CB Financial Services, Inc. 10-Q

Item 1. Financial Statements. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) March 31, 2025 December 31, 2024 (Dollars in thousands, except per share and share data) ASSETS Cash and Due From Banks: Interest-Earning $ 52,191 $ 39,332 Noninterest-Earning 9,083 10,240 Total Cash and Due From Banks 61,274 49,572 Securities: Available-for-Sale Debt Securities, at Fair Value 257,809 259,514 Equity Securities, at Fair Value 890 2,639 Total Securities 258,699 262,153 Loans Held for Sale 230 900 Loans, Net of Allowance for Credit Losses of $ 9,819 and $ 9,805 at March 31, 2025 and December 31, 2024, Respectively 1,078,675 1,082,821 Premises and Equipment, Net 20,392 20,708 Bank-Owned Life Insurance 24,358 24,209 Goodwill 9,732 9,732 Accrued Interest Receivable and Other Assets 30,096 31,469 TOTAL ASSETS $ 1,483,456 $ 1,481,564 LIABILITIES Deposits: Noninterest-Bearing Demand Accounts $ 267,392 $ 267,896 Interest-Bearing Demand Accounts 341,212 316,764 Money Market Accounts 228,005 231,458 Savings Accounts 176,722 170,530 Time Deposits 267,766 296,869 Total Deposits 1,281,097 1,283,517 Other Borrowings 34,728 34,718 Accrued Interest Payable and Other Liabilities 19,342 15,951 TOTAL LIABILITIES 1,335,167 1,334,186 STOCKHOLDERS' EQUITY Common Stock, $ 0.4167 Par Value; 35,000,000 Shares Authorized, 5,828,717 Shares Issued and 5,099,069 Shares Outstanding at March 31, 2025, with 5,787,744 and 5,132,654 Shares Issued and Outstanding at December 31, 2024. 2,429 2,412 Capital Surplus 86,960 86,373 Retained Earnings 91,484 90,856 Treasury Stock, at Cost ( 729,648 and 655,090 Shares at March 31, 2025 and December 31, 2024, Respectively) ( 17,214 ) ( 15,028 ) Accumulated Other Comprehensive Loss ( 15,370 ) ( 17,235 ) TOTAL STOCKHOLDERS' EQUITY 148,289 147,378 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,483,456 $ 1,481,564 The accompanying notes are an integral part of these consolidated financial statements 1 Table of Contents CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended March 31, 2025 2024 (Dollars in thousands, except share and per share data) INTEREST AND DIVIDEND INCOME Loans, Including Fees $ 14,528 $ 14,838 Investment Securities: Taxable 2,777 2,303 Dividends 28 27 Other Interest and Dividend Income 514 818 TOTAL INTEREST AND DIVIDEND INCOME 17,847 17,986 INTEREST EXPENSE Deposits 6,111 5,991 Short-Term Borrowings 23 — Other Borrowings 402 404 TOTAL INTEREST EXPENSE 6,536 6,395 NET INTEREST AND DIVIDEND INCOME 11,311 11,591 Provision (Recovery) For Credit Losses - Loans 68 ( 143 ) (Recovery) Provision For Credit Losses - Unfunded Commitments ( 108 ) 106 NET INTEREST AND DIVIDEND INCOME AFTER NET (RECOVERY) PROVISION FOR CREDIT LOSSES 11,351 11,628 NONINTEREST INCOME Service Fees 462 415 Insurance Commissions 1 2 Other Commissions 63 62 Net Gain on Sales of Loans 22 22 Net Loss on Securities ( 69 ) ( 166 ) Net Gain on Purchased Tax Credits 4 12 Net Gain on Disposal of Premises and Equipment — 274 Income from Bank-Owned Life Insurance 149 148 Net Gain on Bank-Owned Life Insurance Claims — 915 Other Income 155 232 TOTAL NONINTEREST INCOME 787 1,916 NONINTEREST EXPENSE Salaries and Employee Benefits 6,036 4,576 Occupancy 750 749 Equipment 330 264 Data Processing 797 692 Federal Deposit Insurance Corporation Assessment 176 129 Pennsylvania Shares Tax 257 297 Contracted Services 310 281 Legal and Professional Fees 262 212 Advertising 119 129 Other Real Estate Owned (Income) — ( 23 ) Amortization of Intangible Assets — 341 Other Expense 765 781 TOTAL NONINTEREST EXPENSE 9,802 8,428 Income Before Income Tax Expense 2,336 5,116 Income Tax Expense 427 920 NET INCOME $ 1,909 $ 4,196 EARNINGS PER SHARE Basic $ 0.37 $ 0.82 Diluted 0.35 0.82 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 5,125,577 5,129,903 Diluted 5,471,006 5,142,286 The accompanying notes are an integral part of these consolidated financial statements 2 Table of Contents CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) Three Months Ended March 31, 2025 2024 (Dollars in thousands) Net Income $ 1,909 $ 4,196 Other Comprehensive Income (Loss): Unrealized Gain (Loss) on Investment Securities Available-for-Sale 2,371 ( 1,628 ) Income Tax Effect ( 506 ) 295 Other Comprehensive Income (Loss), Net of Income Tax Effect 1,865 ( 1,333 ) Total Comprehensive Income $ 3,774 $ 2,863 The accompanying notes are an integral part of these consolidated financial statements 3 Table of Contents CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) Three Months Ended March 31, 2025 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity (Dollars in thousands, except share and per share data) December 31, 2024 5,787,744 $ 2,412 $ 86,373 $ 90,856 $ ( 15,028 ) $ ( 17,235 ) $ 147,378 Comprehensive Income: Net Income — — — 1,909 — — 1,909 Other Comprehensive Income — — — — — 1,865 1,865 Restricted Stock Awards Granted 25,235 10 ( 10 ) — — — — Restricted Stock Awards Forfeited ( 200 ) — 2 — ( 2 ) — — Stock-Based Compensation Expense — — 223 — — — 223 Exercise of Stock Options 15,938 7 372 — 194 — 573 Treasury stock purchased, at cost ( 82,923 shares) — — — — ( 2,378 ) — ( 2,378 ) Dividends Paid ($ 0.25 Per Share) — — — ( 1,281 ) — — ( 1,281 ) March 31, 2025 5,828,717 $ 2,429 $ 86,960 $ 91,484 $ ( 17,214 ) $ ( 15,370 ) $ 148,289 Three Months Ended March 31, 2024 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity (Dollars in thousands, except share and per share data) December 31, 2023 5,759,378 $ 2,400 $ 85,334 $ 83,392 $ ( 14,545 ) $ ( 16,747 ) $ 139,834 Comprehensive Income: Net Income — — — 4,196 — — 4,196 Other Comprehensive Loss — — — — — ( 1,333 ) ( 1,333 ) Restricted Stock Awards Forfeited ( 1,000 ) — — — — — — Restricted Stock Awards Granted 25,410 11 ( 11 ) — — — — Stock-Based Compensation Expense — — 178 — — — 178 Treasury Stock Purchased, at cost ( 222 shares) — — — — ( 5 ) — ( 5 ) Dividends Paid ($ 0.25 Per Share) — — — ( 1,280 ) — — ( 1,280 ) March 31, 2024 5,783,788 $ 2,411 $ 85,501 $ 86,308 $ ( 14,550 ) $ ( 18,080 ) $ 141,590 The accompanying notes are an integral part of these consolidated financial statements 4 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, 2025 2024 (Dollars in thousands) OPERATING ACTIVITIES Net Income $ 1,909 $ 4,196 Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities Net Accretion on Securities ( 26 ) ( 212 ) Depreciation and Amortization 442 718 Provision (Recovery) for Credit Losses - Loans 68 ( 143 ) (Recovery) Provision for Credit Losses - Unfunded Commitments ( 108 ) 106 Loss on Securities 69 166 Gain on Purchased Tax Credits ( 4 ) ( 12 ) Income from Bank-Owned Life Insurance ( 149 ) ( 148 ) Gain on Bank-Owned Life Insurance Death Benefit Claims — ( 915 ) Proceeds From Mortgage Loans Sold 2,063 994 Originations of Mortgage Loans for Sale ( 1,774 ) ( 972 ) Gain on Sale of Loans ( 22 ) ( 22 ) Gain on Sale of Other Real Estate Owned and Repossessed Assets — ( 7 ) Noncash Expense for Stock-Based Compensation 223 178 Decrease (Increase) in Accrued Interest Receivable 57 ( 162 ) Gain on Disposal of Premises and Equipment — ( 274 ) Increase (Decrease) in Deferred Income Tax 510 ( 300 ) Increase in Taxes Payable 384 925 (Decrease) Increase in Accrued Interest Payable ( 46 ) 399 Other, Net 431 ( 1,255 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 4,027 3,260 INVESTING ACTIVITIES Investment Securities Available for Sale: Proceeds From Principal Repayments and Maturities 14,171 3,082 Purchases of Securities ( 10,069 ) ( 19,770 ) Proceeds from Sale of Securities 1,680 — Net Decrease in Loans 7,466 24,482 Purchase of Premises and Equipment ( 101 ) ( 970 ) Proceeds from Disposal of Premises and Equipment — 988 Proceeds From Sale of Other Real Estate Owned — 169 Decrease in Restricted Equity Securities 34 177 NET CASH PROVIDED BY INVESTING ACTIVITIES 13,181 8,158 FINANCING ACTIVITIES Net Decrease in Deposits ( 2,420 ) ( 4,665 ) Cash Dividends Paid ( 1,281 ) ( 1,280 ) Treasury Stock, Purchases at Cost ( 2,378 ) ( 5 ) Exercise of Stock Options 573 — NET CASH USED IN FINANCING ACTIVITIES ( 5,506 ) ( 5,950 ) INCREASE IN CASH AND CASH EQUIVALENTS 11,702 5,468 CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 49,572 68,223 CASH AND DUE FROM BANKS AT END OF PERIOD $ 61,274 $ 73,691 The accompanying notes are an integral part of these consolidated financial statements 5 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, 2025 2024 (Dollars in thousands) SUPPLEMENTAL CASH FLOW INFORMATION: Cash Paid For: Interest on Deposits and Borrowings (Including Interest Credited to Deposits of $ 6,302 and $ 5,736 , Respectively) $ 6,581 $ 5,995 Income Taxes 1,000 32 SUPPLEMENTAL NONCASH DISCLOSURE: Transfer of Loans from Loans Held for Sale to Portfolio 403 — Proceeds Receivable from Claims on Bank-Owned Life Insurance — 2,679 Securities Purchased Not Settled — 10,075 Syndicated Loans Purchased and Sold Not Settled, net 2,985 10,550 Right of Use Asset Recognized — 1,042 Lease Liability Recognized — 1,042 Unfunded Commitment in Low Income Housing Tax Credit 4,995 — The accompanying notes are an integral part of these consolidated financial statements 6 Table of Contents NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements include the accounts of CB Financial Services, Inc. (“CB Financial”) and its wholly owned subsidiary, Community Bank (the “Bank”), and the Bank’s wholly owned subsidiary, Exchange Underwriters, Inc. (“Exchange Underwriters” or "EU"). CB Financial, the Bank and Exchange Underwriters are collectively referred to as the “Company”. All intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with general practice within the banking industry. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading in any material respect. In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Statements of Financial Condition and income and expenses for the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to determination of the allowance for credit losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, impairment evaluations of securities, goodwill and intangible assets impairment, and the valuation of deferred tax assets. In the opinion of management, the accompanying unaudited interim financial statements include all adjustments considered necessary for a fair presentation of the Company’s financial position and results of operations at the dates and for the periods presented. All these adjustments are of a normal, recurring nature, and they are the only adjustments included in the accompanying unaudited interim financial statements. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Interim results are not necessarily indicative of results for a full year. Nature of Operations The Company derives substantially all its income from banking and bank-related services which include interest income on commercial, commercial mortgage, residential real estate and consumer loan financing, as well as interest and dividend income on securities, insurance commissions, and fees generated from deposit services to its customers. The Company provides banking services through its subsidiary, Community Bank, a Pennsylvania-chartered commercial bank headquartered in Carmichaels, Pennsylvania. The Bank is a community-oriented institution offering residential and commercial real estate loans, commercial and industrial loans, and consumer loans as well as a variety of deposit products for individuals and businesses in its market area. The Bank operates nine offices in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania, and three offices in Marshall and Ohio Counties in West Virginia. On December 1, 2023, the Company announced that the Bank and EU entered into an Asset Purchase Agreement with World Insurance Associates, LLC ("World") pursuant to which EU sold substantially all of its assets to World for a purchase price of $ 30.5 million cash plus possible additional earn-out payments. The sale of assets was completed December 8, 2023, and resulted in a pre-tax gain of $ 24.6 million. This transaction did not meet the criteria for discontinued operations reporting. During 2024, the Company recognized an additional gain of $ 138,000 following the final settlement of all liabilities and an earn-out payment of $ 708,000 . Operating Segments An operating segment is defined as a component of an enterprise that engages in business activities which generate revenue and incur expense, and the operating results of which are reviewed by management. The Company has evaluated the provisions of ASC Topic 280, Segment Reporting , and determined that at March 31, 2025 and December 31, 2024, the Company had one reportable segment, community banking services. Critical Accounting Policies; Use of Critical Accounting Estimates The disclosures below supplement the accounting policies disclosed in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC. Allowance for Credit Losses (ACL) The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for 7 Table of Contents determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. The ACL is reported separately as a contra-asset account on the Consolidated Statement of Financial Condition. The expected credit loss for unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in other liabilities while the provision for credit losses related to unfunded commitments is reported in provision for credit losses - unfunded commitments in the Consolidated Statements of Income. ACL on Loans Receivable The ACL on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether loans within a pool continue to exhibit similar risk characteristics. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. The Company evaluates the pooling methodology at least annually. Loans are charged off against the ACL when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off. The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. Such segments include residential mortgage, commercial real estate mortgages, construction, commercial business, consumer and other. For most segments, the Company calculates estimated credit losses using a probability of default and loss given default methodology, the results of which are applied to the aggregated discounted cash flow of each individual loan within the segment. The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount. The Company estimates the ACL on loans via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts. The Company evaluates a variety of factors including third party economic forecasts, industry trends and other available published economic information in arriving at its forecasts. After the reasonable and supportable forecast period, the Company reverts, on a straight-line basis, to average historical losses. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a restructuring will be executed with an individual borrower or the renewal option is included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. Also included in the ACL on loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and non-accrual loans, and the effect of external factors such as competition, legal and regulatory requirements, among others. Furthermore, the Company considers the inherent uncertainty in quantitative models that are built upon historical data. Individually Evaluated Loans On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less estimated costs to sell at the reporting date, and the amortized cost basis of the loan. ACL on Off-Balance Sheet Unfunded Commitments The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancellable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. As noted above, the ACL on unfunded loan commitments is included in other liabilities on the Consolidated Statement of Financial Condition and the related credit expense is recorded in provision for credit losses - unfunded commitments in the Consolidated Statements of Income. 8 Table of Contents ACL on Available-for-Sale Securities For available-for-sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available-for-sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating by a rating agency, and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income (loss), net of tax. The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major agencies and have a long history of no credit losses. Changes in the ACL are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Accrued Interest Receivable The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans and available-for-sale securities. Accrued interest receivable on loans is reported as a component of accrued interest receivable and other assets on the Consolidated Statement of Financial Condition, totaled $ 4.0 million at March 31, 2025 and $ 3.9 million at December 31, 2024 and is excluded from the estimate of credit losses. Accrued interest receivable on available-for-sale securities, also a component of accrued interest receivable and other assets on the Consolidated Statement of Financial Condition, totaled $ 1.5 million at March 31, 2025 and $ 1.7 million at December 31, 2024 and is excluded from the estimate of credit losses. Recent Accounting Standards In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . This ASU requires that public entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The ASU requires all entities to disclose on an annual basis (1) the amount of income taxes paid, disaggregated by federal, state and foreign taxes and (2) the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal or greater than five percent of total income taxes paid. The ASU also requires that all entities disclose (1) income (loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic or foreign and (2) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state and foreign. This ASU is effective for public entities for annual periods beginning after December 15, 2024. The Company does not expect the adoption of the ASU to have a material effect on the Company's consolidated statements of financial condition and results of operations. In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (DISE); this ASU was then superseded by ASU 2025-01, Clarifying the Effective Date , to clarify the effective date for interim reporting. Collectively, these ASU's require that public entities on an annual and interim basis disclose specific natural expenses contained within each relevant income statement expense caption. These specified natural expenses are: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion and amortization recognized as part of oil- and gas- producing activities (DD&A). This ASU is effective for public entities for annual periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company does not expect the adoption of the ASU to have a material effect on the Company's consolidated statements of financial condition and results of operations. 9 Table of Contents Note 2. Earnings Pe r Share There are no convertible securities which would affect the numerator in calculating basic and diluted earnings per share; therefore, net income as presented on the Consolidated Statements of Income is used as the numerator. The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation: Three Months Ended March 31, 2025 2024 (Dollars in thousands, except share and per share data) Net Income $ 1,909 $ 4,196 Weighted-Average Basic Common Shares Outstanding 5,125,577 5,129,903 Dilutive Effect of Common Stock Equivalents (Stock Options and Restricted Stock) 345,429 12,383 Weighted-Average Diluted Common Shares and Common Stock Equivalents Outstanding 5,471,006 5,142,286 Earnings Per Share: Basic $ 0.37 $ 0.82 Diluted 0.35 0.82 The dilutive effect on weighted average diluted common shares outstanding is the result of outstanding stock options and nonvested restricted stock. The following table presents for the periods indicated (a) options to purchase shares of common stock that were outstanding but not included in the computation of earnings per share because the options’ exercise price was greater than the average market price of the common shares for the period, and (b) shares of restricted stock awards that were not included in the computation of diluted earnings per share because the hypothetical repurchase of shares under the treasury stock method exceeded the weighted average nonvested restricted awards, therefore the effects would be anti-dilutive. Three Months Ended March 31, 2025 2024 Stock Options 24,310 315,566 Restricted Stock 25,235 30,385 10 Table of Contents Note 3. Securities The following tables present the amortized cost and fair value of securities available-for-sale at the dates indicated: March 31, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (Dollars in thousands) Available-for-Sale Debt Securities: U.S. Government Agencies $ 4,997 $ — $ ( 879 ) $ 4,118 Obligations of States and Political Subdivisions 3,500 6 ( 87 ) 3,419 Mortgage-Backed Securities - Government-Sponsored Enterprises 52,647 231 ( 2,658 ) 50,220 Collateralized Mortgage Obligations - Government-Sponsored Enterprises 108,797 73 ( 14,415 ) 94,455 Collateralized Loan Obligations 97,922 8 ( 278 ) 97,652 Corporate Debt 9,477 — ( 1,532 ) 7,945 Total Available-for-Sale Debt Securities 277,340 318 ( 19,849 ) 257,809 Equity Securities: Mutual Funds 890 Total Securities $ 258,699 December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (Dollars in thousands) Available-for-Sale Debt Securities: U.S. Government Agencies $ 4,996 $ — $ ( 1,051 ) $ 3,945 Obligations of States and Political Subdivisions 3,496 — ( 149 ) 3,347 Mortgage-Backed Securities - Government-Sponsored Enterprises 53,628 — ( 3,265 ) 50,363 Collateralized Mortgage Obligations - Government-Sponsored Enterprises 111,076 — ( 16,119 ) 94,957 Collateralized Loan Obligations 98,741 96 ( 58 ) 98,779 Corporate Debt 9,479 — ( 1,356 ) 8,123 Total Available-for-Sale Debt Securities 281,416 96 ( 21,998 ) 259,514 Equity Securities: Mutual Funds 879 Other 1,760 Total Equity Securities 2,639 Total Securities $ 262,153 11 Table of Contents The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at the dates indicated: March 31, 2025 Less than 12 months 12 Months or Greater Total Number of Securities Fair Value Gross Unrealized Losses Number of Securities Fair Value Gross Unrealized Losses Number of Securities Fair Value Gross Unrealized Losses (Dollars in thousands) U.S. Government Agencies — $ — $ — 1 $ 4,118 $ ( 879 ) 1 $ 4,118 $ ( 879 ) Obligations of States and Political Subdivisions 1 531 ( 5 ) 5 2,332 ( 82 ) 6 2,863 ( 87 ) Mortgage Backed Securities- Government-Sponsored Enterprises 1 4,309 ( 43 ) 8 15,104 ( 2,615 ) 9 19,413 ( 2,658 ) Collateralized Mortgage Obligations - Government-Sponsored Enterprises 2 14,948 ( 79 ) 21 71,477 ( 14,336 ) 23 86,425 ( 14,415 ) Collateralized Loan Obligations 10 64,196 ( 252 ) 1 10,031 ( 26 ) 11 74,227 ( 278 ) Corporate Debt — — — 3 7,945 ( 1,532 ) 3 7,945 ( 1,532 ) Total 14 $ 83,984 $ ( 379 ) 39 $ 111,007 $ ( 19,470 ) 53 $ 194,991 $ ( 19,849 ) December 31, 2024 Less than 12 months 12 Months or Greater Total Number of Securities Fair Value Gross Unrealized Losses Number of Securities Fair Value Gross Unrealized Losses Number of Securities Fair Value Gross Unrealized Losses (Dollars in thousands) U.S. Government Agencies — $ — $ — 1 $ 3,945 $ ( 1,051 ) 1 $ 3,945 $ ( 1,051 ) Obligations of States and Political Subdivisions 2 1,068 ( 16 ) 5 2,279 ( 133 ) 7 3,347 ( 149 ) Mortgage Backed Securities- Government-Sponsored Enterprises 5 35,232 ( 222 ) 8 15,131 ( 3,043 ) 13 50,363 ( 3,265 ) Collateralized Mortgage Obligations - Government-Sponsored Enterprises 4 31,208 ( 662 ) 20 63,749 ( 15,457 ) 24 94,957 ( 16,119 ) Collateralized Loan Obligations 5 27,564 ( 58 ) — — — 5 27,564 ( 58 ) Corporate Debt — — — 3 8,123 ( 1,356 ) 3 8,123 ( 1,356 ) Total 16 $ 95,072 $ ( 958 ) 37 $ 93,227 $ ( 21,040 ) 53 $ 188,299 $ ( 21,998 ) 12 Table of Contents For debt securities, the Company does not believe that any individual unrealized loss as of March 31, 2025 or December 31, 2024, represents a credit related impairment. The Company performs a review of the entire securities portfolio on a quarterly basis to identify securities that may indicate a credit related impairment. The unrealized losses on securities at March 31, 2025 and December 31, 2024 relate principally to changes in market interest rates subsequent to the acquisition of the specific securities. The Company does not intend to sell, and it is not more likely than not that it will be required to sell any of the securities in an unrealized loss position before recovery of its amortized cost or maturity of the security. Total securities available to be pledged have a fair value of $ 239.8 million at March 31, 2025 and $ 251.3 million at December 31, 2024 of which securities with a fair value of $ 163.1 million and $ 176.2 million at March 31, 2025 and December 31, 2024, respectively, were pledged to secure uninsured public deposits, borrowings or for other purposes as required or permitted by law. The scheduled maturities of securities available-for-sale are summarized as follows. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay debt obligations with or without prepayment penalties. Mortgage-backed securities, collateralized mortgage obligations and collateralized loan obligations are classified in the table below based on their contractual maturity date; however, regular principal payments and prepayments of principal are received on a monthly basis. March 31, 2025 Amortized Cost Fair Value (Dollars in thousands) Due in One Year or Less $ 37 $ 37 Due after One Year through Five Years 692 682 Due after Five Years through Ten Years 48,402 45,997 Due after Ten Years 228,209 211,093 Total $ 277,340 $ 257,809 The following table presents the loss on equity securities from both realized sales and unrealized market adjustments for the periods indicated. There was no realized gain or loss on sales of debt securities for the periods indicated. All losses presented in the table below are reported in Net Loss on Securities on the Consolidated Statements of Income. Three Months Ended March 31, 2025 2024 (Dollars in thousands) Equity Securities Net Unrealized Loss Recognized on Securities Held $ ( 56 ) $ ( 166 ) Net Realized Loss Recognized on Securities Sold ( 13 ) — Net Loss on Equity Securities $ ( 69 ) $ ( 166 ) Net Loss on Securities $ ( 69 ) $ ( 166 ) Note 4. Loans and Allowance for Credit Losses The Company’s loan portfolio is segmented to enable management to monitor risk and performance. Real estate loans are further segregated into three classes. Residential mortgages include those secured by residential properties and include home equity loans, while commercial mortgages consist of loans to commercial borrowers secured by commercial real estate. Construction loans typically consist of loans to build commercial buildings and acquire and develop residential real estate. The commercial and industrial segment consists of loans to finance the activities of commercial customers. The consumer segment consists primarily of indirect auto loans as well as personal installment loans and personal or overdraft lines of credit. Residential mortgage loans are typically longer-term loans and, therefore, generally present greater interest rate risk than the consumer and commercial loans. Under certain economic conditions, housing values may decline, which may increase the risk that the collateral values are not sufficient. Commercial real estate loans generally present a higher level of credit risk than loans secured by residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income-producing properties, and the increased difficulty in evaluating and monitoring these types of loans. Furthermore, the repayment of commercial real estate loans is typically dependent upon the successful operation of the 13 Table of Contents related real estate project. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed, a bankruptcy court modifies a lease term, or a major tenant is unable to fulfill its lease obligations), the borrower’s ability to repay the loan may be impaired. Construction loans are originated to individuals to finance the construction of residential dwellings and are also originated for the construction of commercial properties, including hotels, apartment buildings, housing developments, and owner-occupied properties used for businesses. Construction loans generally provide for the payment of interest only during the construction phase, which is usually 12 to 18 months. At the end of the construction phase, the loan generally converts to a permanent residential or commercial mortgage loan. Construction loan risks include overfunding in comparison to the plans, untimely completion of work, and leasing and stabilization after project completion. Commercial and industrial loans are generally secured by inventories, accounts receivable, and other business assets, which present collateral risk. Consumer loans generally have higher interest rates and shorter terms than residential mortgage loans; however, they have additional credit risk due to the type of collateral securing the loan. The following table presents the classifications of loans as of the dates indicated: March 31, 2025 December 31, 2024 (Dollars in thousands) Real Estate: Residential $ 334,744 $ 337,990 Commercial 497,316 485,513 Construction 54,597 54,705 Commercial and Industrial 107,419 112,047 Consumer 61,854 70,508 Other 32,564 31,863 Total Loans 1,088,494 1,092,626 Allowance for Credit Losses ( 9,819 ) ( 9,805 ) Loans, Net $ 1,078,675 $ 1,082,821 Included in total loans above are unamortized net deferred loan fees of $ 896 ,000 and $ 846 ,000 at March 31, 2025 and December 31, 2024, respectively. The Company uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first five categories are not considered criticized and are aggregated as “pass” rated. The criticized rating categories used by management generally follow bank regulatory definitions. The special mention category includes assets that are currently protected but are below average quality, resulting in an undue credit risk, but not to the point of justifying a substandard classification. Loans in the substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as loss are considered uncollectible and of such little value that continuance as an asset is not warranted. The following tables present the Company’s loans by year of origination, loan segmentation and risk indicator summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of the dates indicated. There were no loans in the criticized category of Loss. 14 Table of Contents Classified Loans by Origination Year (as of March 31, 2025) (dollars in thousands) 2025 2024 2023 2022 2021 Prior Revolving Loans Amortized Cost Basis Total Real Estate: Residential Pass $ 3,257 $ 18,488 $ 31,584 $ 45,939 $ 41,128 $ 170,600 $ 18,007 $ 329,003 Special Mention — — — 2,566 — — — 2,566 Substandard — — 2,205 — — 970 — 3,175 Doubtful — — — — — — — — Loss — — — — — — — — Total 3,257 18,488 33,789 48,505 41,128 171,570 18,007 334,744 Commercial Pass 17,778 64,171 53,004 68,639 82,096 192,369 2,390 480,447 Special Mention — 5,897 527 — 3,441 1,748 — 11,613 Substandard — — — 176 — 5,080 — 5,256 Doubtful — — — — — — — — Loss — — — — — — — — Total 17,778 70,068 53,531 68,815 85,537 199,197 2,390 497,316 Construction Pass — 11,968 20,782 14,574 269 — — 47,593 Special Mention — — — — — 7,004 — 7,004 Substandard — — — — — — — — Doubtful — — — — — — — — Loss — — — — — — — — Total — 11,968 20,782 14,574 269 7,004 — 54,597 Commercial and Industrial Pass 6,736 27,753 24,431 11,541 5,337 7,755 20,324 103,877 Special Mention — — 197 — — 3,145 200 3,542 Substandard — — — — — — — — Doubtful — — — — — — — — Loss — — — — — — — — Total 6,736 27,753 24,628 11,541 5,337 10,900 20,524 107,419 Consumer Pass 238 667 8,138 27,884 12,936 6,691 5,170 61,724 Special Mention — — — — — — — — Substandard — — — — 35 95 — 130 Doubtful — — — — — — — — Loss — — — — — — — — Total 238 667 8,138 27,884 12,971 6,786 5,170 61,854 Other Pass — 164 4,037 22,210 23 5,012 1,118 32,564 Special Mention — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Loss — — — — — — — — Total — 164 4,037 22,210 23 5,012 1,118 32,564 Total Loans $ 28,009 $ 129,108 $ 144,905 $ 193,529 $ 145,265 $ 400,469 $ 47,209 $ 1,088,494 Gross Charge Offs $ — $ — $ 19 $ 4 $ 1 $ 94 $ 17 $ 135 15 Table of Contents Classified Loans by Origination Year (as of December 31, 2024) (dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total Real Estate: Residential Pass $ 16,932 $ 34,311 $ 46,602 $ 41,652 $ 54,422 $ 122,083 $ 18,015 $ 334,017 Special Mention — — 2,586 — — — — 2,586 Substandard — — 50 — — 1,337 — 1,387 Doubtful — — — — — — — — Loss — — — — — — — — Total 16,932 34,311 49,238 41,652 54,422 123,420 18,015 337,990 Commercial Pass 64,438 52,178 67,336 82,578 45,959 147,557 2,839 462,885 Special Mention 5,919 1,683 2,214 4,496 280 2,782 — 17,374 Substandard — — 175 — — 5,079 — 5,254 Doubtful — — — — — — — — Loss — — — — — — — — Total 70,357 53,861 69,725 87,074 46,239 155,418 2,839 485,513 Construction Pass 11,987 21,145 14,342 269 — — — 47,743 Special Mention — — — — 6,962 — — 6,962 Substandard — — — — — — — — Doubtful — — — — — — — — Loss — — — — — — — — Total 11,987 21,145 14,342 269 6,962 — — 54,705 Commercial and Industrial Pass 33,295 25,063 12,280 5,546 4,374 4,530 20,338 105,426 Special Mention — 200 — — — 3,221 3,200 6,621 Substandard — — — — — — — — Doubtful — — — — — — — — Loss — — — — — — — — Total 33,295 25,263 12,280 5,546 4,374 7,751 23,538 112,047 Consumer Pass 779 8,980 31,806 14,973 4,809 3,519 5,429 70,295 Special Mention — — — — — — — — Substandard — — — 42 21 150 — 213 Doubtful — — — — — — — — Loss — — — — — — — — Total 779 8,980 31,806 15,015 4,830 3,669 5,429 70,508 Other Pass 178 4,039 21,877 27 571 4,553 618 31,863 Special Mention — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Loss — — — — — — — — Total 178 4,039 21,877 27 571 4,553 618 31,863 Total Loans $ 133,528 $ 147,599 $ 199,268 $ 149,583 $ 117,398 $ 294,811 $ 50,439 $ 1,092,626 Gross Charge Offs $ — $ 46 $ 329 $ 57 $ 54 $ 52 $ 114 $ 652 16 Table of Contents The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of the dates indicated: March 31, 2025 Loans Current 30-59 Days Past Due 60-89 Days Past Due 90 Days Or More Past Due Total Past Due Non- Accrual Total Loans (Dollars in Thousands) Real Estate: Residential $ 330,678 $ 2,016 $ — $ — $ 2,016 $ 2,050 $ 334,744 Commercial 496,271 856 — — 856 189 497,316 Construction 54,597 — — — — — 54,597 Commercial and Industrial 107,223 — 196 — 196 — 107,419 Consumer 61,231 487 6 — 493 130 61,854 Other 32,564 — — — — — 32,564 Total Loans $ 1,082,564 $ 3,359 $ 202 $ — $ 3,561 $ 2,369 $ 1,088,494 December 31, 2024 Loans Current 30-59 Days Past Due 60-89 Days Past Due 90 Days Or More Past Due Total Past Due Non- Accrual Total Loans (Dollars in Thousands) Real Estate: Residential $ 331,705 $ 2,926 $ 1,971 $ — $ 4,897 $ 1,388 $ 337,990 Commercial 484,959 366 — — 366 188 485,513 Construction 54,705 — — — — — 54,705 Commercial and Industrial 112,047 — — — — — 112,047 Consumer 69,454 809 32 — 841 213 70,508 Other 31,863 — — — — — 31,863 Total Loans $ 1,084,733 $ 4,101 $ 2,003 $ — $ 6,104 $ 1,789 $ 1,092,626 Additional interest income that would have been recorded if the loans that were nonaccrual at March 31, 2025 were current was $ 52,000 for the three months ended March 31, 2025, and $ 20,000 for the three months ended March 31, 2024. 17 Table of Contents The following table sets forth the amounts for amortized cost basis of loans on nonaccrual status, loans past due 90 days still accruing, and categories of nonperforming assets at the dates indicated. March 31, 2025 Nonaccrual With No ACL Nonaccrual With ACL Loans Past Due 90 Days Still Accruing Total Nonperforming Assets (Dollars in Thousands) Nonaccrual Loans: Real Estate: Residential $ 2,050 $ — $ — $ 2,050 Commercial 189 — — 189 Consumer 130 — — 130 Total Nonaccrual Loans $ 2,369 $ — $ — 2,369 Total Other Real Estate Owned — Total Nonperforming Assets $ 2,369 December 31, 2024 Nonaccrual With No ACL Nonaccrual With ACL Loans Past Due 90 Days Still Accruing Total Nonperforming Assets (Dollars in Thousands) Nonaccrual Loans: Real Estate: Residential $ 1,388 $ — $ — $ 1,388 Commercial 188 — — 188 Consumer 213 — — 213 Total Nonaccrual Loans $ 1,789 $ — $ — 1,789 Total Other Real Estate Owned — Total Nonperforming Assets $ 1,789 No interest income on nonaccrual loans was recognized during the three months ended March 31, 2025 and March 31, 2024. All modifications and refinancing, including those with borrowers that are experiencing financial difficulty are subject to the modification guidance in ASC 310-20. Loan modifications could meet the definition of a new loan if certain terms of the loan are modified to the benefit of the lender and the modification to the terms of the loan are more than minor. Both of these criteria have to be met to define the modification as a new loan. If a loan modification meets the criteria of new loan, then the new loan should include the remaining net investment in the original loan, additional funds advanced, fees received, and direct loan origination costs with the refinancing or restructuring. Additionally, the effective interest rate should be recalculated based on the amortized cost basis of the new loan and a reassessment of contractual cash flow. For the three months ended March 31, 2025 and March 31, 2024, there were no new loan modifications to borrowers experiencing financial difficulty. The recorded investment of residential real estate loans for which formal foreclosure proceedings were in process according to applicable requirements of the local jurisdiction was $ 720 ,000 and $ 1.2 million at March 31, 2025 and December 31, 2024, respectively. 18 Table of Contents The activity in the ACL - Loans is summarized below by primary segments for the periods indicated: Real Estate Residential Real Estate Commercial Real Estate Construction Commercial and Industrial Consumer Other Total (Dollars in thousands) December 31, 2024 $ 2,926 $ 3,103 $ 1,264 $ 1,584 $ 687 $ 241 $ 9,805 Charge-offs — — — — ( 135 ) — ( 135 ) Recoveries 1 — — 43 37 — 81 (Recovery) Provision for Credit Losses - Loans ( 31 ) 25 ( 37 ) 121 ( 3 ) ( 7 ) 68 March 31, 2025 $ 2,896 $ 3,128 $ 1,227 $ 1,748 $ 586 $ 234 $ 9,819 Real Estate Residential Real Estate Commercial Real Estate Construction Commercial and Industrial Consumer Other Total (Dollars in thousands) December 31, 2023 $ 3,129 $ 2,630 $ 639 $ 1,693 $ 1,367 $ 249 $ 9,707 Charge-offs ( 1 ) — — ( 12 ) ( 50 ) — ( 63 ) Recoveries 11 — — 43 27 — 81 (Recovery) Provision for Credit Losses - Loans ( 307 ) 318 231 ( 137 ) ( 260 ) 12 ( 143 ) March 31, 2024 $ 2,832 $ 2,948 $ 870 $ 1,587 $ 1,084 $ 261 $ 9,582 Loans that do not share risk characteristics are evaluated on an individual basis. For loans that are individually evaluated and collateral dependent, financial loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the ACL - Loans is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. During the three months ended March 31, 2025, there were $ 7.9 million of loans that required specific valuation allowances of $ 570 ,000. During the three months ended March 31, 2024, there were no loans that required a credit loss to be individually assigned. The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (accrued interest payable and other liabilities on the Consolidated Statement of Financial Condition), with adjustments to the reserve recognized in provision for credit losses - unfunded commitments on the Consolidated Statement of Income. The Company’s activity in the allowance for credit losses on unfunded commitments for the periods indicated was as follows: (in thousands) Allowance for Credit Losses Balance at December 31, 2024 $ 691 Recovery for Credit Losses - Unfunded Commitments ( 108 ) Balance at March 31, 2025 $ 583 (in thousands) Allowance for Credit Losses Balance at December 31, 2023 $ 500 Provision for Credit Losses - Unfunded Commitments 106 Balance at March 31, 2024 $ 606 19 Table of Contents Note 5. Derivatives and Hedging Activities Derivatives Not Designated as Hedging Instruments The Company has four risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which it is a participant. The risk participation agreements provide credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution. Derivatives Designated as Hedging Instruments In October 2023, the Company entered into an interest rate swap contract that is designated as a fair value hedge to mitigate the risk of interest rate increases and the subsequent impact on the associated fixed rate mortgages. This contract matures on October 17, 2026, has a notional amount of $ 75.0 million and is benchmarked to SOFR. The Company expects the hedge to remain effective during the remaining term of the swap. The following table depicts the credit value and fair value adjustments recorded related to the notional amount of derivatives outstanding and risk participation agreements with other financial institutions. These adjustments are included in Accrued Interest Payable and Other Liabilities on the Company's Consolidated Statement of Financial Condition. March 31, 2025 December 31, 2024 (Dollars in Thousands) Derivatives not Designated as Hedging Instruments Risk Participation Agreements: Credit Value Adjustment $ ( 76 ) $ ( 66 ) Notional Amount 19,841 18,158 Derivatives Designated as Hedging Instruments Interest rate swaps: Fair Value Adjustment ( 1,015 ) ( 801 ) Notional Amount 75,000 75,000 Note 6. Fair Value Disclosure ASC Topic 820 “Fair Value Measurement” defines fair value and provides the framework for measuring fair value and required disclosures about fair value measurements. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the transaction date. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used in valuation methods to determine fair value. The three levels of fair value hierarchy are as follows: Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available. Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are not active for identical or similar assets, and other observable inputs. Level 3 – Fair value is based on significant unobservable inputs. Examples of valuation methodologies that would result in Level 3 classification include option pricing models, discounted cash flows, and other similar techniques. This hierarchy requires the use of observable market data when available. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The majority of the Company’s securities are included in Level 2 of the fair value hierarchy. Fair values for Level 2 securities were primarily determined by a third-party pricing service using both quoted prices for similar assets, when available, and model-based valuation techniques that derive fair value based on market-corroborated data, such as instruments with similar prepayment speeds and default interest rates. The standard inputs that are normally used include benchmark yields of like securities, reportable trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. 20 Table of Contents The Company uses derivative instruments, including interest rate swaps and risk participation agreements, and the fair value of such instruments are calculated using accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative, considering the contractual terms of each derivative, and uses observable market-based inputs, such as interest rate curves and implied volatilities. Credit valuation adjustments are incorporated to appropriately reflect nonperformance risk and the respective counterparties' nonperformance risk in calculating fair value measurements. These instruments are classified as Level 2. There were no transfers into or out of Level 3 during the three months ended March 31, 2025 or year ended December 31, 2024. The following table presents the financial assets measured at fair value on a recurring basis and reported on the Consolidated Statements of Financial Condition as of the dates indicated, by level within the fair value hierarchy: Fair Value Hierarchy March 31, 2025 December 31, 2024 (Dollars in thousands) ASSETS Available-for-Sale Debt Securities U.S. Government Agencies Level 2 $ 4,118 $ 3,945 Obligations of States and Political Subdivisions Level 2 3,419 3,347 Mortgage-Backed Securities - Government-Sponsored Enterprises Level 2 50,220 50,363 Collateralized Mortgage Obligations - Government Sponsored Enterprises Level 2 94,455 94,957 Collateralized Loan Obligations Level 2 97,652 98,779 Corporate Debt Level 2 7,945 8,123 Total Available-for-Sale Debt Securities 257,809 259,514 Equity Securities Mutual Funds Level 1 890 879 Other Level 1 — 1,760 Total Equity Securities 890 2,639 Total Securities $ 258,699 $ 262,153 Total Assets $ 258,699 $ 262,153 LIABILITIES Derivative Financial Liabilities Interest Rate Swaps Level 2 $ 1,015 $ 801 Risk Participation Agreements Level 2 76 66 Total Liabilities $ 1,091 $ 867 The following table presents the financial assets on the Consolidated Statements of Financial Condition measured at fair value on a nonrecurring basis as of the dates indicated by level within the fair value hierarchy for only those nonrecurring assets that had a fair value below the carrying amount. The table also presents the significant unobservable inputs used in the fair value measurements. Financial Asset Fair Value Hierarchy March 31, 2025 Valuation Techniques Significant Unobservable Inputs Range Weighted Average (Dollars in thousands) Individually Evaluated Loans Level 3 $ 7,284 Appraisal of Collateral (1) Appraisal Adjustments (2) 24 % to 100 % 26.5 % 21 Table of Contents Financial Asset Fair Value Hierarchy December 31, 2024 Valuation Techniques Significant Unobservable Inputs Range Weighted Average (Dollars in thousands) Individually Evaluated Loans Level 3 $ 5,244 Appraisal of Collateral (1) Appraisal Adjustments (2) 25 % to 52 % 26.2 % (1) Fair value is generally determined through independent appraisals of the underlying collateral, which may include various Level 3 inputs, which are not identifiable. (2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of appraisal adjustments and liquidation expense are presented as a percent of the appraisal. Individually evaluated loans are evaluated and valued at the time the loan is identified as impaired, at the lower of cost or fair value. Fair value is measured based on the value of the collateral securing the loans and is classified as Level 3 in the fair value hierarchy. At March 31, 2025, the fair value of these loans consisted of loan balances of $ 7.9 million less specific valuation allowances of $ 570 ,000. At December 31, 2024, the fair value of these loans consisted of loan balances of $ 5.6 million less specific valuation allowances of $ 398 ,000. The fair value of mortgage servicing rights ("MSRs") is determined by calculating the present value of estimated future net servicing cash flows, considering expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. The expected rate of mortgage loan prepayments is the most significant factor driving the value of MSRs. MSRs are considered impaired if the carrying value exceeds fair value. Since the valuation model includes significant unobservable inputs as listed above, MSRs are classified as Level 3. At March 31, 2025 and December 31, 2024, the Company did not have any MSRs that would be required to be remeasured. Other real estate owned ("OREO") properties are evaluated at the time of acquisition and recorded at fair value, less estimated selling costs. After acquisition, OREO is recorded at the lower of cost or fair value, less estimated selling costs. The fair value of an OREO property is determined from a qualified independent appraisal and is classified as Level 3 in the fair value hierarchy. As of March 31, 2025 and December 31, 2024, the Company did not have any OREO that would be required to be remeasured. Financial instruments are defined as cash, evidence of an ownership in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on potentially favorable or unfavorable terms. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If no readily available market exists, the fair value estimates for financial instruments should be based upon management’s judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses and other factors, as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from judgments made by management based upon estimates which are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in the assumptions on which the estimated fair values are based may have significant impact on the resulting estimated fair values. As certain assets such as deferred tax assets and premises and equipment are not considered financial instruments, the estimated fair value of financial instruments would not represent the full value of the Company. 22 Table of Contents The following table presents the estimated fair values of the Company’s financial instruments at the dates indicated. March 31, 2025 December 31, 2024 Fair Value Hierarchy Carrying Value Fair Value Carrying Value Fair Value (Dollars in thousands) Financial Assets: Cash and Due From Banks: Interest-Earning Level 1 $ 52,191 $ 52,191 $ 39,332 $ 39,332 Noninterest-Earning Level 1 9,083 9,083 10,240 10,240 Securities See Above 258,699 258,699 262,153 262,153 Loans Held for Sale Level 2 230 230 900 900 Loans, Net Level 3 1,078,675 1,048,251 1,082,821 1,045,104 Restricted Stock Level 2 3,021 3,021 3,055 3,055 Mortgage Servicing Rights Level 3 451 792 466 849 Accrued Interest Receivable Level 2 5,529 5,529 5,586 5,586 Financial Liabilities: Deposits Level 2 1,281,097 1,281,094 1,283,517 1,284,494 Other Borrowed Funds FHLB Borrowings Level 2 20,000 20,000 20,000 20,004 Subordinated Debt Level 2 14,728 14,152 14,718 14,206 Derivative Liabilities Level 2 1,091 1,091 867 867 Accrued Interest Payable Level 2 2,450 2,450 2,496 2,496 Note 7. Commitments and Contingent Liabilities The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business primarily to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby and performance letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statements of Financial Condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby and performance letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The Company maintains an ACL on unfunded commitments to provide for the risk of loss inherent in these arrangements. The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancellable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. The ACL on unfunded loan commitments is included in other liabilities on the Consolidated Statement of Financial Condition and the related expense is recorded in provision for credit losses - unfunded commitments in the Consolidated Statement of Income. 23 Table of Contents The following table presents the unused and available credit balances of financial instruments whose contracts represent credit risk at the dates indicated: March 31, 2025 December 31, 2024 (Dollars in thousands) Standby Letters of Credit $ 630 $ 605 Performance Letters of Credit 668 668 Construction Loans 34,995 41,118 Personal Lines of Credit 7,153 6,959 Overdraft Protection Lines 4,302 4,371 Home Equity Lines of Credit 28,339 27,504 Commercial Lines of Credit 76,436 86,362 Total Commitments $ 152,523 $ 167,587 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the customer. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. Performance letters of credit represent conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These instruments are issued primarily to support bid or performance-related contracts. The coverage period for these instruments is typically a one-year period with an annual renewal option subject to prior approval by management. Fees earned from the issuance of these letters are recognized upon expiration of the letter. For secured letters of credit, the collateral is typically Company deposit instruments or customer business assets. The Company recorded no liability associated with standby letters of credit as of March 31, 2025 and December 31, 2024. Note 8. Leases The Company evaluates all contracts at commencement to determine if a lease is present. In accordance with ASC Topic 842, leases are defined as either operating or finance leases. The Company’s lease contracts are all classified as operating leases and create operating right-of-use (“ROU”) assets and corresponding lease liabilities on the Consolidated Statements of Financial Condition. The leases are primarily ROU assets of land and building for branch and loan production locations. ROU assets are reported in Accrued Interest Receivable and Other Assets and the related lease liabilities in Accrued Interest Payable and Other Liabilities on the Consolidated Statements of Financial Condition. The following tables present the lease expense, ROU assets, weighted average term, discount rate and maturity analysis of lease liabilities for operating leases for the periods and dates indicated. Three Months Ended March 31, 2025 2024 (Dollars in thousands) Operating Lease Expense $ 117 $ 77 Variable Lease Expense 12 8 Total Lease Expense $ 129 $ 85 24 Table of Contents March 31, 2025 December 31, 2024 (Dollars in thousands) Operating Leases: ROU Assets $ 2,729 $ 2,761 Weighted Average Lease Term in Years 10.84 11.07 Weighted Average Discount Rate 4.20 % 4.18 % March 31, 2025 (Dollars in thousands) Maturity Analysis: Due in One Year $ 472 Due After One Year to Two Years 398 Due After Two Years to Three Years 401 Due After Three Years to Four Years 370 Due After Four to Five Years 273 Due After Five Years 1,763 Total $ 3,677 Less: Present Value Discount 869 Lease Liabilities $ 2,808 There were no new lease agreements which commenced during the three months ended March 31, 2025. During the three months ended March 31, 2024, the Bank completed the sale and leaseback of a branch office located in Rostraver, Pennsylvania, for a sales price of $ 1.1 million. As a result, the Bank recorded a pre-tax net gain of $ 274,000 . Concurrently, the Bank entered into a lease agreement with the purchaser under which the Bank will lease the property for an initial term of 20 years with specified renewal options. The lease agreement includes a 2.0 % annual rent escalation during the initial term and renewal terms, if exercised. The Bank recorded an operating lease ROU asset and corresponding lease liability of $ 1.0 million. Note 9. Segment and Related Information Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (CODM) in deciding how to allocate resources and in assessing performance. The Company's President and Chief Executive Officer functions as its CODM. At March 31, 2025 and December 31, 2024, the Company had one reportable segment, community banking services, upon which the CODM makes decisions regarding how to allocate resources and assess performance. Individual bank branches offer a group of similar services, including commercial, real estate and consumer loans, time deposits, checking and savings accounts all with similar operating and economic characteristics. While the CODM monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. The CODM uses net interest income, noninterest income and net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the Company, pursue acquisitions or pay out dividends. Net income is used to monitor budget versus actual results. These metrics and the Company's significant expense categories are disclosed on the Company's Consolidated Statements of Income. 25 Table of Contents Note 10. Stock Based Compensation The following table presents stock option information for the period indicated. Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Outstanding Options at December 31, 2024 377,088 $ 23.65 5.7 Granted — — Exercised ( 24,413 ) 23.51 Forfeited ( 31,792 ) 23.05 Outstanding Options at March 31, 2025 320,883 $ 23.72 5.1 Exercisable Options at March 31, 2025 200,163 $ 24.32 3.3 Number of Shares Weighted Average Exercise Price Weighted Average Remaining Service Period in Years Nonvested Options at March 31, 2025 120,720 $ 22.74 8.1 The following table presents restricted stock award information for the period indicated: Number of Shares Weighted Average Grant Date Fair Value Price Weighted Average Remaining Service Period in Years Nonvested Restricted Stock at December 31, 2024 65,029 $ 22.64 3.0 Granted 25,235 30.62 Vested ( 15,863 ) 23.13 Forfeited ( 310 ) 21.50 Nonvested Restricted Stock at March 31, 2025 74,091 $ 25.26 3.5 The Company recognizes expense over a five-year vesting period for the restricted stock awards and stock options. Stock-based compensation expense related to restricted stock awards and stock options was $ 223,000 and $ 178,000 for the three months ended March 31, 2025 and 2024. Stock-based compensation expense was $ 223,000 and $ 178,000 for the three months ended March 31, 2025 and 2024. As of March 31, 2025 and December 31, 2024, total unrecognized compensation expense was $ 535,000 and $ 701 ,000, respectively, related to stock options, and $ 1.8 million and $ 1.2 million, respectively, related to restricted stock awards. Intrinsic value represents the amount by which the fair value of the underlying stock at March 31, 2025 and December 31, 2024 exceeds the exercise price of the stock options. The intrinsic value of stock options was $ 1.6 million and $ 1.9 million at March 31, 2025 and December 31, 2024, respectively. At March 31, 2025 and December 31, 2024, there were 262,265 and 287,500 shares of common stock available and reserved under the 2024 Plan to be issued as restricted stock awards or units based on the terms of the Plan. At March 31, 2025, 25,235 shares have been granted under the 2024 Plan. The 2021 Plan shall remain in effect as long as any awards are outstanding, but as a result of the approval of the 2024 Plan, no more awards can be granted under the 2021 Plan. Note 11. Variable Interest Entities The Company has an investment interest in the following non-consolidated entity that meets the definition of a variable interest entity ("VIE"). 26 Table of Contents Low Income Housing Tax Credit Investments The Company makes equity investments in an entity that sponsors affordable housing and other community development projects that qualify for the Low Income Housing Tax Credit ("LIHTC") program pursuant to Section 42 of the Internal Revenue Code. The purpose of this investment is not only to assist the Bank in meeting its responsibilities under the Community Reinvestment Act, but also to provide an investment return, primarily through the realization of tax benefits. The LIHTC partnership is managed by unrelated general partners that have the power to direct the activities which most significantly affect the performance of the partnership. The Company is therefore not the primary beneficiary of the LIHTC partnership and accordingly, does not consolidate this VIE. The Company's funding requirements are limited to its invested capital and any additional unfunded commitments for future equity contributions. The Company's maximum exposure to loss as a result of its involvement is limited to the carrying amounts of the investments, including the unfunded commitments. The investment in the LIHTC partnership is included in Accrued Interest Receivable and Other Assets and unfunded commitments are included in Accrued Interest Payable and Other Liabilities on the Consolidated Statements of Financial Condition. The Company currently expects to fund these commitments by the end of 2035. The following table presents the balances of the Company's LIHTC investments and related unfunded commitments: March 31, 2025 December 31, 2024 (Dollars in thousands) Low Income Housing Tax Credit Investments $ 6,000 $ 6,000 Less: Amortization ( 94 ) ( 55 ) Net Low Income Housing Tax Credit Investments $ 5,906 $ 5,945 Unfunded Commitments $ 4,995 $ 4,995 The Company accounts for qualifying LIHTC investments under the proportional amortization method. Under this method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance as a component of income tax expense. The following table presents other information related to the Company's low income housing tax credit investments: Three Months Ended March 31, 2025 2024 (dollars in thousands) Tax Credits and Other Tax Benefits Recognized $ 50 $ — Proportional Amortization Expense Included in Provision for Income Taxes $ 39 $ — Note 12. Subsequent Events The Company evaluated subsequent events through the date the consolidated financial statements were filed with the SEC and incorporated into the consolidated financial statements the effect of all material known events determined by Accounting Standards Codification ("ASC") 855, Subsequent Events , to be recognizable events.