Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Management's discussion and analysis of financial condition and results of operations at September 30, 2025and December 31, 2024and for the three and nine months ended September 30, 2025and September 30, 2024is intended to assist in understanding the financial condition and results of operations of Bogota Financial Corp. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This report may contain forward-looking statements, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "plan," "seek," "expect" and words of similar meaning. These forward-looking statements include, but are not limited to:

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statements of our goals, intentions and expectations;

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statements regarding our business plans, prospects, financial condition and performance, growth and operating strategies;

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statements regarding the quality of our loan and investment portfolios; and

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estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

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general economic conditions, either nationally or in our market area, that are worse than expected, including potential recessionary conditions;

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the imposition of tariffs or other domestic or international governmental policies and retaliatory responses;

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the impact of the current federal government shutdown;

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changes in the amount and trend of loan delinquencies, charge-offs and non-performing and classified loans and changes in estimates and the methodology for calculating the allowance for credit losses;

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our ability to access cost-effective funding;

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changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio;

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fluctuations in real estate values and both residential and commercial real estate market conditions;

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demand for loans and deposits in our market area;

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our ability to continue to implement our business strategies;

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competition among depository and other financial institutions;

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monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;

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inflation and changes in market interest rates that reduce our margins and yields, reduce the fair value of financial instruments or reduce our volume of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary market;

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changes in the securities markets;

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changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

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our ability to manage market risk, credit risk and operational risk;

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our ability to enter new markets successfully and capitalize on growth opportunities;

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our ability to successfully integrate into our operations any assets, liabilities or systems we may acquire, as well as new management personnel or customers, and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

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changes in investor sentiment and consumer spending, borrowing and saving habits;

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changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

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our ability to retain key employees;

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risks as it relates to cyber security against our information technology and those of our third-party providers and vendors;

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the failure to maintain current technologies;

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the current or anticipated impact of military conflict, terrorism or other geopolitical events;

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our compensation expense associated with equity allocated or awarded to our employees; and

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changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Critical Accounting Policies

Our accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024. Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Comparison of Financial Condition at September 30, 2025and December 31, 2024

Total Assets. Assets decreased $45.7 million, or 4.7%, from $971.5 million at December 31, 2024to $925.8 million at September 30, 2025, due largely to a $21.0 million, or 40.2%, decrease in cash and cash equivalents, and a $42.5 million, or 6.0%, decrease in loans, offset by a $20.4 million, or 14.6%, increase in securities available for sale.

Cash and Cash Equivalents. Cash and cash equivalents decreased $21.0 million, or 40.2%, to $31.2 million at September 30, 2025from $52.2 million at December 31, 2024, as excess funds were used to repay borrowings and to purchase securities.

Net Equity Investments. Net equity investments were $2.5 million, at September 30, 2025 and were initially recorded during the quarter. This investment was part of a $10 million commitment to fund a limited partnership which invests in sale leaseback transactions.

Securities Available for Sale.Securities available for sale increased $20.4 million, or 14.6%, to $160.7 million at September 30, 2025from $140.3 million at December 31, 2024, due to purchases of corporate bonds and mortgage-backed securities.

Net Loans. Net loans decreased $42.5 million, or 6.0%, to $669.2 million at September 30, 2025from $711.7 million at December 31, 2024. The decrease was due to a decrease of $23.2 million, or 4.9%, in one- to four-residential real estate loans to $449.6 million from $472.7 million at December 31, 2024, a decrease of $18.0 million, or 41.6%, in construction loans to $25.2 million at September 30, 2025from $43.2 million at December 31, 2024, a decrease of $2.5 million, or 39.9%, in commercial and industrial loans to $3.7 million at September 30, 2025from $6.2 million at December 31, 2024, and a decrease of $3.8 million, or 5.1%, in multi-family real estate loans to $70.4 million at September 30, 2025from $74.2 million at December 31, 2024, offset by a $4.8 million, or 4.1%, increase in commercial real estate loans to $122.8 million at September 30, 2025 from $118.0 million at December 31, 2024. The decreases in one- to four-residential real estate loans and construction loans reflected a decrease in demand for such loans due to the interest rate environment. As of September 30, 2025and December 31, 2024, the Bank had no loans held for sale.

Asset Quality. Delinquent loans increased $7.5 million to $21.8 million, or 3.2% of total loans, at September 30, 2025, compared to $14.3 million, or 2.0% of total loans, at December 31, 2024. The increase was primarily due to one commercial real estate loan with a balance of $7.1 million, which is considered well-secured and in the process of collection. The loan was on the watchlist and was placed on nonaccrual as it became greater than 90 days past due on September 30, 2025, the related credit quality indicator and risk rating were under review as of September 30, 2025. During the same timeframe, non-performing assets increased from $14.0 million at December 31, 2024 to $20.5 million, which represented 2.2% of total assets at September 30, 2025. The Company's allowance for credit losses was 0.38% of total loans and 12.42% of non-performing loans at September 30, 2025compared to 0.37% of total loans and 18.77% of non-performing loans at December 31, 2024. The Bank has limited exposure to commercial real estate loans secured by office space. Non-performing loans at September 30, 2025 were primarily comprised of one construction loan for a catering hall that is 99% complete, with a balance of $10.9 million and a loan to value ratio of 45%. Based on the well-secured nature of the loan, there was no associated specific reserve at September 30, 2025. The Company has commenced legal action to foreclose on the property, which is ongoing. We did not record any specific reserves or charge-offs for our nonaccrual loans. The Company did not record any charge-offs for the three and nine months ended September 30, 2025 or 2024.

Total Liabilities.Total liabilities decreased $49.1 million, or 5.9%, to $785.1 million as of September 30, 2025from $834.2 million as of December 31, 2024, primarily due to a $52.8 million decrease in borrowings, offset by a $4.6 million increase in deposits.

Deposits.Deposits increased $4.6 million, or 0.7%, to $646.8 million at September 30, 2025from $642.2 million at December 31, 2024. The increase in deposits was due to an increase in certificates of deposit of $9.2 million, or 1.9%, to $502.5 million as of September 30, 2025from $493.3 million at December 31, 2024, and by an increase in savings accounts of $5.7 million, or 12.3%, to $52.6 million as of September 30, 2025from $46.9 million at December 31, 2024, offset by a decrease in money market deposit accounts of $3.6 million, or 25.6%, to $10.4 million as of September 30, 2025from $14.0 million at December 31, 2024, a $3.5 million, or 10.6%, a decrease in noninterest bearing accounts to $29.2 million as of September 30, 2025from $32.7 million at December 31, 2024, and by a $3.4 million, or 6.1%, decrease in NOW accounts. The overall changes reflected the Company's efforts to retain certificates of deposit and savings accounts with customers moving funds into these higher-yielding investments.

At September 30, 2025, municipal deposits totaled $33.5 million, which represented 5.2% of total deposits, and brokered deposits totaled $112.9 million, which represented 17.5% of deposits. At December 31, 2024, municipal deposits totaled $30.7 million, which represented 4.8% of deposits, and brokered deposits totaled $101.6 million, which represented 15.8% of total deposits. At September 30, 2025, uninsured deposits totaled $59.7 million, comprised of 312 account holders, which represented 9.2% of total deposits.

Borrowings. Federal Home Loan Bank of New York borrowings decreased $52.8 million, or 30.6%, to $119.4 million at September 30, 2025from $172.2 million at December 31, 2024. Long-term advances decreased $58.3 million, while short-term advances increased by $5.5 million. The weighted average rate of borrowings was 4.42% and 4.49% as of September 30, 2025and December 31, 2024, respectively. Total borrowing capacity at the Federal Home Loan Bank was $234.1 million at September 30, 2025, of which $119.4 million has been advanced. The decrease in borrowings was largely attributable to the repayment of advances and borrowings that matured during the nine months ended September 30, 2025.

Total Equity. Stockholders' equity increased $3.4 million to $140.7 million, primarily due to net income of $1.4 million and less unrealized losses related to available-for-sale securities of $1.7 million. At September 30, 2025, the Company's ratio of average stockholders' equity-to-average total assets was 15.02%, compared to 14.10% at December 31, 2024.

Average Balance Sheets and Related Yields and Rates

The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Nonaccrual loans are included in average balances only. Loan fees are included in interest income on loans and are not material.

		Three Months Ended September 30,
		2025												2024
		Average Balance				Interest and Dividends				Yield/ Cost				Average Balance				Interest and Dividends				Yield/ Cost
		(Dollars in thousands)
Assets:		(unaudited)
Cash and cash equivalents		$	16,683			$	179				4.27	%		$	10,195			$	138				5.39	%
Loans			682,956				8,214				4.77	%			711,601				8,382				4.69	%
Securities			153,945				2,103				5.46	%			187,212				1,897				4.05	%
Other interest-earning assets			6,460				132				8.16	%			9,908				203				8.20	%
Total interest-earning assets			860,044				10,628				4.91	%			918,916				10,620				4.60	%
Non-interest-earning assets			64,826												56,061
Total assets		$	924,870											$	974,977
Liabilities and equity:
NOW and money market accounts		$	70,664			$	434				2.44	%		$	65,767			$	329				1.99	%
Savings accounts			50,442				269				2.11	%			44,029				205				1.85	%
Certificates of deposit (1)			502,657				4,922				3.89	%			497,251				5,626				4.50	%
Total interest-bearing deposits			623,763				5,625				3.58	%			607,047				6,160				4.04	%
Federal Home Loan Bank advances (1)			116,135				1,109				3.79	%			196,885				1,803				3.64	%
Total interest-bearing liabilities			739,898				6,734				3.61	%			803,932				7,963				3.94	%
Non-interest-bearing deposits			29,427												31,679
Other non-interest-bearing liabilities			16,114												2,724
Total liabilities			785,439												838,335
Total equity			139,431												136,642
Total liabilities and equity		$	924,870											$	974,977
Net interest income						$	3,894											$	2,657
Interest rate spread (2)											1.30	%											0.66	%
Net interest margin (3)											1.80	%											1.15	%
Average interest-earning assets to average interest-bearing liabilities			116.24	%											114.30	%

(1) Cash flow and fair value hedges are used to manage interest rate risk. During the three months ended September 30, 2025 and 2024, the net effect on interest expense on the Federal Home Loan Bank advances and certificates of deposit was a reduced expense of $205,000 and $498,000 respectively.

(2) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

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

		Nine Months Ended September 30,
		2025												2024
		Average Balance				Interest and Dividends				Yield/ Cost				Average Balance				Interest and Dividends				Yield/ Cost
		(Dollars in thousands)
Assets:
Cash and cash equivalents		$	14,420			$	550				5.09	%		$	9,072			$	415				6.09	%
Loans			695,200				25,109				4.82	%			711,697				24,888				4.66	%
Securities			146,820				5,882				5.34	%			179,818				5,287				3.92	%
Other interest-earning assets			7,277				515				9.44	%			8,903				566				8.48	%
Total interest-earning assets			863,717				32,056				4.95	%			909,490				31,156				4.57	%
Non-interest-earning assets			58,963												58,221
Total assets		$	922,680											$	967,711
Liabilities and equity:
NOW and money market accounts		$	74,409			$	1,338				2.40	%		$	67,628			$	993				1.96	%
Savings accounts			48,358				743				2.06	%			43,824				608				1.85	%
Certificates of deposit (1)			489,876				14,830				4.05	%			510,494				16,784				4.39	%
Total interest-bearing deposits			612,643				16,911				3.69	%			621,946				18,385				3.95	%
Federal Home Loan Bank advances (1)			134,689				3,963				3.93	%			171,565				4,719				3.67	%
Total interest-bearing liabilities			747,332				20,874				3.73	%			793,511				23,104				3.89	%
Non-interest-bearing deposits			31,413												31,225
Other non-interest-bearing liabilities			5,367												6,154
Total liabilities			784,112												830,890
Total equity			138,568												136,821
Total liabilities and equity		$	922,680											$	967,711
Net interest income						$	11,182											$	8,052
Interest rate spread (2)											1.21	%											0.68	%
Net interest margin (3)											1.73	%											1.18	%
Average interest-earning assets to average interest-bearing liabilities			115.57	%											114.62	%

(1) Cash flow hedges are used to manage interest rate risk. During the nine months ended September 30, 2025 and 2024, the net effect on interest expense on the Federal Home Loan Bank advances and certificates of deposit was a reduced expense of $568,000 and $1.2 million respectively.

(2) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

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

Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

		Three Months Ended September 30, 2025												Nine Months Ended September 30, 2025
		Compared to												Compared to
		Three Months Ended September 30, 2024												Nine Months Ended September 30, 2024
		Increase (Decrease) Due to												Increase (Decrease) Due to
		Volume				Rate				Net				Volume				Rate				Net
		(In thousands)
Interest income:		(unaudited)
Cash and cash equivalents		$	204			$	(163	)		$	41			$	248			$	(113	)		$	135
Loans receivable			(945	)			777				(168	)			(822	)			1,043				221
Securities			(1,714	)			1,920				206				(1,517	)			2,112				595
Other interest earning assets			(70	)			(1	)			(71	)			(137	)			86				(51	)
Total interest-earning assets			(2,525	)			2,533				8				(2,228	)			3,128				900
Interest expense:
NOW and money market accounts			26				79				105				106				239				345
Savings accounts			33				31				64				65				70				135
Certificates of deposit			398				(1,102	)			(704	)			(668	)			(1,286	)			(1,954	)
Federal Home Loan Bank advances			(1,167	)			473				(694	)			(1,234	)			478				(756	)
Total interest-bearing liabilities			(710	)			(519	)			(1,229	)			(1,731	)			(499	)			(2,230	)
Net (decrease) increase in net interest income		$	(1,815	)		$	3,052			$	1,237			$	(497	)		$	3,627			$	3,130

Comparison of Operating Results for the Three Months Ended September 30, 2025and September 30, 2024

General.Net income increased $822,000 to $455,000 for the three months ended September 30, 2025from a net loss of $367,000 for the three months ended September 30, 2024. The increase was primarily due to an increase of $1.2 million in net interest income, partially offset by a decrease of $326,000 in income tax benefit.

Interest Income.Interest income increased $8,000, or 0.1%, and was $10.6 million for the three months ended September 30, 2025 and September 30, 2024.

Interest income on cash and cash equivalents increased $41,000, or 29.7%, to $179,000 for the three months ended September 30, 2025from $138,000 for the three months ended September 30, 2024due to a $6.5 million increase in the average balance to $16.7 million for the three months ended September 30, 2025from $10.2 million for the three months ended September 30, 2024, reflecting proceeds from loan repayments, which were offset by funds used to repay borrowings. This was offset by a 112 basis point decrease in the average yield from 5.39% for the three months ended September 30, 2024to 4.27% for the three months ended September 30, 2025, due to the lower interest rate environment.

Interest income on loans decreased $168,000, or 2.0%, as a $28.6 million decrease in the average balance to $683.0 million for the three months ended September 30, 2025from $711.6 million for the three months ended September 30, 2024 was offset by a eight basis point increase in the yield from 4.69% for the three months ended September 30, 2024to 4.77% for the three months ended September 30, 2025.

Interest income on securities increased $206,000, or 10.9%, due to a 141 basis point increase in the average yield, from 4.05% for the three months ended September 30, 2024to 5.46% for the three months ended September 30, 2025, which was offset by a $33.3 million decrease in the average balance to $153.9 million for the three months ended September 30, 2025from $187.2 million for the three months ended September 30, 2024. The changes in the yield and average balance reflect that, in the fourth quarter of 2024, the Company sold approximately $66.0 million in amortized cost ($57.1 million in market value) of securities with a weighted average yield of 1.89% and reinvested $32.7 million of these proceeds into securities with a weighted average yield of 5.60%.

Interest Expense.Interest expense decreased $1.2 million, or 15.4%, from $8.0 million for the three months ended September 30, 2024to $6.7 million for the three months ended September 30, 2025due to lower costs on certificates of deposit and lower balances on borrowings.

Interest expense on interest-bearing deposits decreased $535,000, or 8.7%, to $5.6 million for the three months ended September 30, 2025from $6.2 million for the three months ended September 30, 2024. The decrease was due to a 46 basis point decrease in the average cost of deposits to 3.58% for the three months ended September 30, 2025from 4.04% for the three months ended September 30, 2024. The decrease in the average cost of deposits was due to the lower interest rate environment and a decrease in the rate paid on certificates of deposit offset by an increase in the rate paid on transactional accounts. Our rates on certificates of deposit decreased 61 basis points to 3.89% for the three months ended September 30, 2025from 4.50% for the three months ended September 30, 2024, while the average balances of certificates of deposit increased $5.4 million to $502.7 million for the three months ended September 30, 2025from $497.3 million for the three months ended September 30, 2024. The average balance of NOW/money market accounts and savings accounts increased $4.9 million and $6.4 million for the three months ended September 30, 2025, respectively, compared to the three months ended September 30, 2024.

Interest expense on Federal Home Loan Bank advances decreased $694,000, or 38.5%, from $1.8 million for the three months ended September 30, 2024 to $1.1 million for the three months ended September 30, 2025. The decrease was primarily due to a decrease in the average balance of $80.8 million to $116.1 million for the three months ended September 30, 2025, from $196.9 million for the three months ended September 30, 2024. The decrease was offset by an increase in the average cost of borrowings of 15 basis points to 3.79% for the three months ended September 30, 2025from 3.64% for the three months ended September 30, 2024 due to the new borrowings being shorter durations at higher rates.

Net Interest Income.Net interest income increased $1.2 million, or 46.6%, to $3.9 million for the three months ended September 30, 2025from $2.7 million for the three months ended September 30, 2024. The increase reflected a 64 basis point increase in our net interest rate spread to 1.30% for the three months ended September 30, 2025from 0.66% for the three months ended September 30, 2024. Our net interest margin increased 65 basis points to 1.80% for the three months ended September 30, 2025from 1.15% for the three months ended September 30, 2024.

Provision for Credit Losses.We recorded a $50,000 recovery of credit losses for the three months ended September 30, 2025 compared to no provision for credit losses for the three months ended September 30, 2024 due to lower loan balances and commitments.

Non-Interest Income.Non-interest income decreased by $6,000, or 1.8%, to $321,000 for the three months ended September 30, 2025from $327,000 for the three months ended September 30, 2024 due to the gain on the sale of loans of $12,000 for the three months ended September 30, 2024 compared to no such gain in 2025.

Non-Interest Expense.For the three months ended September 30, 2025, non-interest expense increased $133,000, or 3.7%, over the comparable 2024 period. Professional fees increased $113,000, or 45.6%, due to an increase in legal and consulting fees. Occupancy and equipment costs increased $259,000, or 68.0%, as a result of the lease-buyback transaction completed in the fourth quarter of 2024, which resulted in increased lease expense going forward. These increases were offset by a $79,000, or 3.8%, reduction in salaries and employee benefits, which decreased due to lower headcount, a $75,000, or 87.9%, decrease in advertising expenses and a $58,000, or 26.9%, decrease in other non-interest expense.

Income Tax Expense.Income tax expense increased $326,000 to an expense of $73,000 for the three months ended September 30, 2025from a $253,000 benefit for the three months ended September 30, 2024. The increase was due to an increase of $1.1 million in pre-tax income.

Comparison of Operating Results for the Nine Months Ended September 30, 2025and September 30, 2024

General. Net income increased by $2.7 million to net income of $1.4 million for the nine months ended September 30, 2025 from a net loss of $1.2 million for the nine months ended September 30, 2024. This increase was primarily due to an increase of $3.1 million in net interest income and a $200,000 decrease in the provision for credit losses, partially offset by a $478,000 increase in non-interest expense and a decrease of $814,000 in income tax benefit. Income for the nine months ended September 30, 2025 included a one-time death benefit of approximately $543,000 from a bank-owned life insurance policy related to a former employee.

Interest Income.Interest income increased $900,000, or 2.9%, from $31.2 million for the ninemonths ended September 30, 2024to $32.1 million for the ninemonths ended September 30, 2025 due to higher yields on interest-earning assets, offset by a decrease in the average balance of interest-earning assets.

Interest income on cash and cash equivalents increased $135,000, or 32.5%, to $550,000 for the ninemonths ended September 30, 2025from $415,000 for the ninemonths ended September 30, 2024due to a $5.3 million increase in the average balance to $14.4 million for the ninemonths ended September 30, 2025from $9.1 million for the ninemonths ended September 30, 2024. This was partially offset by a 100 basis point decrease in the average yield from 6.09% for the ninemonths ended September 30, 2024to 5.09% for the ninemonths ended September 30, 2025, due to the lower rate environment.

Interest income on loans increased $221,000, or 0.9%, to $25.1 million for the ninemonths ended September 30, 2025compared to $24.9 million for the ninemonths ended September 30, 2024due primarily to a 16 basis point increase in the average yield from 4.66% for the ninemonths ended September 30, 2024to 4.82% for the nine months ended September 30, 2025, offset by a $16.5 million decrease in the average balance to $695.2 million for the ninemonths ended September 30, 2025from $711.7 million for the ninemonths ended September 30, 2024.

Interest income on securities increased $595,000, or 11.3%, to $5.9 million for the nine months ended September 30, 2025 from $5.3 million for the nine months ended September 30, 2024 primarily due to a 142 basis point increase in the average yield from 3.92% for the nine months ended September 30, 2024 to 5.34% for the nine months ended September 30, 2025, which was offset by a $33.0 million decrease in the average balance to $146.8 million for the nine months ended September 30, 2025 from $179.8 million for the nine months ended September 30, 2024. The decrease in the average balance and the increase in the yield was as a result of the balance sheet restructuring undertaken in the fourth quarter of 2024, where certain lower-yielding securities were sold and a portion of the proceeds were reinvested into higher-yielding securities and all remaining held to maturity securities were reclassified as available for sale.

Interest Expense.Interest expense decreased $2.2 million, or 9.7%, from $23.1 million for the ninemonths ended September 30, 2024to $20.9 million for the ninemonths ended September 30, 2025, primarily due to lower average balances on certificates of deposit and borrowings and a lower rate paid on certificates of deposit.

Interest expense on interest-bearing deposits decreased $1.5 million, or 8.0%, to $16.9 million for the nine months ended September 30, 2025 from $18.4 million for the nine months ended September 30, 2024. The decrease was due to a 26 basis point decrease in the average cost of deposits to 3.69% for the nine months ended September 30, 2025 from 3.95% for the nine months ended September 30, 2024. The decrease in the average cost was driven by a 34 basis point decrease in the average cost of certificates of deposit to 4.05% for the nine months ended September 30, 2025 from 4.39% for the nine months ended September 30, 2024. The decrease in the average cost of deposits was due to the lower interest rate environment and a change in the composition of the deposit portfolio as the average balance of certificates of deposit declined while the average balance of transactional accounts increased. The average balances of certificates of deposit decreased $20.6 million to $489.9 million for the nine months ended September 30, 2025 from $510.5 million for the nine months ended September 30, 2024 while average NOW/money market accounts and savings accounts increased $6.8 million and $4.5 million for the nine months ended September 30, 2025, respectively, compared to the nine months ended September 30, 2024.

Interest expense on Federal Home Loan Bank advances decreased $756,000, or 16.0%. The decrease was primarily due to a decrease in the average balance of $36.9 million to $134.7 million for the nine months ended September 30, 2025 from $171.6 million for the nine months ended September 30, 2024. The decrease was offset by an increase in the average cost of borrowings of 26 basis points to 3.93% for the nine months ended September 30, 2025 from 3.67% for the nine months ended September 30, 2024 due to the new borrowings being for shorter durations at higher rates.

Net Interest Income.Net interest income increased $3.1 million, or 38.9%, to $11.2 million for the nine months ended September 30, 2025 from $8.1 million for the nine months ended September 30, 2024. The increase reflected a 53 basis point increase in our net interest rate spread to 1.21% for the nine months ended September 30, 2025 from 0.68% for the nine months ended September 30, 2024. Our net interest margin increased 55 basis points to 1.73% for the nine months ended September 30, 2025 from 1.18% for the nine months ended September 30, 2024

Provision for Credit Losses.We recorded an $130,000 recovery of credit losses for the ninemonths ended September 30, 2025 compared to a $70,000 provision for credit losses for the ninemonths ended September 30, 2024. The decrease in the allowance for credit losses was due to the decrease in loans, loan commitments and held-to-maturity securities and the absence of charge-offs.

Non-Interest Income.Non-interest income increased by $612,000, or 65.9%, to $1.5 million for the ninemonths ended September 30, 2025from $930,000 for the ninemonths ended September 30, 2024. Bank-owned life insurance income increased $564,000, or 87.1%, due to a death benefit receivable related to a former employee and higher balances during 2025. The gain on the sale of loans also increased by $26,000 compared to the ninemonths ended September 30, 2024.

Non-Interest Expense. For the nine months ended September 30, 2025, non-interest expense increased $478,000, or 4.4%, over the comparable 2024 period. Professional fees increased $250,000, or 36.7%, due to higher legal and consulting expense. Occupancy and equipment costs increased $833,000, or 74.4%, as a result of the lease-buyback transaction completed in the fourth quarter of 2024, which resulted in increased lease expense. These were offset by a $241,000, or 3.8%, reduction in salaries and employee benefit, which decreased due to lower headcount, advertising expense, which decreased by $179,000, or 57.6%, and other non-interest expense, which decreased $183,000, or 24.4%.

Income Tax Expense.Income tax benefit decreased $814,000, or 99.1%, to a benefit of $8,000 for the ninemonths ended September 30, 2025from a $821,000 benefit for the ninemonths ended September 30, 2024. The decrease was due to an increase of $3.5 million in pre-tax income. Included in the net income for the nine months ended September 30, 2025 was a one-time death benefit of approximately $543,000 from a bank-owned life insurance policy, which was a non-taxable event and reduced the Company's effective tax rate for the period.

Management of Market Risk

General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans and securities, have longer maturities than our liabilities, consisting primarily of deposits and borrowings. As a result, a principal part of our business strategy is to manage our exposure to changes in market interest rates. Accordingly, our board of directors has established an Asset/Liability Management Committee (the "ALCO"), which is comprised of three members of executive management and two independent directors, which oversees the asset/liability management processes and related procedures. The ALCO meets on at least a quarterly basis and reviews asset/liability strategies, liquidity, funding sources, interest rate risk measurement reports, capital levels and economic trends at both national and local levels. Our interest rate risk position is also monitored quarterly by the board of directors.

We manage our interest rate risk to minimize the exposure of our earnings and capital to changes in market interest rates. We have implemented the following strategies to manage our interest rate risk: originating and purchasing loans with adjustable interest rates; promoting core deposit products; monitoring the length of our borrowings with the Federal Home Loan Bank and brokered deposits depending on the interest rate environment; maintaining all of our investments as available-for-sale; diversifying our loan portfolio; and strengthening our capital position. By following these strategies, we believe that we are better positioned to react to changes in market interest rates.

Net Portfolio Value Simulation. We analyze our sensitivity to changes in interest rates through a net portfolio value of equity ("NPV") model. NPV represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities, adjusted for the value of off-balance sheet contracts. The NPV ratio represents the dollar amount of our NPV divided by the present value of our total assets for a given interest rate scenario. NPV attempts to quantify our economic value using a discounted cash flow methodology while the NPV ratio reflects that value as a form of capital ratio. We estimate what our NPV would be at a specific date. We then calculate what the NPV would be at the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate NPV under the assumptions that interest rates increase and decrease 100, 200, 300 and 400 basis points from current market rates.

The following table presents the estimated changes in our net portfolio value that would result from changes in market interest rates as of September 30, 2025. All estimated changes presented in the table are within the policy limits approved by the board of directors.

															NPV as Percent of Portfolio
			NPV												Value of Assets
			(Dollars in thousands)
Basis Point ("bp") Change in			Dollar				Dollar				Percent
Interest Rates			Amount				Change				Change				NPV Ratio				Change
400 bp			$	85,472			$	(45,353	)			(34.67	)%			10.20	%			(29.29	)%
300 bp				97,152				(33,673	)			(25.74	)			11.36				(21.25	)
200 bp				107,892				(22,933	)			(17.53	)			12.37				(14.21	)
100 bp				119,114				(11,711	)			(8.95	)			13.40				(7.11	)
-				130,825				-				-				14.42				-
(100) bp				141,878				11,053				8.45				15.34				6.37
(200) bp				153,187				22,362				17.09				16.24				12.57
(300) bp				164,667				33,842				25.87				17.10				18.55
(400) bp				177,806				46,981				35.91				18.08				25.34

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The table above assumes that the composition of our interest-sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results.

Net Interest Income Analysis. We also use income simulation to measure interest rate risk in our balance sheet at a given point in time by showing the effect on net interest income over specified time frames and using different interest rate shocks and ramps. The assumptions include management's best assessment of the effect of changing interest rates on the prepayment speeds of certain assets and liabilities, projections for account balances in each of the product lines offered and the historical behavior of deposit rates and balances in relation to changes in interest rates. These assumptions are subject to change, and as a result, the model is not expected to precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from the simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in the balance sheet composition and market conditions. Assumptions are supported with quarterly back testing of the model to actual market rate shifts.

As of September 30, 2025, net interest income simulation results indicated that its exposure over one year to changing interest rates was within our guidelines. The following table presents the estimated impact of interest rate changes on our estimated net interest income over one year:

Changes in Interest Rates			Change in Net Interest Income Year One
(basis points)(1)			(% change from year one base)
400				(15.44	)%
300				(11.40	)
200				(7.56	)
100				(3.79	)
-				-
(100)				3.37
(200)				7.00
(300)				10.17
(400)				11.62

(1)

The calculated change in net interest income assumes an instantaneous parallel shift of the yield curve.

The preceding simulation does not represent a forecast of actual results and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions, which are subject to change, including: the nature and timing of interest rate levels, including the yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. Also, as market conditions vary, prepayment/refinancing levels, the varying impact of interest rate changes on caps and floors embedded in adjustable-rate loans, early withdrawal of deposits, changes in product preferences, and other internal/external variables will likely deviate from those assumed.

Liquidity and Capital Resources

Liquidity. Liquidity describes our ability to meet financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities and proceeds from calls, maturities and sales of securities and sales of loans. We also borrow from the Federal Home Loan Bank of New York. At September 30, 2025, we had the ability to borrow up to $234.1 million, of which $119.4 million was outstanding and $7.2 million was utilized as collateral for letters of credit issued to secure municipal deposits. At September 30, 2025, we had $54.0 million in unsecured lines of credit with four correspondent banks with no outstanding balance.

The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we had ample sources of liquidity to satisfy our short- and long-term liquidity needs as of September 30, 2025.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows, loan prepayments and loan and security sales are greatly influenced by market interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any period. At September 30, 2025, cash and cash equivalents totaled $31.2 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $160.7 million at September 30, 2025.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of September 30, 2025totaled $444.6 million, or 68.8% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank of New York advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Capital Resources. We are subject to various regulatory capital requirements administered by the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation. At September 30, 2025, we exceeded all applicable regulatory capital requirements, and were considered "well capitalized" under regulatory guidelines. As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, as modified in April 2020, the federal banking agencies were required to develop a "Community Bank Leverage Ratio" (the ratio of a bank's Tier 1 "equity capital to average total consolidated assets) for financial institutions with less than $10 billion. A "qualifying community bank" with capital exceeding 9% will be considered compliant with all applicable regulatory capital and leverage requirements, including the capital requirements to be considered "well capitalized" under Prompt Corrective Action statutes. As of September 30, 2025, the Bank reported as a qualifying community bank with a ratio of 15.42%.

Inflation

Substantially all of the Company's assets and liabilities relate to banking activities and are monetary. The consolidated financial statements and related financial data are presented in accordance with GAAP. GAAP currently requires the Company to measure the financial position and results of operations in terms of historical dollars, except for securities available for sale, impaired loans, and other real estate loans that are measured at fair value. Changes in the value of money due to inflation can cause purchasing power loss. Management's opinion is that movements in interest rates affect the financial condition and results of operations to a greater degree than changes in the rate of inflation. It should be noted that interest rates and inflation do affect each other but do not always move in correlation with each other. The Company's ability to match the interest sensitivity of its financial assets to the interest sensitivity of its liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the Company's performance.