OTC: SNNF
Seneca Bancorp, Inc.CIK 0002072421 · National Commercial Banks
Seneca Bancorp, Inc. (“Seneca Bancorp”; the “Company”; “we”; “our”) is a Maryland corporation that was incorporated in June 2025 to become the registered bank holding company for Seneca Savings Bank, National Association (“Seneca Savings Bank” or the “Bank”) upon the conversion of Seneca Financial… About this business →
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About Seneca Bancorp, Inc.
Source: Item 1 (Business) from the 10-K filed March 30, 2026. Description as filed by the company with the SEC.
Item 1. Business
Seneca Bancorp, Inc.
Seneca Bancorp, Inc. (“Seneca Bancorp”; the “Company”; “we”; “our”) is a Maryland corporation that was incorporated in June 2025 to become the registered bank holding company for Seneca Savings Bank, National Association (“Seneca Savings Bank” or the “Bank”) upon the conversion of Seneca Financial MHC (the “Mutual Holding Company”), a federally chartered mutual holding company, from the mutual-to-stock form of organization, which occurred on October 15, 2025 (the “Conversion”). The Company sold 1,044,858 shares of common stock, par value $0.01 per share, at a price of $10.00 per share, for gross proceeds of approximately $10.4 million. Shares of the Company’s common stock began being quoted on the OTCQX Market on October 16, 2025 under the trading symbol “SNNF.”
The Company is the successor corporation to Seneca Financial Corp., the former federally chartered mid-tier stock holding company, which was formed in connection with the conversion of Seneca Savings Bank into the mutual holding company form of organization in October 2017, which in turn was a subsidiary of the Mutual Holding Company, which owned a majority of Seneca Financial Corp.’s outstanding common stock.
Upon completion of the Conversion, the outstanding shares of Seneca Financial Corp.’s common stock owned by stockholders other than the Mutual Holding Company were converted into shares of Seneca Bancorp common stock based on an exchange ratio of 0.9684 of a share of Seneca Bancorp common stock for each share of Seneca Financial Corp.’s common stock, so that Seneca Financial Corp.’s existing public stockholders owned approximately the same percentage of Seneca Bancorp’s common stock upon completion of the Conversion as they owned of Seneca Financial Corp.’s common stock immediately prior to the Conversion. Cash was paid in lieu of fractional shares of Seneca Bancorp common stock at a rate of $10.00 per share.
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We conduct our operations from our headquarters in Baldwinsville, New York, primarily through Seneca Savings Bank. The Company is the sole shareholder of Seneca Savings Bank, and as such, is a bank holding company subject to regulation and supervision by the Federal Reserve Board.
Seneca Savings Bank, National Association
Seneca Savings Bank is a national bank headquartered in Baldwinsville, New York. Seneca Savings Bank was originally chartered in 1928 as a New York-chartered mutual savings and loan association under the name “The Baldwinsville Savings & Loan Association.” In 1936, we converted to a federal charter. Following completion of our mutual holding company reorganization in October 2017, the association’s legal name became “Seneca Savings.” Upon completion of the mutual-to-stock conversion in October 2025, Seneca Savings converted its charter from that of a federal savings association to that of a national bank and was renamed “Seneca Savings Bank, National Association.”
Our primary market area currently consists of Onondaga County, New York and the contiguous counties in central New York. We conduct our business from our main office and four branch offices. All of our banking offices are located in Onondaga and Madison Counties, which are northwest and northeast, respectively, of Syracuse, New York. In 2025, we purchased a 1.2-acre parcel of land in Camillus, New York. We currently expect to construct a full-service branch with drive-through on this land and open the branch in early 2027. Additionally, in 2024, we purchased 2.5 acres of land in Clay, New York, directly across from the future site of the Micron Technology, Inc. semiconductor fabrication facility, where we intend to establish a branch office. We anticipate developing this property in 2028, consistent with the extended timeline for construction of the Micron facility.
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Our business consists primarily of taking deposits from the general public and, historically, investing those deposits, along with funds generated from operations and borrowings, in commercial real estate loans, commercial and industrial loans, home equity lines of credit, one- to four-family residential real estate loans (currently primarily originated for sale), and, to a lesser extent, consumer loans and residential construction loans. Subject to market conditions, we expect to continue our focus on originating commercial real estate loans and commercial and industrial loans in an effort to diversify our overall loan portfolio, increase the overall yield earned on our loans and assist in managing interest rate risk. We plan to sell in the secondary market the majority of the fixed-rate conforming one- to four-family residential real estate loans that we originate with terms of 20 years or greater. Our subsidiary, Financial Quest, offers employee benefit plan consulting services, asset management services, and tax and financial planning services. Financial Quest has dedicated investment advisors who evaluate the needs of both retail and retirement plan clients to determine suitable investment solutions to meet their short and long-term wealth management goals. We also invest in securities, which have historically consisted primarily of mortgage-backed securities issued by U.S. government sponsored enterprises, municipal securities, corporate bonds and FHLB of New York stock. We offer a variety of deposit accounts, including demand accounts, NOW accounts, savings accounts, money market accounts and certificate of deposit accounts. Additionally, following Seneca Savings Bank’s charter conversion to a national association, we are able to attract and accept municipal deposits from New York municipalities, which we believe will promote deposit growth and enhance our low-cost deposit base.
Our executive office is located at 35 Oswego Street, Baldwinsville, New York 13027, and our telephone number at this address is (315) 638-0233. Our website address is www.senecasavings.com. Information on our website is not and should not be considered a part of this Annual Report on Form 10-K.
Market Area
Our primary market area currently consists of Onondaga County, New York and the contiguous counties in central New York. We conduct our business from our main office and four branch offices. All of our banking offices are located in Onondaga and Madison Counties, which are northwest and northeast, respectively, of Syracuse, New York. Onondaga and Madison Counties in central New York represent our primary geographic market area for deposits, while we make loans in Onondaga and Madison Counties and the contiguous counties, including the New York counties of Cayuga, Cortland, Oneida and Oswego.
Baldwinsville, New York is a village located in Onondaga County and is 15 miles northwest of Syracuse, New York. As of July 1, 2024, Baldwinsville had an estimated population of 7,662 and an estimated median household income of $80,104 as of 2023. As of 2025, Onondaga County’s total population was estimated at 465,521. The unemployment rate in March 2025 for Onondaga County was 3.6%, compared to 4.1% for the State of New York and 4.2% for the United States. The median household income in Onondaga County in 2023 was approximately $74,740, which is lower than the 2023 New York state median of $84,578 and the national median household income of $78,538 in 2023.
Anheuser-Busch, the world’s largest beer maker, has a plant on a 370-acre site located in Baldwinsville. We view Onondaga County, which is part of the Syracuse, New York Metropolitan Statistical Area and is more populous than the other contiguous counties, as a primary area for growth, particularly for commercial lending and deposit areas. Onondaga County includes a high concentration of office, medical, retail, industrial, mixed use and multi-family real estate buildings and businesses. Other large employers in Onondaga County include Carrier Corporation, Lockheed Martin, Syracuse University, Upstate University Health System and St. Joseph’s Hospital Health Center. There were approximately 8,393 businesses operating in Onondaga County in 2022.
In 2025, we purchased a 1.2-acre parcel of land in Camillus, New York. We currently expect to construct a full-service branch with drive-through on this land and open the branch in early 2027. Additionally, in 2024, we purchased 2.5 acres of land in Clay, New York, directly across from the future site of the Micron Technology, Inc. semiconductor fabrication facility, where we intend to establish a branch office. Micron Technology, Inc. is the world’s fourth-largest semiconductor company and plans to invest $100 billion to build the largest semiconductor fabrication facility in the United States in the town of Clay. The facility is anticipated to create 50,000 New York jobs. This strategic investment positions us to support the economic growth expected in the region and to provide financial solutions to businesses and families as this transformative development takes shape. We anticipate developing this property in 2028, consistent with the extended timeline for construction of the Micron facility.
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As of 2025, Madison County’s total population was estimated at 66,698. Madison County is a predominantly rural agricultural community. Other significant industries include education, healthcare and manufacturing. Top employers include Colgate University. The unemployment rate in March 2025 for Madison County was 4.4%, compared to 4.1% for the State of New York and 4.2% for the United States. The median household income in Madison County in 2023 was approximately $73,141 which is lower than the 2023 New York state median of $84,578 and the national median household income of $78,538 in 2023.
We believe that we have developed products and services that will meet the financial needs of our current and future customer base; however, we plan, and believe it is necessary, to expand the range of products and services that we offer to be more competitive in our market area. Marketing strategies focus on the strength of our knowledge of local consumer and small business markets, as well as expanding relationships with current customers and developing new, profitable business relationships. Our proximity to Syracuse provides us access to a relatively large population for our products and services.
Competition
We face competition within our market area both in making loans and attracting deposits. Our market area has a concentration of financial institutions that include large money centers and regional banks, community banks and credit unions. We also face competition from savings institutions, mortgage banking firms, consumer finance companies and, with respect to deposits, from money market funds, brokerage firms, mutual funds, insurance companies, securities and brokerage firms, and online banks. As of June 30, 2025 (the most recent date for which data is available), our market share of deposits represented 1.62% of Federal Deposit Insurance Corporation-insured deposits in Onondaga County, ranking us 11th in market share of deposits out of 14 institutions operating in the county. As of June 30, 2025, our market share in Madison County represented 2.45% of Federal Deposit Insurance Corporation-insured deposits, ranking us 6th out of six institutions operating in the county.
Lending Activities
General. Our historical principal lending activity has been originating one- to four-family residential real estate loans, however, more recently, we have focused on increasing our commercial real estate and commercial and industrial loans. To a lesser extent, we also originate consumer loans, home equity lines of credit, and residential construction loans. Our strategic plan continues to focus on commercial lending. We intend to increase our commercial real estate and commercial and industrial lending in an effort to diversify our overall loan portfolio, increase the overall yield earned on our loans and assist in managing interest rate risk. Our commercial lending efforts focus on the small- to medium-sized business market, targeting locally owned and operated borrowers in our primary market area with $1.0 million to $10.0 million in annual revenues and one to 100 employees who are seeking loans between $200,000 to $1.0 million. We focus primarily on commercial real estate loans and on commercial and industrial loans in our market area. As part of the commercial loan strategy, we will seek to use our commercial relationships to grow our commercial transactional deposit accounts.
We generally retain in our portfolio adjustable-rate or shorter-term fixed-rate residential real estate mortgage loans. We regularly sell a portion of our fixed-rate one- to four-family residential real estate loans in order to manage the duration and time to repricing of our loan portfolio, and to generate fee income. Loans that we sell into the secondary market consist of long-term (20 years or greater), conforming fixed-rate residential real estate mortgage loans, which we primarily sell to the FHLB of New York’s Mortgage Asset Program and Freddie Mac. These loans are sold without recourse. We generally retain the servicing rights on all conforming fixed-rate residential mortgage loans that we sell.
In 2024, we began offering limited financial products and services to the cannabis industry. As of December 31, 2025, we had one commercial real estate loan to a cannabis-related business totaling $1.5 million, subject to our general concentration of credit limitations. Primarily, we anticipate making commercial real estate loans to cannabis-related businesses. We would also consider making commercial loans such as equipment loans to such borrowers, so long as they were secured by readily salable collateral, such as delivery trucks. Currently, we do not intend to provide lines of credit to such customers.
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Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, by type of loan at the dates indicated. We had no loans held for sale at December 31, 2025 or December 31, 2024, respectively.
At December 31,
2025
2024
(Dollars in thousands)
Amount
Percent
Amount
Percent
Residential:
One- to four-family
$
93,006
41.0
%
$
101,236
49.9
%
Construction
3,196
1.4
1,288
0.6
Home equity loans and lines of credit
15,921
7.0
11,916
5.9
Commercial real estate
87,954
38.8
59,505
29.4
Commercial and industrial
22,243
9.8
23,411
11.5
Consumer and other
4,349
1.9
5,339
2.6
Total loans receivable
226,669
100.0
%
202,695
100.0
%
Deferred loan costs
1,276
1,538
Allowance for credit losses on loans
(1,915)
(1,804)
Total loans receivable, net
$
226,030
$
202,429
Loan Portfolio Maturities. The following table summarizes the contractual maturities of our gross loan portfolio 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. Maturities are based on the final contractual payment date and do not reflect repricing or the effect of prepayments. Actual maturities may differ.
Home
equity
One- to
loans and
Commercial
Consumer
four-
lines of
Commercial
and
and
(In thousands)
family
Construction
credit
real estate
industrial
other
Total
Amounts due in:
One year or less
$
40
$
3,196
$
—
$
—
$
396
$
1,329
$
4,961
After one through five years
1,524
—
357
965
9,720
2,396
14,962
After five through 15 years
16,294
—
394
27,655
5,481
624
50,448
More than 15 years
75,148
—
15,170
59,334
6,646
—
156,298
Total
$
93,006
$
3,196
$
15,921
$
87,954
$
22,243
$
4,349
$
226,669
The following table sets forth our fixed- and adjustable-rate loans at December 31, 2025 that are contractually due after December 31, 2026.
Due After December 31, 2026
(In thousands)
Fixed
Adjustable
Total
Residential:
One- to four-family
$
92,825
$
141
$
92,966
Home equity loans and lines of credit
975
14,946
15,921
Commercial real estate
2,138
85,816
87,954
Commercial and industrial
12,927
8,920
21,847
Consumer and other
3,020
—
3,020
Total
$
111,885
$
109,823
$
221,708
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Commercial Real Estate Loans. In recent years, we have increased our commercial real estate loans. Our commercial real estate loans are secured primarily by office buildings, industrial facilities, retail facilities, motels and other commercial properties, substantially all of which are located in our primary market area. At December 31, 2025, we had $88.0 million in commercial real estate loans, representing 38.8% of our total loan portfolio. This amount included $10.0 million of multi-family residential real estate loans. At December 31, 2025, we had $60.9 million in non-owner occupied commercial real estate loans (excluding multi-family residential real estate loans). At December 31, 2025, our commercial real estate loans had an average balance of $325,613.
We generally originate adjustable-rate commercial real estate loans with maximum terms of up to 25 years. Adjustable-rate commercial real estate loans are tied to the five-year FHLB of New York advance rate plus a margin, subject to an interest rate floor. The maximum loan-to-value ratio of our commercial real estate loans is generally 80%. All of our commercial real estate loans are subject to our underwriting procedures and guidelines. At December 31, 2025, our largest commercial real estate loan totaled $2.4 million and was secured by a shopping plaza located in Rochester, New York. At December 31, 2025, this loan was performing in accordance with its terms.
The following table presents our commercial real estate loan portfolio by industry sector at December 31, 2025:
Loans by Industry Sector
At December 31,
2025
Percentage of
Balance
Total
(Dollars in thousands)
Commercial real estate loans:
Lessors of residential buildings and dwellings
$
17,038
19.37
%
Accommodation and food services
11,879
13.51
%
Lessors of other real estate property
7,038
8.00
%
Lessors of nonresidential buildings (except mini-warehouses)
7,007
7.97
%
Retail trade
6,061
6.89
%
Shopping plazas
6,048
6.88
%
Arts, entertainment, and recreation
6,023
6.85
%
Nonresidential property managers
4,322
4.91
%
Landscaping Services
4,309
4.90
%
Offices of real estate agents & brokers
3,761
4.28
%
Lessors of miniwarehouse and self-storage units
2,910
3.31
%
Personal care services
2,542
2.89
%
Construction
1,944
2.21
%
Manufacturing
1,918
2.18
%
Other
1,559
1.77
%
Other activities related to real estate
1,449
1.65
%
Emergency and other relief services
1,166
1.33
%
Offices of other holding companies
915
1.04
%
All other professional, scientific, and technical services
65
0.07
%
Total commercial real estate loans
$
87,954
100.00
%
We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower (including credit history), profitability and expertise, as well as the value and condition of the mortgaged property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the debt service coverage ratio (the ratio of net operating income to debt service) to ensure that it is at least 120% of the monthly debt service and the ratio of the loan amount to the appraised value of the mortgaged property. All commercial real estate loans are generally appraised by outside independent appraisers approved by the Board of Directors. Personal guarantees are obtained from commercial real estate borrowers.
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Loans secured by commercial real estate generally are larger than one- to four-family residential loans and involve greater credit risk. Commercial real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of these loans makes them more difficult for management to monitor and evaluate.
One- to Four-Family Residential Real Estate Lending. At December 31, 2025, $93.0 million, or 41.0%, of our total loan portfolio consisted of one- to four-family residential real estate mortgage loans. We offer conforming and non-conforming, fixed-rate and adjustable-rate residential real estate mortgage loans with maturities of up to 30 years and maximum loan amounts generally of up to $807,000. Our adjustable-rate mortgage loans provide an initial fixed interest rate for one, five, seven or ten years and then adjust annually thereafter. They amortize over a period of up to 30 years.
One- to four-family residential real estate mortgage loans are generally underwritten according to Freddie Mac guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed-rate and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Office of Federal Housing Enterprise Oversight, which at December 31, 2025 was $806,500 for single-family homes in our market area. Loans that exceed that limit are considered “jumbo loans.” At December 31, 2025, we had two jumbo loans totaling $1.9 million. For first mortgage loans with loan-to-value ratios in excess of 80%, we require private mortgage insurance. We do not have any loans in our loan portfolio that are considered sub-prime, or Alt-A. At December 31, 2025, we had $10.7 million in non-owner occupied one- to four-family residential real estate mortgage loans.
We currently offer several adjustable-rate mortgage loans secured by residential properties with interest rates that are fixed for an initial period ranging from one year to ten years. After the initial fixed period, the interest rate on adjustable-rate mortgage loans is generally reset every year based upon a contractual spread or margin above the average yield on U.S. Treasury securities, adjusted to a constant maturity of one year, as published weekly by the Federal Reserve Board, subject to periodic and lifetime limitations on interest rate changes. All of our traditional adjustable-rate mortgage loans with initial fixed-rate periods of one, five, seven or ten years have initial and periodic caps of two percentage points on interest rate changes, with a cap of six percentage points for the life of the loan. Many of the borrowers who select these loans have shorter-term credit needs than those who select long-term, fixed-rate mortgage loans. We do not offer “Option ARM” loans, where borrowers can pay less than the interest owed on their loan, resulting in an increased principal balance during the life of the loan. At December 31, 2025, we had $141,000 in adjustable-rate one- to four-family residential real estate mortgage loans.
Adjustable-rate mortgage loans generally present different credit risks than fixed-rate mortgage loans primarily because the underlying debt service payments of the borrowers increase as interest rates increase, thereby increasing the potential for default.
We require title insurance on all of our one- to four-family residential real estate mortgage loans, and we also require that borrowers maintain fire and extended coverage casualty insurance (and, if appropriate, flood insurance) in an amount at least equal to the lesser of the loan balance or the replacement cost of the improvements. A majority of our residential real estate mortgage loans have a mortgage escrow account from which disbursements are made for real estate taxes and flood insurance. We do not conduct environmental testing on residential real estate mortgage loans unless specific concerns for hazards are identified by the appraiser used in connection with the origination of the loan. If we identify an environmental problem on land that will secure a loan, the environmental hazard must be remediated before the closing of the loan.
Residential Construction Loans. We make construction loans, primarily to individuals for the construction of their primary residences and to contractors and builders of single-family homes. At December 31, 2025, our construction loans totaled $3.2 million, representing 1.4% of our total loan portfolio. At that date, we also had $1.3 million of construction loans in process. At December 31, 2025, all of our single-family construction loans were to individuals.
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Most of our residential construction loans are interest-only loans that provide for the payment of interest during the construction phase, which is usually up to six months. At the end of the construction phase, the loan may convert to a permanent mortgage loan or the loan may be paid in full. Construction loans generally can be made with a maximum loan-to-value ratio of 90% of the estimated appraised market value upon completion of the project. Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser and title insurance. We also generally require inspections of the property before disbursements of funds during the term of the construction loan.
Construction financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost proves to be inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project proves to be inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment of the loan.
Home Equity Lines of Credit and Loans. In addition to traditional one- to four-family residential mortgage loans, we offer home equity lines of credit that are secured by the borrower’s primary or secondary residence. At December 31, 2025, we had $15.9 million, or 7.0% of our total loan portfolio, in home equity lines of credit and home equity loans. Home equity lines of credit totaled $15.9 million at December 31, 2025. At that date we also had $15.0 million of unused commitments related to home equity lines of credit. Home equity loans totaled $914,000 at December 31, 2025. We resumed making home equity loans in 2024, after having ceased originations in 2015.
Home equity lines of credit and home equity loans are generally underwritten using the same criteria that we use to underwrite one- to four-family residential mortgage loans. Home equity lines of credit may be underwritten with a loan-to-value ratio of up to 80% (or 90% if we hold the first mortgage) when combined with the principal balance of the existing first mortgage loan. Our home equity lines of credit are originated with adjustable-rates based on the prime rate of interest and require interest paid monthly with terms of up to 25 years. For the first ten years during the draw period only interest is required to be paid. Home equity lines of credit are generally available in amounts between $50,000 and $200,000.
Home equity lines of credit secured by junior mortgages have greater risk than one- to four-family residential mortgage loans secured by first mortgages. At December 31, 2025, $59,000 of our home equity loans and lines of credit were in a junior lien position, nearly all of which were second mortgages. We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure, after repayment of the senior mortgages, if applicable. When customers default on their loans, we attempt to foreclose on the property and resell the property as soon as possible to minimize foreclosure and carrying costs. However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid loan and we may be unsuccessful in recovering the remaining balance from those customers. Particularly with respect to our home equity lines of credit, decreases in real estate values could adversely affect our ability to fully recover the loan balance in the event of a default.
Commercial and Industrial Loans. We make commercial and industrial loans, primarily in our market area, to a variety of professionals, sole proprietorships and small businesses. These loans are generally secured by business assets, and we may support this collateral with junior liens on real property. At December 31, 2025, commercial and industrial loans were $22.2 million, or 9.8% of our total loan portfolio. As part of our relationship- driven focus, we encourage our commercial borrowers to maintain their primary deposit accounts with us, which enhances our interest rate spread and margin.
Commercial lending products include term loans and revolving lines of credit. Commercial loans and lines of credit are made with either adjustable or fixed rates of interest. Adjustable rates and fixed rates are based on the prime rate as published in The Wall Street Journal, plus a margin. We are focusing our efforts on experienced, growing small- to medium-sized, privately-held companies with solid historical and projected cash flow that operate in our market areas.
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When making commercial and industrial loans, we consider the financial statements of the borrower, our lending history with the borrower, the debt service capabilities of the borrower, the projected cash flows of the business and the value of the collateral. The debt service coverage ratio (the ratio of net operating income to debt service) must generally be at least 120% of the monthly debt service. Commercial and industrial loans are generally secured by a variety of collateral, primarily accounts receivable, inventory and equipment, and are supported by personal guarantees. Depending on the collateral used to secure the loans, commercial and industrial loans are made in amounts of up to 75% of the value of the collateral securing the loan, or 90% of the value on new equipment purchases. We generally do not make unsecured commercial and industrial loans.
Commercial and industrial loans generally have greater credit risk than residential real estate loans. Unlike residential real estate loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial and industrial loans generally are made on the basis of the borrower’s ability to repay the loan from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial and industrial loans may depend substantially on the success of the business itself. Further, any collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value. We seek to minimize these risks through our underwriting standards. At December 31, 2025, our largest commercial and industrial loan was a $2.0 million loan to an excavating company. This loan was performing according to its original terms at December 31, 2025.
Consumer Loans. We offer a limited range of consumer loans, principally to customers residing in our primary market area with other relationships with us and with acceptable credit ratings. Our consumer loans generally consist of loans secured by investment or deposit accounts, loans on new and used automobiles and unsecured personal loans. At December 31, 2025, consumer and other loans were $4.3 million, or 1.9% of our total loan portfolio. The largest portion of our consumer loan portfolio was consumer secured loans, generally secured by investment accounts or deposits, which totaled $2.9 million at December 31, 2025.
Consumer loans may entail greater risk than residential real estate loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as motor vehicles. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.
Originations, Purchases and Sales of Loans
Lending activities are conducted by our loan personnel operating at our main and branch office locations. We also obtain referrals from existing or past customers and from real estate brokers, builders and attorneys. All loans that we originate are underwritten pursuant to our policies and procedures, which incorporate Freddie Mac underwriting guidelines to the extent applicable. We originate both adjustable-rate and fixed-rate loans. Our ability to originate fixed or adjustable-rate loans is dependent upon the relative customer demand for such loans, which is affected by current market interest rates as well as anticipated future market interest rates. Our loan origination and sales activity may be adversely affected by a rising interest rate environment, which typically results in decreased loan demand.
We have occasionally purchased whole loans from third parties, including loans for manufactured homes, loans made to healthcare providers through BHG Financial LLC, and loans from Home HeadQuarters, Inc., a local non-profit housing and community development organization. Additionally, from time to time, we may purchase or sell participation interests in loans. We underwrite our participation interest in the loan that we are purchasing according to our own underwriting criteria and procedures. At December 31, 2025, we had $18.1 million of whole loans and $9.3 million of loan participation interests that we had purchased, and at that date, we had no loans for which we had sold participation interests.
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We regularly sell a portion of our fixed-rate one- to four-family residential real estate loans into the secondary market in order to manage the duration and time to repricing of our loan portfolio, and to generate fee income. Loans that we sell into the secondary market consist of long-term (20 years or greater), conforming fixed-rate residential real estate mortgage loans, which we primarily sell to the FHLB of New York’s Mortgage Asset Program and Freddie Mac. We sold mortgage loans totaling $8.2 million and recorded related income of $136,000 during the year ended December 31, 2025. These loans are sold without recourse. We generally retain the servicing rights on all conforming fixed-rate residential mortgage loans that we sell. Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent borrowers, supervising foreclosures and property dispositions in the event of unremediated defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans. We retain a portion of the interest paid by the borrower on the loans we service as consideration for our servicing activities.
Loan Approval Procedures and Authority
Pursuant to federal law, the aggregate amount of loans that Seneca Savings Bank is permitted to make to any one borrower or a group of related borrowers is generally limited to 15% of Seneca Savings Bank’s unimpaired capital and surplus (or 25% if the amount in excess of 15% is secured by “readily marketable collateral”). At December 31, 2025, based on the 15% limitation, Seneca Savings Bank’s loans-to-one-borrower limit was approximately $4.9 million. Seneca Savings Bank’s internal limit at December 31, 2025 was $3.5 million. On the same date, Seneca Savings Bank had no borrowers with outstanding balances in excess of this amount. At December 31, 2025, our largest loan relationship with one borrower was for $2.0 million, which was secured by excavating equipment, and the underlying loan was performing in accordance with its terms on that date.
Our lending is subject to written underwriting standards and origination procedures. Decisions on loan applications are made on the basis of detailed applications submitted by the prospective borrower, credit histories that we obtain, and property valuations (consistent with our appraisal policy) prepared by outside independent licensed appraisers approved by our board of directors as well as internal evaluations, where permitted by regulations. The loan applications are designed primarily to determine the borrower’s ability to repay the requested loan, and the more significant items on the application are verified through use of credit reports, bank statements and tax returns.
Residential mortgage loans up to $350,000 may be approved individually by loan officers, our President and Chief Executive Officer, and the Senior Vice President of Commercial Lending. Any two loan officers, one of whom must be an executive officer, may approve retail loans up to the secondary market maximum loan limit (currently $806,500). Residential loans up to $999,000 must be approved by our junior loan committee, while loans over $999,000 must be approved by our senior loan committee and loans over $1.75 million generally must be approved by the Board of Directors. Our junior loan committee consists of our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Senior Vice President of Commercial Lending, Senior Vice President of Retail Banking, Senior Vice President of Operations and six other employees. Our senior loan committee consists of our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Senior Vice President of Commercial Lending, and at least two outside board members.
Commercial loans up to $100,000 may be approved by commercial loan officers and up to $200,000 by the Senior Vice President of Commercial Lending and Vice President–Commercial Loan Officer. The President and Chief Executive Officer has individual authority to approve a commercial loan up to $250,000. Any two of our President and Chief Executive Officer, Senior Vice President of Commercial Lending and Vice President of Commercial lending can combine their authority to approve commercial loans up to $500,000. Our junior loan committee can approve commercial loans up to $999,000, while loans over $999,000 must be approved by our senior loan committee. Commercial loans in excess of $1.75 million generally require the approval of our board of directors.
We require title insurance on our mortgage loans as well as fire and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan.
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Delinquencies and Asset Quality
Delinquency Procedures. System-generated late notices are mailed to borrowers after the late payment “grace period,” which is 15 days in the case of all loans secured by residential or commercial real estate and 10 days in the case of commercial and industrial and most consumer loans. A second notice will be mailed to borrowers if the loan remains past due after 30 days, and we attempt to contact the borrower and develop a plan of repayment. By the 90th day of delinquency, we will have our attorneys issue a demand letter. The demand letter will require the borrowers to bring the loan current within 30 days in order to avoid the beginning of foreclosure proceedings for loans secured by real estate. A report of all loans 30 days or more past due is provided to the Board of Directors monthly.
Loans Past Due and Non-Performing Assets. Loans are reviewed on a regular basis. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.
When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for credit losses, or, if the existing allowance is inadequate, charged to expense of the current period. After acquisition, all costs incurred in maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.
Loans modified for borrowers experiencing financial difficulties occur when we grant borrowers favorable loan modifications that we would not consider but for economic or legal reasons pertaining to the borrower’s financial difficulties. These concessions typically include a modification of loan terms such as a reduction of the interest rate to below market terms, capitalizing past due interest or extending the maturity date, or possibly a partial forgiveness of the principal amount due. We identify loans for potential modifications related to borrowers experiencing financial difficulty primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future. Interest income on restructured loans is accrued after the borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months. We did not modify any loans to borrowers experiencing financial difficulty in the year ended December 31, 2025. We closely monitor the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts. Loans modified to borrowers experiencing financial difficulty did not have payment default during the year ended December 31, 2025 and all such loans were current as of December 31, 2025.
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Delinquent Loans. The following table sets forth our loan delinquencies by type and amount at the dates indicated.
Loans Delinquent For
90 Days and
(In thousands)
30 - 59 Days
60 - 89 Days
Over
At December 31, 2025
Residential:
One- to four-family
$
2,310
$
297
$
770
Construction
—
—
—
Home equity loans and lines of credit
139
53
32
Commercial real estate
314
735
843
Commercial and industrial
33
—
—
Consumer and other
42
3
—
Total
$
2,838
$
1,088
$
1,645
At December 31, 2024
Residential:
One- to four-family
$
1,089
$
230
$
369
Construction
—
—
—
Home equity loans and lines of credit
1
—
32
Commercial real estate
371
—
—
Commercial and industrial
513
—
—
Consumer and other
5
9
—
Total
$
1,979
$
239
$
401
Total delinquent loans increased to $5.6 million at December 31, 2025 from $2.6 million at December 31, 2024, due primarily to increased delinquencies in one- to four-family residential and commercial real estate loans.
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Non-Performing Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.
At December 31,
(Dollars in thousands)
2025
2024
Non-accrual loans:
Residential:
One- to four-family
$
1,455
$
369
Construction
—
—
Home equity loans and lines of credit
—
—
Commercial real estate
1,578
—
Commercial and industrial
41
44
Consumer and other
—
—
Total non-accrual loans
3,074
413
Accruing loans 90 days or more past due:
Residential:
One- to four-family
—
—
Construction
—
—
Home equity loans and lines of credit
32
32
Commercial real estate
—
—
Commercial and industrial
—
—
Consumer and other
—
—
Total accruing loans 90 days or more past due
32
32
Total non-performing loans
3,106
445
Real estate owned
—
—
Other non-performing assets
148
459
Total non-performing assets
$
3,254
$
904
Ratios:
Total non-performing loans to total loans
1.37
%
0.22
%
Total non-performing loans to total assets
1.00
%
0.16
%
Total non-performing assets to total assets
1.04
%
0.32
%
Total non-accrual loans increased $2.7 million to $3.1 million at December 31, 2025 from $413,000 at December 31, 2024. The increase in non-accrual loans was primarily related to three commercial real estate loans totaling $1.6 million and seven one- to four-family residential loans totaling $1.0 million. The one- to four-family residential loans and commercial real estate loans are secured by the associated properties.
Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the 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 insured institution 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 insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management.
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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 our periodic reports with the OCC and in accordance with our classification of assets policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations.
The following table sets forth our amounts of classified assets and assets designated as special mention as of December 31, 2025 and 2024. Generally loans 90 days or more past due are placed on non-accrual status and classified “substandard.” All loans 60 days past due are classified “special mention.”
At December 31,
(In thousands)
2025
2024
Substandard
$
3,253
$
3,249
Doubtful
—
—
Loss
—
—
Total Classified Assets
$
3,253
$
3,249
Special Mention
$
1,082
$
—
“Substandard” loans remained relatively unchanged at December 31, 2025, compared to December 31, 2024, due primarily to two commercial real estate loans and two commercial and industrial loans that were charged off in 2024 and the addition of two commercial real estate loans to substandard in 2025. “Special mention” loans increased at December 31, 2025 due to one commercial borrowing relationship totaling $1.1 million and consisting of one commercial real estate loan and seven commercial and industrial loans.
Allowance for Credit Losses on Loans
The allowance for credit losses on loans represents management’s current estimate of expected credit losses over the contractual term of loans, and is recorded at an amount that, in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. Management considers the allowance for credit losses to be a critical accounting estimate, given the uncertainty in estimating lifetime credit losses attributable to our portfolios of assets exhibiting credit risk, particularly in our loan portfolio, and the material effect that such judgments can have on our results of operations. Determining the amount requires significant judgment on the part of management, is multi-faceted, and can be imprecise. The level of the allowance for credit losses on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and expectations of the future based on reasonable and supportable forecasts.
The allowance is established through a provision for credit losses in our consolidated statements of income, and evaluation of the adequacy of the allowance for credit losses is performed by management on a quarterly basis. While management uses available information to anticipate credit losses, future additions to the allowance may be necessary based on changes in economic conditions or the composition of our portfolios. In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for credit losses.
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Our methodology for maintaining our allowance for credit losses is based on historical experience and data, current economic information, and reasonable and supportable forecasts. Accordingly, the estimation of the allowance for credit losses is impacted by the economic forecasts utilized, which require the use of significant judgment. Deterioration in forecasted economic conditions may lead to further required increases to the allowance for credit losses. Conversely, improvements in forecasted economic conditions may warrant further reductions to the allowance for credit losses. In estimating the allowance for credit losses, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate.
Loans that have similar risk characteristics are evaluated on a collective basis for the purposes of establishing the allowance for credit losses. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are also not included in the collective evaluation. A collateral-dependent asset is a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower, based on management’s assessment, is experiencing financial difficulty. The allowance for credit loss for a collateral dependent financial asset is measured using the fair value of collateral. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
For additional information on the allowance for credit losses, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Summary of Critical Accounting Policies and Critical Accounting Estimates—Allowance for Credit Losses.”
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The following table sets forth activity in our allowance for credit losses on loans for the years indicated.
At or For the Year Ended
December 31,
(Dollars in thousands)
2025
2024
Balance at beginning of year
$
1,804
$
2,045
Charge-offs:
Residential:
One- to four-family
—
—
Construction
—
—
Home equity loans and lines of credit
—
—
Commercial real estate
—
—
Commercial and industrial
(679)
(78)
Consumer and other
(39)
(18)
Total charge-offs
(718)
(96)
Recoveries:
Residential:
One- to four-family
—
—
Construction
—
—
Home equity loans and lines of credit
—
—
Commercial real estate
—
—
Commercial and industrial
2
—
Consumer and other
6
—
Total recoveries
8
—
Net charge-offs
(710)
(96)
Provision (reversal) for credit losses on loans
821
(145)
Balance of allowance at end of period
$
1,915
$
1,804
Net (charge-offs) recoveries to average loans outstanding during year
(0.33)
%
(0.05)
%
Allowance for credit losses on loans to non-accrual loans at end of year
62.30
%
436.80
%
Non-accrual loans to total loans outstanding at end of year
1.36
%
0.20
%
Allowance for credit losses on loans to total loans outstanding at end of year
0.84
%
0.89
%
The following table sets forth additional information with respect to charge-offs by category for the years indicated.
For the Year Ended
December 31,
2025
2024
Net (charge-offs) recoveries to average loans outstanding during the year by loan type:
Residential:
One- to four-family
0.00
%
0.00
%
Construction
0.00
%
0.00
%
Home equity loans and lines of credit
0.00
%
0.00
%
Commercial real estate
0.00
%
0.00
%
Commercial and industrial
(3.02)
%
(0.04)
%
Consumer and other
(0.90)
%
(0.01)
%
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Allocation of Allowance for Credit Losses on Loans. The following table sets forth the allowance for credit losses on loans allocated by loan category, the percent of the allowance in each category to the total allocated allowance, and the percent of loans in each category to total loans at the dates indicated.
At December 31,
2025
2024
Percent of
Percent of
Allowance in
Percent of
Allowance in
Percent of
Allowance
Category to
Loans in
Allowance
Category to
Loans in
for Credit
Total
Category to
for Credit
Total
Category to
(Dollars in thousands)
Losses
Allowance
Total Loans
Losses
Allowance
Total Loans
Residential:
One- to four-family
$
851
44.44
%
41.03
%
$
535
29.66
%
49.94
%
Construction
18
0.94
1.41
10
4.63
0.64
Home equity loans and lines of credit
68
3.55
7.02
76
4.21
5.88
Commercial real estate
232
12.11
38.80
432
23.95
29.36
Commercial and industrial
455
23.76
9.81
372
20.62
11.55
Consumer and other
188
9.82
1.92
163
9.04
2.63
Total allocated allowance
1,812
94.62
100.00
1,588
92.10
100.00
Unallocated allowance
103
5.38
—
216
11.97
—
Total allowance for credit losses on loans
$
1,915
100.00
%
100.00
%
$
1,804
100.00
%
100.00
%
Financial Services Activities and Subsidiary
Seneca Savings Bank is the only subsidiary of Seneca Bancorp. Seneca Savings Bank has one subsidiary, Seneca Savings Insurance Agency, Inc., which does business as “Financial Quest.” Financial Quest offers employee benefit plan consulting services, asset management services, and tax and financial planning services. Financial Quest is headquartered at 925 State Fair Blvd., Syracuse, New York and has partnered with LPL Financial in order to offer broker-dealer services. We have dedicated investment representatives who evaluate the needs of clients to determine suitable investment solutions to meet their short and long-term wealth management goals. Financial services include retirement planning, tax planning, and financial consulting. Financial Quest also provides financial advice and retirement planning and counseling for 401(k) plan administrators, primarily in the medical industry, and consults with both the corporate administrators and the company’s employees related to such 401(k) plans. Financial Quest previously offered annuities and other insurance products and will continue to collect fee income on fixed annuities and life insurance from legacy relationships, although we have generally discontinued those lines of business.
In February 2024, Financial Quest acquired a $131.6 million retirement plan book of business for $714,500 in cash and $475,500 in contingent consideration. At December 31, 2025, Financial Quest had $259.3 million of assets held under management, comprised of $98.5 million of assets held by approximately 752 retail accounts and $160.8 million of assets held by nine corporate-sponsored retirement plans. Income from these activities totaled $969,000, or 43.9% of our non-interest income, for the year ended December 31, 2025 and $893,000, or 47.9% of our non-interest income, for the year ended December 31, 2024.
Investment Activities
General. Our Board of Directors is responsible for approving and overseeing our investment policy. The investment policy is reviewed at least annually by management and any changes to the policy are recommended to the board of directors and are subject to its approval. This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns and consistency with our interest rate risk management strategy. Our Asset/Liability Management Committee, which consists of our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Senior Vice President of Retail Banking, Senior Vice President of Commercial Lending and two board members, oversees our investing activities and strategies. All transactions are formally reviewed by the board of directors at least monthly.
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Our current investment policy authorizes us to invest in debt securities issued by the U.S. government and its agencies or government sponsored enterprises. The policy also permits investments in mortgage-backed securities, including pass-through securities, issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, as well as investments in federal funds and deposits in other insured institutions. In addition, management is authorized to invest in investment grade state and municipal obligations and corporate debt obligations within regulatory parameters. We do not engage in any investment hedging activities or trading activities, nor do we purchase any high-risk mortgage derivative products, corporate junk bonds, and certain types of structured notes.
Debt and equity securities investment accounting guidance requires that, at the time of purchase, we designate a security as held to maturity, available for sale, or trading, depending on our ability and intent. At all dates below, we had only a securities available-for-sale portfolio, which is reported at fair value.
The following table sets forth the amortized cost and fair value of our securities portfolio (excluding FHLB of New York common stock and Federal Reserve Bank of New York common stock) at the dates indicated.
At December 31,
2025
2024
Amortized
Fair
Amortized
Fair
(In thousands)
Cost
Value
Cost
Value
U.S. Treasury securities
$
14,775
$
14,795
$
15,923
$
15,811
U.S. government agency securities
1,000
900
1,000
838
Municipal securities
16,406
13,527
17,151
14,281
Mortgage-backed securities and collateralized mortgage obligations
11,796
10,915
6,862
5,755
Corporate securities
8,608
8,498
10,152
9,799
Total securities available for sale
$
52,585
$
48,635
$
51,088
$
46,484
Sources of Funds
General. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also use borrowings, primarily FHLB of New York advances to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and manage the cost of funds. In addition, we receive funds from scheduled loan payments, investment maturities, loan prepayments, retained earnings and income on interest earning assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.
Deposits. Our deposits are generated primarily from our primary market area. We offer a selection of deposit accounts, including demand accounts, NOW accounts, savings accounts, money market accounts and certificates of deposit and retirement accounts. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. At December 31, 2025, we had $16.7 million in brokered deposits.
Interest rates paid, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals. We rely upon personalized customer service, long-standing relationships with customers, and the favorable reputation of Seneca Savings Bank in the community to attract and retain deposits. We also seek to obtain deposits from our commercial loan customers.
The flow of deposits is influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition. The variety of deposit accounts offered allows us to be competitive in obtaining funds and responding to changes in consumer demand. Based on experience, we believe that our deposits are relatively stable. However, the ability to attract and maintain deposits and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions.
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The following table sets forth the distribution of our average total deposit accounts, by account type, for the periods indicated.
For the Years Ended December 31,
2025
2024
Average
Percent of
Average
Average
Percent of
Average
(Dollars in thousands)
Balance
Total
Rate
Balance
Total
Rate
Deposit type:
NOW accounts
$
26,895
11.86
%
0.09
%
$
25,286
12.51
%
0.09
%
Regular savings and demand club accounts
25,072
11.06
0.44
%
22,887
11.33
0.09
%
Money market accounts
76,409
33.69
2.83
%
56,305
27.87
2.50
%
Certificates of deposit and retirement accounts
64,186
28.30
3.14
%
66,007
32.67
3.61
%
Non-interest-bearing deposits
34,217
15.09
—
%
31,577
15.63
0.00
%
Total deposits
$
226,779
100.00
%
2.24
%
$
202,062
100.00
%
2.25
%
As of December 31, 2025 and 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance), was $111.5 million and $89.8 million, respectively. In addition, as of December 31, 2025, the aggregate amount of all our uninsured time deposits was $38.1 million. We have no deposits that are uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance.
The following table sets forth our uninsured time deposits at December 31, 2025 by time remaining until maturity. This balance as of December 31, 2025 included a $10.0 million New York State municipal deposit which was fully collateralized.
(In thousands)
At December 31, 2025
Three months or less
$
7,349
Over three months through six months
12,737
Over six months through twelve months
7,663
Over twelve months
10,369
Total
$
38,118
Borrowings. Our borrowings consist of advances from the FHLB of New York. At December 31, 2025, we had the ability to borrow approximately $86.1 million under our credit facilities with the FHLB of New York, of which $47.1 million was advanced. Borrowings from the FHLB of New York are secured by our investment in the common stock of the FHLB of New York as well as by securities and a blanket pledge of our mortgage portfolio not otherwise pledged. We also have the ability to borrow from the Federal Reserve Bank of New York through the discount window lending program.
Personnel
As of December 31, 2025, we had 57 full-time employees and four part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good working relations with our employees.
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SUPERVISION AND REGULATION
General
Set forth below is a summary of certain material statutory and regulatory requirements applicable to Seneca Bancorp and Seneca Savings Bank. The summary is not intended to be a complete description of such statutes and regulations and their effects on Seneca Bancorp and Seneca Savings Bank. Upon consummation of the conversion and stock offering, Seneca Savings Bank became a national banking association, regulated and supervised primarily by the OCC. Seneca Savings Bank is also be subject to regulation by the FDIC in more limited circumstances because Seneca Savings Bank’s deposits are insured by the FDIC. Seneca Savings Bank also is a member of the FHLBNY. This regulatory and supervisory structure establishes a comprehensive framework of the activities in which a depository institution may engage and is intended primarily for the protection of the FDIC’s Deposit Insurance Fund, depositors and the banking system. Under this system of federal regulation, depository institutions are periodically examined to ensure that they satisfy applicable standards with respect to their capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market interest rates. The OCC will examine Seneca Savings Bank and prepare reports for the consideration of its board of directors on identified deficiencies, if any. After completing an examination, the OCC issues a report of examination and assigns ratings (known as an institution’s CAMELS ratings). Under federal law and regulation, an institution may not disclose the contents of its reports of examination or its CAMELS ratings to the public. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies regarding classifying assets and establishing an adequate allowance for credit losses on loans for regulatory purposes. Seneca Savings Bank must obtain regulatory approval from the OCC before entering into certain transactions, including mergers with, or acquisitions of, other financial institutions.
Seneca Bancorp is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, subject to regulation, supervision, and examination by the Federal Reserve Board. As a publicly traded holding company, Seneca Bancorp is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws and regulations.
Any change in applicable laws or regulations, whether by the OCC, the FDIC, the Federal Reserve Board, the Securities and Exchange Commission, or the United States Congress, could have a material adverse impact on the financial condition and results of operations of Seneca Bancorp and Seneca Savings Bank.
Federal Bank Regulation
Enforcement. The OCC has primary enforcement responsibility over national banks. This includes authority to bring enforcement actions against a national bank, its directors, officers and employees and all “institution-affiliated parties,” a term that includes certain stockholders, as well as attorneys, appraisers and accountants who knowingly or recklessly participate in specified misconduct which causes or is likely to cause financial loss or a significant adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to the removal of officers and/or directors, receivership, conservatorship or the termination of deposit insurance. Civil monetary penalties can be assessed for a wide range of violations of laws and regulations, unsafe and unsound practices and certain other actions. The maximum penalties that can be assessed are generally based on the type and severity of the violation, unsafe and unsound practice or other action, and are adjusted annually for inflation. The FDIC has authority to recommend to the OCC that an enforcement action be taken with respect to a particular insured bank. If action is not taken by the OCC, the FDIC has authority to take action under specified circumstances.
Business Activities. As a national bank, Seneca Savings Bank derives its lending and investment powers from the National Bank Act, as amended, and the regulations of the OCC. Under these laws and regulations, Seneca Savings Bank is permitted to invest in mortgage loans secured by residential and nonresidential real estate, commercial business and consumer loans and leases, certain types of securities and certain other loans and assets. Unlike federal savings banks, national banks are not generally limited to a specified percentage of assets on various types of lending. A national bank may also establish subsidiaries that engage in activities that are permitted for the bank as well as certain other activities.
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Capital Requirements. Under OCC regulations, Seneca Savings Bank is subject to a comprehensive capital framework for U.S. banking organizations that was effective January 2015 (the Basel III capital rules).
The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets ratios of at least 4.5%, 6% and 8%, respectively, and a leverage ratio of at least 4% Tier 1 capital. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital. Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus Additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for credit losses on loans limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). Seneca Savings Bank previously exercised the opt-out election regarding the treatment of AOCI. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, a bank’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on perceived risks inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien residential mortgage loans, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.
In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.
The federal banking agencies, including the OCC, issued a rule pursuant to The Economic Growth Regulatory Relief and Consumer Protection Act of 2018 (the “Regulatory Relief Act”) to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) of 9% that qualifying institutions may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III. In November 2025, the federal banking agencies issued a proposed rule to lower the CBLR to 8%. That proposed rule was not effective as of December 31, 2025. If an election to use the community bank leverage ratio capital framework is made, a qualifying bank with less than $10 billion in assets with capital exceeding the specified community bank leverage ratio is considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be “well capitalized.” As of December 31, 2025, Seneca Savings Bank had elected to be subject to the alternative community bank leverage ratio framework.
The OCC also has authority to establish individual minimum capital requirements in appropriate cases upon determination that an institution’s capital level is, or is likely to become, inadequate in light of the particular circumstances. At December 31, 2025, Seneca Savings Bank exceeded each of its capital requirements.
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Standards for Safety and Soundness. As required by statute, the federal banking agencies have adopted final regulations and Interagency Guidelines Establishing Standards for Safety and Soundness. The federal banking agencies use the guidelines that set forth the safety and soundness standards to identify and address problems at insured depository institutions before capital becomes impaired. The guidelines address internal controls and information systems, internal audit systems, credit underwriting, loan documentation, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. The agencies have also established standards for safeguarding customer information. If the OCC determines that a national bank fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard and take other appropriate action.
Loans-to-One-Borrower. A national bank generally may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of December 31, 2025, Seneca Savings Bank was in compliance with applicable loan-to-one-borrower limitations.
Dividends. Federal law and OCC regulations govern cash dividends by a national bank. A national bank is authorized to pay such dividends from undivided profits but must receive prior OCC approval if the total amount of dividends (including the proposed dividend) exceeds its net income in that year and the prior two years less dividends previously paid. A national bank may not pay a dividend if the dividend does not comply with applicable regulatory capital requirements, and Seneca Savings Bank may be further limited in payment of cash dividends if it does not maintain the capital conservation buffer described previously.
Prompt Corrective Regulatory Action. Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. For these purposes, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.
The OCC has adopted regulations to implement the prompt corrective action framework under the Basel III capital rules. An institution is classified as “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 capital ratio of 6.5% or greater. An institution is classified as “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 capital ratio of 4.5% or greater. An institution is classified as “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 capital ratio of less than 4.5%. An institution is classified as “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 capital ratio of less than 3.0%. An institution is classified as “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets equal to or less than 2.0%. At December 31, 2025, Seneca Savings Bank was classified as a “well capitalized” institution.
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At each successive lower capital category, a national bank is subject to more restrictions and prohibitions, including restrictions on growth, interest rates paid on deposits, payment of dividends, and acceptance of brokered deposits. Furthermore, if a national bank is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the OCC, and its holding company, if applicable, must guarantee the performance of that plan. Based upon its capital levels, a national bank that is classified as well capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the OCC, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment. An undercapitalized national bank’s compliance with a capital restoration plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized. If an “undercapitalized” national bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” national banks must comply with one or more of a number of additional restrictions, including an order by the OCC to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt of deposits from correspondent banks or dismiss directors or officers, and limitations on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company. “Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it is determined to be critically undercapitalized.
Institutions that have less than $10 billion in total consolidated assets and meet other qualifying criteria may elect to use the optional community bank leverage ratio framework, which requires maintaining a leverage ratio of greater than 9.0% to satisfy the regulatory capital requirements, including the risk-based requirements. In November 2025, the federal banking agencies issued a proposed rule to lower the CBLR to 8%. That proposed rule was not effective as of December 31, 2025. A qualifying institution may opt in or out of the community bank leverage ratio framework on its quarterly call report. An institution that temporarily ceases to meet any qualifying criteria is provided with a two-quarter grace period to again achieve compliance provided that the institution’s leverage ratio falls no more than one percentage point below the applicable community bank leverage ratio requirement. Failure to meet the qualifying criteria within the grace period or maintain the required leverage ratio requires the institution to comply with the generally applicable capital requirements. As of December 31, 2025, Seneca Savings Bank elected to use the community bank leverage ratio framework.
Transactions with Affiliates and Regulation W of the Federal Reserve Board. Transactions between banks and their affiliates are governed by federal law. Generally, Section 23A of the Federal Reserve Act and the Federal Reserve Board’s Regulation W limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate in an amount no more than 10% of the bank’s capital stock and surplus, and with all transactions with all affiliates in an amount no more than 20% of the bank’s capital stock and surplus. The term “covered transaction” includes making loans to, purchasing assets from, and issuing guarantees to, an affiliate, and other similar transactions. In addition, loans or other extensions of credit by a bank to an affiliate are required to be collateralized according to the requirements set forth in Section 23A of the Federal Reserve Act. Section 23B applies to “covered transactions” as well as to certain other transactions and requires that all such transactions be on terms substantially the same, or at least as favorable, to the institution or subsidiary as those provided to a non-affiliate. Section 23B transactions also include the bank’s providing services and selling assets to an affiliate.
Extensions of Credit to Insiders and Regulation O of the Federal Reserve Board. Sections 22(g) and (h) of the Federal Reserve Act, and the Federal Reserve Board’s implementing regulation, Regulation O, place restrictions on loans to a bank’s and its affiliates’ insiders, i.e., executive officers, directors and principal stockholders, and those individuals’ related interests. Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a greater than 10.0% stockholder of a financial institution, and to these persons’ related interests, together with all other outstanding loans to such persons and related interests, may not exceed specified limits. Section 22(h) of the Federal Reserve Act also requires that loans to directors, executive officers and principal stockholders be made on terms substantially the same as, and following credit underwriting procedures that are not less stringent than, those prevailing at the time for comparable transactions with unaffiliated persons, and also requires approval by the majority of the board of directors for certain loans. In addition, the aggregate amount of extensions of credit by a financial institution to insiders cannot exceed the institution’s unimpaired capital and unimpaired surplus. Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers.
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Federal Insurance of Deposit Accounts. Seneca Savings Bank is a member of the Deposit Insurance Fund, which is administered by the FDIC. Deposit accounts in Seneca Savings Bank are insured up to a maximum of $250,000 for each separately insured depositor. Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, order or regulatory condition imposed in writing. We do not know of any practice, condition or violation that might lead to termination of Seneca Savings Bank’s deposit insurance.
The FDIC assesses insured depository institutions to maintain the Deposit Insurance Fund. Under the FDIC’s risk-based assessment system, institutions deemed less risky pay lower assessments. Assessments for institutions with less than $10 billion of assets, such as Seneca Savings Bank, are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years.
The FDIC has authority to increase insurance assessments and increased initial base deposit insurance assessment rates by two basis points beginning in the first quarterly assessment period of 2023. As a result, effective January 1, 2023, assessment rates for institutions of Seneca Savings Bank’s size ranged from 2.5 to 32 basis points. Any significant future increase in insurance premiums may have an adverse effect on the operating expenses and results of operations of Seneca Savings Bank. Seneca Savings Bank cannot predict what its insurance assessment rates will be in the future.
Privacy Regulations. Federal regulations generally require that a national bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter when the information in the privacy notice has changed since the customer received the previous notice. In addition, a national bank is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties, and to not disclose account numbers or access codes to non-affiliated third parties for marketing purposes.
Community Reinvestment Act. All national banks have a responsibility under the Community Reinvestment Act (“CRA”) and related federal regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In connection with its examination of a national bank, the OCC is required to evaluate and rate the bank’s record of compliance with the CRA. A national bank’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on certain of its activities such as branching or mergers. Seneca Savings Bank’s latest CRA rating in September 2022 was “Satisfactory.”
Consumer Protection and Fair Lending Regulations. Seneca Savings Bank is subject to a variety of federal statutes and regulations that are intended to protect consumers and prohibit discrimination in the granting of credit. These statutes and regulations provide for a range of sanctions for non-compliance with their terms, including imposition of administrative fines and remedial orders, and referral to the Attorney General for prosecution of a civil action for actual and punitive damages and injunctive relief.
Cybersecurity. Banking organizations are required to notify their primary federal regulator as soon as possible and no later than 36 hours of determining that a “computer-security incident” that arises to the level of a “notification incident” has occurred. A notification incident is a “computer-security incident” that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector. Bank service providers are also required to notify any affected bank to or on behalf of which the service provider provides services “as soon as possible” after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for four or more hours.
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The USA PATRIOT Act and the Bank Secrecy Act. The USA PATRIOT Act and the Bank Secrecy Act and their implementing regulations require financial institutions to develop programs to assist U.S. government agencies in detecting and preventing money-laundering and terrorist financing activities and to report suspicious activities. The USA PATRIOT Act also gives the federal government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. The federal banking agencies are required to take into consideration the effectiveness of controls designed to combat money laundering activities in determining whether to approve a merger or other acquisition application of a member institution. Accordingly, if we engage in a merger or other acquisition, our controls designed to combat money laundering would be considered as part of the application process. In addition, non-compliance with these laws and their implementing regulations could result in fines, penalties and other enforcement measures. We have developed policies, procedures and systems designed to comply with these laws and regulations.
Federal Home Loan Bank System
Seneca Savings Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. The Federal Home Loan Banks provide a central credit facility primarily for member institutions. Seneca Savings Bank, as a member of the FHLBNY, is required to acquire and hold shares of capital stock in the FHLBNY. Seneca Savings Bank was in compliance with this requirement at December 31, 2025.
Other Regulations
Interest and other charges collected or contracted for by Seneca Savings Bank are subject to state usury laws and federal laws concerning interest rates. Seneca Savings Bank’s operations also are subject to federal laws applicable to credit transactions, such as:
●Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
●Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one-to-four family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;
●The TILA-RESPA Integrated Disclosure Rule, commonly known as the TRID rule. This rule amended the Truth in Lending Act and the Real Estate Settlement Procedures Act to integrate several consumer disclosures for mortgage loans;
●Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;
●Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;
●Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;
●Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;
●Truth in Savings Act;
●Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws;
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●Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;
●Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;
●Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and
●Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.
Bank Holding Company Regulation
Federal Holding Company Regulation. Seneca Bancorp is a bank holding company registered with the Federal Reserve Board and subject to regulations, examination, supervision and reporting requirements applicable to bank holding companies. In addition, the Federal Reserve Board has enforcement authority over Seneca Bancorp and its non-bank subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary bank. The Federal Reserve Board must generally approve the acquisition of additional banks or savings associations by bank holding companies.
A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities the Federal Reserve Board determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking are: (1) making or servicing loans; (2) performing certain data processing services; (3) providing discount brokerage services; (4) acting as fiduciary, investment or financial advisor; (5) leasing personal or real property; (6) making investments in corporations or projects designed primarily to promote community welfare; and (7) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.
The Gramm-Leach-Bliley Act of 1999 authorizes a bank holding company that meets specified conditions, including that its depository institution subsidiaries are “well capitalized” and “well managed,” to opt to become a “financial holding company.” A “financial holding company” may engage in a broader array of financial activities than permitted a typical bank holding company. Such activities can include insurance underwriting and investment banking. As of December 31, 2025, Seneca Bancorp is not a “financial holding company.”
Capital. The Federal Reserve Board must establish for all bank holding companies minimum consolidated capital requirements that are as stringent as those required for their insured depository subsidiaries. Pursuant to the Regulatory Relief Act, bank holding companies with less than $3.0 billion in consolidated assets generally are not subject to the capital requirements unless otherwise advised by the Federal Reserve Board.
Source of Strength Doctrine. The “source of strength doctrine” requires bank holding companies to provide assistance to their subsidiary depository institutions in the event the subsidiary depository institutions experience financial difficulty. The Federal Reserve Board has issued regulations requiring that all bank holding companies serve as a source of financial and managerial strength to their subsidiary depository institutions.
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Dividends and Stock Repurchases. A bank holding company is generally required to give the Federal Reserve Board prior written notice of any purchase or redemption of then outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, Federal Reserve Board order or directive, or any condition imposed by, or written agreement with, the Federal Reserve Board. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions.
The Federal Reserve Board has issued a policy statement regarding capital distributions, including dividends, by bank holding companies. In general, the policy provides that dividends should be paid only from current earnings and only if the prospective rate of earnings retention by the bank holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. The policy also requires that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity, and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary. Additionally, under the prompt corrective action laws, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect the ability of Seneca Bancorp to pay dividends or otherwise engage in capital distributions.
Acquisition. Federal laws and regulations provide that no person (including a company) may acquire direct or indirect control of a bank holding company, such as Seneca Bancorp, or a bank without the prior non-objection or approval of the Federal Reserve Board and/or the OCC pursuant to the Change in Bank Control Act and its implementing regulations. Control, as defined under the applicable regulations, means the power, directly or indirectly, to direct the management or policies of the company or to vote 25% or more of any class of voting securities of the company. Acquisition of 10% or more of any class of a bank holding company’s voting securities constitutes a rebuttable presumption of control under certain circumstances, including where, as is the case with Seneca Bancorp, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
Any company that seeks to acquire “control” within the meaning of the Bank Holding Company Act, and the Federal Reserve Board regulations issued thereunder, must receive the prior approval of the Federal Reserve Board under that Act and, upon the acquisition, becomes a “bank holding company” subject to registration, examination and regulation by the Federal Reserve Board.
Federal Securities Laws
Seneca Bancorp’s common stock is registered with the Securities and Exchange Commission. Seneca Bancorp is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.
The registration under the Securities Act of 1933, as amended (the “Securities Act”), of shares of common stock issued in the offering does not cover the resale of those shares. Shares of common stock purchased by persons who are not affiliates of Seneca Bancorp may be resold without registration. Shares purchased by an affiliate of Seneca Bancorp will be subject to the resale restrictions of Rule 144 under the Securities Act. If Seneca Bancorp meets the current public information requirements of Rule 144 under the Securities Act, each affiliate that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding shares of Seneca Bancorp, or the average weekly volume of trading in the shares during the preceding four calendar weeks.
Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act is intended to improve corporate responsibility, provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. Seneca Bancorp has policies, procedures and systems designed to comply with this Act and its implementing regulations, and Seneca Bancorp will review and document such policies, procedures and systems to ensure continued compliance.
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TAXATION
Seneca Savings Bank and Seneca Bancorp are subject to federal and state income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal and state taxation is intended only to summarize certain pertinent tax matters and is not a comprehensive description of the tax rules applicable to Seneca Bancorp or Seneca Savings Bank.
Our federal and New York State tax returns have not been audited for the past five years.
Federal Taxation
Method of Accounting. For federal income tax purposes, Seneca Bancorp and Seneca Savings Bank report their income and expenses on the accrual method of accounting and use a tax year ending December 31 for filing their federal income tax returns.
Net Operating Loss Carryovers. A financial institution may carry forward indefinitely federal net operating losses incurred after December 31, 2017. At December 31, 2025, Seneca Savings Bank had no net operating loss carryforwards.
Charitable Contribution Carryovers. A financial institution’s deduction for charitable contributions is limited to 10% of its federal taxable income with the excess carried forward to the succeeding five taxable years. Any contributions remaining after the five-year carryover period that has not been deducted is no longer deductible. At December 31, 2025, Seneca Bancorp and Seneca Savings Bank had no charitable contribution carryovers.
Capital Loss Carryovers. Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. Any capital loss carryback or carryover is treated as a short-term capital loss for the year to which it is carried. As such, it is grouped with any other capital losses for the year to which it is carried and is used to offset any capital gains. Any loss remaining after the five-year carryover period that has not been deducted is no longer deductible. At December 31, 2025, Seneca Bancorp and Seneca Savings had no capital loss carryovers.
Corporate Dividends. Seneca Bancorp may generally exclude from its income 100% of dividends received from Seneca Savings as a member of the same affiliated group of corporations.
State Taxation
New York State Taxation. For state income tax purposes, Seneca Bancorp and Seneca Savings Bank report their income and expenses on the accrual method of accounting and use a tax year ending December 31 for filing their state income tax returns.
For New York State purposes, net operating losses can be carried back three years and forward 20 years. At December 31, 2025, Seneca Bancorp and Seneca Savings Bank had approximately $20.0 million of New York State net operating loss carryforwards.
Taxable income is apportioned to New York State based on the location of the taxpayer’s customers, with special rules for income from certain financial transactions. The location of the taxpayer’s offices and branches are not relevant to the determination of income apportioned to New York State. The statutory tax rate is currently 6.5% if New York State business income is less than $5.0 million, or 7.25% if New York State business income exceeds $5.0 million. An alternative tax on apportioned capital, capped at $5.0 million for a tax year, is imposed to the extent that it exceeds the tax on apportioned income. The New York State alternative tax rate is 0.1875% and expires January 1, 2027. Qualified community banks and thrift institutions that maintain a qualified loan portfolio are entitled to a specially computed modification that reduces the income taxable to New York State. As a result, Seneca Bancorp and Seneca Savings Bank only pays tax on apportioned capital.
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Maryland State Taxation. As a Maryland business corporation, Seneca Bancorp is required to file an annual report with and pay franchise taxes to the State of Maryland.
Pennsylvania Taxation. Generating income from Pennsylvania, Seneca Savings Bank is required to file an annual return with and pay shares Tax to the Commonwealth of Pennsylvania.