Ponce Financial Group, Inc. (PDLB) Business

Item 1. Business

Ponce Financial Group, Inc.

Ponce Financial Group, Inc. (hereafter referred to as “we,” “our,” “us,” “Ponce Financial Group, Inc.,” or the “Company”), is a financial holding company and the holding company of Ponce Bank, National Association (“Ponce Bank” or the “Bank”), a national bank. The Company is authorized to pursue other business activities permitted by applicable laws and regulations for financial holding companies, which may include the acquisition of banking and financial services companies.

The Company’s cash flow is dependent on earnings from investments and any dividends received from Ponce Bank. Ponce Financial Group, Inc. does not own nor lease any property, but instead uses the premises, equipment and furniture of Ponce Bank. At the present time, the Company employs only persons who are officers of Ponce Bank to serve as officers of Ponce Financial Group, Inc. It uses the support staff of Ponce Bank from time to time. These persons are not separately compensated by Ponce Financial Group, Inc. Ponce Financial Group, Inc. may hire additional employees, as appropriate, to the extent it so determines in the future.

The Company’s executive office is located at 2244 Westchester Avenue, Bronx, New York 10462, and the telephone number at that address is (718) 931-9000.

Available Information

Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Ponce Financial Group, Inc. is required to file annual, quarterly, and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). The Company electronically files its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other reports as required with the SEC. The SEC website, www.sec.gov, provides access to all Company filings which have been filed electronically. Additionally, the Company’s SEC filings and additional shareholders’ information are available free of charge on the Bank’s website, www.poncebank.com (within the Investor Relations section). The references to our website address and the SEC’s website address do not constitute incorporation by reference of the information contained in those websites and should not be considered part of this annual report.

The Company’s common stock is traded on The Nasdaq Stock Market, LLC under the symbol “PDLB.”

Ponce Bank

Ponce Bank is a national bank headquartered in the Bronx, New York. Ponce Bank was originally chartered in 1960 as a federally-chartered mutual savings and loan association, under the name Ponce De Leon Federal Savings and Loan Association. In 1985, the Bank changed its name to “Ponce De Leon Federal Savings Bank.” In 1997, the Bank changed its name again to “Ponce De Leon Federal Bank.” In 2017, the Bank adopted the name Ponce Bank and assets and liabilities of Ponce De Leon Federal Bank were transferred to and assumed by the Bank. On October 10, 2025, the Bank converted from a federally chartered stock savings association to a national bank and commenced operations under the current name, Ponce Bank, National Association.

The Bank is designated as a Minority Depository Institution (“MDI”) and a Community Development Financial Institution (“CDFI”) under applicable regulations and is a certified Small Business Administration (“SBA") lender. The Bank is subject to comprehensive regulation and examination by the Office of Comptroller of the Currency (the “OCC”).

The Company’s business is conducted through the administrative office and 13 full service banking offices, 2 mortgage loan offices, 1 ATM only location and a representative office. The banking offices and an ATM only location are located in New York City – the Bronx (4 branches), Queens (3 branches), Brooklyn (3 branches), Manhattan (2 branches) and Union City (1 branch), New Jersey. The mortgage loan offices are located in Queens (1) and Bergenfield (1), New Jersey. The Company has a representative office in Coral Gables, Florida. On September 16, 2025, the Company opened a full service banking office in Inwood, New York. The Company’s primary market area currently consists of the New York City metropolitan area.

The Bank’s business primarily consists of taking deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in mortgage loans, consisting of one-to-four family residential (both investor-owned and owner-occupied), multifamily residential, nonresidential properties and construction and land, and, to a lesser extent, in business and consumer loans. The Bank also invests in securities, which have historically consisted of U.S. government and federal agency securities and securities issued by government-sponsored or owned enterprises, corporate securities, mortgage-backed securities, Federal

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Home Loan Bank of New York (the “FHLBNY”) stock and Federal Reserve Bank of New York (the “FRBNY”) stock. The Bank offers a variety of deposit accounts, including demand, savings, money markets and certificates of deposit accounts.

Business Strategy

The Company’s goal is to provide long-term value to our stockholders, customers, employees and the communities we serve (collectively our “stakeholders”) by executing a safe and sound business strategy that produces increasing value. The Company believes there is a significant opportunity for an immigrant community-focused, minority-directed bank to provide a full range of financial services to business and consumer customers in our market area and other similar communities.

Our current business strategy consists of the following:

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Qualify for Repurchase of the Preferred Stock Issued Pursuant to the Emergency Capital Investment Program ("ECIP"). Qualify for ECIP Repurchase (see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations. - Federal Economic Relief Funds To Aid Lending to Small Businesses - Emergency Capital Investment Program). Focus loan originations on applications that meet the Qualified and Deep Impact Lending provisions of ECIP.

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Grow core deposits to support loan growth and increase profitability. In order to generate liquidity to support our lending activity and meet local demand, our strategy involves increasing mission driven/specialty deposits, growing Ponce Bank Direct deposits, cross-selling deposit products to commercial customers and continue to manage operating expenses.

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Adapt and increase utilization of technology. Drive adoption of technology via reporting/tracking in loan origination system ("LOS") and enhance Deposit Account Opening ("DAO") software. Automate SBA lending processes. Transition to construction monitoring application.

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Attract, develop and retain an engaged, high performing workforce. Refine performance management system to align with strategic initiatives and continue to build and leverage Ponce culture.

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Build Ponce Bank 2.0. Ensure risk management internal and compliance controls are aligned with strategic priorities. Improve processes to gain efficiencies.

Employees and Human Capital Resources

As of December 31, 2025, the Company had 216 full-time equivalent employees. None of the Company’s employees are represented by a labor union, and management considers its relationship with employees to be good. The Company believes its ability to attract and retain employees is key to its success. Accordingly, the Company strives to offer competitive salaries and employee benefits to all employees and monitors salaries and other compensation in its market area.

The Company encourages and supports the growth and development of our employees. Continual learning and career development is advanced through ongoing performance and development conversations with employees, internally developed training programs and educational reimbursement programs.

The Company believes that its business is strengthened by a diverse workforce that reflects the communities in which it operates and all of its team members should be treated with respect and equality. As such, the Company maintains strong non-discrimination and anti-harassment policies.

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Market Area

The Bank is headquartered in the Bronx, New York, with a primary market in other boroughs of New York City, Hudson and Bergen Counties, New Jersey and a representative office in Coral Gables, Florida.

The Bank’s primary deposit base includes a large and stable base of locally employed blue-collar workers with low-to-medium income, middle-aged, and with limited investment funds. Within the base of locally employed blue-collar workers there is a significant, and growing, portion of recently immigrated, younger, lower-skilled laborers. The influx of immigrant lower-skilled workers, however, has been hampered by the increases in rental rates in the rental housing market within the New York City metropolitan area.

Another significant customer segment of the Bank consists of middle-aged and older white-collar, high-income, immigrant individuals, many of whom are self-employed real estate investors and developers. They constitute a large percentage of the borrowing base of the Bank and, increasingly, are becoming the source of a significant percentage of commercial deposits.

The Bank has historically been funded through local community deposits. Although the Bank continues to rely primarily on community deposits from its market areas to fund investments and loans, an increasing portion of deposits have come from internet sources and large banks, non-profits and corporations that are supportive of the mission of the Bank. Included in the mix of community deposits are demand and money market funds of consumer, commercial and not-for-profit entities, with a decreasing reliance on time deposits. Additionally, the Bank uses alternative funding sources such as brokered deposits, FHLBNY advances and FRBNY borrowings to support loan growth.

Competition

The Company faces significant competition within its market area both in originating loans and attracting deposits. Factors such as interest rates offered, the number and location of branches, digital services and the type of products offered, as well as the reputation of the institution, can affect competition for deposits and loans. There is a high concentration of financial institutions in the market area, including national, regional and other locally-operated commercial banks, savings banks, savings associations and credit unions whose activities include banking as well as mortgage lending. Several “mega” banks exist in the market, such as JPMorgan Chase, Citibank and Capital One, many of whom are continuing to push for retail deposits and home mortgages. Among the advantages such “mega” banks have is their ability to finance wide-ranging advertising campaigns, to make larger investments in technological advancements and new products and services, to maximize efficiencies through economies of scale and, by virtue of their greater total capitalization, to have substantially higher lending limits than the Bank. A number of the Bank’s competitors offer non-deposit products and services that the Bank does not currently offer, such as trust services, private banking, insurance services and asset management. Additionally, the Company faces an increasing level of competition from non-core financial service providers that do not necessarily maintain a physical presence in the Bank’s market area, such as LendingClub, Rocket Mortgage, United Wholesale Mortgage and many internet bank and nonbank financial service providers. Many of these nonbank financial service providers are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks, which may allow them to offer greater lending limits and certain products and services that the Bank does not provide. The amount of competition facing the Company is extensive and can negatively impact its growth.

The market share of bank deposits in the New York area can be difficult to quantify, as some “mega” banks will include large scale deposits from around the world as held at headquarters. However, in Bronx County, New York, where the Bank maintains four branches, it holds 2.08% (as of June 30, 2025) of the market’s deposits. This represents the Bank’s largest market share in a county-level area. The Bank continues to work to improve its market position by expanding its brand within its current market area, and building its capacity to provide more products and services to its customers.

Lending Activities

General. The Bank’s principal lending activity is originating real estate-secured loans, including one-to-four family investor-owned and owner-occupied residential loans, multifamily residential loans, nonresidential property loans, construction and land loans, and commercial and industrial (“C&I”) business loans, SBA loans and consumer loans. It originates real estate and other loans through its loan officers, marketing efforts, customer base, walk-in customers and referrals from real estate brokers, builders and attorneys. Subject to market conditions and its asset-liability analysis, the Bank looks to maintain its emphasis on multifamily residential and nonresidential property loans while growing the overall loan portfolio and increasing the overall yield earned on loans.

The ability of the Bank’s borrowers to honor their loan contracts is dependent on the real estate market and general economic conditions in those markets, as well as other economic factors.

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All loan originations are underwritten pursuant to the Bank’s policies and procedures, which include a number of underwriting factors considered in making a loan, including debt service coverage and loan-to-value ratio, interest rate and the credit history of the borrower.

Loan Portfolio Composition. The following table sets forth the composition of the Bank’s loan portfolio by type of loan (excluding mortgage loans held for sale) at the dates indicated. Loans in process at December 31, 2025 and 2024 were $132.7 million and $359.2 million, respectively.

(1)
As of December 31, 2025, 2024, 2023, 2022 and 2021, business loans include $0.3 million, $0.5 million, $1.0 million, $20.0 million and $136.8 million, respectively, of SBA Paycheck Protection Program (“PPP”) loans.

(2)
As of December 31, 2023, 2022 and 2021, consumer loans include $8.0 million, $18.2 million and $33.9 million, respectively, of microloans pursuant to the Bank’s former arrangement with Grain. At December 31, 2024, these microloans were fully charged-off.

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Loan Products Offered by the Bank. The following table provides a breakdown of the Bank’s loan portfolio by product type and principal balance outstanding at December 31, 2025, excluding mortgage loans held for sale.

One-to-four Family Investor-Owned Loans. At December 31, 2025, one-to-four family investor-owned loans were $307.3 million, or 11.7% of the Bank’s total loans. Investor-owned mortgage loans secured by non-owner-occupied one-to-four family residential property represents the Bank’s fourth largest lending concentration. The majority of the portfolio, $267.3 million, or 87.0%, are two-to-four family properties (411 accounts), while the remaining $39.9 million, or 13.0%, are primarily single family, non-owner-occupied investment properties (79 accounts). The three largest loans outstanding in this category had outstanding balances of $5.2 million, $2.8 million and $2.7 million. In this category, loans totaling $121.1 million, or 39.4%, are secured by properties located in Queens County, $101.1 million, or 32.9%, in Kings County, $36.4 million, or 11.8%, in Bronx County, $11.2 million, or 3.6%, in New York County, $6.5 million, or 2.1%, in Westchester County, $7.0 million, or 2.3%, in Hudson County, $6.6 million, or 2.2% in Bergen County, $5.5 million, or 1.8% in Suffolk County, $3.0 million, or 1.0%, in Nassau County and $$2.4 million, or 0.8% in Fairfield County . The rest of this category, 2.1%, is spread out in other counties and no other concentration exceeded $2.0 million, or 0.8%.

The Bank imposes prudent underwriting guidelines in the origination of such loans, including lower maximum loan-to-value ratios (“LTVs”) of 70% on purchases and 65% on refinances, a required minimum debt service coverage ratio (“DSCR,” net operating income divided by debt service requirement) of 1.20x that must be met by either the property on a standalone basis or by the inclusion of the owner(s) as co-borrower(s). In addition, all origination of such loans currently require that the transaction exhibit a global debt service coverage ratio (net operating income divided by debt service requirement) of no less than 1.0x. This coverage ratio indicates that the owner has the capacity to support the loan along with all personal obligations. On occasion, the Bank has required that the borrower establish a cash reserve to be held at the Bank in order to provide additional security. The maximum term on such loans is 30 years, typically with five-year adjustable rates.

One-to-four family investor-owned real estate loans involve a greater degree of risk than one-to-four family owner-occupied real estate loans. Rather than depending on the borrower’s repayment ability from employment or other income, the borrower’s repayment ability is primarily dependent on ensuring that a tenant occupies the investor property and has the financial capacity to pay sufficient rent to cover the borrower’s debt. In addition, if an investor borrower has several loans secured by properties in the same market, the loans have risks similar to a multifamily real estate loan and repayment of those loans is subject to adverse conditions in the rental market or the local economy.

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One-to-four Family Owner-occupied Loans. One-to-four family owner-occupied loans totaled $127.1 million, or 4.8% of the Bank’s total loan portfolio at December 31, 2025. The three largest loans outstanding in this category had outstanding balances of $2.5 million, $2.0 million and $1.8 million. There are 17 loans with an outstanding balance in excess of $1.0 million, totaling $24.0 million, or approximately 18.9% of this category. At December 31, 2025, approximately $44.8 million, or 35.2%, of this category was secured by properties located in Queens County, $29.4 million, or23.1%, in Kings County, $14.0 million, or 11.0%, in Nassau County, $8.0 million, or 6.3%, in Bronx County, $5.8 million, or 4.5%, in Westchester County, $4.9 million, or 3.9%, in Richmond County, $4.7 million, or 3.7%, in Suffolk County, $4.0 million, or 3.2%, in New York County, $3.0 million, or 2.4%, in Bergen County and $2.2 million, or 1.7%, in Monmouth County. The rest of this category, less than 2.1%, is spread out in other counties and no other concentration exceeded $1.0 million, or 0.6%.

It is the Bank’s policy to underwrite loans secured by one-to-four family owner-occupied residential real estate in a manner that ensures strict compliance with Federal and State regulations, including Dodd-Frank requirements. This includes underwriting to meet the standard of qualified mortgage requirements set by Freddie Mac or Fannie Mae or that meet non-qualified mortgage standards. A qualified mortgage is presumed to meet the borrower’s ability to repay the loan. As part of this effort, the Bank employs software that tests each loan for qualified mortgage compliance. As a CDFI, the Bank is authorized to originate non-qualified mortgages. Non-qualified mortgages generally require greater down payments and other alternative credit requirements.

For loans underwritten to be held in the bank’s portfolio, the Bank generally limits the maximum LTV for one-to-four family loans.

Additionally, the Bank offers one-to-four family residential loans that are saleable in the secondary market. The salable programs give the Bank the option to offer FHA, conventional, and non-qualified loans to its consumers. These programs are underwritten specifically to the Government agencies guidelines, such as Freddie Mac, Fannie Mae, Federal Housing Administration/ HUD and the designated investors requirements.

Multifamily Loans. Multifamily loans totaled $756.5 million, or 28.8% of the Bank’s total loan portfolio at December 31, 2025. Loans secured by multifamily properties represent the Bank’s second largest concentration. The three largest loans were $35.0 million, $30.0 million and $25.5 million. Of the total of $756.5 million in multifamily loans, 164 loans have balances in excess of $1.0 million and account for $673.4 million, or approximately 89.0%, of this lending concentration. In terms of geographical concentrations, $258.3 million, or 34.1%, are secured by properties located in Queens County, $251.9 million, or 33.3%, in Kings County, $177.0 million, or 23.4%, in Bronx County, $26.1 million, or 3.5%, in Westchester County, $19.4 million, or 2.6%, in New York County, $15.4 million, or 2.0%, in Hudson County, $2.1 million, or 0.3%, in Nassau County, $1.4 million, or 0.2%, in Suffolk County and $1.0 million, or 0.1%, in Bergen County. All other concentrations by county, which account for 0.5% of this category, have balances of $1.2 million or less.

Nonresidential Loans. Nonresidential loans totaled $526.2 million, or 20.0% of the Bank’s total loan portfolio at December 31, 2025. Loans secured by nonresidential properties represent the Bank’s third largest concentration. The three largest loans were $50.0 million, $37.5 million and $22.9 million. Of the total of $526.2 million in nonresidential loans, 97 loans have balances in excess of $1.0 million and account for $462.4 million, or approximately 87.9%, of this lending concentration. In terms of geographical concentrations, $183.6 million, or 34.9%, are secured by properties located in Queens County, $167.7 million, or 31.9%, in Kings County, $93.1 million, or 17.7%, in Bronx County, $17.9 million, or 3.4%, in Nassau County, $15.2 million, or 2.9%, in New York County, $9.2 million, or 1.7%, in Westchester County, $6.4 million, or 1.2%, in Cobb County, $6.3 million, or 1.2%, in Suffolk County, $5.8 million, or 1.1%, in Bergen County, $4.1 million, or 0.8%, in Union County, $3.5 million, or 0.7%, in Hudson County, $3.0 million, or 0.6%, in Rockland County, $3.0 million, or 0.6%, in Columbia County and $2.5 million, or 0.5%, in Ulster County. All other concentrations by county, which account for 0.9% of this category, have balances of $2.2 million or less.

In the nonresidential portfolio, the overall mix is diverse in terms of property types, with the largest concentration being retail and wholesale at $127.1 million, or 24.1% of the portfolio, industrial and warehouse at $85.6 million, or 16.3%, hotels and motels at $51.3 million, or 9.8%, service, doctor, dentist, daycare and schools at $46.3 million, or 8.8%, offices at $37.3 million, or 7.1%, churches at $11.2 million, or 2.1%, restaurants at $6.6 million, or 1.2%, and the rest of the portfolio accounts for other property types, with none exceeding 1.0% as a portfolio concentration.

The Bank considers a number of factors when originating multifamily and nonresidential mortgages. Loans secured by multifamily and nonresidential real estate generally have larger balances and involve a greater degree of risk than one-to-four family residential real estate loans. The primary concern in this type of lending is the borrower’s creditworthiness and the viability and cash flow potential of the property. Payments on loans secured by income-producing properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be more subject to adverse conditions in the real estate market or the economy as compared to residential real estate loans. To address the risks involved, the Bank evaluates the qualifications and financial resources of the underlying principal(s) of the borrower, including credit history, profitability and expertise, as well as the value of cash flows and condition of the property securing the loan. When evaluating the qualifications of the borrower, the Bank considers the financial resources of the borrower, the experience of the underlying principal(s) of the borrower in owning or managing similar properties and

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the borrower’s payment history with the Bank and other financial institutions. In evaluating the property securing the loan, the factors considered include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value or purchase price of the mortgaged property (whichever is lower), and the debt service coverage ratio. All multifamily and nonresidential loans are supported by appraisals that conform to the Bank’s appraisal policy. The Bank generally limits the maximum LTVs on these loans to 75%, based on the lower of the purchase price or appraised value of the subject property (70% on the refinance of nonresidential properties such as retail spaces, office buildings, and warehouses) and a DSCR of 1.20%. The maximum loan term ranges between 5 to 15 years. As is the Bank’s general policy, the Bank offers only adjustable rates on its multifamily and nonresidential mortgages ─ with adjustments based on a spread currently ranging between 2.50% to 3.00% over the five-year FHLBNY rate.

Construction and Land Loans. Construction and land loans totaled $854.01 million, or 32.5%, of the Bank’s total loan portfolio at December 31, 2025, (79 projects), with $681.6 million consisting of multifamily residential construction (61 projects). Loans secured by construction properties represent the Bank's largest concentration. The three largest construction and land loans were $58.0 million, $47.0 million and $44.0 million. In terms of geographical concentrations, $397.2 million, or 46.5%, are secured by properties located in Queens County, $296.1 million, or 34.7%, in Kings County, $103.4 million, or 12.1%, in New York County, $33.2 million, or 3.9%, in Bronx County and $24.2 million, or 2.8%, in Hudson County. At December 31, 2025, loans in process related to construction loans totaled $132.7 million.

The Bank’s typical construction loan has a term of up to 36 months and contains:

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an approximate 50% of the loan value down payment by the borrower;

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a minimum of 5% contingency;

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a minimum of 5% retainage;

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a loan-to-cost ratio of 70% or less;

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a loan-to-stabilized-value ratio of 65% or less;

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an interest reserve;

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guarantees of all owners / partners / shareholders of a closely held organization owning 20% or more of company stock or entity ownership;

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a conditional option to convert to a permanent mortgage loan upon completion of the project, at which time the interest rate is generally adjusted based on the five-year FHLBNY rates plus 300 basis points for loans without cash out to the borrower; and

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debt service coverage using projected rental net income must be at least 1.2x the estimated debt service when operating at stabilized levels.

The Bank’s approach to the underwriting of construction loans is driven by five factors: analysis of the developer; analysis of the contractor; analysis of the project; valuation of the project; and evaluation of the source of repayment. The developer’s character, capacity and capital are analyzed to determine that the individual or entity has the ability to first complete the project and then either sell it or carry permanent financing. The general contractor is analyzed for reputation, sufficient expertise and capacity to complete the project within the allotted time. The project is analyzed in order to ensure that the project will be completed within a reasonable period of time according to the plans and specifications, and can either be sold, rented or refinanced once completed. All construction loans are supported by appraisals which conform to the Bank’s appraisal policy and affirm the value of the project both “As Is” and “As Completed.” Lastly, the Bank reviews the developer’s cash flow estimations for the project on an “As Completed” basis. These projections are compared to the appraiser’s estimates.

Upon closing of the construction loan, the Bank begins monitoring the project and funding requisitions for completed stages upon inspection and confirmation by third party firms, such as engineers, of the work performed and its value and quality. Conversion to permanent financing usually occurs upon a conversion underwriting and receipt of certificates of occupancy, as applicable.

A significant portion of the Bank’s construction lending activity in New York City involves multifamily rental developments. The financial feasibility of many new rental housing projects in the City is influenced by local property tax incentive programs and zoning regulations intended to encourage the development of affordable housing. Historically, many projects relied on benefits provided under the 421-a Tax Exemption Program, which expired in June 2022. The program applied to qualifying residential projects that commenced construction between January 1, 2016 and June 15, 2022 and generally required construction completion by June 15, 2026. Legislation enacted in April 2024 extended the construction completion deadline for certain vested projects to June 15, 2031 and introduced a replacement tax incentive program commonly referred to as the 485-x Affordable Neighborhoods for New Yorkers

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("ANNY") program. New developments are now commonly evaluated under the 485-x program, which generally requires qualifying projects to include income-restricted housing units tied to Area Median Income thresholds, with permanently affordable and rent-stabilized units and, for certain larger developments, construction wage requirements. In addition, certain projects may benefit from zoning amendments adopted under the City of Yes for Housing Opportunity initiative, including the Universal Affordability Preference (UAP), which may permit additional residential density where affordable housing is provided. These programs may affect project feasibility and the demand for construction financing in the Bank’s primary lending markets.‎

C&I Loans and Lines of Credit. C&I loans and lines of credit total $53.1 million, or 2.02%, of the Bank’s total loan portfolio at December 31, 2025. Unlike real estate loans, which are secured by real property, and whose collateral value tends to be more easily ascertainable, commercial and industrial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. The collateral, such as accounts receivable, securing these loans may fluctuate in value.

Although the Bank’s loan policy allows for the extension of secured and unsecured financing, the Bank usually seeks to obtain collateral when in initial discussions with potential borrowers. Unsecured credit facilities are made only to strong borrowers that possess established track records with the Bank (or come highly recommended) and are supported by guarantors. Guarantees are required of any individual or entity owning or controlling 20% or more of the borrowing entity, with exceptions requiring approval from the Board of Directors. When credits are not secured by a specific lien on an asset, the Bank usually requires a general lien on all business assets as evidenced by a UCC filing. Pricing is typically based on the Wall Street Journal prime rate plus a spread driven by risk-rating variables.

Underwriters are required to identify at least two sources of repayment, usually recommend that loans contain covenants, such as minimum debt service coverage ratios, minimum global debt service coverage ratios, maximum leverage ratios, 30-day “cleanups” or “clean-downs,” as applicable, and must require periodic financial reporting. In addition, every effort is made to set up borrowers with auto-debit for loan payments and strongly encourage them to maintain operating accounts at the Bank.

Lines of credit are typically short-term facilities (12 months) that are provided for occasional or seasonal needs. They are extended to only qualifying borrowers who have established cash flow from operations and a clean credit history. At a minimum, a bi-annual 30-day clean-up, or 75% bi-annual pay-down period is required, although annually is preferred. A clean-up period generally is not required on amortizing secured lines. Guarantors, which are usually required, must have clean credit histories and a substantial outside net worth. Most lines contain an option to convert to a term loan upon maturity.

Secured term loans are long-term facilities extended typically for the purpose of financing the purchase of a long term asset. At a minimum, they will be collateralized by the asset being purchased. They may also be secured by an existing long term business asset or outside collateral pledged by the guarantor or borrower. Unsecured term loans are usually extended only to well-known borrowers who have established strong cash flow from operations and a clean credit history. Although Bank policy allows term loans for up to ten years, the preference is to offer self-amortizing term loans based on a term of no more than five-to-seven years.

The Bank is an approved SBA lender providing SBA 504 and 7(a) loans. Included in C&I loans are also certain SBA loans in which the loan is secured by underlying assets of the business.

Consumer Loans. Consumer loans generally have higher interest rates than mortgage loans. The risk involved in consumer loans fluctuates based on the type and nature of the collateral and, in certain cases, the absence of collateral. Consumer loans include passbook loans and other secured and unsecured loans that have been made for a variety of consumer purposes. As of December 31, 2025, there were $0.6 million, or 0.02% of total loans, in consumer loans.

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Loan Originations, Purchases and Sales. The following table sets forth the Bank’s loan originations, sales, purchases and principal repayment activities, excluding mortgage loans held for sale, during the periods indicated.

(1)
For the year ended December 31, 2021, business loans originated include $117.3 million of PPP loans. The PPP program ended on May 31, 2021.

(2)
For the years ended December 31, 2022 and 2021, consumer loans originated include $3.2 million and $59.3 million, respectively, of microloans pursuant to the Bank's former arrangement with Grain.

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Contractual Maturities. The following table sets forth the contractual maturities of the Bank’s total loan portfolio, excluding mortgage loans held for sale, at December 31, 2025. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The table presents contractual maturities and does not reflect repricing or the effect of prepayments. Actual maturities may differ.

The following table sets forth the Bank’s fixed and adjustable-rate loans at December 31, 2025 that are contractually due after December 31, 2026.

Loan Approval Procedures and Authority. The Bank’s total loans or extensions of credit to a single borrower or group of related borrowers cannot exceed, with specified exemptions, 15% of its total regulatory capital. The Bank’s lending limit as of December 31, 2025 was $81.5 million, with the ability to lend additional amounts up to 10% if the loans or extensions of credit are fully secured by readily-marketable collateral. At December 31, 2025, the Bank complied with these loans-to-one borrower limitations.

At December 31, 2025, the Bank’s largest aggregate exposure to one borrower was $58.0 million which was outstanding in full. The second largest exposure was $50.0 million to each of two customers, both of which were outstanding in full and the third largest exposure was $47.0 million to each of two customers, with one customer with an outstanding balance in full and one customer with an outstanding balance of $38.9 million. No other loan or loans-to-one borrower, individually or cumulatively, exceeded $44.0 million, or 54.1% of the lending limit.

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The Bank’s real estate lending is subject to written policies, underwriting standards and operating procedures. Decisions on loan requests are made on the basis of detailed applications submitted by the prospective borrower, credit histories that the Bank obtains and property valuations, consistent with the appraisal policy. The appraisals are prepared by outside independent licensed appraisers and reviewed by third parties, all approved by the Board of Directors. The Loan Committee usually reviews appraisals in considering a loan application. The performance of the appraisers is also subject to internal evaluations using scorecards and are assessed periodically. The loan applications are designed primarily to determine the borrower’s ability to repay the requested loan, and all information provided with the application and checklists provided as part of the application package are evaluated by the loan underwriting department.

The real estate lending approval process starts with the processing of the application package, which is reviewed for completeness and then all necessary agency reports are ordered. Upon initial review and preparation of preliminary documents by the processors in the underwriting department, the file is assigned to an underwriter. The underwriters are responsible for presenting the loan request along with a recommendation, to the Loan Committee, and to the Board of Directors when the credit exposure is greater than the Loan Committee’s authority or there are exceptions to the loan policy. If approved, closed and booked, the loan reviewers then undertake the responsibility of monitoring the credit file for the life of the loan by assessing the borrower’s creditworthiness periodically, given certain criteria and following certain operating procedures. An independent third party also performs loan reviews following similar criteria and scope under the oversight of the Audit Committee of the Board of Directors.

The Bank’s non-real estate lending is also subject to written policies, underwriting standards and operating procedures. Decisions on these loans requests are made on the basis of applications submitted by the prospective borrowers credit histories that the Bank obtains where applicable, borrower cash flows, as obtained directly from bank statements and predictive algorithms based on expected cash flows. Certain of these loans maybe wholly or partly collateralized by cash or business assets.

Mortgage Loans Held for Sale, at Fair Value.

At December 31, 2025 and 2024, mortgage loans held for sale, at fair value, were $3.4 million and $10.7 million, respectively, including residential mortgages that were originated in accordance with secondary market pricing and underwriting standards. The Bank’s intent was to sell these loans on the secondary market.

Delinquencies and Non-Performing Assets

Delinquency Procedures. Collection efforts commence the day following the grace period, normally on the 17th of the month. Those loans that have experienced sporadic late payments over the previous 12 months are reviewed with a greater degree of diligence. After a loan has become 90 days past due, the Bank usually will initiate legal proceedings for collection or foreclosure unless it is in the best interest of the Bank to sell the debt or work further with the borrower to arrange a suitable workout plan.

Delinquent Loans. The following table sets forth the Bank’s loan delinquencies, including non-accrual loans, by type and amount at the dates indicated.

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Non-Performing Assets. The following table sets forth information regarding non-performing assets excluding mortgage loans held for sale at fair value. Non-performing assets are comprised of non-accrual loans and non-accrual modifications to borrowers experiencing financial difficulty. There was no other real estate owned at the dates indicated. Non-accrual loans include non-accruing previously existing troubled debt restructured loans, prior to ASU 2022-02, of $0.4 million, $0.4 million, $0.4 million, $2.3 million and $2.5 million at December 31, 2025, 2024, 2023, 2022 and 2021, respectively. There were no accruing loans past due 90 days or more at the dates indicated.

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Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities, considered by the Office of the Comptroller of the Currency (“OCC”) to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the Bank will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss allowance is not warranted. Assets which do not currently expose the Bank to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management.

Under OCC regulations, when an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover probable accrued losses. General allowances represent loss allowances which have been established to cover probable accrued losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, which may require the establishment of additional general or specific loss allowances.

In connection with the filing of the Bank’s periodic reports with the OCC and in accordance with its classification of assets policy, it regularly reviews the loans in its portfolio to determine whether any loans require classification in accordance with applicable regulations.

On the basis of this review of loans, the Bank’s classified and special mention loans at the dates indicated were as follows:

Substandard loans increased $4.9 million, or 17.8%, to $32.2 million at December 31, 2025 compared to $27.3 million at December 31, 2024. The $4.9 million increase in substandard loans was primarily attributable to increases of $1.7 million in multifamily loans, $1.6 million in 1-4 family loans and $1.4 million in construction and land loans.

Special mention loans increased $1.4 million, or 6.6%, to $21.9 million at December 31, 2025 compared to $20.6 million at December 31, 2024. The $1.4 million increase was primarily attributable to increases of $3.0 million in multifamily loans, $1.4 million in construction and land loans and $0.2 million in nonresidential loans, offset by decreases of $2.7 million in 1-4 family loans and $0.6 million in business loans.

Loan Modifications to Borrowers Experiencing Financial Difficulties.

The Company adopted Accounting Standards Update (“ASU”) 2022-02 on January 1, 2023. Since adoption, the Company has modified one loan with borrowers experiencing financial difficulty. These modifications may include a reduction in interest rate, an extension in term, principal forgiveness and/or other than insignificant payment delay. At both December 31, 2025 and 2024, there was one loan in the amount of $0.2 million with modifications to borrowers experiencing financial difficulty.

Prior to the adoption of ASU 2022-02 on January 1, 2023, the Company classified certain loans as troubled debt restructuring (“TDR”) loans when credit terms to a borrower in financial difficulty were modified, in accordance with ASC 310-40. With the adoption of ASU 2022-02 as of January 1, 2023, the Company has ceased to recognize or measure for new TDRs but those existing at December 31, 2022 will remain until settled.

At December 31, 2025 and 2024, there were 14 and 18 TDR loans totaling $3.6 million and $5.4 million of which $3.2 million and $4.7 million are on accrual status, respectively. There were no commitments to lend additional funds to borrowers whose loans have been modified in a TDR.

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Allowance for Credit Losses

The Allowance for Credit Losses ("ACL") on loans is management's estimate of expected credit losses over the expected life of the loans at the reporting date. The ACL on loans is increased through a provision for credit losses (“PCL”) recognized in the Consolidated Statements of Operations and by recoveries of amounts previously charged off. The ACL on loans is reduced by charge-offs on loans. Loan charge-offs are recognized when management believes the collectability of the principal balance outstanding is unlikely. Full or partial charge-offs on collateral-dependent individually analyzed loans are generally recognized when the collateral is deemed to be insufficient to support the carrying value of the loan.

According to ASC 326-20-30-9, estimating expected credit losses is highly judgmental and generally will require the Bank to make specific judgments. The Bank will make or obtain reasonable and supportable forecasts of expected credit losses. The Bank uses Federal Open Market Committee to obtain various forecasts for unemployment rate, national gross domestic product and the National Consumer Price Index. The Bank has elected to forecast the first four quarters of the credit loss estimate and revert to a long-run average of each considered economic factor as permitted in ASC 326-20-30-9.

The level of the ACL on loans is based on management's ongoing review of all relevant information, from internal and external sources, related to past events, current conditions and reasonable forecast. Historical credit loss experience provides the basis for calculation of probability of default, loss given default, exposure at default and the estimation of expected credit losses. As discussed further below, adjustments to historical information are made for differences in specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level, or term, as well as for changes in environmental conditions, that may not be reflected in historical loss rates.

Management employs a process and methodology to estimate the ACL on loans that evaluates both quantitative and qualitative factors. Under ASC 326-20-30-2 and 326-20-55-5, the Bank aggregates financial assets on the basis of similar risk characteristics. Management selected a Call Code segmentation, as based on the Bank's call report. Management’s criteria for determining an appropriate segmentation (1) groups loans based on similar risk characteristics; (2) allows for mapping and utilization/application of publicly available external information (Call Report Filings); (3) allows for mapping and utilization/application of publicly available external information; (4) using federal call code is granular enough to accommodate a “like-kind” notion, yet broad enough to maintain statistical relevance and/or a meaningful number of loan observations within material segments and (5) using federal call code designation is identifiable throughout historical data sets, which is critical component of segmentation selection.

Quantitative loss factors are also supplemented by certain qualitative risk factors reflecting management's view of how losses may vary from those represented by quantitative loss rates. These qualitative risk factors include: (1) changes in lending policies, procedures and strategies including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses; (2) economic conditions such as the Bank’s market area, customer demographics, portfolio composition, along with national indicators considered impactful to the model; (3) changes in the nature and volume of the portfolio; (4) credit and lending staff/administration quality; (5) changes in loan trends; (6) portfolio concentrations; (7) loan review results; (8) collateral values and (9) regulatory and business environment.

Because the methodology is based upon historical experience and trends, current economic data, reasonable and supportable forecasts, as well as management's judgment, factors may arise that result in different estimations. Deteriorating conditions or assumptions could lead to further increases in the ACL on loans. The ACL on loans is determined by an estimate of future credit losses, and ultimate losses may vary from management's estimate.

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The following table sets forth activity in the ACL for the periods indicated.

(1)
At December 31, 2024, 2023, 2022 and 2021, includes $5.1 million, $7.2 million, $6.7 million and $1.2 million of charge-offs and $0.7 million, $0.7 million, $0.6 million and $0.1 million of recoveries related to loans associated with microloans pursuant to the Bank's former arrangement with Grain, respectively.

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Allowance for Credit Losses. The following table sets forth the ACL by loan category and the percent of the allowance in each category to the total allowance at the dates indicated. The ACL of each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

At December 31, 2025, ACL represented 0.97% of total gross loans and 94.74% of nonperforming loans compared to 0.97% of total gross loans and 97.98% of nonperforming loans at December 31, 2024. The ACL increased to $25.4 million at December 31, 2025 from $22.5 million at December 31, 2024. There were $1.5 million and $5.2 million in net charge-offs during the years ended December 31, 2025 and 2024, respectively.

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Although the Bank believes that it uses the best information available to establish the ACL, future adjustments to the allowance may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, although the Bank believes that it has established the ACL in conformity with GAAP, after a review of the loan portfolio by regulators, the Bank may determine it is appropriate to increase the ACL. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, the existing ACL may not be adequate and increases may be necessary should the quality of any loan deteriorate as a result of the factors discussed above. Any material increase in the ACL may adversely affect the Bank’s financial condition and results of operations.

Investment Activities

General. The Bank’s investment policy was adopted and is reviewed annually by the Board of Directors. The Chief Financial Officer (designated as the Chief Investment Officer) plans and executes investment strategies consistent with the policies approved by the Board of Directors. The Chief Financial Officer provides an investment schedule detailing the investment portfolio which is reviewed at least quarterly by the Bank’s asset-liability committee and the Board of Directors.

The current investment policy permits, with certain limitations, investments in United States Treasury securities; securities issued by the U.S. government and its agencies or government-sponsored enterprises including mortgage-backed and collateralized mortgage obligations (“CMO”) issued by Fannie Mae, Ginnie Mae and Freddie Mac; and corporate bonds and obligations, and certificates of deposit in other financial institutions.

At December 31, 2025 and 2024, the investment portfolio consisted of available-for-sale and held-to-maturity securities and obligations issued by the U.S. government and government-sponsored enterprises, corporate bonds and FHLBNY stock. In addition, during the year ended December 31, 2025 the Bank purchased FRBNY stock. At December 31, 2025 and 2024, the Bank owned $29.3 million and $29.2 million, respectively, of FHLBNY stock. During the year December 31, 2025, the Bank purchased $10.7 million of FRBNY stock in connection with its conversion to a national bank. The Bank did not have any FRBNY stock at December 31, 2024. As a member of FHLBNY and FRBNY, the Bank is required to purchase stock from the FHLBNY and FRBNY which is carried at cost and classified as restricted equity securities.

Securities Portfolio Composition. The following table sets forth the amortized cost and estimated fair value of the available-for-sale and held-to-maturity securities portfolios at the dates indicated, which consisted of U.S. government and federal agencies, corporate bonds, pass-through mortgage-backed securities and certificates of deposit.

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(1)
Comprised of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Ginnie Mae (“GNMA”) issued securities.

At December 31, 2025 and 2024, there were no securities of which the amortized cost or estimated value exceeded 10% of total equity.

Mortgage-Backed Securities. At December 31, 2025 and 2024, the Bank had mortgage-backed securities with a carrying value of $355.2 million and $410.3 million, respectively. Mortgage-backed securities are securities issued in the secondary market that are collateralized by pools of mortgages. Certain types of mortgage-backed securities are commonly referred to as “pass through” certificates because the underlying loans are “passed through” to investors, net of certain costs, including servicing and guarantee fees. Mortgage-backed securities typically are collateralized by pools of one-to-four family residential or multifamily residential mortgages, although the Bank invests primarily in mortgage-backed securities backed by one-to-four family residential mortgages. The issuers of such securities sell the participation interests to investors such as the Bank. The interest rate of the security is lower than the interest rates of the underlying loans to allow for payment of servicing and guaranty fees. All of the Bank’s mortgage-backed securities are backed by Freddie Mac and Fannie Mae, which are government-sponsored enterprises, or Ginnie Mae, which is a government-owned enterprise.

Residential mortgage-backed securities issued by U.S. government agencies and government-sponsored enterprises are more liquid than individual mortgage loans because there is an active trading market for such securities. In addition, residential mortgage-backed securities may be used to collateralize borrowings. Investments in residential mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such interests, thereby affecting the net yield on the securities. Current prepayment speeds determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at December 31, 2025 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur. Adjustable-rate mortgage-backed securities are included in the period in which interest rates are next scheduled to adjust. The weighted average yield is calculated based on the yield to maturity

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weighted for the size of each debt security over the entire portfolio of debt securities. The weighted average yields on tax-exempt obligations have been computed on a tax-equivalent basis.