Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

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

This discussion and analysis reflects the information contained in our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. Certain of the information in this section has been derived from the consolidated financial statements, which appear elsewhere in this Annual Report on Form 10-K. You should read the information in this section in conjunction with the other business and financial information provided in this Annual Report on Form 10-K.

Overview

Net Interest Income. Our primary source of income is net interest income. Net interest income is the difference between interest income, which is the income we earn on our loans and investments, and interest expense, which is the interest we pay on our deposits and borrowings.

Provision for Credit Losses. The current expected credit loss ("CECL") model requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It replaces the incurred loss model that delayed the recognition of a credit loss until it was probable that a loss event was incurred.

The estimate of expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the historical period used. The Company considers future economic conditions and portfolio performance as part of a reasonable and supportable forecast.

The Company determines its allowance for credit losses ("ACL") through an analysis of its loan portfolio segments. The Company has designated six portfolio segments, which are residential, commercial real estate, multi-family, construction, commercial and industrial and consumer. These portfolio segments are further disaggregated into classes, which represent loans and leases of similar type, risk characteristics, and methods for monitoring and assessing credit risk.

The Company has minimal history of credit losses and therefore uses the Weighted Average Remaining Maturity method for all segments and relies on the use of qualitative factors to determine future credit losses.

The Company considers the impact of current environmental factors at the reporting date that did not exist over the period from which historical experience was used. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), economic trends and conditions, changes in underwriting standards, experience and depth of lending staff, trends in delinquencies, and the level of criticized loans.

The Company also incorporates a one-year reasonable and supportable loss forecast period to account for the effect of forecasted economic conditions and other factors on the performance of the portfolio, which could differ from historical loss experience. The Company performs a quarterly asset quality review, which includes a review of forecasted gross charge-offs and recoveries, non-performing assets, criticized loans and leases, and risk rating migration. The asset quality review is reviewed by management and the results are used to consider a qualitative overlay to the quantitative baseline. After the one-year reasonable and supportable loss forecast period, this overlay adjustment assumes an immediate reversion to historical loss rates for the remaining loan life period.

The Company establishes a specific reserve for individually evaluated loans which do not share similar risk characteristics with the loans included in the quantitative baseline. These individually evaluated loans are removed from the pooling approach discussed above for the quantitative baseline, and include non-accrual loans, and other loans as deemed appropriate by management.

A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans deemed collateral-dependent, the Company elected the practical expedient to estimate expected credit losses based on the collateral's fair value less cost to sell. In most cases, the Company records a partial charge-off to reduce the loan's carrying value to the collateral's fair value less cost to sell. Substantially all of the collateral consists of various types of real estate, including: residential properties; commercial properties, such as apartments, retail centers, office buildings, and lodging; agriculture land; and vacant land.

The reserve for unfunded commitments (the "Unfunded Reserve") represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The Unfunded Reserve is recognized as a liability (other liabilities in the consolidated statements of financial condition), with adjustments to the reserve recognized in other noninterest expense in the consolidated statements of operations. The Unfunded Reserve is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). To estimate future draws on unfunded balances, current utilization rates are compared to historical utilization rates. If current utilization rates are below historical utilization rates, the rate difference is applied to the committed balance to estimate the future draw. Loss rates are estimated by utilizing the same loss rates calculated for the allowance general reserves.

Non-Interest Income. Our primary sources of non-interest income are banking fees and service charges, net gains in cash surrender value of bank-owned life insurance and miscellaneous income.

Non-Interest Expenses. Our non-interest expenses consist of salaries and employee benefits, net occupancy and equipment, data processing, federal deposit insurance premiums, advertising, directors fees, professional fees and other general and administrative expenses.

Salaries and employee benefits consist primarily of salaries and wages paid to our employees, payroll taxes, expenses for workers' compensation and disability insurance, health insurance, retirement plans, our employee stock ownership plan, our equity incentive plan and other employee benefits, as well as other incentives.

Occupancy and equipment expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, rental expenses, furniture and equipment expenses, maintenance, real estate taxes and costs of utilities. Depreciation of premises and equipment is computed using a straight-line method based on the estimated useful lives of the related assets or the expected lease terms, if shorter.

Federal deposit insurance premiums are payments we make to the Federal Deposit Insurance Corporation for insurance of our deposit accounts.

Data processing expenses are fees we pay to third parties for use of their software and for processing customer information, deposits and loans.

Advertising includes most marketing expenses, including multi-media advertising (public and in-store), promotional events and materials, civic and sales-focused memberships, and community support.

Directors' fees consist of the fees we pay to our directors for their service on our board of directors, as well as the costs associated with the directors' retirement plan and grants to directors under our equity incentive plan.

Professional fees include legal, accounting, auditing, risk management, financial printing, transfer agent and payroll processing expenses.

Other expenses include expenses for office supplies, postage, telephone, insurance and other miscellaneous operating expenses.

Income Tax Expense. Our income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized.

Business Strategy

Our business strategy is to operate as a well capitalized and profitable community bank dedicated to providing personal service to individuals and businesses. We believe that we have a competitive advantage in the markets we serve because of our over 130-year history in the community, our knowledge of the local marketplace and our long-standing reputation for providing superior, relationship-based customer service. We believe we can distinguish ourselves by maintaining the culture of a local community bank. The following are the key elements of our business strategy:

Continue to focus on residential real estate lending. We have been, and will continue to be, primarily a one- to four-family residential real estate lender in our market area. As of December 31, 2025, $443.9 million, or 68.3% of our total loan portfolio, consisted of one- to four-family residential real estate loans. We expect that one- to four-family residential real estate lending will remain our primary lending activity.

Continue to emphasize commercial and multi-family real estate lending. We view the growth of commercial real estate and multi-family lending as a means of increasing our interest income and the yield on our loan portfolio, and reducing the average terms of our loans. We believe that local banking consolidation has created opportunities to attract talent with experience originating commercial real estate loans within our market area. Our commercial real estate and multi-family loan portfolio decreasedto $180.9 million, or 27.8% of total loans, at December 31, 2025, from $192.2 million, or 26.9% of total loans, at December 31, 2024.

Increase lower-cost core deposits. We continue to emphasize offering core deposits (demand deposit accounts, savings accounts and money market accounts) to individuals, businesses and municipalities. We attract and retain transaction accounts by offering competitive products and rates and providing quality customer service. Core deposits are our least costly source of funds, which improves our interest rate spread and also contributes non-interest income from account related services. At December 31, 2025, core deposits decreased to 24.3% of our total deposits compared to 24.8% of our total deposits at December 31, 2024.

Grow through opportunistic bank or branch acquisitions or formations. We are opening a new branch in Point Pleasant during the second quarter of 2026, which we hope will be an additional source for deposit growth. We will consider acquisition opportunities that may enhance the value of our franchise and yield potential financial benefits for our stockholders. Although we believe opportunities exist to increase our market share in our market, we expect to expand into contiguous markets. Our capital position affords us the opportunity to acquire smaller institutions or fee-based businesses located in or contiguous to our market area.

Continue to emphasize operating efficiencies and cost controls. We are focused on controlling expenses while increasing our net income. We are disciplined in managing non-interest expenses by identifying cost savings opportunities such as the sale/leaseback transaction we executed, renegotiating key third-party contracts and reducing other operating expenses. Our overhead ratio, defined as non-interest expense to average total assets, was 1.66% for the year ended December 31, 2025 compared to 1.66% for the year ended December 31, 2024. To support our growth in a cost-effective way, we plan to continue to invest prudently in technology to help improve our operational infrastructure.

Maintain disciplined underwriting. We emphasize a disciplined credit culture basedon intimate knowledge of the market, close ties to our customers, sound underwriting standards and experienced loan officers. We are committed to actively monitoring and managing our loan portfolio in an effort to proactively identify and mitigate credit risks within the portfolio. At December 31, 2025, non-performing assets totaled $13.3 million, which represented 1.47% of total assets. Included in this amount was a $10.9 million construction loan, which is being actively managed by the Company and is considered well-secured with a loan-to-value of 41% based on an appraisal performed in March 2025. We did not record any specific reserve, or charge-offs for this loan. At December 31, 2024, there were $14.0 million of non-performing assets, which represented 1.44% of total assets.

Critical Accounting Estimates

The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, income and expenses and disclosure of contingent assets and liabilities. We consider the accounting estimate discussed below to be a critical accounting estimate, which is presented in the notes to the consolidated financial statements. The estimates and assumptions that we use are based on historical experience and various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

The following represents our critical accounting estimate:

Allowance for Credit Losses. The allowance for credit losses is the amount estimated by management as necessary to absorb credit losses in the loan portfolio that are expected over the life of an exposure (or pool of exposures). The amount of the allowance is based on significant estimates, and the ultimate losses may vary from such estimates as more information becomes available or conditions change. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management due to the high degree of judgment involved, the subjectivity of the assumptions used and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for credit losses.

As a substantial percentage of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans are critical in determining the amount of the allowance required for specific collateral-dependent loans. Assumptions are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property securing a loan and the related allowance. Management reviews the assumptions supporting such appraisals to determine that the resulting values reasonably reflect amounts realizable on the related loans.

Management performs an evaluation of the adequacy of the allowance for credit losses at least quarterly. We consider a variety of factors in establishing this estimate including current economic and forecasted conditions, delinquency statistics, geographic concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates by management that may be susceptible to significant change based on changes in economic and real estate market conditions.

The evaluation has pooled and individual components. The individual component relates to loans that do not share similar risk characteristics with the remaining loans in the pools that are collectively evaluated. For such loans that are also collateral-dependent, an allowance is generally established when the collateral value, less costs to sell as appropriate, of the loan is lower than the carrying value of that loan. The general component covers non-classified loans that share similar risk characteristics and is based on the weighted average remaining maturity method for determining loss factors and historical loss experience adjusted for qualitative factors.

Actual credit losses may be significantly more than the allowance we have established, which could have a material negative effect on our financial results. See "Overview - Provision for Credit Losses" or Note 1 to the Notes to the consolidated financial statements for a complete discussion of the allowance for credit losses.

Average Balance Sheets

The following tables set forth average balances, average yields and costs, and certain other information for the years indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans are included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense, as applicable.

		For the Years Ended December 31,
		2025												2024
		Average Balance				Interest and Dividends				Yield/ Cost				Average Balance				Interest and Dividends				Yield/Cost
		(Dollars in thousands)
Assets:
Cash and cash equivalents		$	17,390			$	908				5.22	%		$	10,197			$	606				5.94	%
Loans			686,850				33,521				4.88				713,138				33,412				4.69
Securities			149,549				7,944				5.31				178,684				6,939				3.88
Other interest-earning assets			6,974				636				9.12				9,106				793				8.71
Total interest-earning assets			860,763				43,009				5.00				911,125				41,750				4.58
Non-interest-earning assets			58,254												59,511
Total assets		$	919,017											$	970,636
Liabilities and Equity:
NOW and money market accounts		$	73,918				1,792				2.42			$	67,561				1,359				2.01
Savings accounts			49,298				1,025				2.08				43,975				821				1.87
Certificates of deposit			492,766				19,637				3.98				508,327				22,405				4.41
Total interest-bearing deposits			615,982				22,454				3.65				619,863				24,585				3.97
Federal Home Loan Bank advances (1)			127,933				5,084				3.97				175,997				6,614				3.76
Total interest-bearing liabilities			743,915				27,538				3.70				795,860				31,199				3.92
Non-interest-bearing deposits			31,008												31,572
Other non-interest-bearing liabilities			5,067												6,303
Total liabilities			779,990												833,735
Total equity			139,027												136,901
Total liabilities and equity		$	919,017											$	970,636
Net interest income						$	15,471											$	10,551
Interest rate spread (2)											1.29	%											0.66	%
Net interest margin (3)											1.80	%											1.16	%
Average interest-earning assets to average interest-bearing liabilities							115.71	%											114.48	%

(1)	Cash flow hedges are used to manage interest rate risk. During the twelve months ended December 31, 2025 and 2024, the net effect on interest expense on Federal Home Loan Bank advances was a reduced expense of $664,000 and $1.5 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 presents the effects of changing rates and volumes on our net interest income for the periods indicated. 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 total column represents the sum of the prior two columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.

		Year Ended December 31, 2025 vs 2024
		Increase (Decrease) Due to
		Volume				Rate				Net
		(In thousands)
Interest income:
Cash and cash equivalents		$	383			$	(81	)		$	302
Loans receivable			(1,254	)			1,363				109
Securities			(1,258	)			2,263				1,005
Other interest-earning assets			(193	)			36				(157	)
Total interest-earning assets			(2,322	)			3,581				1,259
Interest expense:
NOW and money market accounts			137				296				433
Savings accounts			105				99				204
Certificate of deposit			(664	)			(2,104	)			(2,768	)
Federal Home Loan Bank advances			(1,887	)			357				(1,530	)
Total interest-bearing liabilities			(2,309	)			(1,352	)			(3,661	)
Net decrease in net interest income		$	(13	)		$	4,933			$	4,920

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

Total Assets. Total assets decreased $66.6 million, or 6.9%, to $904.9 million at December 31, 2025from $971.5 million at December 31, 2024. The decrease was primarily due to a $64.1 million decrease in loans and $16.6 million decrease in cash and cash equivalents, offset by a $17.8 million increase in securities available for sale.

Cash and Cash Equivalents. Cash and cash equivalents decreased $16.6 million, or 31.8%, to $35.6 million at December 31, 2025from $52.2 million at December 31, 2024. This decrease was primarily due to cash used to purchase securities.

Investment Securities. Securities available for sale increased $17.8 million, or 12.7%, to $158.1 million at December 31, 2025 from $140.3 million at December 31, 2024. Average yields on securities available for sale increased 143 basis points from 3.88% for the twelve months ended December 31, 2024, to 5.31% for the twelve months ended December 31, 2025, due to the balance sheet restructuring that took place in December 2024.

Net Loans. Net loans decreased $64.1 million, or 9.0%, to $647.6 million at December 31, 2025from $711.7 million at December 31, 2024 due to $105.1 million in repayments, partially offset by new originations of approximately $41.0 million. Due to the interest rate environment, we have seen a decrease in demand for residential and construction loans, which have been the primary drivers of our loan growth in recent periods.

The decrease in net loans reflected a $28.9 million, or 6.1%, decrease in one- to four-family residential real estate loans and home equity lines of credit to $443.9 million at December 31, 2025from $472.7 million at December 31, 2024, a decrease of $21.1 million, or 48.9%, in construction loans to $22.0 million at December 31, 2025from $43.2 million at December 31, 2024 and an decrease of $11.3 million, or 5.8%, decrease in commercial and multi-family real estate loans to $180.9 million at December 31, 2025from $192.1 million at December 31, 2024. As of December 31, 2025, the Bank had no loans held for sale.

Regulatory Stock. Regulatory stock decreased $3.5 million or 39.4% to $5.4 million at December 31, 2025 from $4.7 million as of December 31, 2024, the decrease was due to a reduction in borrowings.

Investment in limited partnership. The Company made a $2.5 million equity investment as part of a $10 million commitment to fund a limited partnership that invests in sale leaseback transactions.

Deposits. Total deposits at December 31, 2025 were $652.4 million, increasing $10.3 million, or 1.6%, as compared to $642.2 million at December 31, 2024, primarily due to a $14.8 million increase in interest-bearing deposits offset by a $4.5 million decrease in non-interest bearing checking accounts. The average rate paid on deposits decreased 43 basis points to 3.30% for 2025 from 3.73% for 2024 due to lower market interest rates and an increase in NOW accounts, which increased $10.5 million, or 19.0%, to $65.5 million at December 31, 2025 from $55.0 million at December 31, 2024 primarily due to a increase in municipal deposits.

At December 31, 2025, municipal deposits totaled $45.1 million, which represented 6.9% of total deposits, and brokered deposits totaled $109.7 million, which represented 16.8% of total deposits. At December 31, 2024, municipal deposits totaled $30.7 million, which represented 4.8% of total deposits, and brokered deposits totaled $101.6 million, which represented 15.8% of total deposits.

Borrowings. Federal Home Loan Bank of New York borrowings decreased $78.9 million, or 45.8%, to $93.3 million at December 31, 2025from $172.2 million at December 31, 2024, due to repayments of $9.5 million from short-term advances and a decrease of $69.4 million in long-term advances. The weighted average rate paid on borrowings was 4.35% and 4.49% as of December 31, 2025and December 31, 2024, respectively. The Company uses cash flow hedges to manage interest rate risk. At December 31, 2025, the Company had six interest rate swaps with a notional amount of $85.0 million hedging on certain short-term FHLB advances. Borrowings decrease because of less need for wholesale funding with a decrease in assets and a increase in deposits.

Total Equity. Total stockholders' equity increased $3.6 million to $140.9 million at December 31, 2025, from $137.3 million at December 31, 2024. The increase was due to a reduction in the accumulated other comprehensive loss on the securities portfolio of $1.5 million and net income of $2.1 million, offset by the repurchase of 123,603 shares of stock at a total cost of $1.1 million. At December 31, 2025, the Company's ratio of average stockholders' equity-to-average total assets was 15.30%, compared to 14.10% at December 31, 2024.

Comparison of Operating Results for the Years Ended December 31, 2025 and 2024

General. Net income increased by $4.3 million, or 196.3%, to net income of $2.1 million for the twelve months ended December 31, 2025, compared to a net loss of $2.2 million for the twelve months ended December 31, 2024. This increase was primarily due to an increase of $4.9 million in net interest income and an increase of $420,000 in non-interest income offset by an increase of $707,000 in non-interest expense and an increase of $353,000 in income tax.

Interest Income. Interest income increased $1.3 million, or 3.0%, from $41.8 million for the twelve months ended December 31, 2024 to $43.0 million for the twelve months ended December 31, 2025 due to higher yields on interest-earning assets offset by lower average balances.

Interest income on cash and cash equivalents increased $302,000, or 49.8%, to $908,000 for the twelve months ended December 31, 2025 from $606,000 for the twelve months ended December 31, 2024 due to a $7.2 million increase in the average balance to $17.4 million for the twelve months ended December 31, 2025 from $10.2 million for the twelve months ended December 31, 2024, offset by a 72 basis point decrease in the average yield from 5.94% for the twelve months ended December 31, 2024 to 5.22% for the twelve months ended December 31, 2025 due to the lower interest rate environment for most of 2025.

Interest income on loans increased $109,000, or 0.3%, to $33.5 million for the twelve months ended December 31, 2025 compared to $33.4 million for the twelve months ended December 31, 2024 primarily due to a 19 basis point increase in the average yield from 4.69% for the twelve months ended December 31, 2024 to 4.88% for the twelve months ended December 31, 2025 offset by a $26.3 million decrease in the average balance to $686.9 million for the twelve months ended December 31, 2025 from $713.1 million for the twelve months ended December 31, 2024.

Interest income on securities increased $1.0 million, or 14.5%, to $7.9 million for the twelve months ended December 31, 2025 from $6.9 million for the twelve months ended December 31, 2024 due to a 143 basis point increase in the average yield from 3.88% for the twelve months ended December 31, 2024 to 5.31% for the twelve months ended December 31, 2025, offset by a $29.1 million decrease in the average balance of securities to $149.5 million for the twelve months ended December 31, 2025 from $178.7 million for the twelve months ended December 31, 2024. Both the increase in the yield and the decrease in the average balance of securities was due to the balance sheet restructuring effected in December 2024.

Interest Expense. Interest expense decreased $3.7 million, or 11.7%, from $31.2 million for the twelve months ended December 31, 2024 to $27.5 million for the twelve months ended December 31, 2025 due to a lower average balance of and lower costs on interest-bearing liabilities. During the twelve months ended December 31, 2025, the use of cash flow hedges reduced the interest expense on the Federal Home Loan Bank advances by $644,000, compared to $1.5 million for 2024.

Interest expense on interest-bearing deposits decreased $2.1 million, or 8.7%, to $22.5 million for the twelve months ended December 31, 2025 from $24.6 million for the twelve months ended December 31, 2024. The decrease was due to a 32 basis point decrease in the average cost of interest-bearing deposits to 3.65% for the twelve months ended December 31, 2025 from 3.97% for the twelve months ended December 31, 2024 and a $3.9 million decrease in the average balance of interest-bearing deposits. The decrease in the average cost of deposits was due to the lower interest rate environment, which primarily impacted the rates paid on certificates of deposit, which remain the largest portion of the portfolio. The changes was also due to a slight change in the composition of the deposit portfolio as the average balances of certificates of deposit decreased $15.6 million to $492.8 million for the twelve months ended December 31, 2025 from $508.3 million for the twelve months ended December 31, 2024 while NOW and money market accounts and savings accounts increased $6.4 million and $5.3 million for the twelve months ended December 31, 2025, respectively, compared to the twelve months ended December 31, 2024.

Interest expense on Federal Home Loan Bank borrowings decreased $1.5 million, or 23.1%, from $6.6 million for the twelve months ended December 31, 2024 to $5.1 million for the twelve months ended December 31, 2025. The decrease was due to a decrease in the average balance of borrowings of $48.1 million to $127.9 million for the twelve months ended December 31, 2025 from $176.0 million for the twelve months ended December 31, 2024. The decrease was offset by an increase in the average cost of 22 basis points to 3.97% for the twelve months ended December 31, 2025 from 3.76% for the twelve months ended December 31, 2024 due to maturity of low cost borrowings. At December 31, 2025, cash flow hedges used to manage interest rate risk had a notional value of $85.0 million, while fair value hedges totaled $60.0 million in notional value.

Net Interest Income. Net interest income increased $4.9 million, or 46.6%, to $15.5 million for the twelve months ended December 31, 2025 from $10.7 million for the twelve months ended December 31, 2024. The increase reflected a 63 basis point increase in our net interest rate spread to 1.29% for the twelve months ended December 31, 2025 from 0.66% for the twelve months ended December 31, 2024. Our net interest margin increased 64 basis points to 1.80% for the twelve months ended December 31, 2025 from 1.16% for the twelve months ended December 31, 2024.

Provision for (recovery of) Credit Losses. We recorded a $130,000 recovery of credit losses for the twelve months ended December 31, 2025 compared to a $148,000 recovery for credit losses for the twelve-month period ended December 31, 2024 which reflected a decrease in the loan portfolio, as well as no charge-offs during the years. This 2024 recovery was inclusive of the effect due to the transfer of certain securities from the held to maturity portfolio to the available for sale portfolio, which resulted in a $108,000 recovery for credit losses for the 2024 period.

Non-Interest Income. Non-interest income increased by $420,000, or 31.1%, primarily due to an increase in bank owned life insurance of $564,000, or 64.7%, due to collection of death proceeds in 2025 offset by a decrease of $84,000 in other income due to a net loss on the investment in a limited partnership.

Non-Interest Expenses. For the twelve months ended December 31, 2025, non-interest expense increased $707,000, or 4.8%, compared to the twelve months ended December 31, 2024. Occupancy and equipment increased $1.2 million, or 82.7%, due to higher lease expense associated with the sale leaseback transaction that took place in December 2024. Salaries and employee benefits decreased $251,000, or 2.9%, due to a lower employee count when compared to 2024. Advertising decreased by $199,000 or 53.5% due to less promotion events taking place. Professional fees increased $265,000 or 33.5%, due to higher legal expense. Data processing decreased $47,000, or 3.9%, due to lower processing costs. Other expense decreased $168,000, or 17.5%, due to lower miscellaneous expenses.

Income Tax Expense. Income tax expense increased $353,000, to a benefit of $18,000 for the twelve months ended December 31, 2025 from a benefit of $372,000 for the twelve months ended December 31, 2024. The increase in expense was due to $4.1 million, or 118.0%, of higher taxable income. The effective tax rate for the twelve months ended December 31, 2025 and December 31, 2024 were (0.88%) and (14.62%), respectively.

Management of Market Risk

General. The majority of our assets and liabilities are monetary. 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, we maintain 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 process and related procedures. The ALCO meets on at least a quarterly basis and reviews asset/liability strategies, liquidity positions, alternative 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 mitigate 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 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 a portion 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 100, 200, 300 and 400 basis points from current market rates and that interest rates decrease 100, 200, 300 and 400 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 at December 31, 2025. All estimated changes presented in the table are within the policy limits approved by the board of directors.

			NPV												NPV as Percent of Portfolio Value of Assets
			(Dollars in thousands)
Basis Point ("bp") Change in Interest Rates			Dollar Amount				Dollar Change				Percent Change				NPV Ratio				Change
400 bp			$	95,145			$	(49,387	)			(39.09	)%			11.52	%			(39.52	)%
300 bp				107,616				(36,916	)			(28.76	)			12.75				(20.71	)
200 bp				119,228				(25,304	)			(19.77	)			13.84				(13.93	)
100 bp				131,356				(13,176	)			(0.09	)			14.94				(7.09	)
0				144,532				-				-				16.08				-
(100) bp				156,929				12,397				9.62				17.09				6.28
(200) bp				168,367				23,835				18.63				17.97				11.75
(300) bp				179,331				34,799				26.66				18.75				16.60
(400) bp				191,277				46,745				35.27				19.63				22.08

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 above table 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 inherent 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 December 31, 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 (basis points)(1)			Change in Net Interest Income Year One (% change from year one base)
400 bp				(22.96)
300 bp				(17.08)
200 bp				(11.23)
100 bp				(5.57)
0				0
(100) bp				4.78
(200) bp				9.77
(300) bp				13.63
(400) bp				12.93

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

The preceding simulation analysis 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. 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 the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing needs 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 salesof securities. We also have the ability to borrow from the Federal Home Loan Bank of New York. At December 31, 2025, we had the ability to borrow up to $232.8 million, of which $93.3 million was outstanding and $3.0 million was utilized as collateral for letters of credit issued to secure municipal deposits resulting in remaining availability of $136.6 million. At December 31, 2025, we also had $54.0 million in unsecured lines of credit with four correspondent banks with no outstanding balances.

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 enough sources of liquidity to satisfy our short- and long-term liquidity needs as of December 31, 2025.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan sales and prepayments 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 December 31, 2025, cash and cash equivalents totaled $35.6 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $158.1 million with a unrealized loss of $2.7 million at December 31, 2025.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within oneyear of December 31, 2025totaled $441.3 million, or 67.6% 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. The Bank is subject to various regulatory capital requirements administered by NJDBI and the Federal Deposit Insurance Corporation. At December 31, 2025, we exceeded all applicable regulatory capital requirements, and were considered "well capitalized" under regulatory guidelines. See Note 14 in the Notes to the consolidated financial statements.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements. We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. The financial instruments include commitments to originate loans, unused lines of credit and standby letters of credit, which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments as we do for on-balance sheet instruments.

At December 31, 2025, we had $1.3 million of commitments to originate loans, comprised of $1.3 million of commitments of home equity loans and lines of credit. See Note 15 in the Notes to the consolidated financial statements for further information.

The reserve for unfunded commitments (the "Unfunded Reserve") represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The Unfunded Reserve is recognized as a liability (other liabilities in the consolidated statements of condition), with adjustments to the reserve recognized in other noninterest expense in the consolidated statements of operations. The Unfunded Reserve is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). To estimate future draws on unfunded balances, current utilization rates are compared to historical utilization rates. If current utilization rates are below historical utilization rates, the rate difference is applied to the committed balance to estimate the future draw. Loss rates are estimated by utilizing the same loss rates calculated for the allowance general reserve. At December 31, 2025, the Bank held $80,000 in reserves for unfunded liabilities, compared to $135,000 as of December 31, 2024.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

Recent Accounting Pronouncements

Please refer to Note 1 in the Notes to the consolidated financial statements that appear starting on page 56 of this Annual Report on Form 10-K for a description of recent accounting pronouncements that may affect our financial condition and results of operations.

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, market interest rates generally have a more significant impact on a financial institution's performance than inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.