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What changed in Hanover Bancorp, Inc. /MD's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Hanover Bancorp, Inc. /MD's 2023 and 2024 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 2024 report.

+221 added−245 removedSource: 10-K (2025-03-14) vs 10-K (2023-12-21)

Top changes in Hanover Bancorp, Inc. /MD's 2024 10-K

221 paragraphs added · 245 removed · 161 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe 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.
Biggest changeThe loans are typically made to small and medium-sized businesses for working capital needs, business expansions and 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.
The USA PATRIOT Act also includes prohibitions on correspondent accounts for foreign shell banks and requires compliance with record keeping obligations with respect to correspondent accounts of foreign banks. The bank regulatory agencies have increased the regulatory scrutiny of the BSA and anti-money laundering programs maintained by financial institutions.
The USA PATRIOT Act also includes prohibitions on maintaining correspondent accounts for foreign shell banks and requires compliance with record keeping obligations with respect to correspondent accounts of foreign banks. The bank regulatory agencies have increased the regulatory scrutiny of the BSA and anti-money laundering programs maintained by financial institutions.
Item 1. Business Overview Hanover Bancorp, Inc. (“Hanover”) is a New York corporation which is the holding company for Hanover Community Bank (the “Bank”), a New York chartered community commercial bank focusing on highly personalized and efficient services and products responsive to local needs.
Item 1. Business Overview Hanover Bancorp, Inc. (“Hanover”) is currently a New York corporation which is the holding company for Hanover Community Bank (the “Bank”), a New York chartered community commercial bank focusing on highly personalized and efficient services and products responsive to local needs.
We also have a municipal banking business, which we believe has produced a significant level of deposits at cost-effective rates. The business provides banking services to public municipalities, including counties, cities, towns, and school districts, throughout the Long Island area.
We also have a municipal banking business, which has produced a significant level of deposits at cost-effective rates. The business provides banking services to public municipalities, including counties, cities, towns, and school districts, throughout the Long Island area.
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.
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; and ● The rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
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.
The agencies have indicated that they 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.
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.
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 December 31, 2024, 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.
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.
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 59% for this portfolio as of December 31, 2024. Within the commercial real estate portfolio, multi-family loans are secured primarily by rent controlled/stabilized multi-family properties located in New York City.
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.
We compete for loans, deposits, and financial services in all of our principal markets. 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.
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 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 $13.5 million in total balances at December 31, 2024.
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”).
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 reported a transition quarter that ran from October 1, 2023 through December 31, 2023 (“transition period”).
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.
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.
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.
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, ATM fees and debit card interchange and other miscellaneous fees. 6 Table of Contents Employees and Human Capital Resources As of December 31, 2024, we employed 185 full-time employees.
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.
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.
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.
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.
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 Company’s current full fiscal year is the calendar year January 1, 2024 through December 31, 2024 (“calendar 2024”). 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.
Additional benefits offered include paid time off, dental, vision, life insurance and employee assistance. The Company’s compensation package is designed to maintain market competitive total rewards programs for all employees in order to attract and retain superior talent.
Additional benefits offered include paid time off, dental, vision, life insurance and employee assistance. The Company’s compensation package is designed to maintain market competitive total rewards programs for all employees in order to attract and retain superior talent. We also implemented flexible scheduling, which has allowed us to remain competitive. Competition The financial services industry is highly competitive.
As of September 30, 2023, the Bank was a “well-capitalized” bank, as defined by its primary federal regulator.
As of December 31, 2024, the Bank was a “well-capitalized” bank, as defined by its primary federal regulator.
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%.
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 December 31, 2024, we had $509.3 million in municipal deposits at a weighted average rate of 3.72%.
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.).
We now offer these services in New Jersey and may in the future consider opening accounts for licensed entities in other states. 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, wholesale distribution, construction, etc.).
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.
We expect C&I lending to be a key component of our growth going forward. As of December 31, 2024, our commercial and industrial loans comprised $168.9 million, or 8.5%, of total loans held for investment. 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.
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.
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.
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.
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”).
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.
As of December 31, 2024, 100% of our real estate construction loan portfolio was secured by commercial properties. ​ 5 Table of Contents Commercial and industrial . We provide a mix of variable and fixed rate commercial and industrial loans, which we refer to as C&I loans.
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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.
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In 2024, our Board and shareholders approved a proposal to redomicile the Company in Maryland, and the Company is in the process of completing the change in its state of incorporation from New York to Maryland.
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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 .
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In addition, we have recently received regulatory approval to open a new branch in Port Jefferson, Suffolk County, New York, which we expect to open in early 2025. As of December 31, 2024, we had total assets of $2.31 billion, total loans of $1.99 billion, total deposits of $1.95 billion and total stockholders’ equity of $196.6 million.
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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.
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During the fourth calendar quarter of 2023, we began offering business banking services to the legal, licensed cannabis industry, initially in New York state.
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However, with higher market interest rates experienced in recent years, the appetite among the Bank’s purchasers of residential loans for pools of loans declined, eliminating the Bank’s ability to sell residential loans in its portfolio on desirable terms.
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Commencing in late 2023, the Bank initiated a flow origination program under which the Bank originates individual loans for sale to specific buyers, thereby positioning the Bank to resume residential loan sales. Commercial real estate .
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These regulations have staggered effective dates, and management has not yet determined the impact of these new regulations as a whole on the Bank.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA substantial portion of our business is in the New York metro area, therefore, our business is particularly vulnerable to an economic downturn in our primary market area. We primarily serve businesses, municipalities and individuals located in the New York metro area. As a result, we are exposed to risks associated with lack of geographic diversification.
Biggest changeWe primarily serve businesses, municipalities and individuals located in the New York metro area. As a result, we are exposed to risks associated with lack of geographic diversification. 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.
Adverse developments affecting commerce or real estate values in the local economies in our primary market areas could increase the credit risk associated with our loan portfolio and have an adverse impact on our revenues and financial condition. In particular, we may experience increased loan delinquencies, which could result in a higher provision for loan losses and increased charge-offs.
Adverse developments affecting commerce or real estate values in the local economies in our primary market areas could increase the credit risk associated with our loan portfolio and have an adverse impact on our revenues and financial condition. In particular, we may experience increased loan delinquencies, which could result in a higher provision for credit losses and increased charge-offs.
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.
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 programs are an increasingly important part of our business, and changes to SBA or other government guaranteed lending programs, including funding for such programs, or the rules governing such programs or other government guaranteed lending programs, may adversely affect our profitability.
In 2006, the OCC, the FDIC, and the FRB, or collectively, the Agencies, issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices,” or the “CRE Guidance.” Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
In 2006, the OCC, the FDIC, and the FRB, or collectively, the Agencies, issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices,” or the “CRE Guidance.” Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure will receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
While we believe our allowance for loan losses is appropriate for the risk identified in our loan portfolio, we cannot provide assurance that we will not further increase the allowance for loan losses, that it will be sufficient to address losses, or that regulators will not require us to increase this allowance.
While we believe our allowance for credit losses is appropriate for the risk identified in our loan portfolio, we cannot provide assurance that we will not further increase the allowance for credit losses, that it will be sufficient to address losses, or that regulators will not require us to increase this allowance.
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.
Approximately 26.1% 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.
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.
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. ​ 39 Table of Contents COMMON STOCK AND TRADING RISKS The price of our common stock could be volatile.
Our non-performing assets adversely affect our net income in various ways: ● we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for OREO; ● we must provide for probable loan losses through a current period charge to the provision for loan losses; ● non-interest expense increases when we write down the value of properties in our OREO portfolio to reflect changing market values; ● there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and ● the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.
Our non-performing assets adversely affect our net income in various ways: ● we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for OREO; ● we must provide for expected credit losses through a current period charge to the provision for credit losses; ● non-interest expense increases when we write down the value of properties in our OREO portfolio to reflect changing market values; ● there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and ● the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.
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.
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. ​ 40 Table of Contents Our dividend policy may change without notice and our future ability to pay dividends is subject to restrictions.
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.
Approximately 91% of these loans are secured by properties in the five boroughs of New York City and Nassau County, New York and 66% 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.
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.
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. 23 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.
These regulatory authorities may impose conditions on the activities or transactions contemplated by our business strategies, which may negatively impact our ability to realize fully the expected benefits of certain opportunities. Any failure by us to manage acquisitions and other significant transactions successfully may have a material adverse effect on our results of operations, financial condition, and cash flows.
These regulatory authorities may impose conditions on the activities or transactions contemplated by our business strategies, which may negatively impact our ability to realize fully the expected benefits of certain opportunities. ​ 28 Table of Contents Any failure by us to manage acquisitions and other significant transactions successfully may have a material adverse effect on our results of operations, financial condition, and cash flows.
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.
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 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.
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.
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.
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. ​ 22 Table of Contents LENDING ACTIVITIES RISKS Small Business Administration lending is an increasingly important part of our business.
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.
No assurance can be given that we will be successful in this strategy. 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.
Further, if actual charge-offs in future periods exceed the amounts allocated to our allowance for loan losses, we may need additional provisions for loan losses to restore the adequacy of our allowance for loan losses.
Further, if actual charge-offs in future periods exceed the amounts allocated to our allowance for credit losses, we may need additional provisions for credit losses to restore the adequacy of our allowance for credit losses.
Secondarily, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making. LIQUIDITY RISKS If we do not manage our liquidity effectively, our business could suffer. Liquidity is essential for the operation of our business.
Secondarily, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making. 27 Table of Contents LIQUIDITY RISKS If we do not manage our liquidity effectively, our business could suffer. Liquidity is essential for the operation of our business.
Accordingly, as a part of our liquidity management, we must use a number of funding sources in addition to deposits and repayments and maturities of loans and investments, which may include Federal Home Loan Bank of New York advances, federal funds purchased and brokered certificates of deposit.
Accordingly, as a part of our liquidity management, we must use a number of funding sources in addition to deposits and repayments and maturities of loans and investments, which may include Federal Home Loan Bank of New York advances, Federal Reserve Bank of New York’s discount window advances, federal funds purchased and brokered certificates of deposit.
A lack of liquidity could also attract increased regulatory scrutiny and potential restraints imposed on us by regulators.
A lack of liquidity could also attract increased regulatory scrutiny and result in potential restraints imposed on us by regulators.
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.
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. Our allowance for credit losses may not be adequate to cover actual losses.
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.
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.
No assurance can be given that we will be able to raise any required capital, or that we will be able to raise capital on terms that are beneficial to stockholders. Attractive acquisition opportunities may not be available to us in the future.
No assurance can be given that we will be able to raise any required capital, or that we will be able to raise capital on terms that are beneficial to stockholders. 29 Table of Contents Attractive acquisition opportunities may not be available to us in the future.
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.
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 December 31, 2024, 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.
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.
Inflation rose sharply at the end of 2021 and remained at an elevated level through 2024. 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.
Commencing in fourth calendar quarter of 2023, we implemented specialized deposit and lending services intended for a limited number of state licensed medical-use cannabis business customers. Medical use cannabis, as well as recreational use businesses, are legal in numerous states and the District of Columbia, including our primary markets of New York and New Jersey.
Commencing in fourth calendar quarter of 2023, we implemented specialized deposit and lending services intended for cannabis-related business customers (“CRBs”). Medical use cannabis, as well as recreational use businesses, are legal in numerous states and the District of Columbia, including our primary markets of New York and New Jersey.
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.
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 December 31, 2024, our net deferred tax asset was $1.6 million. Failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions.
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.
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 December 31, 2024, approximately $1.8 billion, or 91%, of our total loan portfolio was secured by real estate, almost all of which is located in our primary lending market.
If alternative funding sources were no longer available to us, we may need to sell a portion of our investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets.
In this case, our operating margins and profitability would be adversely affected. If alternative funding sources were no longer available to us, we may need to sell a portion of our investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets.
Throughout the relationship, our policies call for continued monitoring of the business, including periodic site visits, confirmation that licenses are in good standing and reviews of business and compliance data, as applicable, to determine that the business continues to satisfy our requirements. The Bank may offer additional banking products and services to cannabis related customers in the future.
Throughout the relationships, our policies call for continued monitoring of the businesses, including periodic site visits, confirmation that licenses are in good standing and reviews of business and compliance data, as applicable, to determine that the businesses continue to satisfy our requirements. The Bank may offer additional banking products and services to CRBs in the future.
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.
Although we held no OREO properties at December 31, 2024, it is possible that in future periods we may take title to OREO properties in the event of defaults on outstanding loans.
We also cannot be certain that actual results will be consistent with forecasts and assumptions used in our modeling. Any of these occurrences could materially and adversely affect our financial condition and results of operations.
We also cannot be certain that actual results will be consistent with forecasts and assumptions used in our modeling. Any of these occurrences could materially and adversely affect our financial condition and results of operations. If our non-performing assets increase, our earnings will be adversely 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.
Such events could have a material adverse effect on our business, financial condition and results of operations. 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. Our growth depends upon successful, consistent execution of our business strategies.
We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of the real property, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all.
This could have an adverse effect on our business, financial condition or results of operations. 21 Table of Contents We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of the real property, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all.
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.
Non-qualified mortgage loans are considered to have a higher degree of risk and are less liquid than qualified mortgage loans. For the year ended December 31, 2024 and fiscal year ended September 30, 2023, we originated $130.4 million and $196.0 million in non-qualified mortgage loans, respectively.
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 loan portfolio includes a significant concentration of one- to four- family residential mortgage loans. As of December 31, 2024, we had $729.3 million in one- to four- family residential mortgage loans, representing 37% of our total loan portfolio.
If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our OREO, and our allowance for loan losses may not reflect accurate loan impairments. This could have an adverse effect on our business, financial condition or results of operations.
If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our OREO, and our allowance for credit losses may not reflect accurate loan impairments.
Additionally, our policies call for due diligence review of the cannabis business before the business is on-boarded, including confirmation that the business is properly licensed and maintains the license in good standing in the applicable state.
Additionally, our policies call for due diligence review of CRBs before they are on-boarded, including confirmation that businesses requiring licenses are properly licensed and maintain their licenses in good standing in the applicable state.
Depending on the capitalization status and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits. ​ 20 Table of Contents Our financial flexibility would be severely constrained if we were unable to maintain our access to funding or if adequate financing were not available at acceptable interest rates.
Depending on the capitalization status and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits.
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.
We maintain an allowance for credit losses that represents management’s judgment of expected credit losses and risks inherent in our loan portfolio. As of December 31, 2024, our allowance for credit losses totaled $22.8 million, which represented approximately 1.15% of our total loans held for investment.
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.
At December 31, 2024, our non-performing assets, which consist of non-performing loans and OREO (of which we had none at December 31, 2024), were $16.4 million, or 0.71% of total assets.
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.
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.
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.
This could require increasing our allowance for credit 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.
If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected. Even if we are able to replace third-party service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations.
If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected.
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.
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 federal and state regulators, as an integral part of their examination process, review our methodology for calculating, and the adequacy of, our allowance for loan losses and may direct us to make additions to the allowance based on their judgments about information available to them at the time of their examination.
The determination of the appropriate level of our allowance for credit losses is inherently highly subjective and requires management to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes. 26 Table of Contents Our federal and state regulators, as an integral part of their examination process, review our methodology for calculating, and the adequacy of, our allowance for credit losses and may direct us to make additions to the allowance based on their judgments about information available to them at the time of their examination.
The deposits of our bank are insured by the FDIC up to legal limits and, accordingly, subject it to the payment of FDIC deposit insurance assessments as determined according to the calculation described in “Supervision and Regulation-Deposit Insurance.” Increases in assessment rates or special assessments may occur in the future, especially if there are significant additional financial institution failures.
The deposits of our bank are insured by the FDIC up to legal limits and, accordingly, subject it to the payment of FDIC deposit insurance assessments as determined according to the calculation described in “Supervision and Regulation-Deposit Insurance.” In addition, the FDIC has the ability to assess special assessments against insured depository institutions if required to recapitalize the DIF.
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.
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.
The challenges arising from generating organic or strategic growth may include preserving valuable relationships with employees, clients and other business partners and delivering enhanced products and services. Execution of our business strategies also may require certain regulatory approvals or consents, which may include approvals of the FRB, the FDIC, the DFS and other domestic regulatory authorities.
Execution of our business strategies also may require certain regulatory approvals or consents, which may include approvals of the FRB, the FDIC, the DFS and other domestic regulatory authorities.
Further, if we were required to rely more heavily on more expensive funding sources to support liquidity, our revenues may not increase proportionately to cover our increased costs. In this case, our operating margins and profitability would be adversely affected.
Our financial flexibility would be severely constrained if we were unable to maintain our access to funding or if adequate financing were not available at acceptable interest rates. Further, if we were required to rely more heavily on more expensive funding sources to support liquidity, our revenues may not increase proportionately to cover our increased costs.
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.
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.
As of September 30, 2023, we had a net unrealized loss of $2.1 million on our available for-sale investment securities portfolio as a result of the rising interest rate environment. Our investment securities totaled $15.0 million, or 0.7% of total assets, at September 30, 2023. The details of this portfolio are included in Note 2 to the consolidated financial statements.
As of December 31, 2024, we had a net unrealized loss of $1.3 million on our available for-sale investment securities portfolio as a result of the higher interest rate environment. Our investment securities totaled $87.5 million, or 3.8% of total assets, at December 31, 2024.
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.
Consequently, as of December 31, 2024, we held $187.4 million of SBA loans on our balance sheet, $134.1 million of which consisted of the non-guaranteed portion of SBA loans and $53.3 million consisted of the guaranteed portion of SBA loans.
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.
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. If we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, we may experience a material adverse effect on our financial condition and results of operations.
We are subject to certain operational risks, including, but not limited to, customer, employee or third-party fraud and data processing system failures and errors. We rely on the ability of our employees and systems to process a high number of transactions.
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 are subject to certain operational risks, including, but not limited to, customer, employee or third-party fraud and data processing system failures and errors.
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.
Our commercial real estate and multi-family loans balance have decreased 4% combined for the year ended December 31, 2024 and commercial real estate loans represent 385% of our risk-based capital at December 31, 2024, a decrease from 432% at December 31, 2023 and 448% at September 30, 2023.
Our growth depends upon successful, consistent execution of our business strategies. A failure to execute these strategies may impact growth negatively. A failure to grow, whether organically or through strategic acquisitions, may have an adverse effect on our business.
A failure to execute these strategies may impact growth negatively. A failure to grow, whether organically or through strategic acquisitions, may have an adverse effect on our business. The challenges arising from generating organic or strategic growth may include preserving valuable relationships with employees, clients and other business partners and delivering enhanced products and services.
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.
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 December 31, 2024, 67% of our commercial real estate loan portfolio was secured by real estate located in the five boroughs of New York City and Nassau County, New York.
In considering whether to make a loan secured by real property, we generally require an appraisal of the property.
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 addition, the Bank’s primary federal regulator, the FDIC, has issued guidance outlining the expectations for third-party service provider oversight and monitoring by financial institutions.
Even if we are able to replace third-party service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations. ​ 38 Table of Contents In addition, the Bank’s primary federal regulator, the FDIC, has issued guidance outlining the expectations for third-party service provider oversight and monitoring by financial institutions.
Removed
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.
Added
The details of this portfolio are included in Note 2 to the consolidated financial statements. ​ 20 Table of Contents A substantial portion of our business is in the New York metro area, therefore, our business is particularly vulnerable to an economic downturn in our primary market area.
Removed
On March 9, 2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations.
Added
Various market conditions also affect our operating results. 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.
Removed
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.
Added
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.
Removed
These banks had elevated levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits. These failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.
Added
During the year ended December 31, 2024 we sold into the secondary market $37.6 million of our non-qualified mortgages. There were no such sales for the fiscal year ended September 30, 2023.
Removed
These events have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of their deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management.
Added
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.
Removed
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.
Added
Increases in assessment rates or special assessments may occur in the future, especially if there are significant additional financial institution failures.
Removed
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.
Added
We rely on the ability of our employees and systems to process a high number of transactions.
Removed
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.
Removed
The determination of the appropriate level of our allowance for loan losses is inherently highly subjective and requires management to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes.
Removed
The implementation of the Current Expected Credit Loss accounting standard could require us to increase our allowance for loan losses and may have a material adverse effect on our financial condition and results of operations.
Removed
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.
Removed
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.
Removed
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.

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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. ● 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. ​
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 Residential Banking Team. ● 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. ​ 43 Table of Contents ​
Added
In addition, we have recently received regulatory approval to open a new branch in Port Jefferson, Suffolk County, New York, which we expect to open in early 2025.

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. 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.
Biggest changeAt December 31, 2024 and 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. ​ ​ Part II
Removed
Mine Safety Disclosures Not applicable. ​ 42 Table of Contents Part II
Added
ITEM 3. Legal Proceedings From time to time we are party to various litigation matters incidental to the conduct of our business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs 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.
Biggest changeAs of December 31, 2024, we had approximately 415 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. We have paid a cash dividend of $0.10 per share on a quarterly basis to holders of our common stock.
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] ​
The Company has not made any repurchases of its common stock under the program through the filing date of this Annual Report on Form 10-K. ​ ​ ITEM 6. [Reserved] ​ 44 Table of Contents ​
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.
There were no sales of unregistered securities during the quarter ended December 31, 2024. On October 5, 2023, the Company announced that the Board of Directors approved a share repurchase program. Under the repurchase program, the Company may repurchase up to 366,050 shares of its common stock, or approximately 5% of its then outstanding shares.
Removed
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.

Item 7. Management's Discussion & Analysis

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

72 edited+45 added−56 removed22 unchanged
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.
Biggest changeThe following table presents the allocation of the allowance for credit losses by loan category for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ At September 30, ​ ​ ​ 2024 ​ ​ 2023 ​ 2023 ​ ​ ​ % of ​ ​ % of ​ ​ % of ​ ​ ​ ​ ​ Total ​ ​ ​ ​ Total ​ ​ ​ ​ Total ​ (dollars in thousands) ​ Amount ​ Loans ​ Amount ​ Loans ​ Amount ​ Loans ​ Residential real estate ​ $ 6,236 0.86 % $ 5,001 0.70 % $ 4,778 0.73 % Multi-family ​ 5,284 0.96 % 4,671 0.82 % 4,206 0.73 % Commercial real estate ​ 5,605 1.07 % 8,390 1.53 % 3,197 0.59 % Commercial and industrial ​ 5,447 3.22 % 1,419 1.31 % 2,368 2.70 % Construction ​ 180 1.34 % 122 0.93 % 104 0.80 % Consumer ​ 27 5.37 % 55 13.32 % 33 7.76 % Total allowance for credit losses ​ $ 22,779 1.15 % $ 19,658 1.00 % $ 14,686 0.78 % ​ The following table presents information related activity in the allowance for credit losses for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Fiscal ​ ​ ​ Year Ended ​ December 31, ​ Year Ended ​ ​ ​ December 31, ​ (transition period) ​ September 30, ​ (dollars in thousands) 2024 2023 2023 Beginning balance ​ $ 19,658 ​ $ 14,686 ​ $ 12,844 ​ Impact of adopting ASC 326 ​ ​ — ​ ​ 4,095 ​ ​ — ​ Provision for credit losses ​ 4,750 ​ 200 ​ 3,432 ​ Charge-Offs: ​ ​ ​ ​ Residential real estate ​ (280) ​ — ​ — ​ Multi-family ​ (765) ​ — ​ (959) ​ Commercial real estate ​ (30) ​ — ​ — ​ Commercial and industrial ​ (572) ​ — ​ (734) ​ Construction ​ — ​ — ​ — ​ Consumer ​ — ​ — ​ — ​ Total loan charge-offs ​ (1,647) ​ — ​ (1,693) ​ Recoveries: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Multi-family ​ ​ — ​ ​ 567 ​ ​ — ​ Commercial and industrial ​ 18 ​ 110 ​ 103 ​ Total recoveries ​ 18 ​ ​ 677 ​ ​ 103 ​ Total net (charge-offs) recoveries ​ (1,629) ​ 677 ​ (1,590) ​ Ending balance ​ $ 22,779 ​ $ 19,658 ​ $ 14,686 ​ Allowance for credit losses to total loans held-for- investment ​ 1.15 % 1.00 % 0.78 % Net (charge-offs) recoveries to average loans held-for-investment ​ (0.08) % 0.04 % (0.09) % 58 Table of Contents Sources of Funds and Liquidity Liquidity management is defined as the ability of the Company and the Bank to meet their financial obligations on a continuous basis without material loss or disruption of normal operations.
As a New York State chartered bank, the Bank is subject to regulation by the New York State DFS and the FDIC. As a bank holding company, we are subject to regulation and examination by the FRB.
As a New York State chartered bank, the Bank is subject to regulation by the DFS and the FDIC. As a bank holding company, we are subject to regulation and examination by the FRB.
Business Overview We are a New York corporation which became the holding company for the Bank in 2016. The Bank, a community commercial bank focusing on highly personalized and efficient services and products responsive to local needs, commenced operations in 2009 and was incorporated under the laws of the State of New York.
Business Overview We are currently a New York corporation which became the holding company for the Bank in 2016. The Bank, a community commercial bank focusing on highly personalized and efficient services and products responsive to local needs, commenced operations in 2009 and was incorporated under the laws of the State of New York.
We continue to evaluate our qualitative assessment assumptions, which are subject to risks and uncertainties, including: (1) general macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets; (2) industry and market conditions such as a deterioration in the environment in which an entity operates, an increased competitive environment, a decline in market-dependent multiples or metrics (in both absolute terms and relative to peers), a change in the market for an entity’s products or services, or a regulatory or political development; (3) changes in cost factors such as increases in labor, or other costs that have a negative effect on earnings and cash flows; (4) overall financial performance for both actual and expected performance; (5) Entity and reporting unit–specific events such as changes in management, key personnel, strategy, or customers; contemplation of bankruptcy; litigation; or a change in the composition or carrying amount of net assets; and (6) a sustained decrease in share price in both absolute terms and relative to peers, if applicable.
We continue to evaluate our qualitative assessment assumptions, which are subject to risks and uncertainties, including: (1) general macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets; (2) industry and market conditions such as a deterioration in the environment in which we operate, an increased competitive environment, a decline in market-dependent multiples or metrics (in both absolute terms and relative to peers), a change in the market for our products or services, or a regulatory or political development; (3) changes in cost factors such as increases in labor, or other costs that have a negative effect on earnings and cash flows; (4) overall financial performance for both actual and expected performance; (5) Entity and reporting unit–specific events such as changes in management, key personnel, strategy, or customers; contemplation of bankruptcy; litigation; or a change in the composition or carrying amount of net assets; and (6) a sustained decrease in share price in both absolute terms and relative to peers, if applicable.
The Bank offers a full range of financial services and employs a complete suite of consumer and commercial banking products and services, including multi-family and commercial mortgages, government guaranteed loans, residential loans, business loans and lines of credit.
The Bank offers a full range of financial services including a complete suite of consumer and commercial banking products and services, including multi-family and commercial mortgages, government guaranteed loans, residential loans, business loans and lines of credit.
Under the new repurchase program, the Company may repurchase up to 366,050 shares of its common stock, or approximately 5% of its then outstanding shares.
Under the repurchase program, the Company may repurchase up to 366,050 shares of its common stock, or approximately 5% of its then outstanding shares.
These instruments are intended to manage the interest rate exposure relating to certain brokered certificates of deposit. Additional information regarding our use of interest rate derivatives is presented in Note 1 and Note 9 to Consolidated Financial Statements contained in Item 8.
These instruments are intended to manage the interest rate exposure relating to certain brokered certificates of deposit and certain fixed rate residential mortgages. Additional information regarding our use of interest rate derivatives is presented in Note 1 and Note 9 to Consolidated Financial Statements contained in Item 8.
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.
The following table summarizes the amortized cost and fair value of investment securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, ​ Balance at September 30, ​ ​ 2024 ​ 2023 ​ 2023 (in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Investment securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S.
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.
Management believes that all of its unrealized losses on individual investment securities at December 31, 2024 and 2023 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.
In accordance with accounting requirements, we formally designate all of our hedging relationships as either fair value hedges or cash flow hedges, and document the strategy for undertaking the hedge transactions and its method of assessing ongoing effectiveness. At September 30, 2023, our derivative instruments were comprised of interest rate swaps with a total notional amount of $75.0 million.
In accordance with accounting requirements, we formally designate all of our hedging relationships as either fair value hedges or cash flow hedges, and document the strategy for undertaking the hedge transactions and its method of assessing ongoing effectiveness. At December 31, 2024, our derivative instruments were comprised of interest rate swaps with a total notional amount of $125.0 million.
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.
Investment Securities Portfolio by Expected Maturities (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2024 ​ ​ Available-for-Sale ​ Held-to-Maturity ​ Amortized Weighted Amortized Weighted (dollars in thousands) ​ Cost ​ Average Yield ​ Cost ​ Average Yield 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 $192.6 million and $149.9 million at September 30, 2023 and 2022, 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 $246.6 million and $238.6 million at December 31, 2024 and 2023, respectively.
No borrowings were outstanding under lines of credit with correspondent banks at September 30, 2023. 57 Table of Contents Derivatives We utilize derivative instruments in the form of interest rate swaps to hedge our exposure to interest rate risk in conjunction with our overall asset/liability management process.
No borrowings were outstanding under lines of credit with correspondent banks at December 31, 2024. Derivatives We utilize derivative instruments in the form of interest rate swaps to hedge our exposure to interest rate risk in conjunction with our overall asset/liability management process.
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.
The tables below illustrate the maturity distribution and weighted average yield and amortized cost of our investment securities as of December 31, 2024 and 2023, on a contractual maturity basis.
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.
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.
If, after assessing the totality of such events or circumstances, we determine it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then we would not be required to perform an impairment test. ​ 44 Table of Contents The quantitative impairment analysis requires a comparison of each reporting unit’s fair value to its carrying value to identify potential impairment.
If, after assessing the totality of such events or circumstances, we determine it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then we would not be required to perform an impairment test.
Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.
Commitments to extend credit are agreements to lend to customers provided there are no violations of material conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.
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.
At December 31, 2024, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $713.1 million, or approximately 283% 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.
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.
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 December 31, 2024 were $1.95 billion, an increase of $49.7 million from total deposits of $1.90 billion at December 31, 2023.
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.
Goodwill Goodwill represents the excess of the purchase price over the net fair value of the acquired businesses. 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.
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.
A summary of the Bank’s regulatory capital amounts and ratios are presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ September 30, (dollars in thousands) ​ 2024 ​ 2023 ​ 2023 Total capital $ 220,696 $ 210,071 $ 205,786 Tier 1 capital ​ 201,744 ​ 193,324 ​ 190,928 ​ Common equity tier 1 capital ​ 201,744 ​ 193,324 ​ 190,928 ​ Total capital ratio ​ 14.58 % 14.31 % 14.60 % Tier 1 capital ratio ​ 13.32 % 13.17 % 13.55 % Common equity tier 1 capital ratio ​ 13.32 % 13.17 % 13.55 % Tier 1 leverage ratio ​ 9.13 % 9.08 % 9.16 % ​ 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 stock repurchase program.
The results of the evaluation indicated that fair value exceeded the carrying value of the reporting unit. Goodwill impairment testing is performed annually as of August 31 and no impairment charges were incurred. Future unfavorable conditions could result in goodwill impairment.
The results of the evaluation indicated that fair value exceeded the carrying value of the reporting unit. ​ 46 Table of Contents Annual goodwill impairment testing was performed as of November 30 and no impairment charges were incurred. Future unfavorable conditions could result in goodwill impairment.
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.
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.
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.
GSE commercial mortgage-backed securities ​ 2,499 ​ 2,431 ​ 2,561 ​ 2,451 ​ 2,577 ​ 2,407 Total investment securities held-to-maturity ​ 3,758 ​ 3,609 ​ 4,041 ​ 3,835 ​ 4,108 ​ 3,760 Total investment securities ​ $ 88,842 ​ $ 87,364 ​ $ 67,333 ​ $ 65,254 ​ $ 17,130 ​ $ 14,649 ​ 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 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.
GSE residential mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after five years through ten years ​ $ — — % $ 1,044 2.31 % Due after ten years ​ 309 3.26 % 436 2.66 % ​ ​ 309 3.26 % 1,480 2.41 % U.S.
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.
Results of Operations for the year ended December 31, 2024 (“calendar 2024”) compared to fiscal year ended September 30, 2023 (“fiscal 2023”) For calendar 2024, we recognized net income of $12.3 million, or $1.66 per diluted share (including Series A preferred shares), compared to net income of $15.2 million, or $2.05 per diluted share (including Series A preferred shares) for fiscal 2023.
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 Notes 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 SOFR plus 487.4 basis points.
The selection and weighting of the various fair value techniques may result in a higher or lower fair value. Judgment is applied in determining the weightings that are most representative of fair value. As of August 31, 2023, the Company elected to proceed to a quantitative calculation to compare the reporting unit's fair value with its carrying value.
Judgment is applied in determining the weightings that are most representative of fair value. As of November 30, 2024, the Company elected to proceed to a quantitative calculation to compare the reporting unit's fair value with its carrying value.
On a weekly basis, appropriate senior management receives a current liquidity position report and a ninety day forecasted cash flow to ensure that all short-term obligations will be met and there is sufficient liquidity available.
On a weekly basis, appropriate senior management receives a current liquidity position report and a ninety day forecasted cash flow to ensure that all short-term obligations will be met and there is sufficient liquidity available. As of December 31, 2024, we held $252.0 million of deposits that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit.
GSE residential mortgage-backed securities ​ 1,531 ​ 1,353 ​ 1,778 ​ 1,618 U.S.
GSE residential mortgage-backed securities ​ 1,259 ​ 1,178 ​ 1,480 ​ 1,384 ​ 1,531 ​ 1,353 U.S.
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 Company’s total interest income increased by $28.0 million, or 26.6%, as the average yield on interest-earning assets for calendar 2024 was 6.12%, an increase of 63 basis points from 5.49% for fiscal 2023.
These evaluations may cause us to change the level of funds we deploy into investment securities, change the composition of our investment securities portfolio, and change the proportion of investments made into the available-for-sale and held-to-maturity investment categories.
These evaluations may cause us to change the level of funds we deploy into investment securities, change the composition of our investment securities portfolio, and change the proportion of investments made into the available-for-sale and held-to-maturity investment categories. 52 Table of Contents Our investment securities available-for-sale portfolio included gross unrealized gains of $0.3 million and gross unrealized losses of $1.6 million at December 31, 2024, compared to gross unrealized gains of $0.1 million and gross unrealized losses of $2.0 million at December 31, 2023.
Accumulated other comprehensive loss, net of tax, was $1.3 million, reflecting the relatively small size of the Company’s investment portfolio and representing approximately 0.71% of total capital at September 30, 2023. We are subject to various regulatory capital requirements administered by the federal banking agencies.
The accumulated other comprehensive loss at December 31, 2024 was 0.68% of total equity and was comprised of a $1.0 million after tax net unrealized loss on the investment portfolio and a $0.3 million after tax net unrealized loss on derivatives. We are subject to various regulatory capital requirements administered by the federal banking agencies.
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.
This financial data is derived in part from, and should be read in conjunction with, our consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ September 30, (in thousands) ​ 2024 ​ 2023 ​ 2023 Selected Balance Sheet Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities available-for-sale, at fair value ​ $ 83,755 ​ $ 61,419 ​ $ 10,889 Securities held-to-maturity ​ 3,758 ​ 4,041 ​ 4,108 Loans ​ 1,985,524 ​ 1,957,199 ​ 1,874,562 Total assets ​ 2,312,110 ​ 2,270,060 ​ 2,149,535 Total deposits ​ 1,954,283 ​ 1,904,595 ​ 1,735,070 Total stockholders' equity ​ 196,638 ​ 184,830 ​ 185,907 ​ ​ 47 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Fiscal ​ ​ ​ Year Ended ​ December 31, ​ Year Ended ​ ​ ​ December 31, ​ (transition period) ​ September 30, ​ (dollars in thousands) ​ 2024 ​ 2023 ​ 2023 ​ Selected Operating Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest income ​ $ 133,022 ​ $ 31,155 ​ $ 105,043 ​ Total interest expense ​ 79,930 ​ 18,496 ​ 50,551 ​ Net interest income ​ 53,092 ​ 12,659 ​ 54,492 ​ Provision for credit losses ​ 4,940 ​ 200 ​ 3,432 ​ Total non-interest income ​ 15,339 ​ 3,254 ​ 8,848 ​ Total non-interest expense ​ 47,112 ​ 10,670 ​ 39,721 ​ Income before income taxes ​ 16,379 ​ 5,043 ​ 20,187 ​ Income tax expense ​ 4,033 ​ 1,280 ​ 5,023 ​ Net income ​ 12,346 ​ 3,763 ​ 15,164 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selected Financial Data and Other Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average equity ​ 6.45 % 8.10 % 8.40 % Return on average assets ​ 0.55 % 0.69 % 0.77 % Yield on average interest earning assets ​ 6.12 % 5.91 % 5.49 % Cost of average interest bearing liabilities ​ 4.40 % 4.19 % 3.18 % Net interest rate spread ​ 1.72 % 1.72 % 2.31 % Net interest rate margin ​ 2.44 % 2.40 % 2.85 % Average equity to average assets ​ 8.57 % 8.58 % 9.13 % ​ Analysis of Results of Operations ​ Net Interest Income ​ Net interest income is the primary source of the Company’s revenue.
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.
We use our capital primarily for our lending activities as well as acquisitions and expansions of our business and other operating requirements.
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.
The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. At December 31, 2024 and 2023, letters of credit outstanding were approximately $0.8 million and $3.9 million, respectively.
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.
Together, this resulted in the higher cost of funds. 48 Table of Contents 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 December 31, ​ Fiscal Year Ended September 30, ​ ​ ​ 2024 ​ 2023 ​ ​ ​ Average ​ ​ Average ​ Average ​ ​ Average ​ (dollars in thousands) Balance ​ Interest ​ Yield/Cost ​ Balance ​ Interest ​ Yield/Cost ​ Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans (1)(2) ​ $ 2,005,524 ​ $ 122,970 6.13 % $ 1,771,878 ​ $ 97,560 5.51 % Investment securities (1) ​ 98,238 ​ 5,991 6.10 % 16,007 ​ 806 5.04 % Interest-earning balances and other ​ ​ 70,238 ​ ​ 4,061 ​ 5.78 % ​ 126,740 ​ ​ 6,677 ​ 5.27 % Total interest-earning assets ​ 2,174,000 ​ 133,022 6.12 % 1,914,625 ​ 105,043 5.49 % Non interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other assets ​ 59,028 ​ ​ 62,248 ​ ​ Total assets ​ $ 2,233,028 ​ ​ $ 1,976,873 ​ ​ Liabilities and stockholders' equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW and money market deposits ​ $ 1,160,115 ​ $ 51,457 4.44 % $ 997,068 ​ $ 32,647 3.27 % Time deposits ​ 483,668 ​ 21,060 4.35 % 420,495 ​ 11,204 2.66 % Total interest-bearing deposits ​ 1,643,783 ​ 72,517 4.41 % 1,417,563 ​ 43,851 3.09 % Borrowings ​ 149,667 ​ 6,109 4.08 % 145,705 ​ 5,396 3.70 % Subordinated debentures ​ 24,660 ​ 1,304 5.29 % 24,593 ​ 1,304 5.30 % Total interest-bearing liabilities ​ 1,818,110 ​ 79,930 4.40 % 1,587,861 ​ 50,551 3.18 % Non-interest bearing deposits ​ 196,595 ​ ​ 184,051 ​ ​ Other liabilities ​ 27,000 ​ ​ 24,390 ​ ​ Total liabilities ​ ​ 2,041,705 ​ ​ ​ ​ ​ ​ ​ 1,796,302 ​ ​ ​ ​ ​ ​ Stockholders' equity ​ ​ 191,323 ​ ​ ​ ​ ​ ​ ​ 180,571 ​ ​ ​ ​ ​ ​ Total liabilities and stockholders' equity ​ $ 2,233,028 ​ ​ ​ ​ ​ ​ $ 1,976,873 ​ ​ ​ ​ ​ ​ Net interest rate spread (3) ​ ​ ​ ​ ​ ​ ​ 1.72 % ​ ​ ​ ​ ​ ​ 2.31 % Net interest income/margin (4) ​ ​ ​ ​ $ 53,092 ​ 2.44 % ​ ​ ​ $ 54,492 ​ 2.85 % (1) There is no income tax exempt interest recorded for loans or investment securities for the periods presented.
Goodwill impairment exists when a reporting unit’s carrying value of goodwill exceeds its implied fair value. Significant judgment is applied when goodwill is assessed for impairment. This judgment includes, but may not be limited to, the selection of appropriate discount rates, the identification of relevant market comparables and the development of cash flow projections.
This judgment includes, but may not be limited to, the selection of appropriate discount rates, the identification of relevant market comparables and the development of cash flow projections. The selection and weighting of the various fair value techniques may result in a higher or lower fair value.
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.
Non-Interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Fiscal ​ ​ Year Ended ​ December 31, ​ Year Ended ​ ​ December 31, ​ (transition period) ​ September 30, (in thousands) ​ 2024 2023 2023 Loan servicing and fee income ​ $ 3,690 ​ $ 778 ​ $ 2,709 Service charges on deposit accounts ​ 469 ​ 85 ​ 275 Net gain on sale of loans held for sale ​ 10,940 ​ 2,326 ​ 4,093 Net gain on sale of investments available-for-sale ​ 31 ​ — ​ — Other income ​ 209 ​ 65 ​ 1,771 Total non-interest income ​ $ 15,339 ​ $ 3,254 ​ $ 8,848 ​ Non-interest income was $15.3 million for calendar 2024, an increase of $6.5 million from $8.8 million for fiscal 2023.
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.
These funds can be obtained by converting liquid assets to cash or by attracting new deposits or other sources of funding. Many factors affect the Company’s ability to meet liquidity needs, including variations in the markets served, loan demand, its asset/liability mix, its reputation and credit standing in its markets and general economic conditions.
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.
The Company did not own any repossessed property for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ ​ Balance at December 31, ​ September 30, ​ (dollars in thousands) ​ 2024 ​ 2023 ​ 2023 ​ Nonaccrual loans ​ $ 16,368 ​ $ 14,451 ​ $ 14,933 ​ Loans greater than 90 days past due ​ — ​ — ​ 128 ​ Total nonperforming loans/assets ​ $ 16,368 ​ $ 14,451 ​ $ 15,061 ​ Nonperforming loans as a percentage of loans held-for- investment ​ 0.82 % 0.74 % 0.80 % Non-performing assets as a percentage of total assets ​ ​ 0.71 % ​ 0.64 % ​ 0.70 % Allowance for credit losses as a percentage of nonperforming loans ​ 139.17 % 136.03 % 97.51 % ​ Total nonaccrual loans were $16.4 million at December 31, 2024, an increase from total nonaccrual loans of $14.5 million at December 31, 2023. ​ 57 Table of Contents Reserve for Unfunded Commitments The Company maintains a reserve, recorded in other liabilities, associated with unfunded loan commitments accepted by borrowers.
GSE residential mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after five years through ten years ​ $ — — % $ 1,256 2.30 % Due after ten years ​ 375 3.02 % 522 2.66 % ​ ​ 375 3.02 % 1,778 2.41 % U.S.
GSE residential mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after five years through ten years ​ $ — — % $ 885 2.32 % Due after ten years ​ 11,016 4.51 % 374 2.66 % ​ ​ 11,016 4.51 % 1,259 2.42 % U.S.
The following table provides the composition of the Company’s loan portfolio by type at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At September 30, ​ At September 30, ​ 2023 ​ 2022 ​ ​ Amount ​ Percent ​ Amount ​ Percent ​ ​ (Dollars in thousands) Real estate: ​ ​ ​ ​ ​ ​ ​ ​ Residential ​ $ 657,332 ​ 35.07 % ​ $ 516,258 ​ 31.80 % Multi-family ​ 578,895 ​ 30.88 % ​ 575,061 ​ 35.42 % Commercial ​ 537,314 ​ 28.66 % ​ 472,984 ​ 29.13 % Total real estate ​ 1,773,541 ​ 94.61 % ​ 1,564,303 ​ 96.35 % Commercial and industrial ​ 87,575 ​ 4.67 % ​ 46,285 ​ 2.85 % Construction ​ 13,021 ​ 0.70 % ​ 12,907 ​ 0.80 % Consumer ​ 425 ​ 0.02 % ​ 36 ​ — % Total loans ​ 1,874,562 ​ 100.00 % ​ 1,623,531 ​ 100.00 % Allowance for loan losses ​ 14,686 ​ ​ ​ ​ 12,844 ​ ​ Total loans, net ​ $ 1,859,876 ​ ​ ​ ​ $ 1,610,687 ​ ​ ​ ​ The following table provides information for the contractual maturities of our total loan portfolio at September 30, 2023.
The following table provides the composition of the Company’s loan portfolio by type at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ At September 30, ​ 2024 ​ 2023 ​ 2023 ​ ​ Amount ​ Percent ​ Amount ​ Percent ​ Amount ​ Percent ​ ​ (Dollars in thousands) ​ Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential ​ $ 729,254 ​ 36.73 % ​ $ 714,843 ​ 36.52 % ​ $ 657,332 ​ 35.07 % Multi-family ​ 550,570 ​ 27.73 % ​ 572,849 ​ 29.27 % ​ 578,895 ​ 30.88 % Commercial ​ 522,805 ​ 26.33 % ​ 548,012 ​ 28.00 % ​ 537,314 ​ 28.66 % Total real estate ​ 1,802,629 ​ 90.79 % ​ 1,835,704 ​ 93.79 % ​ 1,773,541 ​ 94.61 % Commercial and industrial ​ 168,909 ​ 8.51 % ​ 107,912 ​ 5.52 % ​ 87,575 ​ 4.67 % Construction ​ 13,483 ​ 0.68 % ​ 13,170 ​ 0.67 % ​ 13,021 ​ 0.70 % Consumer ​ 503 ​ 0.02 % ​ 413 ​ 0.02 % ​ 425 ​ 0.02 % Total loans ​ 1,985,524 ​ 100.00 % ​ 1,957,199 ​ 100.00 % ​ 1,874,562 ​ 100.00 % Allowance for credit losses ​ 22,779 ​ ​ ​ ​ 19,658 ​ ​ ​ 14,686 ​ ​ Total loans, net ​ $ 1,962,745 ​ ​ ​ ​ $ 1,937,541 ​ ​ ​ ​ $ 1,859,876 ​ ​ ​ ​ ​ 54 Table of Contents ​ The following table provides information of our total loan portfolio at December 31, 2024 by the earlier of the maturity or next repricing date.
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.
Borrowings The total carrying value of our borrowings was $132.5 million at December 31, 2024, a decrease of $21.1 million from $153.6 million at December 31, 2023. 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.
Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The table presents contractual maturities and does not reflect repricing or the effect of prepayments.
Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. Adjustable rate loans are included in the period which their interest rates are next scheduled to adjust.
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.
Non-Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Fiscal ​ ​ Year Ended ​ December 31, ​ Year Ended ​ ​ December 31, ​ (transition period) ​ September 30, (in thousands) 2024 2023 2023 Salaries and employee benefits ​ $ 25,600 ​ $ 5,242 ​ $ 20,652 Occupancy and equipment ​ 7,222 ​ 1,746 ​ 6,359 Data processing ​ 2,096 ​ 530 ​ 1,951 Professional fees ​ 3,079 ​ 729 ​ 3,145 Federal deposit insurance premiums ​ ​ 1,418 ​ ​ 375 ​ ​ 1,259 Other expenses ​ 7,697 ​ 2,048 ​ 6,355 Total non-interest expense ​ $ 47,112 ​ $ 10,670 ​ $ 39,721 ​ 51 Table of Contents Non-interest expense was $47.1 million for calendar 2024, an increase of $7.4 million from $39.7 million for fiscal 2023.
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.
As of December 31, 2024 and 2023, we held $106.4 million and $107.3 million, respectively, of time deposits that meet or exceed the FDIC insurance limit.
Letters of credit are conditional commitments guaranteeing payments of drafts in accordance with the terms of the letter of credit agreements. Commercial letters of credit are used primarily to facilitate trade or commerce and are also issued to support public and private borrowing arrangements, bond financing and similar transactions.
Commercial letters of credit are used primarily to facilitate trade or commerce and are also issued to support public and private borrowing arrangements, bond financings and similar transactions. Collateral may be 61 Table of Contents required to support letters of credit based upon management’s evaluation of the creditworthiness of each customer.
However, total interest expense increased by $43.4 million, or 604.5%, reflecting the rapid and significant rise in interest rates driven by the Federal Reserve and, to a lesser extent, the Company’s decision to maintain increased liquidity as a result of recent industry events resulted in the higher cost of funds as the average rate on interest bearing liabilities increased to 3.18% from 0.62%.
However, total interest expense increased by $29.4 million, or 58.1%, as the average cost interest-bearing liabilities for calendar 2024 was 4.40%, an increase of 122 basis points, from 3.18% for fiscal 2023 due to the rapid and significant rise in market interest rates and the competitive deposit environment and, to a lesser extent, the Company’s decision to increase liquidity as a result of the industry events over the last two years.
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.
GSE commercial mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after one year through five years ​ ​ — ​ 2,561 2.68 % ​ ​ — — ​ 2,561 2.68 % Collateralized loan obligations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after five years through ten years ​ ​ 3,824 7.24 % — — ​ Due after ten years ​ 46,459 6.90 % — — ​ ​ ​ 50,283 6.93 % — — ​ Corporate bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after five years through ten years ​ 12,700 5.19 % — — ​ ​ ​ 12,700 5.19 % — — ​ Total investment securities ​ $ 63,292 6.56 % $ 4,041 2.58 % (1) There is no income tax exempt interest recorded for investment securities for the periods presented.
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.
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.
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.
The following table sets forth the maturity of time deposits that meet or exceed the FDIC insurance limit of as of December 31, 2024: ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2024 Three months or less ​ $ 39,784 Over three months through twelve months ​ 59,126 Over one year through three years ​ 7,181 Over three years ​ 259 Total ​ $ 106,350 ​ See Note 6, “Deposits” to the accompanying Consolidated Financial Statements contained in Item 8 for additional details.
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 increase in non-interest expense was primarily attributed to additional staff for the SBA, C&I Banking and Operations teams. Set forth below are our selected consolidated financial and other data. Our business is primarily the business of our Bank.
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.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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.
Additional branches are located in Garden City Park, Hauppauge, Forest Hills, Flushing, Sunset Park, Manhattan and Chinatown, New York and Freehold, New Jersey.
Additional branches are located in Garden City Park, Hauppauge, Forest Hills, Flushing, Sunset Park, Manhattan and Chinatown, New York and Freehold, New Jersey. The Bank has received regulatory approval to open a full-service branch in Port Jefferson, New York. Business development staff have already joined the Bank in anticipation of the opening of this location.
The remaining buyback authority under the share repurchase program remained at 366,050 shares as of December 21, 2023, the filing date of this Annual Report on Form 10-K. ​ ​ ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk A smaller reporting company is not required to provide the information related to this item. ​ ​
The remaining buyback authority under the share repurchase program therefore remained at 366,050 shares as of March 14, 2025, the filing date of this Annual Report on Form 10-K. ​ ​ 62 Table of Contents
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.
At December 31, 2024, $7.1 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. 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.
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.
Treasury securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due in one year or less ​ 19,995 4.37 % — — % ​ ​ 19,995 4.37 % — — % Collateralized loan obligations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after five years through ten years ​ 27,284 6.12 % — — % Due after ten years ​ 4,987 6.10 % — — % ​ ​ 32,271 6.12 % — — % Corporate bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due after one year through five years ​ 1,000 8.75 % — — % Due after five years through ten years ​ 19,282 5.90 % — — % ​ ​ 20,282 6.04 % — — % Total investment securities ​ $ 85,084 5.45 % $ 3,758 2.59 % ​ ​ 53 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2023 ​ ​ Available-for-Sale ​ Held-to-Maturity ​ Amortized Weighted Amortized Weighted (dollars in thousands) ​ Cost ​ Average Yield ​ Cost ​ Average Yield U.S.
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.
See Note 7, “Borrowings” and Note 8, “Subordinated Debentures” to the accompanying Consolidated Financial Statements contained in Item 8 for additional details. ​ 60 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.
(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.
(4) Net interest margin represents net interest income divided by average interest-earning assets. ​ The following table details the variances in net interest income caused by changes in interest rates and volume for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2024 vs. ​ ​ Fiscal Year Ended September 30, 2023 ​ ​ Increase (decrease) due to change in: ​ ​ ​ (in thousands) ​ Volume Rate Total Interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 13,649 ​ $ 11,761 ​ $ 25,410 Investment securities ​ 4,981 ​ 205 ​ 5,186 Interest-earning balances and other ​ (2,946) ​ 329 ​ (2,617) Total interest income ​ 15,684 ​ 12,295 ​ ​ 27,979 Interest expense ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW and money market deposits ​ ​ 5,937 ​ ​ 12,873 ​ ​ 18,810 Time deposits ​ 1,888 ​ 7,968 ​ 9,856 Borrowings ​ 150 ​ 563 ​ 713 Subordinated debentures ​ — ​ — ​ — Total interest expense ​ 7,975 ​ 21,404 ​ 29,379 Net increase (decrease) in net interest income ​ $ 7,709 ​ $ (9,109) ​ $ (1,400) ​ ​ 50 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended December 31, ​ ​ 2023 vs. 2022 ​ ​ Increase (decrease) due to change in: ​ ​ ​ (in thousands) ​ Volume Rate Total Interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 3,197 ​ $ 3,218 ​ $ 6,415 Investment securities ​ 652 ​ 76 ​ 728 Interest-earning balances and other ​ 1,179 ​ 261 ​ 1,440 Total interest income ​ 5,028 ​ 3,555 ​ ​ 8,583 Interest expense ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW and money market deposits ​ ​ 755 ​ ​ 6,028 ​ ​ 6,783 Time deposits ​ 1,081 ​ 2,603 ​ 3,684 Borrowings ​ 392 ​ 337 ​ 729 Subordinated debentures ​ (8) ​ — ​ (8) Total interest expense ​ 2,220 ​ 8,968 ​ 11,188 Net increase (decrease) in net interest income ​ $ 2,808 ​ $ (5,413) ​ $ (2,605) ​ Provision for Credit Losses The provision for credit losses was $4.9 million (including a $0.2 million provision for unfunded comments) for calendar 2024 compared to $3.4 million (including no provision for unfunded comments) for fiscal 2023.
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.
GSE commercial mortgage-backed securities ​ ​ 1,520 ​ ​ 1,503 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Collateralized loan obligations ​ 32,271 ​ 32,477 ​ 50,283 ​ 50,266 ​ — ​ — Corporate bonds ​ 20,282 ​ 19,130 ​ 12,700 ​ 10,952 ​ 12,700 ​ 10,747 Total investment securities available-for- sale ​ 85,084 ​ 83,755 ​ 63,292 ​ 61,419 ​ 13,022 ​ 10,889 Investment securities held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S.
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.
Based on historical experience, the Company expects to be able to replace a substantial portion of those maturing deposits with comparable deposit products. ​ 59 Table of Contents The following is our average deposits and weighted-average interest rates paid thereon for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Three Months Ended December 31, ​ Fiscal Year Ended September 30, ​ ​ ​ 2024 ​ 2023 (transition period) ​ 2023 ​ ​ ​ Average Average ​ ​ Average Average ​ Average Average (dollars in thousands) ​ Balance Rate ​ ​ Balance Rate ​ Balance Rate Non-interest bearing demand ​ $ 196,595 0.00 % $ 187,216 0.00 % $ 184,051 0.00 % Savings ​ 48,749 2.21 % ​ 50,191 1.79 % ​ 87,637 1.30 % NOW ​ 631,267 4.56 % ​ 539,194 4.58 % ​ 545,827 3.40 % Money market ​ 480,099 4.49 % ​ 449,677 4.50 % ​ 363,604 3.57 % Time deposits ​ 483,668 4.35 % ​ 541,475 3.83 % ​ 420,495 2.66 % Total average deposits ​ $ 1,840,378 3.94 % $ 1,767,753 3.77 % $ 1,601,614 2.74 % ​ The Company had municipal deposits of $509.3 million at December 31, 2024, which comprised 26.1% of total deposits, a decrease of $18.8 million or 3.6% from $528.1 million at December 31, 2023.
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.
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.
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.
At December 31, 2024, the Bank had a $247.2 million collateralized line of credit from the Federal Reserve Bank of New York’s discount window with no outstanding borrowings. At December 31, 2024, the Bank had access to approximately $92 million in unsecured lines of credit extended by correspondent banks, if needed, for short-term funding purposes.
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.
The increase in non-interest expense was primarily attributed to additional staff for the SBA, C&I Banking and Operations teams. Income Taxes Income tax expense was $4.0 million for calendar 2024, a decrease from $5.0 million for fiscal 2023. The decline in income tax expense reflects lower net income in calendar 2024.
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.
Net interest income for calendar 2024 was $53.1 million, a decrease of 2.6% from $54.5 million for fiscal 2023. Net interest margin was 2.44% for calendar 2024, a decrease of 41 basis points from 2.85% for fiscal 2023.
Insured and collateralized deposits, which include municipal deposits, accounted for approximately 85% of total deposits at September 30, 2023.
Insured and collateralized deposits, which include municipal deposits, accounted for approximately 87% of total deposits at December 31, 2024. Time deposits of $481.6 million are scheduled to mature within the next 12 months.
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.
The Bank expects this site to be fully operational in the first half of 2025. At December 31, 2024, on a consolidated basis we had $2.31 billion in total assets, $196.6 million in total stockholders’ equity, $1.99 billion in total loans, $1.95 billion in total deposits and 185 full-time equivalent employees.
See additional discussion under " Asset Quality - Analysis of Allowance for Loan Losses ” section.
Total net charge-offs were $1.6 million for both calendar 2024 and fiscal 2023. See additional discussion under " Asset Quality - Allowance for Credit Losses ” section.
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.
Collateral required varies, but may include accounts receivable, inventory, equipment, real estate and income-producing commercial properties.
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.
Allowance for Credit Losses The allowance for credit losses was $22.8 million at December 31, 2024, an increase of $3.1 million from $19.7 million at December 31, 2023.
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.
Although management uses the best information available, the level of the allowance for credit losses remains an estimate, which is subject to significant judgment and short-term change. Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for credit losses.
Removed
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.
Added
As a result of the change in year end, the Company filed a Transition Report on Form 10-Q with the SEC on February 13, 2024, which included unaudited financial statements as of December 31, 2023 and for the three months then ended and for comparative purposes we presented financial statements for the three months ended December 31, 2022.
Removed
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.
Added
In this report, our discussion and analysis will present the more significant factors affecting our financial condition at December 31, 2024 and December 31, 2023.
Removed
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.
Added
For the results of operations, our discussion and analysis will present the more significant factors affecting the periods presented as follows: ● the calendar year ended December 31, 2024 (“calendar 2024”) compared to the fiscal year ended September 30, 2023 (“fiscal 2023”); and ● the transition period from October 1, 2023 through December 31, 2023 (“transition period”) compared to the year earlier period October 1, 2022 through December 31, 2022.
Removed
Allowance for Loan Losses We establish an allowance for loan losses that represents management’s best estimate of probable credit losses inherent in the portfolio at the balance sheet date.
Added
Critical Accounting Policies and Estimates We prepare our consolidated financial statements in conformity with GAAP.

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