accounts; ● a decrease in the value of collateral securing our loans; ● an increase in the level of nonperforming and classified loans; ● an increase in provisions for credit losses and loan charge-offs; ● a decrease in net interest income derived from our lending and deposit gathering activities; ● a decrease in our ability to access the capital markets; and ● an increase in our operating expenses associated with attending to the effects of certain circumstances listed above.
An economic recession or a downturn in various markets could have one or more of the following adverse effects on our business: ● a decrease in the demand for our loans and other products we offer; ● a decrease in our deposit balances due to overall reductions in the number or value of client accounts; ● a decrease in the value of collateral securing our loans; ● an increase in the level of nonperforming and classified loans; ● an increase in provisions for loan losses and loan charge-offs; ● a decrease in net interest income derived from our lending and deposit gathering activities; ● a decrease in our ability to access the capital markets; and ● an increase in our operating expenses associated with attending to the effects of certain circumstances listed above. 22 Table of Contents Various market conditions also affect our operating results.
We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability. At September 30, 2022, approximately $1.6 billion, or 96%, of our total loan portfolio was secured by real estate, almost all of which is located in our primary lending market.
We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability. At September 30, 2023, approximately $1.8 billion, or 95%, of our total loan portfolio was secured by real estate, almost all of which is located in our primary lending market.
During the years ended September 30, 2022 and 2021, we sold into the secondary market $19.4 million and $32.1 million, respectively of our non-qualified mortgages. We also have a concentration in the secondary market for our non-qualified mortgage loans, as a substantial portion of our non-qualified mortgage loans have been sold to one purchaser.
During the years ended September 30, 2023 and 2022, we sold into the secondary market $0 and $19.4 million, respectively of our non-qualified mortgages. We also have a concentration in the secondary market for our non-qualified mortgage loans, as a substantial portion of our non-qualified mortgage loans have historically been sold to one purchaser.
If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating results may be materially adversely affected. We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth. We have experienced rapid organic and acquisition-driven growth in recent periods.
If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating results may be materially adversely affected. ​ 37 Table of Contents We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth.
We have been and may in the future become involved in legal and regulatory proceedings. We consider most of our historical proceedings to be in the normal course of our business or typical for the industry; however, it is difficult to assess the outcome of these matters, and we may not prevail in any current or future proceedings or litigation.
We consider most of our historical proceedings to be in the normal course of our business or typical for the industry; however, it is difficult to assess the outcome of these matters, and we may not prevail in any current or future proceedings or litigation.
Pandemics, including the continuing COVID-19 pandemic, natural disasters, global climate change, acts of terrorism, global conflicts or other similar events have in the past, and may in the future have, a negative impact on our business and operations.
Pandemics, natural disasters, global climate change, acts of terrorism, global conflicts or other similar events have in the past, and may in the future have, a negative impact on our business and operations.
Non-qualified mortgage loans are considered to have a higher degree of risk and are less liquid than qualified mortgage loans. For the years ended September 30, 2022 and 2021, we originated $182.7 million and $106.4 million in non-qualified mortgage loans, respectively.
Non-qualified mortgage loans are considered to have a higher degree of risk and are less liquid than qualified mortgage loans. For the years ended September 30, 2023 and 2022, we originated $196.0 million and $182.7 million in non-qualified mortgage loans, respectively.
We have historically originated, primarily through Savoy, a significant number of SBA loans, and sold a significant portion of the guaranteed portions of these loans on the secondary market. We generally retain the non-guaranteed portions of the SBA loans that we originate.
We have historically originated an increasingly significant number of SBA loans, and sold a significant portion of the guaranteed portions of these loans on the secondary market. We generally retain the non-guaranteed portions of the SBA loans that we originate.
Our loan portfolio includes a significant concentration of one- to four- family residential mortgage loans. As of September 30, 2022, we had $515.3 million in one- to four- family residential mortgage loans, representing 32% of our total loan portfolio.
Our loan portfolio includes a significant concentration of one- to four- family residential mortgage loans. As of September 30, 2023, we had $657.3 million in one- to four- family residential mortgage loans, representing 35% of our total loan portfolio.
Our asset and revenue growth may slow or our revenue may decline for a number of other reasons, including reduced 36 Table of Contents demand for our services, increased competition, a decrease in the growth or reduction in size of our overall market, the impacts to our business from the COVID-19 pandemic, or if we cannot capitalize on growth opportunities.
Our asset and revenue growth may slow or our revenue may decline for a number of other reasons, including reduced demand for our services, increased competition, a decrease in the growth or reduction in size of our overall market, or if we cannot capitalize on growth opportunities.
We maintain an allowance for loan losses that represents management’s judgment of probable losses and risks inherent in our loan portfolio. As of September 30, 2022, our allowance for loan losses totaled $12.8 million, which represented approximately 0.80% of our total loans held for investment, excluding PPP loans.
We maintain an allowance for loan losses that represents management’s judgment of probable losses and risks inherent in our loan portfolio. As of September 30, 2023, our allowance for loan losses totaled $14.7 million, which represented approximately 0.78% of our total loans held for investment.
Failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions. The Bank is subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital which it must maintain. From time to time, regulators implement changes to these regulatory capital adequacy guidelines.
The Bank is subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital which it must maintain. From time to time, regulators implement changes to these regulatory capital adequacy guidelines.
At September 30, 2022, our non-performing assets, which consist of non-performing loans and OREO (of which we had none at September 30, 2022), were $13.5 million, or 0.73% of total assets.
At September 30, 2023, our non-performing assets, which consist of non-performing loans and OREO (of which we had none at September 30, 2023), were $15.1 million, or 0.70% of total assets.
Thus, any borrowing that must be done by the Company to make a required capital injection becomes more difficult and expensive and could have an adverse effect on our business, financial condition and results of operations. Moreover, it is possible that we will be unable to borrow funds when we need to do so.
Thus, any borrowing that must be done by the Company to make a required capital injection becomes more difficult and expensive and could have an adverse effect on our business, financial condition and results of operations.
In the event of our bankruptcy, dissolution or liquidation, the holders of our debt obligations must be satisfied before any distributions can be made to the holders of our common stock.
As a result, we must make payments on our debt obligations before any dividends can be paid on our common stock. In the event of our bankruptcy, dissolution or liquidation, the holders of our debt obligations must be satisfied before any distributions can be made to the holders of our common stock.
We intend to acquire additional lending teams in other parts of the country. This geographic expansion of our government guaranteed lending may expose us to greater and different risks than lending in our trade area.
This geographic expansion of our government guaranteed lending may expose us to greater and different risks than lending in our trade area.
If the FDIC, our primary federal regulator, were to impose restrictions on the amount of such loans we can hold in our portfolio or require us to implement additional compliance measures, for reasons noted above or otherwise, our earnings could be adversely affected as would our earnings per share.
If the FDIC, our primary federal regulator, were to impose restrictions on the amount of such loans we can hold in our portfolio or require us to implement additional compliance measures, for reasons noted above or otherwise, our earnings could be adversely affected as would our earnings per share. 24 Table of Contents The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans which may be considered less liquid and more risky.
Historically, our SBA and other government guaranteed lending has been to customers, and secured by collateral, located primarily on our metropolitan New York trade area. However, we have recently begun an initiative to expand the geographic scope of our government guaranteed lending, and have hired a lending team based in the Southeast.
Historically, our SBA and other government guaranteed lending has been to customers, and secured by collateral, located primarily on our metropolitan New York trade area. However, we have hired lending personnel in other parts of the country to expand our market share of SBA and other government guaranteed lending.
In the event of a holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank.
Any loans by a holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank.
As a strategy, we have focused on growth by aggressively pursuing business development opportunities. Our assets have grown from $68.5 million at December 31, 2012 to $1.84 billion at September 30, 2022, representing a compound annual growth rate of approximately 40%. We cannot guarantee that we will sustain our recent asset and revenue growth rate in future periods.
We have experienced rapid organic and acquisition-driven growth in recent periods. As a strategy, we have focused on growth by aggressively pursuing business development opportunities. Our assets have grown from $68.5 million at December 31, 2012 to $2.15 billion at September 30, 2023, representing a compound annual growth rate of approximately 38%.
A public trading market having the desired characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of willing buyers and sellers of our common stock at any given time, which presence is dependent upon the individual decisions of investors, over which we have no control. 39 Table of Contents The holders of our existing and future debt obligations will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest.
A public trading market having the desired characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of willing buyers and sellers of our common stock at any given time, which presence is dependent upon the individual decisions of investors, over which we have no control.
This could require increasing our allowance for loan losses to address the decrease in the value of the real estate securing our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
This could require increasing our allowance for loan losses to address the decrease in the value of the real estate securing our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. ​ 21 Table of Contents Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned and repossessed personal property may not accurately describe the net value of the asset.
Consequently, as of September 30, 2022, we held $106.4 million of SBA loans on our balance sheet, $77.3 million of which consisted of the non-guaranteed portion of SBA loans and $29.1 million consisted of the guaranteed portion of SBA loans.
Consequently, as of September 30, 2023, we held $115.5 million of SBA loans on our balance sheet, $90.6 million of which consisted of the non-guaranteed portion of SBA loans and $24.9 million consisted of the guaranteed portion of SBA loans.
In recent years, several financial services firms suffered successful cyber-attacks launched both domestically and from abroad, resulting in the disruption of services to clients, loss or misappropriation of sensitive or private information, and reputational harm.
If this confidential or proprietary information were to be mishandled, misused or lost, we could be exposed to significant regulatory consequences, reputational damage, civil litigation and financial loss. ​ 35 Table of Contents In recent years, several financial services firms suffered successful cyber-attacks launched both domestically and from abroad, resulting in the disruption of services to clients, loss or misappropriation of sensitive or private information, and reputational harm.
The net deferred tax asset is measured by applying currently enacted income tax rates to the accounting period during which the tax benefit is expected to be realized. As of September 30, 2022, our net deferred tax asset was $2.5 million. Tax rates may go up, which could negatively impact our net income and cash flow.
The net deferred tax asset is measured by applying currently enacted income tax rates to the accounting period during which the tax benefit is expected to be realized. As of September 30, 2023, our net deferred tax asset was $1.5 million. Failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions.
Approximately 91% of these loans are secured by properties in the five boroughs of New York City 24 Table of Contents and Nassau County, New York and 69% of these loans are rental properties and are not owner-occupied.
Approximately 91% of these loans are secured by properties in the five boroughs of New York City and Nassau County, New York and 69% of these loans are rental properties and are not owner-occupied. These loans expose us to credit risks that may be different from those related to loans secured by owner-occupied properties or commercial loans.
Stock market downturns often reflect broader economic deterioration and/or a downward trend in business earnings which may adversely affect businesses’ ability to raise capital and/or service their debts.
Real estate market conditions directly affect performance of our loans secured by real estate. Debt markets affect the availability of credit, which impacts the rates and terms at which we offer loans. Stock market downturns often reflect broader economic deterioration and/or a downward trend in business earnings which may adversely affect businesses’ ability to raise capital and/or service their debts.
Our commercial real estate loan balance has increased 70% during fiscal year 2022 and commercial real estate loans represent 453% of our risk-based capital at September 30, 2022, an increase from 355% at September 30, 2021 reflecting the additional capital raised through our initial public offering.
Our commercial real estate loan balance has increased 7% during fiscal year 2023 and commercial real estate loans represent 448% of our risk-based capital at September 30, 2023, a decrease from 453% at September 30, 2022.
If we lose this purchaser, or any other purchaser of our loans, our resale market may decline and we may not be able to sell our non-conforming residential mortgage loans at our current volume, which will significantly decrease our non-interest income as well as limit the number of non-conforming residential mortgage loans we can originate without excess interest rate risk.
If this purchaser is unwilling to purchase loans from us in the future, our resale market may decline and we may have difficulty selling our non-conforming residential mortgage loans, which could decrease our non-interest income as well as limit the number of non-conforming residential mortgage loans we can originate without excess interest rate risk.
If we fail to continue to upgrade our technology infrastructure and monitor our vendors to ensure effective information security relative to the type, size and complexity of our operations, we could become more vulnerable to cyber-attack and, consequently, subject to significant regulatory penalties. 34 Table of Contents Although we employ a variety of physical, procedural and technological safeguards to protect this confidential and proprietary information from mishandling, misuse or loss, these safeguards do not provide absolute assurance that mishandling, misuse or loss of the information will not occur, and that if mishandling, misuse or loss of information does occur, those events will be promptly detected and addressed.
Although we employ a variety of physical, procedural and technological safeguards to protect this confidential and proprietary information from mishandling, misuse or loss, these safeguards do not provide absolute assurance that mishandling, misuse or loss of the information will not occur, and that if mishandling, misuse or loss of information does occur, those events will be promptly detected and addressed.
We have paid cash dividends for four consecutive quarters. We have no obligation to continue paying dividends.
We have no obligation to continue paying dividends.
We generally retain the non-guaranteed portions of the SBA loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations would be adversely impacted.
We generally retain the non-guaranteed portions of the SBA loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations would be adversely impacted. 23 Table of Contents When we sell the guaranteed portion of SBA loans in the ordinary course of business, we are required to make certain representations and warranties to the purchaser about the SBA loans and the manner in which they were originated.
In addition, the market value of the real estate securing loans as collateral could be adversely affected by unfavorable changes in market and economic conditions. As of September 30, 2022, 78% of our real estate loan portfolio was secured by real estate located in the five boroughs of New York City and Nassau County, New York.
As of September 30, 2023, 77% of our real estate loan portfolio was secured by real estate located in the five boroughs of New York City and Nassau County, New York.
The occurrence of an economic downturn in the New York metro area, or adverse changes in laws or regulations in New York due to the adverse effects of the COVID-19 pandemic or otherwise, could impact the credit quality of our assets, the businesses of our customers and the ability to expand our business.
The occurrence of an economic downturn in the New York metro area, could impact the credit quality of our assets, the businesses of our customers and the ability to expand our business. Our success significantly depends upon the growth in population, income levels, deposits and housing in our market area.
Our success significantly depends upon the growth in population, income levels, deposits and housing in our market area. If the communities in which we operate do not grow or if prevailing economic conditions locally or nationally are unfavorable, our business may be negatively affected.
If the communities in which we operate do not grow or if prevailing economic conditions locally or nationally are unfavorable, our business may be negatively affected. In addition, the market value of the real estate securing loans as collateral could be adversely affected by unfavorable changes in market and economic conditions.
We regularly collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and others and concerning our business, operations, plans and strategies. In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf.
In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf.
Shares of our common stock are equity interests and do not constitute indebtedness. In the event of any liquidation, dissolution or winding up of our business or of the Bank, our common stock would rank below all claims of debt holders against us.
The holders of our existing and future debt obligations will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest. Shares of our common stock are equity interests and do not constitute indebtedness.
Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned and repossessed personal property may not accurately describe the net value of the asset. In considering whether to make a loan secured by real property, we generally require an appraisal of the property.
In considering whether to make a loan secured by real property, we generally require an appraisal of the property.
As of September 30, 2022, we had outstanding approximately $25.0 million in aggregate principal amount of subordinated notes. Our debt obligations are senior to our shares of common stock. As a result, we must make payments on our debt obligations before any dividends can be paid on our common stock.
In the event of any liquidation, dissolution or winding up of our business or of the Bank, our common stock would rank below all claims of debt holders against us. As of September 30, 2023, we had outstanding approximately $25.0 million in aggregate principal amount of subordinated notes. Our debt obligations are senior to our shares of common stock.
Removed
ECONOMIC, MARKET AND INVESTMENT RISKS The ongoing global COVID-19 outbreak could harm our business and results of operations, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.
Added
Inflation began to rise sharply at the end of 2021 and has remained at an elevated level through 2023. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
Removed
The COVID-19 pandemic has had a specific impact on our business, including: (1) causing some of our borrowers to be unable to meet existing payment obligations; (2) legal and regulatory requirements that require us to provide payment deferrals to certain customers adversely affected by the pandemic and which limit our ability to foreclose on certain property securing certain of our loans, (3) requiring us to increase our allowance for loan losses; and (4) affecting consumer and business spending, borrowing and savings habits.
Added
Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition.
Removed
The ultimate risk posed by the COVID-19 pandemic remains highly uncertain; however, COVID-19 poses a material risk to our business, financial condition and results of operations.
Added
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition. Our stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.
Removed
Other factors likely to have an adverse effect on our results of operations include: ● risks to the capital markets due to the volatility in financial markets that may impact the performance of our investment securities portfolio; ● effects on key employees, including operational management personnel and those charged with preparing, monitoring and evaluating our financial reporting and internal controls; ● declines in demand for loans and other banking services and products, as well as increases in our non-performing loans, owing to the effects of COVID-19 in the markets served by the Bank and on the business of borrowers of the Bank; ● reduced fees as we waive certain fees for our customers impacted by the COVID-19 pandemic; and ● higher operating costs, increased cybersecurity risks and potential loss of productivity due to employees working remotely, at least part of the time.
Added
Further, if we were unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, which have come under greater scrutiny in light of recent bank failures, we may experience a material adverse effect on our financial condition and results of operations.
Removed
Lastly, our commercial real estate and multi-family loans are dependent on the profitable operation and management of the properties securing such loans.
Added
On March 9, 2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations.
Removed
The longer the pandemic persists, the stronger the likelihood that COVID-19 could have a significant adverse impact by reducing the revenue and cash flows of our borrowers, impacting the borrowers’ ability to repay their loans, increasing the risk of delinquencies and defaults, and reducing the collateral value underlying the loans.
Added
On March 10, 2023, Silicon Valley Bank, Santa Clara, California, was closed by the California Department of Financial Protection and Innovation (the “DFPI”), on March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services and on May 1, 2023, First Republic Bank, San Francisco, California, was closed by the DFPI, and in each case the FDIC was appointed receiver for the failed institution.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSet forth below is certain information about the Bank’s offices: ● Headquarters and Mineola Branch — 80 East Jericho Turnpike, Mineola, New York — this building has a branch on the first floor and Hanover’s corporate and administrative offices on the second and third floors and was opened in 2017. ● Garden City Park Branch — 2131 Jericho Turnpike, Garden City Park, New York — this one-story building houses the Bank’s original branch as well as its Loan Servicing Department. ● Flushing Branch — 138-29 39th Avenue, Flushing, New York — this is a ground floor branch opened in 2019. ● Forest Hills Branch — 71-15 Austin Street, Forest Hills, New York — this is a ground floor branch opened in 2017. ● Sunset Park Branch — 5512 8th Avenue, Brooklyn, New York — this three-story building has a branch on the ground floor and administrative offices on the second and third floors. ● Bowery Branch — 109 Bowery, New York, New York — this three-story building has a branch on the ground floor and administrative offices on the second and third floors. ● Rockefeller Center Branch — 600 5th Avenue, New York, New York — this is a branch located on the 17 th floor of a 26-floor commercial building and was acquired as part of the Savoy transaction. ● Freehold Branch — 4400 Route 9, Freehold, NJ — this branch and administrative office is located on the second floor of three-story commercial office building. 40 Table of Contents ​
Biggest changeSet forth below is certain information about the Bank’s offices: ● Headquarters and Mineola Branch — 80 East Jericho Turnpike, Mineola, New York — this building has a branch on the first floor and Hanover’s corporate and administrative offices on the second and third floors and was opened in 2017. ● Garden City Park Branch — 2131 Jericho Turnpike, Garden City Park, New York — this one-story building houses the Bank’s original branch as well as its Loan Servicing Department. ● Flushing Branch — 138-29 39th Avenue, Flushing, New York — this is a ground floor branch opened in 2019. ● Forest Hills Branch — 71-15 Austin Street, Forest Hills, New York — this is a ground floor branch opened in 2017. ● Sunset Park Branch — 5512 8th Avenue, Brooklyn, New York — this three-story building has a branch on the ground floor and administrative offices on the second and third floors. ● Bowery Branch — 109 Bowery, New York, New York — this three-story building has a branch on the ground floor and administrative offices on the second and third floors. ● Rockefeller Center Branch — 600 5th Avenue, New York, New York — this is a branch located on the 17 th floor of a 26-floor commercial building and was acquired as part of the Savoy transaction. ● Freehold Branch — 4400 Route 9, Freehold, NJ — this branch and administrative office is located on the second floor of three-story commercial office building. ● Hauppauge Branch — 410 Motor Parkway, Hauppauge, New York — this branch is located on the third floor of a commercial office building and was opened in May 2023. ​
ITEM 2. Properties The Bank owns its administrative headquarters and its Garden City Park branch and leases six other branch locations. Our banking offices are located in Kings, Nassau, New York and Queens Counties in New York and in Monmouth County in New Jersey.
ITEM 2. Properties The Bank owns its administrative headquarters and its Garden City Park branch and leases seven other branch locations. Our banking offices are located in Kings, Nassau, Suffolk, New York and Queens Counties in New York and in Monmouth County in New Jersey.
Removed
In addition, we have recently received regulatory approval to open a new branch in Hauppauge, Suffolk County, New York, which we expect to open in early 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. Legal Proceedings From time to time we are party to various litigation matters incidental to the conduct of our business. We are not presently party to any such legal proceeding the resolution of which we believe would have a material adverse effect on our business, operating results, financial condition or cash flow. ​ ITEM 4.
Biggest changeITEM 3. Legal Proceedings From time to time we are party to various litigation matters incidental to the conduct of our business. At September 30, 2023, we are not party to any such legal proceeding the resolution of which we believe would have a material adverse effect on our business, financial condition or results of operations. ​ ITEM 4.
Mine Safety Disclosures Not applicable. ​ 41 Table of Contents Part II
Mine Safety Disclosures Not applicable. ​ 42 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of Hanover Bancorp, Inc. has been listed on The Nasdaq Global Select Market under the symbol “HNVR” and began trading on May 11, 2022. As of September 30, 2022, there were 512 holders of record of our common stock.
Biggest changeITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of Hanover Bancorp, Inc. trades on The Nasdaq Global Select Market under the symbol “HNVR”.
Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including our earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, our ability to service any equity or debt obligations senior to our common stock, and other factors deemed relevant by our Board of Directors. ​ ITEM 6.
The future determination of our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including our earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, our ability to service any equity or debt obligations senior to our common stock, and other factors deemed relevant by our Board of Directors.
Subject to prior approval from our Board of Directors and regulatory restrictions, we intend to continue the payment of a cash dividend on a quarterly basis to holders of our common stock.
We have paid a cash dividend of $0.10 per share on a quarterly basis to holders of our common stock for the prior eight quarters.
Added
As of September 30, 2023, we had approximately 458 holders of record of our common stock, not including the number of persons or entities holding stock in nominee or the street name through various banks and brokers.
Added
There were no sales of unregistered securities or repurchases of shares of common stock during the quarter ended September 30, 2023. On October 5, 2023, the Company announced that its Board of Directors has approved a Share Repurchase Program. Under this program, the Company may repurchase up to 366,050 shares, or approximately 5% of its outstanding common stock.
Added
The timing and amount of purchases will be dictated by a number of factors. Under the Share Repurchase Program, repurchases will be made from time to time by the Company in the open market as conditions allow, or in privately negotiated transactions.
Added
The Company has not made any repurchases of its common stock under this program through the filing date of this Annual Report on Form 10-K. ​ ITEM 6. [Reserved] ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

67 edited+34 added−22 removed49 unchanged
Biggest changeThe following table presents the allocation of the allowance for loan losses by loan category for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, ​ ​ ​ ​ 2022 ​ ​ 2021 ​ 2020 ​ 2019 ​ 2018 ​ ​ ​ ​ % of ​ ​ % of ​ ​ % of ​ ​ % of ​ ​ % of ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ (dollars in thousands) ​ Amount ​ Loans ​ Amount ​ Loans ​ Amount ​ Loans ​ ​ Amount ​ Loans ​ Amount ​ Loans ​ Residential real estate ​ $ 3,951 0.77 % $ 4,155 0.94 % $ 5,103 1.12 % $ 4,647 1.00 % $ 4,363 1.17 % Multi-family ​ 4,308 0.75 % 2,433 0.91 % 1,506 1.10 % 1,215 0.87 % 1,478 1.12 % Commercial real estate ​ 3,707 0.78 % 1,884 0.54 % 1,221 1.07 % 1,193 1.10 % 500 1.03 % Commercial and industrial ​ 761 1.66 % 79 0.05 % 38 0.18 % 75 1.02 % 152 2.26 % Construction ​ 115 0.89 % — — ​ — — ​ — — ​ — — ​ Consumer ​ 2 9.09 % 1 9.09 % 1 4.17 % 13 2.59 % — — ​ Total allowance for loan losses ​ $ 12,844 0.79 % $ 8,552 0.69 % $ 7,869 1.08 % $ 7,143 0.99 % $ 6,493 1.16 % ​ ​ 52 Table of Contents The following table presents information related activity in the allowance for loan losses for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ (dollars in thousands) ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ 2018 Beginning balance ​ $ 8,552 ​ $ 7,869 ​ $ 7,143 ​ $ 6,493 ​ $ 4,795 ​ Provision for loan losses ​ 4,450 ​ 1,000 ​ 1,250 ​ 650 ​ 1,698 ​ Charge-Offs: ​ ​ ​ ​ ​ ​ Residential real estate ​ — ​ (267) ​ — ​ — ​ — ​ Multi-family ​ (66) ​ (32) ​ — ​ — ​ — ​ Commercial real estate ​ — ​ (30) ​ (224) ​ — ​ — ​ Commercial and industrial ​ (92) ​ — ​ (300) ​ — ​ — ​ Construction ​ — ​ — ​ — ​ — ​ — ​ Consumer ​ — ​ — ​ — ​ — ​ — ​ Total loan charge-offs ​ (158) ​ (329) ​ ​ (524) ​ ​ — ​ ​ — ​ Recoveries: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ — ​ 12 ​ — ​ — ​ — ​ Total recoveries ​ — ​ ​ 12 ​ ​ — ​ ​ — ​ ​ — ​ Total net charge-offs ​ (158) ​ (317) ​ ​ (524) ​ ​ — ​ ​ — ​ Ending balance ​ $ 12,844 ​ $ 8,552 ​ $ 7,869 ​ $ 7,143 ​ $ 6,493 ​ Allowance for loan losses to total loans held-for- investment (1)(2) ​ 0.79 % 0.69 % 1.09 % 0.99 % 1.16 % Net charge-offs to average loans held-for-investment ​ 0.01 % 0.03 % 0.07 % 0.00 % 0.00 % (1) Calculation includes $10.2 million and $140.4 million of PPP loans at September 30, 2022 and 2021, respectively.
Biggest changeThe Company has recorded recoveries of $0.1 million and $0 during the years ended September 30, 2023 and 2022, respectively. ​ 54 Table of Contents The following table presents the allocation of the allowance for loan losses by loan category for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, ​ ​ ​ 2023 ​ ​ 2022 ​ ​ ​ % of ​ ​ % of ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ (dollars in thousands) ​ Amount ​ Loans ​ Amount ​ Loans ​ Residential real estate ​ $ 4,778 0.73 % $ 3,951 0.77 % Multi-family ​ 4,206 0.73 % 4,308 0.75 % Commercial real estate ​ 3,197 0.60 % 3,707 0.78 % Commercial and industrial ​ 2,368 2.77 % 761 1.66 % Construction ​ 104 0.80 % 115 0.89 % Consumer ​ 33 9.82 % 2 9.09 % Total allowance for loan losses ​ $ 14,686 0.79 % $ 12,844 0.79 % ​ ​ The following table presents information related activity in the allowance for loan losses for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (dollars in thousands) ​ 2023 ​ 2022 Beginning balance ​ $ 12,844 ​ $ 8,552 ​ Provision for loan losses ​ 3,432 ​ 4,450 ​ Charge-Offs: ​ ​ ​ Residential real estate ​ — ​ — ​ Multi-family ​ (959) ​ (66) ​ Commercial real estate ​ — ​ — ​ Commercial and industrial ​ (734) ​ (92) ​ Construction ​ — ​ — ​ Consumer ​ — ​ — ​ Total loan charge-offs ​ (1,693) ​ (158) ​ Recoveries: ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ 103 ​ — ​ Total recoveries ​ 103 ​ ​ — ​ Total net charge-offs ​ (1,590) ​ (158) ​ Ending balance ​ $ 14,686 ​ $ 12,844 ​ Allowance for loan losses to total loans held-for- investment (1) ​ 0.78 % 0.79 % Net charge-offs to average loans held-for-investment ​ 0.09 % 0.01 % (1) Includes loans acquired from Savoy that do not carry an allowance for loans losses as of September 30 2023 and 2022.
In establishing the appropriate classification for specific assets, management considers, among other factors, the estimated value of the underlying collateral, the borrower’s ability to repay, the borrower’s payment history and the current delinquent status.
In establishing the appropriate classification for specific assets, management considers, among other factors, the estimated value of the underlying collateral, the borrower’s ability to repay, the borrower’s payment history and the current delinquent status.
As a result of this process, certain loans are categorized as substandard, doubtful or loss and the allowance is allocated based on management’s judgment and historical experience. Acquired loans are recorded at fair value as of the loan’s acquisition date and allowances are recorded for post-acquisition credit quality deterioration.
As a result of this process, certain loans are categorized as substandard, doubtful or loss and the allowance is allocated based on management’s judgment and historical experience. Acquired loans are recorded at fair value as of the loan’s acquisition date and allowances are recorded for post-acquisition credit quality deterioration.
Subsequent to the acquisition date, recurring analyses are performed on the credit quality of acquired loans to determine if expected cash flows have changed. Based upon the results of the individual loan reviews, revised impairment amounts are calculated which could result in additional allowance for loan losses.
Subsequent to the acquisition date, recurring analyses are performed on the credit quality of acquired loans to determine if expected cash flows have changed. Based upon the results of the individual loan reviews, revised impairment amounts are calculated which could result in additional allowance for loan losses.
Analysis of Results of Financial Condition Investment Securities Our investment securities portfolio, which is structured with minimum credit exposure, is intended to provide us with adequate liquidity, flexibility in asset/liability management, and a source of stable income.
Analysis of Financial Condition Investment Securities Our investment securities portfolio, which is structured with minimum credit exposure, is intended to provide us with adequate liquidity, flexibility in asset/liability management, and a source of stable income.
If foreclosure is probable or the loan is collateral dependent, impairment is measured using the fair value of the loan’s collateral, less estimated costs to sell. ​ 50 Table of Contents Asset Quality We consider asset quality to be of primary importance and employ a formal internal loan review process to ensure adherence to our lending policy as approved by our Board of Directors.
If foreclosure is probable or the loan is collateral dependent, impairment is measured using the fair value of the loan’s collateral, less estimated costs to sell. ​ 52 Table of Contents Asset Quality We consider asset quality to be of primary importance and employ a formal internal loan review process to ensure adherence to our lending policy as approved by our Board of Directors.
Management believes that all of its unrealized losses on individual investment securities at September 30, 2022 and 2021 are the result of fluctuations in interest rates and do not reflect deterioration in the credit quality of these investments. Accordingly, management considers these unrealized losses to be temporary in nature.
Management believes that all of its unrealized losses on individual investment securities at September 30, 2023 and 2022 are the result of fluctuations in interest rates and do not reflect deterioration in the credit quality of these investments. Accordingly, management considers these unrealized losses to be temporary in nature.
Capital adequacy guidelines and the regulatory framework for prompt corrective action prescribe specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators 55 Table of Contents about components, risk weightings, and other factors.
Capital adequacy guidelines and the regulatory framework for prompt corrective action prescribe specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Investment Securities Portfolio by Expected Maturities (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, 2022 ​ ​ Available-for-Sale ​ Held-to-Maturity ​ Amortized Weighted Amortized Weighted (dollars in thousands) ​ Cost ​ Average Yield ​ Cost ​ Average Yield U.S.
Investment Securities Portfolio by Expected Maturities (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, 2023 ​ ​ Available-for-Sale ​ Held-to-Maturity ​ Amortized Weighted Amortized Weighted (dollars in thousands) ​ Cost ​ Average Yield ​ Cost ​ Average Yield U.S.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of our financial condition and results of our operations for the fiscal years ended September 30, 2022 and 2021, respectively.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of our financial condition and results of our operations for the fiscal years ended September 30, 2023 and 2022, respectively.
In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan 51 Table of Contents losses and may require us to make additions for estimated losses based upon judgments different from those of management.
In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to make additions for estimated losses based upon judgments different from those of management.
Collateral may be required to support letters of credit based upon management’s evaluation of the creditworthiness of each customer. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. At September 30, 2022 and 2021, letters of credit outstanding were approximately $0.8 million.
Collateral may be required to support letters of credit based upon management’s evaluation of the creditworthiness of each customer. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. At September 30, 2023 and 2022, letters of credit outstanding were approximately $0.5 million and $0.8 million, respectively.
We use our capital primarily for our lending activities as well as acquisitions and expansions of our business and other operating requirements. The Bank capital level is characterized as "well-capitalized" under the Basel III Capital Rules.
We use our capital primarily for our lending activities as well as acquisitions and expansions of our business and other operating requirements. 58 Table of Contents The Bank capital level is characterized as "well-capitalized" under the Basel III Capital Rules.
The following table summarizes the amortized cost and fair value of investment securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, ​ ​ 2022 ​ 2021 ​ 2020 (in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S.
The following table summarizes the amortized cost and fair value of investment securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, ​ ​ 2023 ​ 2022 (in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ U.S.
Asset liquidity is provided by short-term investments, such as fed funds sold, the marketability of securities available-for-sale and interest-bearing deposits due from the Federal Reserve Bank of New York, Federal Home Loan Bank (the “FHLB”) and correspondent banks, which totaled $149.9 million and $166.0 million at September 30, 2022 and 2021, respectively.
Asset liquidity is provided by short-term investments, such as fed funds sold, the marketability of securities available-for-sale and interest-bearing deposits due from the Federal Reserve Bank of New York, Federal Home Loan Bank (the “FHLB”) and correspondent banks, which totaled $192.6 million and $149.9 million at September 30, 2023 and 2022, respectively.
Collateral required varies, but may include accounts receivable, inventory, equipment, real estate and income-producing commercial properties. At September 30, 2022 and 2021, commitments to originate loans and commitments under unused lines of credit for which the Bank is obligated amounted to approximately $73.1 million and $105.7 million, respectively.
Collateral required varies, but may include accounts receivable, inventory, equipment, real estate and income-producing commercial properties. At September 30, 2023 and 2022, commitments to originate loans and commitments under unused lines of credit for which the Bank is obligated amounted to approximately $119.6 million and $73.1 million, respectively.
These accounts generally pay interest at rates established by management based on competitive market factors and management’s desire to increase or decrease certain types or maturities of deposits. Deposits continue to be our primary funding source. Total deposits at September 30, 2022 were $1.53 billion, an increase of $363.4 million from total deposits of $1.16 billion at September 30, 2021.
These accounts generally pay interest at rates established by management based on competitive market factors and management’s desire to increase or decrease certain types or maturities of deposits. Deposits continue to be our primary funding source. Total deposits at September 30, 2023 were $1.74 billion, an increase of $207.0 million from total deposits of $1.53 billion at September 30, 2022.
The tables below illustrates the maturity distribution and weighted average yield for amortized cost of our investment securities as of September 30, 2022 and 2021, on a contractual maturity basis.
The tables below illustrate the maturity distribution and weighted average yield and amortized cost of our investment securities as of September 30, 2023 and 2022, on a contractual maturity basis.
Management evaluates the adequacy of the allowance at least monthly. In addition, on a monthly basis our Board of Directors reviews the loan portfolio, conducts an evaluation of credit quality and reviews the computation of the loan loss allowance.
In addition, on a monthly basis our Board of Directors reviews the loan portfolio, conducts an evaluation of credit quality and reviews the computation of the loan loss allowance.
As of September 30, 2022 and 2021, we held $87.9 million and $60.2 million, respectively, of time deposits that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit.
As of September 30, 2023 and 2022, we held $106.9 million and $87.9 million, respectively, of time deposits that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit.
The preparation of these consolidated financial statements 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 the reported amount of revenues and expenses during the reporting period.
The preparation of these consolidated financial statements 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 the reported amount of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.
GSE commercial mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after one year through five years ​ — — ​ 2,636 2.68 % ​ ​ — — ​ 2,636 2.68 % Corporate bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after five years through ten years ​ 12,700 5.19 % — — % ​ ​ 12,700 5.19 % — — % Total investment securities ​ $ 13,075 5.13 % $ 4,414 2.57 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, 2021 ​ ​ Available-for-Sale ​ Held-to-Maturity ​ Amortized Weighted Amortized Weighted (dollars in thousands) ​ Cost ​ Average Yield ​ Cost ​ Average Yield U.S.
GSE commercial mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after one year through five years ​ — — ​ 2,577 2.68 % ​ ​ — — ​ 2,577 2.68 % Corporate bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after five years through ten years ​ 12,700 5.19 % — — % ​ ​ 12,700 5.19 % — — % Total investment securities ​ $ 13,022 5.14 % $ 4,108 2.58 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, 2022 ​ ​ Available-for-Sale ​ Held-to-Maturity ​ Amortized Weighted Amortized Weighted (dollars in thousands) ​ Cost ​ Average Yield ​ Cost ​ Average Yield U.S.
Borrowings and the scheduled amortization of investment securities and loans are more predictable funding sources. Deposit flows and securities prepayments are somewhat less predictable as they are often subject to external factors. Among these are changes in the local and national economies, competition from other financial institutions and changes in market interest rates.
Deposit flows and securities prepayments are somewhat less predictable as they are often subject to external factors. Among these are changes in the local and national economies, competition from other financial institutions and changes in market interest rates.
Our investment securities portfolio included no gross unrealized gains and gross unrealized losses of $1.1 million at September 30, 2022, compared to gross unrealized gains of $0.6 million and gross unrealized losses of $5 thousand at September 30, 2021.
Our investment securities portfolio included no gross unrealized gains and gross unrealized losses of $2.5 million at September 30, 2023, compared to no gross unrealized gains and gross unrealized losses of $1.1 million at September 30, 2022.
See Note 1, “Summary of Significant Accounting Policies” and Note 4, “Loans” to the accompanying Consolidated Financial Statements contained in Item 8 for further details.
See Note 1, “Summary of Significant Accounting Policies” and Note 10, “Goodwill and Other Intangible Assets” to the accompanying Consolidated Financial Statements contained in Item 8 for further details.
At September 30, 2022, approximately $65.0 million in unsecured lines of credit extended by correspondent banks were also available to be utilized, if needed, for short-term funding purposes. No borrowings were outstanding under lines of credit with correspondent banks at September 30, 2022.
At September 30, 2023, approximately $92.0 million in unsecured lines of credit extended by correspondent banks were also available to be utilized, if needed, for short-term funding purposes.
The allowance for loan losses was $12.8 million at September 30, 2022, an increase of $4.2 million from $8.6 million at September 30, 2021 due to growth in the loan portfolio. The ratio of the allowance for loan losses to total portfolio loans was 0.79% and 0.69% at September 30, 2022, and 2021, respectively.
The allowance for loan losses was $14.7 million at September 30, 2023, an increase of $1.8 million from $12.8 million at September 30, 2022 due to growth in the loan portfolio. The ratio of the allowance for loan losses to total portfolio loans was 0.78% and 0.79% at September 30, 2023, and 2022, respectively.
The Notes will initially bear interest, payable semi-annually, at the rate of 5.00% per annum, until October 15, 2025. From and including October 15, 2025 through maturity, the interest rate applicable to the outstanding principal amount due will reset quarterly to the then current three-month secured overnight financing rate plus 487.4 basis points.
From and including October 15, 2025 through maturity, the interest rate applicable to the outstanding principal amount due will reset quarterly to the then current three-month Secured Overnight Financing Rate plus 487.4 basis points.
The increase was primarily due to loan growth recorded in fiscal year 2022. Total net charge-offs were $0.2 million and $0.3 million for the years ended September 30, 2022, and 2021, respectively. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management.
Total net charge-offs were $1.6 million and $0.2 million for the years ended September 30, 2023, and 2022, respectively. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management.
The Company did not own any repossessed property for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, ​ (dollars in thousands) ​ ​ 2022 ​ ​ 2021 ​ ​ 2020 ​ ​ 2019 ​ ​ 2018 Nonaccrual loans ​ $ 12,281 ​ $ 7,028 ​ $ 953 ​ $ 1,613 ​ $ — ​ Loans greater than 90 days past due ​ 1,231 ​ 2,519 ​ 296 ​ 629 ​ — ​ Total nonperforming assets ​ $ 13,512 ​ $ 9,547 ​ $ 1,249 ​ $ 2,242 ​ $ — ​ Performing TDRs ​ $ 2,370 ​ $ 455 ​ $ 454 ​ $ 454 ​ $ 354 ​ Nonaccrual loans as a percentage of loans held-for- investment ​ 0.76 % 0.56 % 0.13 % 0.22 % 0.00 % Non-performing assets as a percentage of total assets ​ 0.73 % 0.64 % 0.15 % 0.26 % 0.00 % ​ Total nonaccrual loans were $12.3 million at September 30, 2022, an increase from total nonaccrual loans of $7.0 million at September 30, 2021.
The Company did not own any repossessed property for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, (dollars in thousands) ​ ​ 2023 ​ ​ 2022 ​ Nonaccrual loans ​ $ 14,933 ​ $ 12,281 ​ Loans greater than 90 days past due ​ 128 ​ 1,231 ​ Total nonperforming assets ​ $ 15,061 ​ $ 13,512 ​ Performing TDRs ​ $ 1,727 ​ $ 2,370 ​ Nonaccrual loans as a percentage of loans held-for- investment ​ 0.80 % 0.76 % Non-performing assets as a percentage of total assets ​ 0.70 % 0.73 % ​ Total nonaccrual loans were $14.9 million at September 30, 2023, an increase from total nonaccrual loans of $12.3 million at September 30, 2022.
GSE commercial mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after one through five years ​ — — ​ 2,694 2.68 % ​ ​ — — ​ 2,694 2.68 % Corporate bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after one year through five years ​ ​ — — ​ 1,500 5.00 % Due after five years through ten years ​ 6,700 4.61 % 2,000 5.25 % ​ ​ 6,700 4.61 % 3,500 5.14 % Total investment securities ​ $ 7,422 4.36 % $ 8,611 3.57 % (1) There is no income tax exempt interest recorded for investment securities for the periods presented. 48 Table of Contents Loans At September 30, 2022, our loan portfolio was $1.62 billion, an increase of $376.4 million from $1.25 billion at September 30, 2021.
GSE commercial mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after one through five years ​ — — ​ 2,636 2.68 % ​ ​ — — ​ 2,636 2.68 % Corporate bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after five years through ten years ​ 12,700 5.19 % — — % ​ ​ 12,700 5.19 % — — % Total investment securities ​ $ 13,075 5.13 % $ 4,414 2.57 % (1) There is no income tax exempt interest recorded for investment securities for the periods presented. 50 Table of Contents Loans At September 30, 2023, our loan portfolio was $1.87 billion, an increase of $251.1 million from $1.62 billion at September 30, 2022.
Accordingly, our significant accounting policies and effects of new accounting pronouncements are discussed in detail in Note 1, “Summary of Significant Accounting Policies” to the accompanying Consolidated Financial Statements contained in Item 8 for further details.
Our significant accounting policies and effects of new accounting pronouncements are discussed in detail in Note 1, “Summary of Significant Accounting Policies” to the accompanying Consolidated Financial Statements contained in Item 8. Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for loan losses and goodwill.
GSE commercial mortgage-backed ​ ​ ​ ​ ​ ​ securities ​ 2,636 ​ 2,477 ​ 2,694 ​ 2,869 ​ 2,749 ​ 3,002 Corporate bonds ​ — ​ — ​ 3,500 ​ 3,505 ​ 3,500 ​ 3,533 Total investment securities held-to-maturity ​ 4,414 ​ 4,095 ​ 8,611 ​ 8,865 ​ 10,727 ​ 11,131 Total investment securities ​ $ 17,489 ​ $ 16,380 ​ $ 16,033 ​ $ 16,612 ​ $ 16,565 ​ $ 17,166 ​ 47 Table of Contents We continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, and the level of interest rate risk to which we are exposed.
GSE commercial mortgage-backed ​ ​ ​ ​ securities ​ 2,577 ​ 2,407 ​ 2,636 ​ 2,477 Total investment securities held-to-maturity ​ 4,108 ​ 3,760 ​ 4,414 ​ 4,095 Total investment securities ​ $ 17,130 ​ $ 14,649 ​ $ 17,489 ​ $ 16,380 ​ ​ 49 Table of Contents We continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, and the level of interest rate risk to which we are exposed.
For the year ended September 30, 2022, we recognized net income of $23.6 million, or $3.68 per diluted share, compared to net income of $10.9 million, or $2.28 per diluted share, for the year ended September 30, 2021.
Results of Operations for the year ended September 30, 2023 compared to the year ended September 30, 2022 For the year ended September 30, 2023, we recognized net income of $15.2 million, or $2.05 per diluted share (including Series A preferred shares), compared to net income of $23.6 million, or $3.68 per diluted share, for the year ended September 30, 2022.
Non-Interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) ​ 2022 2021 2020 Loan servicing and fee income ​ $ 2,885 ​ $ 1,207 ​ $ 385 Service charges on deposit accounts ​ 232 ​ 127 ​ 62 Net gain on sale of loans held for sale ​ 5,143 ​ 1,307 ​ 917 Net gain on sale of investments available-for-sale ​ 105 ​ 240 ​ — Other income ​ 507 ​ 468 ​ — Total non-interest income ​ $ 8,872 ​ $ 3,349 ​ $ 1,364 ​ Non-interest income was $8.9 million for the year ended September 30, 2022, an increase of $5.5 million from $3.3 million for the year ended September 30, 2021.
Non-Interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) ​ 2023 2022 Loan servicing and fee income ​ $ 2,709 ​ $ 2,885 Service charges on deposit accounts ​ 275 ​ 232 Net gain on sale of loans held for sale ​ 4,093 ​ 5,143 Net gain on sale of investments available-for-sale ​ — ​ 105 Other income ​ 1,771 ​ 507 Total non-interest income ​ $ 8,848 ​ $ 8,872 ​ Non-interest income was $8.8 million for the year ended September 30, 2023, a slight decrease of $24 thousand from $8.9 million for the year ended September 30, 2022.
(2) Includes loans acquired from Savoy that do not carry an allowance for loans losses as of September 30 2022 and 2021. Sources of Funds and Liquidity Liquidity management is defined as both our and the Bank’s ability to meet our financial obligations on a continuous basis without material loss or disruption of normal operations.
Sources of Funds and Liquidity Liquidity management is defined as both our and the Bank’s ability to meet our financial obligations on a continuous basis without material loss or disruption of normal operations.
GSE residential mortgage-backed securities ​ $ 375 ​ $ 242 ​ $ 722 ​ $ 833 ​ $ 838 ​ $ 962 Corporate bonds ​ 12,700 ​ 12,043 ​ 6,700 ​ 6,914 ​ 5,000 ​ 5,073 Total investment securities available-for- sale ​ 13,075 ​ 12,285 ​ 7,422 ​ 7,747 ​ 5,838 ​ 6,035 Investment securities held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S.
GSE residential mortgage-backed securities ​ $ 322 ​ $ 142 ​ $ 375 ​ $ 242 Corporate bonds ​ 12,700 ​ 10,747 ​ 12,700 ​ 12,043 Total investment securities available-for- sale ​ 13,022 ​ 10,889 ​ 13,075 ​ 12,285 Investment securities held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S.
Analysis of Allowance for Loan Losses The allowance for loan losses is established through charges to earnings in the form of a provision for loan losses. Management increases the allowance for loan losses by provisions charged to operations and by recoveries of amounts previously charged off. The allowance is reduced by loans charged off.
Management increases the allowance for loan losses by provisions charged to operations and by recoveries of amounts previously charged off. The allowance is reduced by loans charged off. Management evaluates the adequacy of the allowance at least monthly.
A summary of the Bank’s regulatory capital amounts and ratios are presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (dollars in thousands) ​ 2022 ​ 2021 ​ 2020 Total capital $ 191,355 $ 132,554 $ 95,079 ​ Tier 1 capital ​ 178,340 ​ 123,666 ​ 89,275 ​ Common equity tier 1 capital ​ 178,340 ​ 123,666 ​ 89,275 ​ Total capital ratio ​ 16.32 % 15.59 % 20.57 % Tier 1 capital ratio ​ 15.21 % 14.54 % 19.32 % Common equity tier 1 capital ratio ​ 15.21 % 14.54 % 19.32 % Tier 1 leverage ratio ​ 10.90 % 9.45 % 11.22 % ​ Under a policy of the Federal Reserve applicable to bank holding companies with less than $3.0 billion in consolidated assets, the Company is not subject to consolidated regulatory capital requirements. ​ ITEM 7A.
A summary of the Bank’s regulatory capital amounts and ratios are presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (dollars in thousands) ​ 2023 ​ 2022 ​ Total capital $ 205,785 $ 191,355 Tier 1 capital ​ 190,928 ​ 178,340 ​ Common equity tier 1 capital ​ 190,928 ​ 178,340 ​ Total capital ratio ​ 14.60 % 16.32 % Tier 1 capital ratio ​ 13.55 % 15.21 % Common equity tier 1 capital ratio ​ 13.55 % 15.21 % Tier 1 leverage ratio ​ 9.16 % 10.90 % ​ ​ Under a policy of the Federal Reserve applicable to bank holding companies with less than $3.0 billion in consolidated assets, the Company is not subject to consolidated regulatory capital requirements. ​ On October 5, 2023, the Company announced that the Board of Directors approved a new stock repurchase program.
This financial data is derived in part from, and should be read in conjunction with, our consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) ​ 2022 ​ 2021 ​ 2020 Selected Balance Sheet Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities available-for-sale, at fair value ​ $ 12,285 ​ $ 7,747 ​ $ 6,035 Securities held-to-maturity ​ 4,414 ​ 8,611 ​ 10,727 Loans held for investment ​ 1,623,531 ​ 1,247,125 ​ 725,019 Total assets ​ 1,840,058 ​ 1,484,641 ​ 851,606 Total deposits ​ 1,528,106 ​ 1,164,662 ​ 664,760 Total stockholders' equity ​ 172,584 ​ 122,529 ​ 78,043 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (dollars in thousands) ​ 2022 ​ 2021 ​ 2020 Selected Operating Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest income ​ $ 68,429 ​ $ 48,675 ​ $ 40,133 ​ Total interest expense ​ 7,175 ​ 6,967 ​ 13,011 ​ Net interest income ​ 61,254 ​ 41,708 ​ 27,122 ​ Provision for loan losses ​ 4,450 ​ 1,000 ​ 1,250 ​ Total non-interest income ​ 8,872 ​ 3,349 ​ 1,364 ​ Total non-interest expense ​ 35,181 ​ 30,005 ​ 21,022 ​ Income before income taxes ​ 30,495 ​ 14,052 ​ 6,214 ​ Income tax expense ​ 6,939 ​ 3,201 ​ 1,240 ​ Net income ​ 23,556 ​ 10,851 ​ 4,974 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selected Financial Data and Other Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average equity ​ 16.14 % 11.53 % 6.63 % Return on average assets ​ 1.55 % 0.99 % 0.58 % Yield on average interest earning assets ​ 4.66 % 4.63 % 4.87 % Cost of average interest bearing liabilities ​ 0.62 % 0.81 % 1.87 % Net interest rate spread ​ 4.04 % 3.82 % 3.00 % Net interest rate margin ​ 4.18 % 3.97 % 3.29 % Average equity to average assets ​ 9.59 % 8.61 % 8.80 % ​ Analysis of Results of Operations ​ Net Interest Income ​ Net interest income is the primary source of the Company’s revenue.
This financial data is derived in part from, and should be read in conjunction with, our consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) ​ 2023 ​ 2022 Selected Balance Sheet Data: ​ ​ ​ ​ ​ ​ Securities available-for-sale, at fair value ​ $ 10,889 ​ $ 12,285 Securities held-to-maturity ​ 4,108 ​ 4,414 Loans ​ 1,874,562 ​ 1,623,531 Total assets ​ 2,149,535 ​ 1,840,058 Total deposits ​ 1,735,070 ​ 1,528,106 Total stockholders' equity ​ 185,907 ​ 172,584 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (dollars in thousands) ​ 2023 ​ 2022 ​ Selected Operating Data: ​ ​ ​ ​ ​ ​ ​ Total interest income ​ $ 105,043 ​ $ 68,429 ​ Total interest expense ​ 50,551 ​ 7,175 ​ Net interest income ​ 54,492 ​ 61,254 ​ Provision for loan losses ​ 3,432 ​ 4,450 ​ Total non-interest income ​ 8,848 ​ 8,872 ​ Total non-interest expense ​ 39,721 ​ 35,181 ​ Income before income taxes ​ 20,187 ​ 30,495 ​ Income tax expense ​ 5,023 ​ 6,939 ​ Net income ​ 15,164 ​ 23,556 ​ ​ ​ ​ ​ ​ ​ ​ ​ Selected Financial Data and Other Data: ​ ​ ​ ​ ​ ​ ​ Return on average equity ​ 8.40 % 16.14 % Return on average assets ​ 0.77 % 1.55 % Yield on average interest earning assets ​ 5.49 % 4.66 % Cost of average interest bearing liabilities ​ 3.18 % 0.62 % Net interest rate spread ​ 2.31 % 4.04 % Net interest rate margin ​ 2.85 % 4.18 % Average equity to average assets ​ 9.13 % 9.59 % ​ Analysis of Results of Operations ​ Net Interest Income ​ Net interest income is the primary source of the Company’s revenue.
Income Taxes Income tax expense was $6.9 million for the year ended September 30, 2022, an increase from $3.2 million for the year ended September 30, 2021. The effective income tax rate for the years ended September 30, 2022 and 2021 was 22.8%.
Income Taxes Income tax expense was $5.0 million for the year ended September 30, 2023, a decrease from $6.9 million for the year ended September 30, 2022. The decline in income tax expense reflects lower net income in 2023. The effective income tax rate for the years ended September 30, 2023 and 2022 was 24.9% and 22.8%, respectively.
Additional branches are located in Garden City Park, Forest Hills, Flushing, Sunset Park, Manhattan and Chinatown, New York and Freehold, New Jersey. In addition, we have received regulatory approval to open a new office in Hauppauge, New York In Suffolk County, which we expect to open in early 2023.
Additional branches are located in Garden City Park, Hauppauge, Forest Hills, Flushing, Sunset Park, Manhattan and Chinatown, New York and Freehold, New Jersey.
GSE residential mortgage-backed securities ​ 1,778 ​ 1,618 ​ 2,417 ​ 2,491 ​ 4,478 ​ 4,596 U.S.
GSE residential mortgage-backed securities ​ 1,531 ​ 1,353 ​ 1,778 ​ 1,618 U.S.
The Company experienced $0.2 million in net charge-offs during the year ended September 30, 2022, a decrease compared to net charge-offs of $0.3 million during the year ended September 30, 2021. The Company has recorded an immaterial amount of recoveries during the years ended September 30, 2022 and 2021, respectively.
The Company experienced $1.6 million in net charge-offs during the year ended September 30, 2023, an increase compared to net charge-offs of $0.2 million during the year ended September 30, 2022.
These funds can be obtained by converting liquid assets to cash or by attracting new deposits or other sources of funding. Many factors affect our ability to meet liquidity needs, including variations in the markets served, loan demand, asset/liability mix, reputation and credit standing in our markets and general economic conditions.
Many factors affect our ability to meet liquidity needs, including variations in the markets served, loan demand, asset/liability mix, reputation and credit standing in our markets and general economic conditions. Borrowings and the scheduled amortization of investment securities and loans are more predictable funding sources.
Management monitors the rates and cash flows from the loan and investment portfolios while also examining the maturity structure and volatility characteristics of liabilities to develop an optimum asset/liability mix.
Management monitors the rates and cash flows from the loan and investment portfolios while also examining the maturity structure and volatility characteristics of liabilities to develop an optimum asset/liability mix. Available funding sources include retail, commercial and municipal deposits, purchased liabilities and stockholders’ equity. Daily, management receives a current cash position update to ensure that all obligations are satisfied.
The following table presents daily average balances, interest, yield/rate, and net interest margin on a fully tax-equivalent basis for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ Average ​ ​ Average ​ Average ​ ​ Average ​ Average ​ Average (dollars in thousands) ​ Balance ​ Interest ​ Rate ​ Balance ​ Interest ​ Rate ​ Balance ​ Interest ​ Rate Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans (1)(2) ​ $ 1,344,369 ​ $ 67,005 4.98 % $ 934,066 ​ $ 47,685 5.11 % $ 717,834 ​ $ 38,641 5.38 % Investment securities (1) ​ 12,788 ​ 484 3.78 % 16,845 ​ 685 4.07 % 13,907 ​ 523 3.76 % Interest-earning balances and other ​ ​ 109,922 ​ ​ 940 ​ 0.86 % ​ 99,348 ​ ​ 305 ​ 0.31 % ​ 92,506 ​ ​ 969 ​ 1.05 % Total interest-earning assets ​ 1,467,079 ​ 68,429 4.66 % 1,050,259 ​ 48,675 4.63 % 824,247 ​ 40,133 4.87 % Other assets ​ 55,295 ​ ​ 42,675 ​ ​ 27,807 ​ ​ Total assets ​ $ 1,522,374 ​ ​ $ 1,092,934 ​ ​ $ 852,054 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and stockholders' equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW and money market deposits ​ $ 737,057 ​ $ 3,166 0.43 % $ 333,996 ​ $ 903 0.27 % $ 179,106 ​ $ 1,445 0.81 % Time deposits ​ 313,435 ​ 2,209 0.70 % 380,473 ​ 3,822 1.00 % 418,384 ​ 9,180 2.19 % Total interest-bearing deposits ​ 1,050,492 ​ 5,375 0.51 % 714,469 ​ 4,725 0.66 % 597,490 ​ 10,625 1.78 % Borrowings ​ 82,362 ​ 469 0.57 % 121,246 ​ 955 0.79 % 99,550 ​ 2,386 2.40 % Subordinated debentures ​ 24,533 ​ 1,331 5.43 % 24,088 ​ 1,287 5.34 % — ​ — 0.00 % Total interest-bearing liabilities ​ 1,157,387 ​ 7,175 0.62 % 859,803 ​ 6,967 0.81 % 697,040 ​ 13,011 1.87 % Non-interest-bearing deposits ​ 206,484 ​ ​ 128,540 ​ ​ 72,007 ​ ​ Other liabilities ​ 12,526 ​ ​ 10,519 ​ ​ 8,031 ​ ​ Total liabilities ​ ​ 1,376,397 ​ ​ ​ ​ ​ ​ ​ 998,862 ​ ​ ​ ​ ​ ​ ​ 777,078 ​ ​ ​ ​ ​ ​ Stockholders' equity ​ ​ 145,977 ​ ​ ​ ​ ​ ​ ​ 94,072 ​ ​ ​ ​ ​ ​ ​ 74,976 ​ ​ ​ ​ ​ ​ Total liabilities and stockholders' equity ​ $ 1,522,374 ​ ​ ​ ​ ​ ​ $ 1,092,934 ​ ​ ​ ​ ​ ​ $ 852,054 ​ ​ ​ ​ ​ ​ Net interest rate spread ​ ​ ​ ​ ​ ​ ​ 4.04 % ​ ​ ​ ​ ​ ​ 3.82 % ​ ​ ​ ​ ​ ​ 3.00 % Net interest income/margin ​ ​ ​ ​ $ 61,254 ​ 4.18 % ​ ​ ​ $ 41,708 ​ 3.97 % ​ ​ ​ $ 27,122 ​ 3.29 % (1) There is no income tax exempt interest recorded for loans or investment securities for the periods presented.
The following table presents daily average balances, interest, yield/cost, and net interest margin on a fully tax-equivalent basis for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ ​ 2023 ​ 2022 ​ ​ ​ Average ​ ​ Average ​ Average ​ ​ Average ​ (dollars in thousands) ​ Balance ​ Interest ​ Yield/Cost ​ Balance ​ Interest ​ Yield/Cost ​ Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans (1)(2) ​ $ 1,771,878 ​ $ 97,560 5.51 % $ 1,344,369 ​ $ 67,005 4.98 % Investment securities (1) ​ 16,007 ​ 806 5.04 % 12,788 ​ 484 3.78 % Interest-earning balances and other ​ ​ 126,740 ​ ​ 6,677 ​ 5.27 % ​ 109,922 ​ ​ 940 ​ 0.86 % Total interest-earning assets ​ 1,914,625 ​ 105,043 5.49 % 1,467,079 ​ 68,429 4.66 % Other assets ​ 62,248 ​ ​ 55,295 ​ ​ Total assets ​ $ 1,976,873 ​ ​ $ 1,522,374 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and stockholders' equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW and money market deposits ​ $ 997,068 ​ $ 32,647 3.27 % $ 737,057 ​ $ 3,166 0.43 % Time deposits ​ 420,495 ​ 11,204 2.66 % 313,435 ​ 2,209 0.70 % Total interest-bearing deposits ​ 1,417,563 ​ 43,851 3.09 % 1,050,492 ​ 5,375 0.51 % Borrowings ​ 145,705 ​ 5,396 3.70 % 82,362 ​ 469 0.57 % Subordinated debentures ​ 24,593 ​ 1,304 5.30 % 24,533 ​ 1,331 5.43 % Total interest-bearing liabilities ​ 1,587,861 ​ 50,551 3.18 % 1,157,387 ​ 7,175 0.62 % Non-interest bearing deposits ​ 184,051 ​ ​ 206,484 ​ ​ Other liabilities ​ 24,390 ​ ​ 12,526 ​ ​ Total liabilities ​ ​ 1,796,302 ​ ​ ​ ​ ​ ​ ​ 1,376,397 ​ ​ ​ ​ ​ ​ Stockholders' equity ​ ​ 180,571 ​ ​ ​ ​ ​ ​ ​ 145,977 ​ ​ ​ ​ ​ ​ Total liabilities and stockholders' equity ​ $ 1,976,873 ​ ​ ​ ​ ​ ​ $ 1,522,374 ​ ​ ​ ​ ​ ​ Net interest rate spread (3) ​ ​ ​ ​ ​ ​ ​ 2.31 % ​ ​ ​ ​ ​ ​ 4.04 % Net interest income/margin (4) ​ ​ ​ ​ $ 54,492 ​ 2.85 % ​ ​ ​ $ 61,254 ​ 4.18 % (1) There is no income tax exempt interest recorded for loans or investment securities for the periods presented.
The Company’s average yield on interest-earning assets for the year ended September 30, 2022 was 4.66%, an increase of 3 basis points from 4.63% for the year ended September 30, 2021. Average interest-bearing liabilities were $1.16 billion for the year ended September 30, 2022, an increase of $297.6 million compared to $859.8 million for the year ended September 30, 2021.
The Company’s total interest income increased by $36.6 million, or 53.5%, as the average yield on interest-earning assets for the year ended September 30, 2023 was 5.49%, an increase of 83 basis points from 4.66% for the year ended September 30, 2022.
The following table sets forth the maturity of time deposits exceeding the FDIC insurance limit as of September 30. 2022: ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2022 Three months or less ​ $ 10,192 Over three months through six months ​ 8,471 Over six months through 12 months ​ 17,817 Over 12 months ​ 51,424 Total ​ $ 87,904 ​ Borrowings The total carrying value of our borrowings was $126.3 million at September 30, 2022, a decrease of $57.8 million from $184.2 million at September 30, 2021.
The following table sets forth the maturity of time deposits exceeding the FDIC insurance limit as of September 30. 2023: ​ ​ ​ ​ ​ ​ ​ September 30, (in thousands) 2023 Three months or less ​ $ 104,363 Over three months through six months ​ 253 Over six months through 12 months ​ 1,005 Over 12 months ​ 1,267 Total ​ $ 106,888 ​ See Note 6, “Deposits” to the accompanying Consolidated Financial Statements contained in Item 8 for additional details. ​ Borrowings The total carrying value of our borrowings was $204.5 million at September 30, 2023, an increase of $78.2 million from $126.3 million at September 30, 2022.
At September 30, 2022, the Company had access to approximately $276.4 million in FHLB lines of credit for overnight or term borrowings, of which $55.0 million in overnight borrowings and $37.8 million in term borrowings were outstanding.
At September 30, 2023, the Company had $49.0 million in overnight borrowings and $126.7 million in term borrowings outstanding both with the FHLB. At September 30, 2023, the Company had access to an additional $291.2 million in FHLB lines of credit.
These liquid assets may include assets that have been pledged primarily against municipal deposits or borrowings. Liquidity is also provided by the maintenance of a base of core deposits, cash and non-interest-bearing deposits due from banks, the ability to sell or pledge marketable assets and access to lines of credit.
Liquidity is also provided by the maintenance of a base of core deposits, cash and non-interest-bearing deposits due from banks, the ability to sell or pledge marketable assets and access to lines of credit. ​ 55 Table of Contents Liquidity is continuously monitored, thereby allowing management to better understand and react to emerging balance sheet trends, including temporary mismatches with regard to sources and uses of funds.
At September 30, 2022, $66.9 million of these borrowings were classified as short-term, while the remaining was classified as long- term. Short-term borrowings are comprised of short-term FHLB advances, securities sold under agreements to repurchase and Federal funds purchased.
The Company added $100.7 million of extended duration FHLB term advances in March 2023 to provide additional liquidity and enhance the interest rate sensitivity profile. At September 30, 2023, $67.9 million of these borrowings were classified as short-term, while the remaining was classified as long- term. Short-term borrowings are comprised of short-term FHLB advances.
This increase was primarily due to a $19.5 million increase in net interest income, principally due to growth in interest-earning assets and a widening of the Company’s net interest margin. ​ 43 Table of Contents Set forth below are our selected consolidated financial and other data. Our business is primarily the business of our Bank.
The increase in non-interest expense was primarily due to growth related increases in compensation and benefits, occupancy and equipment, data processing, professional fees, federal deposit insurance premiums and other expenses. ​ 45 Table of Contents Set forth below are our selected consolidated financial and other data. Our business is primarily the business of our Bank.
The overall increase in non-interest expenses was primarily from growth in compensation and benefits related to increased headcount.
The increase in non-interest expense was primarily due to growth related increases in compensation and benefits, occupancy and equipment, data processing, professional fees, federal deposit insurance premiums and other expenses.
GSE residential mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due within one year ​ $ 25 -0.99 % $ — — ​ Due after one year through five years ​ ​ 1 ​ -3.75 % ​ — ​ — ​ Due after ten years ​ 696 2.44 % 2,417 2.29 % ​ ​ 722 2.01 % 2,417 2.29 % U.S.
GSE residential mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after five years through ten years ​ $ — — % $ 1,080 2.31 % Due after ten years ​ 322 3.28 % 451 2.66 % ​ ​ 322 3.28 % 1,531 2.41 % U.S.
The increase was primarily attributable to growth in interest-bearing deposits, which increased by $336.0 million during fiscal year 2022 from both the acquisition of Savoy and organic growth in our markets.
Average interest-bearing liabilities were $1.59 billion for the year ended September 30, 2023, an increase of $430.5 million compared to $1.16 billion for the year ended September 30, 2022. The increase was primarily attributable to growth in interest-bearing deposits and borrowings, which increased by $240.5 million and $78.1 million, respectively, during fiscal year 2023.
See Note 7, “Borrowings” and Note 8, “Subordinated Debentures” to the accompanying Consolidated Financial Statements contained in Item 8 for additional details. 54 Table of Contents In October 2020, the Company completed the private placement of $25.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due in 2030.
In October 2020, the Company completed the private placement of $25.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due in 2030. The Notes bear interest, payable semi-annually, at the rate of 5.00% per annum, until October 15, 2025.
The increase in loan servicing and fee income was due to the increase in loan balances and growth in the volume of loans serviced by the Company. ​ 46 Table of Contents Non-Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2022 2021 2020 Salaries and employee benefits ​ $ 19,665 ​ $ 14,761 ​ $ 10,945 Occupancy and equipment ​ 5,633 ​ 4,978 ​ 4,462 Data processing ​ 1,629 ​ 1,280 ​ 911 Advertising and promotion ​ 348 ​ 118 ​ 296 Acquisition costs ​ 250 ​ 4,430 ​ 450 Professional fees ​ 2,568 ​ 1,706 ​ 2,070 Other expenses ​ 5,088 ​ 2,732 ​ 1,888 Total non-interest expense ​ $ 35,181 ​ $ 30,005 ​ $ 21,022 ​ Non-interest expense was $35.2 million for the year ended September 30, 2022, an increase of $5.2 million from $30.0 million for the year ended September 30, 2021.
In addition, offsetting this decline, in September 2023, the Company settled ongoing litigation and received a settlement payment of $975 thousand recorded in Other income. ​ 48 Table of Contents Non-Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, (in thousands) 2023 2022 Salaries and employee benefits ​ $ 20,652 ​ $ 19,665 Occupancy and equipment ​ 6,359 ​ 5,633 Data processing ​ 1,951 ​ 1,629 Acquisition costs ​ — ​ 250 Professional fees ​ 3,145 ​ 2,568 Federal deposit insurance premiums ​ ​ 1,259 ​ ​ 368 Other expenses ​ 6,355 ​ 5,068 Total non-interest expense ​ $ 39,721 ​ $ 35,181 ​ Non-interest expense was $39.7 million for the year ended September 30, 2023, an increase of $4.5 million from $35.2 million for the year ended September 30, 2022.
Capital Resources Total stockholders’ equity was $172.6 million at September 30, 2022, an increase of $50.1 million from stockholders’ equity of $122.5 million at September 30, 2021.
Capital Resources Total stockholders’ equity was $185.9 million at September 30, 2023, an increase of $13.3 million from stockholders’ equity of $172.6 million at September 30, 2022. The increase was primarily due to net income earned for the year ended September 30, 2023, less cash dividends paid to shareholders.
Available funding sources include retail, commercial and municipal deposits, purchased liabilities and stockholders’ equity. 53 Table of Contents Deposits We provide a range of deposit services, including non-interest bearing demand accounts, interest-bearing demand and savings accounts, money market accounts and time deposits.
At September 30, 2023, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $534.7 million or approximately 204% of uninsured deposit balances. Deposits We provide a range of deposit services, including non-interest bearing demand accounts, interest-bearing demand and savings accounts, money market accounts and time deposits.
Liquidity is continuously monitored, thereby allowing management to better understand and react to emerging balance sheet trends, including temporary mismatches with regard to sources and uses of funds. After assessing actual and projected cash flow needs, management seeks to obtain funding at the most economical cost.
After assessing actual and projected cash flow needs, management seeks to obtain funding at the most economical cost. These funds can be obtained by converting liquid assets to cash or by attracting new deposits or other sources of funding.
(2) Includes non-accrual loans and loans held for sale. 45 Table of Contents The following table details the variances in net interest income caused by changes in average interest rates and average volume for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 vs. 2021 ​ 2021 vs. 2020 ​ ​ Increase (decrease) due to change in: (in thousands) ​ Average volume Average rate Total Average volume Average rate Total Interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 20,475 ​ $ (1,155) ​ $ 19,320 ​ $ 11,127 ​ $ (2,083) ​ $ 9,044 Investment securities ​ (156) ​ (45) ​ (201) ​ 117 ​ 45 ​ 162 Interest-earning balances and other ​ 35 ​ 600 ​ 635 ​ 67 ​ (731) ​ (664) Total interest income ​ 20,354 ​ (600) ​ ​ 19,754 ​ 11,311 ​ (2,769) ​ ​ 8,542 Interest expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW and money market deposits ​ ​ 1,521 ​ ​ 742 ​ ​ 2,263 ​ ​ 780 ​ ​ (1,322) ​ ​ (542) Time deposits ​ (599) ​ (1,015) ​ (1,614) ​ (775) ​ (4,583) ​ (5,358) Borrowings ​ (261) ​ (225) ​ (486) ​ 434 ​ (1,865) ​ (1,431) Subordinated debentures ​ 24 ​ 20 ​ 44 ​ 1,287 ​ — ​ 1,287 Total interest expense ​ 685 ​ (478) ​ 207 ​ 1,726 ​ (7,770) ​ ​ (6,044) Net increase (decrease) in net interest income ​ $ 19,669 ​ $ (122) ​ $ 19,547 ​ $ 9,585 ​ $ 5,001 ​ $ 14,586 ​ Provision for Loan Losses The provision for loan losses was $4.5 million for the year ended September 30, 2022, an increase of $3.5 million compared to $1.0 million for the year ended September 30, 2021.
(4) Net interest margin represents net interest income divided by average interest-earning assets. 47 Table of Contents The following table details the variances in net interest income caused by changes in interest rates and volume for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 vs. 2022 ​ ​ Increase (decrease) due to change in: (in thousands) ​ Volume Rate Total Interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 22,986 ​ $ 7,569 ​ $ 30,555 Investment securities ​ 139 ​ 183 ​ 322 Interest-earning balances and other ​ 165 ​ 5,572 ​ 5,737 Total interest income ​ 23,290 ​ 13,324 ​ ​ 36,614 Interest expense ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW and money market deposits ​ ​ 1,494 ​ ​ 27,987 ​ ​ 29,481 Time deposits ​ 983 ​ 8,012 ​ 8,995 Borrowings ​ 603 ​ 4,324 ​ 4,927 Subordinated debentures ​ (27) ​ — ​ (27) Total interest expense ​ 3,053 ​ 40,323 ​ 43,376 Net increase (decrease) in net interest income ​ $ 20,237 ​ $ (26,999) ​ $ (6,762) ​ Provision for Loan Losses The provision for loan losses was $3.4 million for the year ended September 30, 2023 compared to $4.5 million for the year ended September 30, 2022.
Net interest income for the year ended September 30, 2022 was $61.3 million, an increase of 46.9% from $41.7 million for the year ended September 30, 2021.
Net interest income for the year ended September 30, 2023 was $54.5 million, a decrease of 11.0% from $61.3 million for the year ended September 30, 2022 primarily due to compression of the Company’s net interest margin. ​ 46 Table of Contents Net interest margin was 2.85% for the year ended September 30, 2023, a decrease of 133 basis points from 4.18% for the year ended September 30, 2022.
The following is our average deposits and weighted-average interest rates paid thereon for the past three fiscal years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ Average Average ​ ​ Average Average ​ Average Average ​ (dollars in thousands) ​ Balance Rate ​ ​ Balance Rate ​ Balance Rate ​ Non-interest bearing demand ​ $ 206,484 0.00 % $ 128,540 0.00 % $ 72,007 0.00 % Savings ​ 77,756 0.41 % ​ 48,995 0.20 % 41,223 0.45 % NOW ​ 483,400 0.44 % ​ 153,595 0.26 % 37,774 0.63 % Money market ​ 175,901 0.42 % ​ 131,406 0.30 % 100,109 1.02 % Time deposits ​ 313,435 0.70 % ​ 380,473 1.00 % 418,384 2.19 % Total average deposits ​ $ 1,256,976 0.43 % $ 843,009 0.56 % $ 669,497 1.59 % ​ As discussed previously, during fiscal year 2022 the Company made the strategic decision to allow higher cost consumer deposits to run-off and replace these funding sources with municipal deposits, which have a significantly lower average interest rate.
The following is our average deposits and weighted-average interest rates paid thereon for the past two fiscal years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ ​ 2023 ​ 2022 ​ ​ ​ Average Average ​ ​ Average Average (dollars in thousands) ​ Balance Rate ​ ​ Balance Rate Non-interest bearing demand ​ $ 184,051 0.00 % $ 206,484 0.00 % Savings ​ 87,637 1.30 % ​ 77,756 0.41 % NOW ​ 545,827 3.40 % ​ 483,400 0.44 % Money market ​ 363,604 3.57 % ​ 175,901 0.42 % Time deposits ​ 420,495 2.66 % ​ 313,435 0.70 % Total average deposits ​ $ 1,601,614 2.74 % $ 1,256,976 0.43 % ​ The Company had municipal deposits of $313.2 million at September 30, 2023, which comprised 18.1% of total deposits, a decrease of $103.7 million or 24.9% from $416.9 million, at September 30, 2022. ​ 56 Table of Contents Our sources of wholesale funding included brokered certificates of deposit, listing service certificates of deposit and insured cash sweep (“ICS”) reciprocal deposits in excess of 20% of total liabilities, whose balances totaled approximately $102.0 million, $15.9 million and $18.1 million, or 5.9%, 0.9% and 1.0% of total deposits, respectively, at September 30, 2023.
At September 30, 2022, on a consolidated basis we had $1.84 billion in total assets, $172.6 million in total stockholders’ equity, $1.62 billion in total loans, $1.53 billion in total deposits and 162 full-time equivalent employees. Significant Factors Affecting Our Business The COVID-19 pandemic has caused widespread economic disruption in our metropolitan New York trade area.
At September 30, 2023, on a consolidated basis we had $2.15 billion in total assets, $185.9 million in total stockholders’ equity, $1.87 billion in total loans, $1.74 billion in total deposits and 176 full-time equivalent employees. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in conformity with GAAP.
For the year ended September 30, 2022, the Bank realized an increase in loans secured by multi-family properties of $308.1 million, representing growth of approximately 116%. This increase was the result of the Bank’s desire to leverage capital and expertise in favor of dependable asset growth with an attractive risk profile.
Year over year growth was concentrated primarily in residential, commercial real estate and C&I loans. For the year ended September 30, 2023, the Bank realized an increase in residential mortgage loans of $139.9 million, representing growth of approximately 27%. Loans secured by commercial real estate properties increased by $64.2 million, representing growth of approximately 14%.
Many short-term funding sources, particularly Federal funds purchased and securities sold under agreements to repurchase, are expected to be reissued and, therefore, do not represent an immediate need for cash. Long-term funding is comprised of long-term FHLB advances and subordinated debentures. The Company will prepay FHLB advances from time to time as funding needs change.
Long-term funding is comprised of long-term FHLB advances and subordinated debentures. The Company will prepay FHLB advances from time to time as funding needs change. See Note 7, “Borrowings” and Note 8, “Subordinated Debentures” to the accompanying Consolidated Financial Statements contained in Item 8 for additional details.
Removed
We have actively participated in state and local programs designed to mitigate the impacts of the COVID-19 pandemic on individuals and small businesses. 42 Table of Contents A key program under the CARES Act is the Paycheck Protection Program (“PPP”), administered by the Small Business Administration (“SBA”) which provided funding to qualifying businesses and organizations.
Added
We opened the Bank’s Hauppauge Business Banking Center in Hauppauge, Suffolk County, New York in May 2023. 43 Table of Contents In October 2023, the Company’s Board of Directors approved a change in the Company’s fiscal year end from September 30 to December 31.
Removed
These loans are 100% guaranteed by the SBA and have no allowance for loan losses allocated to them based on the nature of the guarantee.
Added
Accordingly, the Company will report a transition quarter that runs from October 1, 2023 through December 31, 2023 (the “Stub Period”). The Company’s next full fiscal year will be the calendar year January 1, 2024 through December 31, 2024.
Removed
These loans carry a fixed rate of 1.00% and a term of two years (loans made before June 5, 2020, subject to extension to five years with the consent of the lender) or five years (loans made on or after June 5, 2020), if not forgiven, in whole or in part.
Added
As a result, all references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to a quarter or year are to the Company’s historical fiscal quarter or fiscal year unless stated otherwise.
Removed
Under this program, we have originated approximately $366.1 million in principal amount of PPP loans to local borrowers. As of September 30, 2022, borrowers had received forgiveness or have made payments on $355.9 million in PPP loans. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in conformity with GAAP.
Added
See Note 1, “Summary of Significant Accounting Policies” and Note 3, “Loans” to the accompanying Consolidated Financial Statements contained in Item 8 for further details. Goodwill Goodwill represents the excess of the purchase price over the net fair value of the acquired businesses.
Removed
We believe the more critical accounting and reporting policies that currently affect our financial condition and results of operations include the accounting for the allowance for loan losses.
Added
Goodwill is not amortized, but is tested for impairment at the reporting unit level, at least annually or more frequently whenever events or circumstances occur that indicate that it is more-likely-than-not that an impairment loss has occurred.
Removed
Results of Operations for the year ended September 30, 2022 compared to the year ended September 30, 2021 To facilitate review of our results of operations, the following tables set forth our financial results for the periods indicated. All information is derived from the consolidated statements of income.
Added
In assessing impairment, the Company has the option to perform a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount.
Removed
The increase was primarily driven by a $416.8 million increase in average interest-earning assets, primarily due to the acquisition of Savoy, as well as continued organic loan growth in our markets, particularly in loans secured by multifamily properties. 44 Table of Contents Net interest margin was 4.18% for the year ended September 30, 2022, an increase of 21 basis points from 3.97% for the year ended September 30, 2021.

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