Hanover Bancorp HNVR Form 10-Q filing Q2 FY2026

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PART I

ITEM 1. – FINANCIAL STATEMENTS

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See accompanying notes to unaudited consolidated financial statements.

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See accompanying notes to unaudited consolidated financial statements.

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See accompanying notes to unaudited consolidated financial statements.

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HANOVER BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands, except share and per share data)

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See accompanying notes to unaudited consolidated financial statements.

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See accompanying notes to unaudited consolidated financial statements.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Hanover Bancorp, Inc., a Maryland corporation (the “Company”), is the holding company for Hanover Community Bank (the “Bank”). On June 25, 2025, the Company completed its reincorporation from New York to Maryland (the “Reincorporation”). The Reincorporation was approved by the Company’s shareholders at the annual shareholder meeting held on March 5, 2024, by the Federal Reserve Bank of New York on July 5, 2024, and the New York State Department of Financial Services (the “DFS”) on November 20, 2024. Accordingly, the Company is incorporated in the State of Maryland.

The Bank, headquartered in Mineola, New York, is a New York State chartered bank. The Bank commenced operations on November 4, 2008 and is a full-service bank providing personal and business lending and deposit services. As a New York State chartered, non-Federal Reserve member bank, the Bank is subject to regulation by the DFS and the Federal Deposit Insurance Corporation (“FDIC”). The Company is subject to regulation and examination by the Board of Governors of the Federal Reserve System (the “FRB”).

Basis of Presentation

In the opinion of the Company’s management, the preceding unaudited interim consolidated financial statements contain all adjustments, consisting of normal accruals, necessary for a fair presentation of the Company’s consolidated statement of financial condition as of June 30, 2026, its consolidated statements of income for the three and six months ended June 30, 2026 and 2025, its consolidated statements of comprehensive income for the three and six months ended June 30, 2026 and 2025, its consolidated statements of changes in stockholders’ equity for the three and six months ended June 30, 2026 and 2025 and its consolidated statements of cash flows for the six months ended June 30, 2026 and 2025. Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had an immaterial effect on the Company’s consolidated financial statements and had no effect on prior period net income or stockholders’ equity.

In addition, the preceding unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, as well as in accordance with predominant practices within the banking industry. They do not include all the information and footnotes required by U.S. GAAP for complete financial statements. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of results for any other interim period or of the results for the full fiscal year 2026. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to the Company’s significant accounting policies since December 31, 2025.

All material intercompany accounts and transactions have been eliminated in consolidation. Unless the context otherwise requires, references herein to the Company include the Company and the Bank on a consolidated basis.

Salaries and employee benefits for the six months ended June 30, 2026 includes a severance payment related to a Board approved Transition Agreement dated February 12, 2026 between the Company and the former President of the Company and the Bank, McClelland Wilcox. In connection with a management restructuring initiative, Mr. Wilcox’s last day of employment was March 31, 2026 and pursuant to the terms of his Employment Agreement, he was entitled to a severance benefit of approximately $2.15 million.

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2. EARNINGS PER SHARE

The two-class method is used in the calculation of basic and diluted earnings per share (“EPS”). Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared and participation rights in undistributed earnings. The restricted stock awards granted by the Company contain non-forfeitable rights to dividends and therefore are considered participating securities.

The Company’s basic and diluted EPS calculations for the three and six months ended June 30, 2026 and 2025 are as follows. There were no stock options outstanding as of June 30, 2026. There were no stock options that were antidilutive for the three and six months ended June 30, 2025.

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3. SECURITIES

The following tables summarize the amortized cost, fair value and allowance for credit losses of securities available for sale and securities held to maturity at June 30, 2026 and December 31, 2025 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss and gross unrecognized gains and losses:

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The amortized cost and fair value of investment securities at June 30, 2026, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single date are shown separately.

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At June 30, 2026 and December 31, 2025, investment securities with a carrying amount of $47.5 million and $34.0 million, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

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There were no sales of securities during the three and six months ended June 30, 2026 and 2025.

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There were no holdings of securities of any one issuer in an amount greater than 10% of stockholders' equity other than securities issued by the U.S. government and its agencies at June 30, 2026 and December 31, 2025.

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The following tables summarize securities available-for-sale in an unrealized loss position for which an allowance for credit losses has not been recorded at June 30, 2026 and December 31, 2025, aggregated by major security type and length of time in a continuous unrealized loss position:

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Assessment of Available for Sale Debt Securities for Credit Risk

Management assesses the decline in fair value of investment securities periodically. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates both qualitative and quantitative factors to assess whether an impairment exists. The following is a discussion of the credit quality characteristics of portfolio segments carrying unrealized losses at June 30, 2026 and December 31, 2025.

Obligations of U.S. Government agencies and sponsored entities

The mortgage-backed securities and collateralized mortgage obligations held by the Company were issued by U.S. government-sponsored entities and agencies. The decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality. The Company does not have the intent to sell these mortgage-backed securities and collateralized mortgage obligations and it is likely that it will not be required to sell the securities before their anticipated recovery. These securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers. The Company did not record expected credit loss on these securities at June 30, 2026 and December 31, 2025.

Corporate bonds

The Company’s corporate bond portfolio is comprised of subordinated debt issues of community and regional banks. Management considers the credit quality of each individual investment. Management reviewed the collectibility of these investments, taking into account such factors as the financial condition of the issuers, reported regulatory capital ratios, and credit ratings, when available, and other factors. All corporate bond debt securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers. The Company considers the potential credit risk of the issuers to be immaterial and has not allocated an allowance for credit losses on its corporate bond portfolio as of June 30, 2026 and December 31, 2025.

Collateralized loan obligations (“CLO”)

The Company’s CLO portfolio is comprised of an actively managed portfolio of senior secured Class A Notes. Management considers the credit quality of each individual investment. Management reviewed the collectibility of these investments, taking into account such factors as the financial condition of the issuers and credit ratings, when available and other factors. All CLO securities continue to accrue interest and make payments as expected with no defaults or deferrals on the part of the issuers. The Company considers the potential credit risk of the issuers to be immaterial and has not allocated an allowance for credit losses on its CLO portfolio as of June 30, 2026 and December 31, 2025.

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4. LOANS

The following table sets forth the classification of the Company’s loans by loan portfolio segment for the periods presented.

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At June 30, 2026 and December 31, 2025, the Company was servicing approximately $367.5 million and $375.6 million, respectively, of loans for others. The Company had no SBA loans held for sale at June 30, 2026 and December 31, 2025, respectively. The Company had $2.9 million and $6.4 million of residential real estate loans held for sale at June 30, 2026 and December 31, 2025, respectively.

For the three months ended June 30, 2026 and 2025, the Company sold loans totaling approximately $35.5 million and $46.0 million, respectively, recognizing net gains of $1.4 million and $2.3 million, respectively. For the six months ended June 30, 2026 and 2025, the Company sold loans totaling approximately $77.0 million and $92.7 million, respectively, recognizing net gains of $2.8 million and $4.7 million, respectively.

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The following tables summarize the activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2026 and 2025:

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(1) Additional provision related to off-balance sheet exposure was a debit of $187 thousand for the three months ended June 30, 2025.

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(1) Additional provision related to off-balance sheet exposure was a debit of $30 thousand for the six months ended June 30, 2026.

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(1) Additional provision related to off-balance sheet exposure was a debit of $187 thousand for the six months ended June 30, 2025.

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Allowance for Credit Losses on Unfunded Commitments

The Company has recorded an ACL for unfunded credit commitments, which is recorded in other liabilities. The provision for credit losses on unfunded commitments is recorded within the provision for credit losses on the Company’s income statement. The following table presents the allowance for credit losses for unfunded commitments for the three and six months ended June 30, 2026 and 2025:

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The table below presents the provision for credit losses on loans and unfunded commitments for the three and six months ended June 30, 2026 and 2025:

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The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of June 30, 2026 and December 31, 2025:

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Individually Analyzed Loans

The Company analyzes loans on an individual basis when management has determined that the loan no longer exhibits risk characteristics consistent with the risk characteristics existing in its designed pool of loans, under the Company’s CECL methodology. Loans individually analyzed include certain nonaccrual loans.

As of June 30, 2026 and December 31, 2025, the amortized cost basis of individually analyzed loans amounted to $28.3 million and $17.2 million, respectively, of which $27.4 million and $16.4 million were considered collateral dependent. For collateral dependent loans where foreclosure is probable or the borrower is experiencing financial difficulty and repayment is likely to be substantially provided through the sale or operation of the collateral, the ACL is measured based on the difference between the fair value of the collateral adjusted for sales costs and the amortized cost basis of the loan, at measurement date. Certain assets held as collateral may be exposed to future deterioration in fair value, particularly due to changes in real estate markets or usage.

The following tables present the amortized cost basis and related allowance for credit loss of individually analyzed loans considered to be collateral dependent as of June 30, 2026 and December 31, 2025.

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(1) Secured by residential real estate

(2) Secured by commercial real estate

(3) Secured by business assets

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(1) Secured by residential real estate

(2) Secured by commercial real estate

(3) Secured by business assets

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The following tables present the aging of the amortized cost basis in past due loans as of June 30, 2026 and December 31, 2025 by class of loans:

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The Company may occasionally make modifications to loans where the borrower is considered to be in financial distress. Types of modifications include principal reductions, significant payment delays, term extensions, interest rate reductions or a combination thereof. The amount of principal reduction is charged-off against the allowance for credit losses.

The following tables present the amortized cost basis of loans that were both experiencing financial difficulty and modified during the three and six month periods ended June 30, 2026 and 2025, by class and type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.

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The Company had no commitment to lend additional funds to borrowers for which modifications described above were made during the three and six month periods ended June 30, 2026 and 2025.

The Company monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. No such loans that have been modified in the last twelve month periods preceding June 30, 2026 and June 30, 2025 were past due.

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three and six month periods ended June 30, 2026 and 2025:

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Upon the Company’s determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. During the three and six month periods ended June 30, 2026 and 2025, no loans that were modified to borrowers experiencing financial difficulty had a payment default within twelve months of modification.

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Credit Quality Indicators:

The Company has adopted a credit risk rating system as part of the risk assessment of its loan portfolio. The Company’s lending officers are required to assign a credit risk rating to each loan in their portfolio at origination. When the lender learns of important financial developments, the risk rating is reviewed and adjusted if necessary. In addition, the Company engages a third-party independent loan reviewer that performs semi-annual reviews of a sample of loans, validating the credit risk ratings assigned to such loans. The credit risk ratings play an important role in the establishment of the loan loss provision and to confirm the adequacy of the allowance for credit losses.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. The Company uses the following definitions for risk ratings:

Special Mention: The loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects for the asset or in the Company’s credit position at some future date.

Substandard: The loan is inadequately protected by current sound worth and paying capacity of the obligor or collateral pledged, if any. Loans classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: The loan has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing factors, conditions, and values, highly questionable and improbable.

Loans not having a credit risk rating of Special Mention, Substandard or Doubtful are considered pass loans.

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The following table summarizes the Company’s loans by year of origination and internally assigned credit risk at June 30, 2026 and gross charge-offs for the six months ended June 30, 2026:

(1) Certain fixed rate residential mortgage loans are included in a fair value hedging relationship. The amortized cost excludes a contra asset of $179,000 related to basis adjustments for loans in the closed portfolio under the portfolio layer method at June 30, 2026. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See “Note 10 – Derivatives” for more information on the fair value hedge.

The following table summarizes the Company’s loans by year of origination and internally assigned credit risk at December 31, 2025:

(1) Certain fixed rate residential mortgage loans are included in a fair value hedging relationship. The amortized cost excludes a contra asset of $539,000 related to basis adjustments for loans in the closed portfolio under the portfolio layer method at December 31, 2025. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See “Note 10 – Derivatives” for more information on the fair value hedge.

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5. EQUITY COMPENSATION PLANS

On May 28, 2026, the Company's stockholders approved the Hanover Bancorp, Inc. 2026 Equity Incentive Plan (the "2026 Plan"). Upon stockholder approval of the 2026 Plan, the Company terminated the 2021 and 2018 Equity Compensation Plans (the "2018 Plan" and the “2021 Plan”). As a result, no further awards may be granted under the 2018 and 2021 Plans.

Shares available for future issuance under the 2018 and 2021 Plans immediately prior to their termination were rolled over and added to the authorized share reserve under the 2026 Plan. Specifically, 110,713 shares that were previously authorized but unissued under the 2021 Plan and 5,026 shares that were previously authorized but unissued under the 2018 Plan, were rolled into the 2026 Plan. Under the terms of the 2026 Plan, the total number of shares authorized for issuance consists of these rolled-over shares plus an additional 155,000 newly authorized shares. At June 30, 2026, a total of 270,739 shares of common stock are available for issuance under the 2026 Plan.

Outstanding awards previously granted under the 2018 and 2021 Plans continue to be governed by the terms of those Plans but are now counted against the aggregate share pool of the 2026 Plan. If any outstanding awards under the 2018 or the 2021 Plan are forfeited, expire, or are settled in cash without the delivery of shares, the equivalent number of shares will become available for future grant under the 2026 Plan.

Stock Options

Stock options are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant, and generally with vesting periods of three years and contractual terms of ten years. All stock options fully vest upon a change in control.

The fair value of stock options is estimated on the date of grant using a closed form option valuation (Black-Scholes) model. Expected volatilities are based on historical volatilities of the common stock of the Company’s peers. The Company uses historical data to estimate option exercise and post-vesting termination behavior. Expected terms are based on historical data and represent the periods in which the options are expected to be outstanding. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

There were 16,000 stock options exercised resulting in the net issuance (after netting the value of the exercise price and/or certain tax liabilities) of 12,711 shares of common stock during the six months ended June 30, 2026. There were 42,000 stock options exercised resulting in the net issuance (after netting the value of the exercise price and/or certain tax liabilities) of 14,332 shares of common stock during the six months ended June 30, 2025.

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A summary of stock option activity follows (aggregate intrinsic value in thousands):

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The following table presents information related to the stock option plan for the periods presented:

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There was no compensation expense attributable to stock options for the three and six months ended June 30, 2026 and 2025.

Restricted Stock Awards

During the six months ended June 30, 2026, restricted stock awards of 53,596 shares were granted with vesting periods ranging from three to five years. During the six months ended June 30, 2025, restricted stock awards of 51,250 shares were granted with a five-year vesting period. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date.

A summary of restricted stock awards activity follows:

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Compensation expense attributable to restricted stock awards was $368 thousand and $325 thousand for the three months ended June 30, 2026 and 2025, respectively. Compensation expense attributable to restricted stock awards was $708 thousand and $674 thousand for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026 and December 31, 2025, there was $3.1 million and $2.9 million of total unrecognized compensation cost related to unvested restricted stock, expected to be recognized over a weighted-average term of 2.75 years and 3.01 years, respectively. The total fair value of shares vested during the six months ended June 30, 2026 and 2025 was $1.3 million and $1.8 million, respectively.

Restricted Stock Units

Long Term Incentive Plan

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Restricted stock units (“RSU”s) represent an obligation to deliver shares to a grantee at a future date if certain vesting conditions are met. RSUs are subject to a time-based vesting schedule and the satisfaction of performance conditions and are settled in shares of the Company's common stock. RSUs do not provide voting rights and RSUs may accrue dividends from the date of grant.

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The following table summarizes the unvested performance-based RSU activity for the six months ended June 30, 2026:

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During the six months ended June 30, 2026, the Company granted 20,022 RSUs. These performance-based RSUs cliff vest after three years and are subject to the achievement of the Company's pre-defined performance goals for the three-year period ending December 31, 2028. Performance-based RSUs granted in 2025 cliff vest after three years and are subject to the achievement of the Company's pre-defined performance goals for the three-year period ending December 31, 2027.

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Compensation expense attributable to RSUs was $73 thousand and $67 thousand, respectively, for the three months ended June 30, 2026 and 2025. Compensation expense attributable to RSUs was $91 thousand and $212 thousand, respectively, for the six months ended June 30, 2026 and 2025. As of June 30, 2026 and December 31, 2025, there was $658 thousand and $414 thousand of total unrecognized compensation cost related to non-vested RSUs. The cost is expected to be recognized over a weighted-average period of 2.35 years and 2.21 years, respectively.

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6. REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Capital adequacy regulations and, additionally, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate regulatory action. The effects of accumulated other comprehensive income or loss are not included in computing regulatory capital. Management believes as of June 30, 2026, the Bank meets all capital adequacy requirements to which it is subject.

In addition to the minimum capital requirements discussed above, the Bank is also required to maintain a capital buffer above the requirements set forth in the capital adequacy regulations. Failure to maintain the required buffer could impair the Bank’s ability to pay dividends to the Company and to pay certain compensation to its executives.

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Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized or worse, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At June 30, 2026 and December 31, 2025, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

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.

The following table sets forth the Bank’s actual and required capital amounts (in thousands) and ratios under current regulations:

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Dividend restrictions - The Company’s principal source of funds for dividend and debt service payments is dividends received from the Bank. During the six months ended June 30, 2026 the Bank paid $2.3 million in cash dividends to the Company. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. As of June 30, 2026, the Bank had $29.8 million of retained net income available for dividends to the Company, without obtaining regulatory approval, provided that the Bank satisfies the regulatory capital requirements, including the capital conservation buffer, disclosed above. The Company made capital contributions of $6.0 million to the Bank during the six months ended June 30, 2026.

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7. FAIR VALUE

Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined using quoted market prices. However, in many instances, quoted market prices are not available. In such instances, fair values are determined using appropriate valuation techniques. Various assumptions and observable inputs must be relied upon in applying these techniques. Accordingly, categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. As such, the fair value estimates may not be realized in an immediate transfer of the respective asset or liability.

There are three levels of inputs that may be used to measure fair values:

• Level 1: Valuation is based upon unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
• Level 2: Fair value is calculated using significant inputs other than quoted market prices that are directly or indirectly observable for the asset or liability. The valuation may rely on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, rate volatility, prepayment speeds, credit ratings) or inputs that are derived principally or corroborated by market data, by correlation, or other means.
• Level 3: Inputs for determining the fair value of the respective assets or liabilities are not observable. Level 3 valuations are reliant upon pricing models and techniques that require significant management judgment or estimation.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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Assets Measured at Fair Value on a Recurring Basis

The following presents fair value measurements on a recurring basis at June 30, 2026 and December 31, 2025:

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The fair value for the securities available-for-sale were obtained from an independent broker based upon matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. The Company has determined these are classified as Level 2 inputs within the fair value hierarchy.

Derivatives represent interest rate swaps for which the estimated fair values are based on valuation models using observable market data as of the measurement date resulting in a Level 2 classification.

The fair value of collateral-dependent loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Non-real estate collateral may be valued using an appraisal, net book value per the borrowers financial statements, adjusted or discounted based on management’s knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Collateral-dependent loans are evaluated on a quarterly basis and adjusted in accordance with the allowance policy.

Other Real Estate Owned (“OREO”) (included in Other Assets): Assets acquired through or in lieu of loan foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and income approach with data comparable properties. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. OREO properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals for both collateral-dependent loans and OREO are performed by certified commercial appraisers for commercial properties or certified residential appraisers for residential properties whose qualifications and licenses have been reviewed and approved by the Bank. Once received, an independent third party reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated future servicing income. The valuation model utilizes interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future net servicing income. The fair value of loan servicing rights related to residential mortgage loans at June 30, 2026 was determined based on discounted expected future cash flows using discount rates ranging from 12.8% to 15.3%, prepayment speeds ranging from 17.5% to 18.7% and a weighted average life ranging from 1.2 to 3.6 years. Fair value at December 31, 2025 for loan servicing rights related to residential mortgage loans was determined based on discounted expected future cash flows using discount rates ranging from 12.4% to 14.9%, prepayment speeds ranging from 17.6% to 18.9% and a weighted average life ranging from 1.5 to 3.6 years.

The fair value of loan servicing rights for SBA loans at June 30, 2026 was determined based on discounted expected future cash flows using discount rates ranging from 3.8% to 57.5%, prepayment speeds ranging from 8.4% to 35.9% and a weighted average life ranging from 0.4 to 5.2 years. The fair value of loan servicing rights for SBA loans at December 31, 2025 was determined based on discounted expected future cash flows using discount rates ranging from 6.0% to 48.8%, prepayment speeds ranging from 7.9% to 31.9% and a weighted average life ranging from 0.4 to 5.4 years.

The Company has determined these are mostly unobservable inputs and considers them Level 3 inputs within the fair value hierarchy.

The following table presents the changes in mortgage servicing rights for the periods presented:

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Assets Measured at Fair Value on a Non-recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below:

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The Bank had one other real estate owned property at June 30, 2026 and December 31, 2025 with a $650 thousand carrying value (included in other assets).

The table below presents quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis at June 30, 2026 and December 31, 2025:

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Financial Instruments Not Measured at Fair Value

The following presents the carrying amounts and estimated fair values of the Company’s financial instruments not carried at fair value at June 30, 2026 and December 31, 2025:

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8. BORROWINGS

Federal Home Loan Bank (“FHLB”) Advances

On February 23, 2026, the Company restructured five existing FHLB advances with a total principal balance of $60.3 million and a weighted average rate of 4.27%. These advances were replaced with two new putable fixed-rate advances with FHLB totaling $60.3 million at a weighted average rate of 3.47%. $13.5 million and $46.8 million maturing on February 23, 2029 and February 24, 2031, respectively, are structured with an embedded option allowing the FHLB to terminate the advances at par on specified dates after a one-year and two-year lock-out period, respectively. If the FHLB exercises this option, the Company will need to replace this funding at market rates. A prepayment penalty of $481 thousand was incurred but deferred and is being amortized as a yield adjustment over the life of the new advances.

At June 30, 2026 and December 31, 2025, FHLB term borrowings outstanding were $59.8 million (net of $440 thousand deferred prepayment penalty) and $100.7 million, respectively, all of which were fixed rate.

There were no FHLB overnight borrowings outstanding at June 30, 2026 and December 31, 2025.

Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. The advances were collateralized by residential and commercial mortgage loans under a blanket lien arrangement at June 30, 2026 and December 31, 2025. Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow up to an additional total of $215.2 million and $8.9 million at June 30, 2026 and December 31, 2025, respectively.

The following tables set forth the contractual maturities in the next five years and weighted average interest rates of the Company’s fixed rate FHLB advances (dollars in thousands):

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Federal Reserve Borrowings

The Company pledges residential and commercial loans and investments to the Federal Reserve Bank of New York’s Discount Window. Based on this collateral, the Company was eligible to borrow up to $85.2 million and $97.3 million as of June 30, 2026 and December 31, 2025, respectively. The Company did not have any outstanding borrowings against this line as of June 30, 2026 and December 31, 2025.

Correspondent Bank Borrowings

At June 30, 2026, approximately $92.0 million in unsecured lines of credit extended by correspondent banks were available to be utilized for short-term funding purposes. No borrowings were outstanding under lines of credit with correspondent banks at June 30, 2026 and December 31, 2025.

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9. SUBORDINATED DEBENTURES

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 on October 15, 2030 (the “2020 Notes”) to certain qualified institutional buyers and accredited investors. The 2020 Notes bore interest, payable semi-annually, at the rate of 5.00% per annum, until October 15, 2025. From and including October 15, 2025 through maturity or earlier redemption, the interest rate applicable to the outstanding principal amount due reset quarterly to the then current three-month Secured Overnight Financing Rate (“SOFR”) plus 487.4 basis points payable quarterly in arrears on January 15, April 15, July 15, and October 15 of each year, commencing on January 15, 2026. On April 15, 2026, the Company redeemed in full the $25.0 million in aggregate principal amount of its outstanding floating rate subordinated notes for a total redemption price of $25.0 million plus accrued interest of $534 thousand. As a result of this redemption, the Company recorded debt extinguishment charges of $240 thousand in the second quarter of 2026 representing the acceleration and write-off of the remaining unamortized debt issuance costs. The redemption was funded using a portion of the net proceeds from the $35.0 million subordinated notes that the Company issued on March 12, 2026, as discussed below.

On March 12, 2026, the Company completed the private placement of $35 million in aggregate principal amount of fixed-to-floating rate subordinated notes due on March 15, 2036 (the “2026 Notes”) to certain qualified institutional buyers and accredited investors. The 2026 Notes bear interest, payable semi-annually, at the rate of 7.25% per annum, to be excluding March 15, 2031. From and including March 15, 2031 through the maturity date or early redemption date, the interest rate applicable to the outstanding principal amount due will reset quarterly to the then current three-month SOFR plus 386 basis points. The Company may, at its option, beginning with the interest payment date of March 15, 2031, but not generally prior thereto, and on any scheduled interest payment date thereafter, redeem the 2026 Notes, in whole or in part, subject to the receipt of any required regulatory approval. The 2026 Notes are not subject to redemption at the option of the holders of the 2026 Notes. The Company used the net proceeds of the 2026 Notes to redeem the 2020 Notes on April 15, 2026 and for general corporate purposes, including contributing equity capital to the Bank. The portion of the proceeds of the 2026 Notes contributed to the Bank is included as a component of the Bank’s Tier 1 capital for regulatory reporting.

At June 30, 2026 and December 31, 2025, the unamortized issuance costs of the subordinated notes were $771 thousand and $257 thousand, respectively. For the three months ended June 30, 2026 and 2025, $20 thousand and $13 thousand in issuance costs were recorded in interest expense. For the six months ended June 30, 2026 and 2025, $37 thousand and $27 thousand in issuance costs were recorded in interest expense The subordinated notes are presented net of unamortized issuance costs in the Company’s Consolidated Statements of Financial Condition.

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10. DERIVATIVES

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As part of its asset liability management, the Company utilizes interest rate swap agreements to help manage its interest rate risk position. The notional amount of the interest rate swap does not represent the amount exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

The following sets forth information regarding the Company’s derivative financial instruments as of the dates indicated:

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(1) Derivatives in a positive position are recorded as “Other assets” and derivatives in a negative position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling $75.0 million as of June 30, 2026 and December 31, 2025, were designated as cash flow hedges of certain Brokered Certificates of Deposit. The swaps were determined to be fully effective during the periods presented and therefore no amount of ineffectiveness has been included in net income. The aggregate fair value of the swaps is recorded in other assets/(other liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining term of the swaps.

The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the consolidated statements of income relating to the cash flow derivative instruments for the periods indicated.

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Fair Value Hedges of Interest Rate Risk

On November 1, 2023, the Company entered into a three year interest rate swap with a notional amount totaling $50 million which was designated as a fair value hedge of certain fixed rate residential mortgages. The Company pays a fixed rate of 4.56% and receives a floating rate based on SOFR for the life of the agreement without an exchange of the underlying notional amount. The hedge was determined to be effective during all periods presented and the Company expects the hedge to remain effective during the remaining term of the swap. The gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk is recognized in interest income.

The following table presents the effects of the Company’s derivative instruments designated as fair value hedges on the Consolidated Statements of Income for the three and six months ended June 30, 2026 and 2025.

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At June 30, 2026 and December 31, 2025, the following amounts were recorded on the Statement of Financial Condition related to cumulative basis adjustment for fair value hedges.

(1) This amount includes the amortized cost basis of the closed portfolios of loans receivable used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. At June 30, 2026 and December 31, 2025, the amortized cost basis of the closed portfolios used in the hedging relationships was $282.0 million and $318.6 million, respectively. The cumulative basis adjustments associated with these hedging relationships was $0.2 million and $0.5 million, respectively, and the amounts of the designated hedged items were $50.0 million and $50.0 million, respectively.

Credit-Risk-Related Contingent Features

The Company has minimum collateral posting thresholds with certain of its derivative counterparties. If the termination value of derivatives is a net liability position, the Company is required to post collateral against its obligations under the agreements. However, if the termination value of derivatives is a net asset position, the counterparty is required to post collateral to the Company. At June 30, 2026 and December 31, 2025, the Company posted $0.4 million and $1.2 million, respectively, in collateral to its counterparties in a net liability position.

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11. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following presents changes in accumulated other comprehensive (loss) income by component, net of tax, for the periods indicated:

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There were no significant amounts reclassified out of accumulated other comprehensive (loss) income for the three and six months ended June 30, 2026 and 2025.

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12. SEGMENT INFORMATION

The Company’s reportable segment is determined by the Chief Executive Officer, who is the designated chief operating decision maker (the “CODM”). The Chief Executive Officer along with others in the Company’s executive management evaluates performance and allocates resources based upon analysis of the Company as one operating segment or unit. The activities of the Company comprise one reportable segment, "Community Banking." All of the Company’s activities are interrelated, and each activity is dependent and assessed based on the manner in which it supports the other activities of the Company. All the consolidated assets are attributable to the Community Banking segment.

The Company provides a range of community banking services, including commercial and consumer lending, personal and business banking, cash management services, and other financial services primarily to individuals, businesses, and municipalities in the New York metropolitan area.

The CODM is provided with the Company’s consolidated statements of financial condition and income and evaluates the Company’s operating results based on consolidated net interest income, non-interest income, non-interest expense, and net income, which can be seen on the consolidated statements of income. These results are used to measure the Company against its competitors. Other significant non-cash items assessed by the CODM are depreciation, amortization and provision for credit losses consistent with the reporting on the consolidated statements of cash flows. Expenditures for long-lived assets are also evaluated and are consistent with the reporting on the consolidated statements of cash flows. Strategic plans and budget to actual monitoring are evaluated as one reportable segment. The actual results are used in assessing performance of the segment and in establishing compensation. All revenues are derived from banking operations within the United States, and for the three and six months ended June 30, 2026 and 2025, there was no customer that accounted for more than 10% of the Company's consolidated revenue.

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ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or modifies amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. The Company believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and the Company’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other financial institutions.

With respect to the calculations and reconciliations of TCE, tangible assets and the TCE ratio, please see Liquidity and Capital Resources contained herein for a reconciliation to the most directly comparable GAAP measure.

Executive Summary – The Company is a one-bank holding company incorporated in 2016. The Company operates as the parent for its wholly owned subsidiary, the Bank, which commenced operations in 2008. The income of the Company is primarily derived through the operations of the Bank. Unless the context otherwise requires, references herein to the Company include the Company and the Bank on a consolidated basis.

The Company completed its core processing system conversion to FIS Horizon in February 2025. This conversion, coupled with our refreshed corporate logo, exemplifies our momentum towards a more technologically advanced, modern and digitally forward-thinking bank.

The Company was added to the Russell 2000 Index in late June 2025. The Russell 2000 Index tracks 2,000 small-cap U.S.-traded stocks by objective, market-capitalization rankings, and style attributes. The Russell Indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for active investment strategies.

The Bank operates as a locally headquartered, community-oriented bank serving customers throughout the New York metro area from offices in Nassau, Suffolk, Queens, Kings (Brooklyn) and New York (Manhattan) Counties, New York, and Freehold, Monmouth County, New Jersey. We opened the Bank’s Hauppauge Business Banking Center in Hauppauge, Suffolk County, New York in May 2023. This location is the nexus of our expanded commercial lending and deposit activities that are integral to the ongoing diversification of our balance sheet as we fill the void left by the diminishing number of commercial banks in the NYC Metro area. In June 2025, we opened a full-service branch in Port Jefferson, Suffolk County, New York to serve the thriving Suffolk County area. Our new full-service branch in downtown Riverhead, New York is currently scheduled to open for business in the third quarter of 2026. We offer personal and business loans on a secured and unsecured basis, SBA and USDA guaranteed loans, revolving lines of credit, commercial mortgage loans, and one- to four-family non-qualified mortgages secured by primary and secondary residences that may be owner occupied or investment properties, home equity loans, bridge loans and other personal purpose loans.

The Bank works to provide more direct, personal attention to customers than management believes is offered by competing financial institutions, the majority of which are headquartered outside of the Bank’s primary trade area and are represented locally by branch offices. By striving to employ professional, responsive and knowledgeable staff, the Bank believes it offers a superior level of service to its customers. As a result of senior management’s availability for consultation on a daily basis, the Bank believes it offers customers quicker responses on loan applications and other banking transactions, as well as greater and earlier certainty as to whether these transactions will actually close, than competitors, whose decisions may take longer and be made in distant headquarters.

Historically, the Bank has generated additional income by strategically originating and selling residential and government guaranteed loans to other financial institutions at premiums, while also retaining servicing rights in some sales. However, with the 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. In response, the Bank developed 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 and generate fee income to complement sale premiums earned from the sale of the guaranteed portion of SBA loans. The Bank is an approved SBA Preferred Lender, enabling the Bank to process SBA applications under delegated authority from the SBA and enhancing the Bank’s ability to compete more effectively for SBA lending opportunities.

The Bank remains focused on expanding its core verticals and continues to originate loans for its portfolio and for sale in the secondary market under its residential flow origination program. During the quarters ended June 30, 2026 and 2025, the Company sold $27.2 million and $23.7 million, respectively, of residential loans under its flow origination program and recorded gains on sale of loans held-for-sale of $0.7 million and $0.5 million, respectively.

During the quarters ended June 30, 2026 and 2025, the Company sold approximately $8.3 million and $22.3 million, respectively, of government guaranteed SBA loans and recorded gains on sale of loans held-for-sale of $0.7 million and $1.8 million, respectively. SBA loan originations and gains on sale continue to be lower due to a less favorable economic outlook for many business owners along with the Bank’s ongoing prudent decision to tighten credit. Together, these factors contributed to lower SBA loan volume, approval levels, and related gain-on-sale income.

In February 2026, the Bank executed a proactive wholesale funding optimization strategy, restructuring five FHLB advances maturing in 2027 and 2028 and totaling $60.3 million in two new advances of equal principal with embedded put features to enhance balance sheet flexibility. The transaction reduced the weighted average all-in borrowing cost from 4.27% to 3.47%, generating approximately $40 thousand in monthly interest expense savings while preserving appropriate term funding and call protection.

On March 12, 2026, the Company issued $35 million of 10-year fixed-to-floating rate subordinated notes with a fixed coupon rate of 7.25% for the first five years. The Company used the net proceeds to provide capital to support growth of the consolidated entity and redeemed in full its previously outstanding $25 million of 8.54% floating rate subordinated notes on April 15, 2026, thereby reducing the Company’s cost of funds.

As previously announced on July 20, 2026, Kevin O’Connor has been named to the position of President of the Company and the Bank effective July 27, 2026. Mr. O’Connor brings more than 35 years of banking experience to Hanover Bank, having most recently served as Long Island Market President at Valley Bank.

The Bank finances most of its activities through a combination of deposits, including non-interest-bearing demand, savings, NOW and money market deposits as well as time deposits, and both short- and long-term borrowings. The Company’s chief competition includes local banks within its market area, New York City money center banks and regional banks, as well as non-bank lenders, including fintech lenders.

Financial Performance Summary

As of or for the three and six months ended June 30, 2026 and 2025

(dollars in thousands, except per share data)

(1) Represents net interest income plus total non-interest income.

(2) Includes common stock and Series A preferred stock.

(3) The ratio of total stockholders’ equity to total assets is the most comparable GAAP measure to the non-GAAP tangible common equity ratio presented herein.

(4) Represents non-interest expense divided by the sum of net interest income and non-interest income.

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At June 30, 2026 the Company, on a consolidated basis, had total assets of $2.3 billion, total deposits of $2.0 billion and total stockholders’ equity of $202.7 million. The Company recorded net income of $4.1 million, or $0.55 per diluted share (including Series A preferred shares) for the three months ended June 30, 2026 compared to net income of $2.4 million, or $0.33 per diluted share (including Series A preferred shares), for the same period in 2025.

During the quarter ended June 30, 2026, net interest income increased $2.0 million and provision for credit losses decreased $1.9 million, compared to the June 30, 2025 quarter. These were partially offset by a decrease of $0.8 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $0.9 million, a $1.0 million increase in non-interest expense, which includes $240 thousand debt extinguishment charges in the 2026 quarter and a $0.4 million increase in income tax expense, resulting in a $1.6 million increase in net income between these periods.

The Company’s return on average assets and return on average stockholders’ equity were 0.73% and 8.01%, respectively, for the three months ended June 30, 2026, versus 0.44% and 4.93%, respectively, for the comparable 2025 quarter.

Total non-accrual loans at June 30, 2026 were $28.3 million, or 1.42% of total loans, compared to $21.6 million, or 1.08% of total loans at December 31, 2025 and $12.7 million, or 0.64% of total loans, at June 30, 2025. The allowance for credit losses as a percentage of total non-accrual loans amounted to 68%, 87% and 171% at June 30, 2026, December 31, 2025 and June 30, 2025, respectively.

The Company’s efficiency ratio was 69.75% for the three months ended June 30, 2026, versus 68.73% in the June 30, 2025 quarter.

Critical Accounting Policies, Judgments and Estimates - To prepare financial statements in conformity with U.S. GAAP, the Company’s management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. Critical accounting estimates are accounting estimates where (a) the nature of the estimate is material due to levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and (b) the impact of the estimate on financial condition or operating performance is material. At June 30, 2026, there have been no material changes to the Company’s critical accounting policies as compared to the critical accounting policies disclosed in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2025.

Financial Condition – Total assets of the Company were $2.3 billion at June 30, 2026 and $2.4 billion at December 31, 2025. Total securities available for sale at June 30, 2026 were $135.0 million, an increase of $35.5 million from December 31, 2025, primarily driven by growth in U.S. GSE residential mortgage-backed securities, collateralized loan obligations and corporate bonds, offset by decreases in U.S. Treasury securities and collateralized mortgage obligations. Total loans at June 30, 2026 and December 31, 2025 were $2.0 billion. Total deposits were $2.0 billion at June 30, 2026 and at December 31, 2025. Total borrowings and subordinated debt at June 30, 2026 were $94.0 million, including $59.8 million (net of $440 thousand deferred prepayment penalty) of outstanding FHLB advances, compared to $125.5 million at December 31, 2025.

At June 30, 2026, the residential loan portfolio amounted to $764.2 million, or 38.2% of total loans. Commercial real estate loans, including multifamily loans and construction and land development loans, totaled $1.1 billion or 54.2% of total loans at June 30, 2026. Commercial and industrial loans totaled $150.4 million or 7.5% of total loans at June 30, 2026.

Total deposits were $2.0 billion at June 30, 2026 and at December 31, 2025. Our loan to deposit ratio was 99% at June 30, 2026 and at December 31, 2025. Core deposit balances, which consist of demand, NOW, savings and money market deposits, represented 74.8% and 74.9% of total deposits at June 30, 2026 and December 31, 2025, respectively. At those dates, demand deposit balances represented 12.6% and 12.2% of total deposits. The Company’s municipal deposit program is built on long-standing relationships developed in the local marketplace. We believe that this core deposit business will continue to provide a stable source of funding for the Company’s lending products at costs lower than both consumer deposits and market-based borrowings. The Company continues to broaden its municipal deposit program. At June 30, 2026, total municipal deposits were $577.4 million, representing 28.7% of total deposits, compared to $700.7 million, or 34.5% of total deposits at December 31, 2025. The weighted average rate on the municipal deposit portfolio was 2.98% at June 30, 2026 and 3.01% at December 31, 2025. The aggregate amount of the Company’s outstanding uninsured deposits was $258.2 million or 12.8% of total deposits as of June 30, 2026 and $304.8 million or 15.0% of total deposits as of December 31, 2025.

Borrowings at June 30, 2026 and December 31, 2025 were $59.8 million (net of $440 thousand deferred prepayment penalty) and $100.7 million, respectively, comprised of outstanding FHLB advances. The Company had no borrowings outstanding under lines of credit with correspondent banks at June 30, 2026 and December 31, 2025.

Commercial Real Estate Statistics

The Company continues to actively manage its Multifamily and Commercial Real Estate portfolios which resulted in a reduction in the commercial real estate concentration ratio to 346% of capital at June 30, 2026.

A significant portion of the Bank’s commercial real estate portfolio consists of loans secured by Multifamily and CRE-Investor owned real estate that are predominantly subject to fixed interest rates for an initial period of 5 years. The Bank’s exposure to Land/Construction loans as of June 30, 2026 is not significant at $10.3 million, all at floating interest rates. As shown below, as of June 30, 2026, 16% of the loan balances in these combined portfolios will either have a rate reset or mature in 2026, with another 54% with rate resets or maturing in 2027.

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Stabilized Multifamily Pro Forma Stress Results

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The table below reflects a pro forma stressed evaluation of the Bank’s Multifamily stabilized loan portfolio as of June 30, 2026, using the primary assumption for a revised Debt Service Coverage Ratio (“DSCR”) calculation, for all loans where the current interest rate is below 6.00%. The current balance for these loans is recast at 6.00% with a 30-year amortization. The chart below reflects the impact of these adjustments on the portfolio. The projected loan to value (“LTV”) assumption resets all loans using a 6.25% cap rate and the last reported property net operating income (“NOI”) to determine an implied property valuation and based on the current loan balance, the resultant LTV.

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As reflected above, only 5 loans totaling $16 million in the multifamily rent stabilized portfolio would have a pro forma DSCR less than 1x, which represents 3% of the total multifamily portfolio. The remainder of this portfolio, totaling $194 million, representing 34% of the entire multifamily portfolio, would possess DSCR’s greater than 1x while maintaining a projected weighted average LTV well within our policy guidelines. Additionally, 73% of the rent stabilized loans and 74% of the entire multifamily portfolio are further secured with personal guarantees from the borrowers. Based on the maturities and rate resets in the previous 12 months, we believe the overall demand for multifamily housing in our market will allow our borrowers to address any adverse impact proactively. The Bank continues to successfully manage multifamily loans with scheduled rate repricing or maturities. Matured loans that qualified for renewal have been retained while others have paid off in full through refinances. The majority of the rate resetting loans remain as performing loans at the new higher interest rate.

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Rental Breakdown of Multifamily Portfolio

The table below segments our portfolio of loans secured by Multifamily properties based on rental terms and location as of June 30, 2026. As shown below, 63% of the combined portfolio is secured by properties subject to free market rental terms, which is the dominant tenant type. Both the Market Rent and Stabilized Rent segments of our portfolio present very similar average borrower profiles. The portfolio is primarily located in the New York City boroughs of Brooklyn, the Bronx and Queens.

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Office Property Exposure

The Bank’s exposure to the Office market is not significant. Loans secured by office space accounted for 2% of the total loan portfolio at June 30, 2026, with a total balance of $40.2 million, of which less than 1% is located in Manhattan. The pool has a 2.44x weighted average DSCR and a 54% weighted average LTV.

Liquidity and Capital Resources – 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. These obligations include the withdrawal of deposits on demand or at their contractual maturity, the repayment of borrowings as they mature, funding new and existing loan commitments and the ability to take advantage of business opportunities as they arise. 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, FHLB and correspondent banks, which totaled $276.3 million and $308.5 million at June 30, 2026 and December 31, 2025, respectively. 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. At June 30, 2026, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $742.6 million or approximately 288% of uninsured deposit balances.

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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. 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. 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.

The Company’s primary sources of funds are cash provided by deposits, which may include brokered and listing service deposits, borrowings, proceeds from maturities and sales of securities and cash provided by operating activities. At June 30, 2026, total deposits were $2.0 billion, of which $496.5 million were time deposits scheduled to mature within the next 12 months. Based on historical experience, the Company expects to be able to replace a substantial portion of those maturing deposits with comparable deposit products. Insured and collateralized deposits, which include municipal deposits, accounted for approximately 87% of total deposits at June 30, 2026. At June 30, 2026 and December 31, 2025, the Company had $59.8 million (net of $440 thousand deferred prepayment penalty) and $100.7 million, respectively, in borrowings outstanding.

The Liquidity and Wholesale Funding Policy of the Bank establishes specific policies and operating procedures governing liquidity levels to assist management in developing plans to address future and current liquidity needs. Management monitors the rates and cash flows from loan and investment portfolios while also examining the maturity structure and volatility characteristics of liabilities to develop an optimum asset/liability mix. Available funding sources include retail, commercial and municipal deposits, purchased liabilities and stockholders’ equity. Daily, management receives a current cash position update to ensure that all obligations are satisfied. 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. At June 30, 2026, the Bank had a total borrowing capacity of $829.3 million at the Federal Home Loan Bank of New York, of which $553.6 million was used to collateralize municipal deposits, $60.3 million was utilized for term advances and $0.2 million was used for MPF-CMA Credit enhancements. At June 30, 2026, the Bank had an $85.2 million collateralized line of credit from the Federal Reserve Bank of New York’s discount window with no outstanding borrowings. At June 30, 2026, the Bank had access to approximately $92 million in unsecured lines of credit extended by correspondent banks, if needed, for short-term funding purposes. No borrowings were outstanding under lines of credit with correspondent banks at June 30, 2026.

Our sources of wholesale funding included brokered deposits, listing service certificates of deposit and insured cash sweep (“ICS”) reciprocal deposits in excess of 20% of total liabilities, which balances totaled approximately $126.9 million, $0.3 million and $0, or 6.3%, 0.0% and 0.0% of total deposits, respectively, at June 30, 2026. We utilized brokered certificates of deposit and listing service certificates of deposit as alternatives to other forms of wholesale funding, including borrowings, when interest rates and market conditions favor the use of such deposits. For a portion of our brokered certificates of deposit, we utilized interest rate swap contracts to effectively extend their duration and to fix their cost.

The Company strives to maintain an efficient level of capital, commensurate with its risk profile, on which a competitive rate of return to stockholders will be realized over the short and long terms. Capital is managed to enhance stockholder value while providing flexibility for management to act opportunistically in a changing marketplace. Management continually evaluates the Company’s capital position in light of current and future growth objectives and regulatory guidelines. Total stockholders’ equity was $202.7 million at June 30, 2026 and $200.3 million at December 31, 2025. Retained earnings increased by $4.4 million due primarily to net income of $5.9 million for the six months ended June 30, 2026, which was offset by $1.5 million of dividends declared. The accumulated other comprehensive loss at June 30, 2026 was 0.28% of total equity and was comprised of a $0.5 million after tax net unrealized loss on the investment portfolio and a $0.1 million after tax net unrealized loss on derivatives.

The Bank is subject to regulatory capital requirements. The Bank’s tier 1 leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios were 9.76%, 13.59%, 13.59% and 14.84%, respectively, at June 30, 2026, exceeding all regulatory guidelines for a well-capitalized institution, the highest regulatory capital category. Moreover, capital rules also place limits on capital distributions and certain discretionary bonus payments if a banking organization does not maintain a buffer of common equity tier 1 capital above the minimum capital requirements. At June 30, 2026, the Bank’s capital buffer was in excess of requirements.

On October 5, 2023, the Company announced that the Board of Directors approved a stock 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. The repurchase program permits shares to be repurchased in the open market as conditions allow, or in privately negotiated transactions, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. During the six months ended June 30, 2026, the Company repurchased 112,346 shares of its common stock at an aggregate cost of $2.6 million. There were no share repurchases during the six months ended June 30, 2025. As of June 30, 2026, 171,729 shares remained available for repurchase under the program. See “Part II – Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds” for additional information about repurchases of common stock.

The Company’s total stockholders’ equity to total assets ratio and tangible common equity to tangible assets ratio (“TCE ratio”) were 8.68% and 7.91%, respectively, at June 30, 2026, versus 8.40% and 7.65%, respectively, at December 31, 2025. The TCE ratio is a non-GAAP ratio. The ratio of total stockholders’ equity to total assets is the most comparable U.S. GAAP measure to this non-GAAP ratio. The ratio of tangible common equity to tangible assets, or TCE ratio, is calculated by dividing total stockholders’ equity by total assets, after reducing both amounts by intangible assets. The TCE ratio is not required by U.S. GAAP or by applicable bank regulatory requirements, but is a metric used by management to evaluate the adequacy of our capital levels. Since there is no authoritative requirement to calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and tangible assets are non-GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with U.S. GAAP. Set forth below are the reconciliations of tangible common equity to U.S. GAAP total stockholders’ equity and tangible assets to U.S. GAAP total assets at June 30, 2026 (in thousands). (See also Non-GAAP Disclosure contained herein.)

(1) The ratio of total stockholders’ equity to total assets is the most comparable GAAP measure to the non-GAAP tangible common equity ratio presented herein.

(2) TCE ratio

(3) Includes common stock and Series A preferred stock.

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All dividends must conform to applicable statutory and regulatory requirements. The Company’s ability to pay dividends to stockholders depends on the Bank’s ability to pay dividends to the Company. Additionally, the ability of the Bank to pay dividends to the Company is subject to certain regulatory restrictions. Under New York law, a bank may pay a dividend on its common stock only out of net profits, and must obtain the approval of the Superintendent of the DFS if the total of all dividends declared by a bank or trust company in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock.

The Company’s Board of Directors approved the declaration of a $0.10 per share cash dividend on both common shares and Series A preferred shares payable on August 13, 2026 to stockholders of record on August 6, 2026.

Off-Balance Sheet Arrangements - The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated financial statements. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to 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. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer. Collateral required varies, but may include accounts receivable, inventory, equipment, real estate and income-producing commercial properties. At June 30, 2026 and December 31, 2025, commitments to originate loans and commitments under unused lines of credit for which the Bank is obligated amounted to approximately $168.3 million and $160.9 million, respectively.

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 financings and similar transactions. 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 June 30, 2026 and December 31, 2025, letters of credit outstanding were approximately $1.0 million and $0.8 million, respectively.

Results of Operations – Comparison of the Three Months Ended June 30, 2026 and 2025 – The Company recorded net income of $4.1 million during the three months ended June 30, 2026, versus net income of $2.4 million in the 2025 comparable quarter. During the quarter ended June 30, 2026, net interest income increased $2.0 million and provision for credit losses decreased $1.9 million, compared to the June 30, 2025 quarter. These were partially offset by a decrease of $0.8 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $0.9 million, a $1.0 million increase in non-interest expense, which includes $240 thousand debt extinguishment charges in the 2026 quarter, and a $0.4 million increase income tax expense.

Net Interest Income and Margin

The $2.0 million increase in net interest income for the three months ended June 30, 2026, versus the comparable 2025 quarter was due to improvement in the Company’s net interest margin to 3.10% in the 2026 quarter from 2.76% in the comparable 2025 quarter. The cost of interest-bearing liabilities decreased to 3.46% in the 2026 quarter from 3.94% in the comparable 2025 quarter, a decrease of 48 basis points. This decrease was partially offset by a 5 basis point decrease in the yield on interest earning assets to 5.93% in the 2026 quarter from 5.98% in the second quarter of 2025. Net interest income on a linked quarter basis increased $0.4 million or 2.50%, resulting from a 9 basis point increase in the yield on interest earning assets and a 5 basis point decrease in cost of interest-bearing liabilities.

The following table, “Net Interest Income Analysis”, presents for the three months ended June 30, 2026 and 2025, the Company’s average assets, liabilities and stockholders’ equity. The Company’s net interest income, net interest spread and net interest margin are also reflected.

NET INTEREST INCOME ANALYSIS

For the Three Months Ended June 30, 2026 and 2025

(dollars in thousands)

(1) Annualized.

(2) Includes non-accrual loans.

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

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

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Provision and Allowance for Credit losses on Loans

The Company recorded a provision for credit losses of $500 thousand for the three months ended June 30, 2026, versus $2.4 million (including a $187 thousand provision for credit losses on unfunded commitments) in the quarter ended June 30, 2025. Net charge-offs of $510 thousand were incurred during the quarter ended June 30, 2026. The June 30, 2026 allowance for credit losses was $19.1 million versus $18.7 million at December 31, 2025. The allowance for credit losses as a percentage of total loans was 0.96% at June 30, 2026 and 0.93% at December 31, 2025. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)

Reserve for Unfunded Commitments

The Company maintains a reserve, recorded in other liabilities, associated with unfunded loan commitments accepted by borrowers. The amount of the reserve was $0.7 million at June 30, 2026 and $0.6 million at December 31, 2025. This reserve is determined based upon the outstanding volume of loan commitments at the end of each period. Any increases or reductions in this reserve are recognized in the provision for credit losses.

Non-interest Income

Non-interest income decreased by $0.8 million for the three months ended June 30, 2026 versus the comparable 2025 quarter. The decrease in non-interest income is primarily related to the decrease in the net gain on sale of loans held for sale of $0.9 million, which was partially offset by increases in loan servicing and fee income and other income.

Non-Interest Income

For the three and six months ended June 30, 2026 and 2025

(in thousands)

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Non-interest Expense

Total non-interest expense increased by $1.0 million for the three months ended June 30, 2026 versus the comparable 2025 quarter due to a $0.3 million increase in salaries and employee benefits, a $0.1 million increase in occupancy and equipment and a $0.6 million increase in other expenses, which includes $240 thousand debt extinguishment charges in the 2026 quarter.

Non-Interest Expense

For the three and six months ended June 30, 2026 and 2025

(in thousands)

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The Company recorded income tax expense of $1.4 million for the three months ended June 30, 2026, versus income tax expense of $0.9 million in the comparable 2025 quarter.

Results of Operations – Comparison of the Six Months Ended June 30, 2026 and 2025 – The Company recorded net income of $5.9 million during the six months ended June 30, 2026, versus net income of $4.0 million in the comparable 2025 six month period. The $1.9 million increase in earnings for the six months ended June 30, 2026, versus the comparable 2025 period resulted from a $3.7 million increase in net interest income and a $1.9 million decrease in provision for credit losses. This was partially offset by a $1.8 million decrease in non-interest income, primarily the decrease in the net gain on sale of loans held for sale, a $0.6 million increase in non-interest expense, and a $1.3 million increase in income tax expense.

Net Interest Income and Margin

The $3.7 million increase in net interest income for the six months ended June 30, 2026, versus the comparable 2025 period was due to the improvement of the Company’s net interest margin to 3.03% in the 2026 six month period from 2.72% in the comparable 2025 period. The cost of interest-bearing liabilities decreased to 3.48% in the 2026 six months period from 3.98% in the comparable 2025 period, a decrease of 50 basis points. This decrease was partially offset by a 11 basis point decrease in the yield on interest earning assets to 5.88% in the 2026 period from 5.99% in the comparable 2025 period.

The following table, “Net Interest Income Analysis”, presents for the six months ended June 30, 2026 and 2025, the Company’s average assets, liabilities and stockholders’ equity. The Company’s net interest income, net interest spread and net interest margin are also reflected.

NET INTEREST INCOME ANALYSIS

For the Six Months Ended June 30, 2026 and 2025

(dollars in thousands)

(1) Annualized.

(2) Includes non-accrual loans.

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

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

Provision for Credit Losses on Loans

The Company recorded a provision for credit losses of $1.0 million (including a $30 thousand provision for credit losses on unfunded commitments) for the six months ended June 30, 2026, versus $3.0 million (including a $187 thousand provision for credit losses on unfunded commitments) recorded for the comparable period in 2025. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)

Non-interest Income

Non-interest income decreased by $1.8 million for the six months ended June 30, 2026 versus the comparable 2025 period. This decrease was driven by a $1.8 million decrease in net gain on sale of loans held for sale and a $0.1 million decrease in other income, which were partially offset by a total $0.1 million increase in loan servicing and fee income and service charges on deposit accounts.

Non-interest Expense

Total non-interest expense increased by $0.6 million for the six months ended June 30, 2026 versus the comparable 2025 period. The increase in non-interest expense was primarily related to increases of $3.3 million in salaries and employee benefits and $0.3 million in occupancy and equipment. Salaries and employee benefits for the six months ended June 30, 2026 includes a severance benefit of approximately $2.2 million to the former President of the Company and the Bank whose last day of employment was March 31, 2026. Non-interest expense for the six months ended June 30, 2025 includes a $3.2 million core system conversion expenses.

The Company recorded income tax expense of $2.5 million for the six months ended June 30, 2026, versus income tax expense of $1.2 million in the comparable 2025 period. Income tax expense increased during 2026 due to a higher impact from non-deductible compensation costs subject to the limitations of Section 162(m) of the Internal Revenue Code. In addition, the prior year period benefited from excess tax benefits associated with the exercise of non-qualified stock options, which did not recur at the same level in the current period.

Asset Quality - Total non-accrual loans at June 30, 2026 were $28.3 million, or 1.42% of total loans, compared to $21.6 million, or 1.08% of total loans at December 31, 2025. The allowance for credit losses as a percentage of total non-accrual loans amounted to 68%, 87% and 171% at June 30, 2026, December 31, 2025 and June 30, 2025, respectively.

Total loans having credit risk ratings of Special Mention and Substandard were $56.4 million at June 30, 2026, versus $56.1 million at December 31, 2025. The Company’s Special Mention and Substandard loans were comprised of residential real estate, multifamily, commercial real estate loans, commercial and industrial loans (including SBA facilities) and construction and land development loans at June 30, 2026. The Company had no loans with a credit risk rating of Doubtful for the periods presented. All loans not having credit risk ratings of Special Mention, Substandard or Doubtful are considered pass loans.

At June 30, 2026, the Company’s allowance for credit losses amounted to $19.1 million or 0.96% of period-end total loans outstanding. The allowance as a percentage of loans outstanding was 0.93% at December 31, 2025 and 1.10% at June 30, 2025. Net loan charge-offs of $510 thousand were recorded during the three months ended June 30, 2026. The Company recorded net loan charge-offs of $3.5 million for the three months ended June 30, 2025, of which $2.5 million is attributable to the charge-off of a specific reserve on an individually evaluated commercial loan.

The Company recorded a provision for credit losses of $0.5 million for the three months ended June 30, 2026, versus $2.4 million (including a $187 thousand provision for credit losses on unfunded commitments) for the June 30, 2025 quarter. Additional information regarding the ACL and the associated provisions recognized during the quarters ended June 30, 2026 and 2025 is presented in Note 4 to the unaudited consolidated financial statements. (See also Critical Accounting Policies, Judgments and Estimates contained herein).

ASSET QUALITY

June 30, 2026 versus December 31, 2025 and June 30, 2025

(dollars in thousands)

(1) Non-performing assets defined as non-accrual loans, non-accrual loans held for sale, loans greater than 90 days past due and accruing and other real estate owned.

(2) Excludes loans held for sale.

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ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company originates and invests in interest-earning assets and solicits interest-bearing deposit accounts. The Company’s operations are subject to market risk resulting from fluctuations in interest rates to the extent that there is a difference between the amounts of interest-earning assets and interest-bearing liabilities that are prepaid, withdrawn, matured or repriced in any given period of time. The Company’s earnings or the net value of its portfolio will change under different interest rate scenarios. The principal objective of the Company’s asset/liability management program is to maximize net interest income within an acceptable range of overall risk, including both the effect of changes in interest rates and liquidity risk.

The Company utilizes a number of strategies to manage interest rate risk including, but not limited to: (i) balancing the types and structures of interest-earning assets and interest-bearing liabilities by diversifying mix, coupons, maturities and/or repricing characteristics, (ii) reducing the overall interest rate sensitivity of liabilities by emphasizing core and/or longer-term deposits; utilizing FHLB advances and wholesale deposits for our interest rate risk profile, and (iii) entering into interest rate swap agreements.

The following presents the Company’s economic value of equity (“EVE”) and net interest income (“NII”) sensitivities at June 30, 2026 (dollars in thousands). The results are within the Company’s policy limits.

(1) Assumes 12 month time horizon.

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Certain model limitations are inherent in the methodology used in the EVE and net interest income measurements. The models require the making of certain assumptions which may tend to oversimplify the way actual yields and costs respond to changes in market interest rates. The models assume that the composition of the Company’s interest sensitive assets and liabilities existing at the beginning of a period remain constant over the period being measured, thus they do not consider the Company’s strategic plans, or any other steps it may take to respond to changes in rates over the forecasted period of time. Additionally, the models assume immediate changes in interest rates, based on yield curves as of a point-in-time, which are reflected in a parallel, instantaneous and uniform manner across all yield curves, when in reality changes may rarely be of this nature. The models also utilize data derived from historical performance and as interest rates change the actual performance of loan prepayments, rate sensitivities, and average life assumptions may deviate from assumptions utilized in the models and can impact the results. Accordingly, although the above measurements provide an indication of the Company’s interest rate risk exposure at a particular point in time, such measurements are not intended to provide a precise forecast of the effect of changes in market interest rates. Given the speed with which interest rates may change, the projections noted above on the Company’s EVE and net interest income can be expected to differ from actual results.

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ITEM 4. – CONTROLS AND PROCEDURES

Disclosure controls and procedures. The Company carried out an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures as defined in Rule l3a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company’s periodic reports filed with the Securities and Exchange Commission.

Changes in internal controls over financial reporting. There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

ITEM 1. - LEGAL PROCEEDINGS

The Company is not subject to any legal proceedings, which if determined adversely to the Company could have a materially adverse impact on its results of operations and financial condition.

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ITEM 1A. – RISK FACTORS

There have been no material changes to the risks disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission.

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ITEM 2. – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Issuer Purchases of Equity Securities

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(1) In October 2023, the Company announced the adoption of a new stock repurchase program of up to 366,050 shares of its common stock. The stock repurchase program may be suspended, terminated, or modified at any time for any reason, and has no termination date. As of June 30, 2026, 171,729 shares remained available for repurchase under the program.

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ITEM 3. – DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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ITEM 4. – MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5. – OTHER INFORMATION

During the fiscal quarter ended June 30, 2026, none of our directors or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.

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ITEM 6. – EXHIBITS

• Management contract or compensatory plan, contract or arrangement.

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Dated: August 7, 2026 /s/ Michael P. Puorro

​ Michael P. Puorro

​ Chairman & Chief Executive Officer

​ (Principal Executive Officer)

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Dated: August 7, 2026 /s/ Lance P. Burke

​ Lance P. Burke

​ Senior Executive Vice President & Chief Financial Officer

​ (Principal Financial Officer)

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