What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-07 compared with 2025-08-08 · 144 added, 123 removed, 362 unchanged (42% of the section changed)

30 unchanged sentences

It is intended to complement the unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and should be read in conjunction therewith.

The detailed discussion focuses on our consolidated financial condition as of June 30, 2025, compared to the consolidated financial condition as of December 31, 2024 and the consolidated results of operations for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024.

The detailed discussion focuses on our consolidated financial condition as of September 30, 2025, compared to the consolidated financial condition as of December 31, 2024 and the consolidated results of operations for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024.

Our results of operations depend primarily on our net interest income.

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Three Months Ended

Six Months Ended

June 30, June 30,

Nine Months Ended

September 30, September 30,

2025 2024 2025 2024

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Adjustment to FTE Basis

100 42 213 118

Interest Income (FTE) (Non-GAAP)

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We believe this non-GAAP measure serves as a useful tool to help evaluate the strength and discipline of the Company's capital management strategies and as an additional, conservative measure of the Company’s total value.

September 30,

2025 December 31, 2024

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Consolidated Statements of Financial Condition Analysis

Total assets increased $36.4 million, or 2.5%, to $1.52 billion at June 30, 2025 compared to $1.48 billion at December 31, 2024.

Total assets increased $64.0 million, or 4.3%, to $1.55 billion at September 30, 2025 compared to $1.48 billion at December 31, 2024.

Cash and Securities

• Cash and due from banks increased $14.9 million, or 30.1%, to $64.5 million at June 30, 2025, compared to $49.6 million at December 31, 2024.

• Securities increased $5.0 million, or 1.9%, to $267.2 million at June 30, 2025, compared to $262.2 million at December 31, 2024.

The securities balance was primarily impacted by security purchases and an increase in the market value of the portfolio, partially offset by principal repayments on amortizing securities and the sale of equity securities.

• Cash and due from banks increased $6.3 million, or 12.7%, to $55.9 million at September 30, 2025, compared to $49.6 million at December 31, 2024.

• Securities increased $10.4 million, or 4.0%, to $272.6 million at September 30, 2025, compared to $262.2 million at December 31, 2024.

During the quarter ended September 30, 2025, the Bank implemented a balance sheet repositioning strategy of its portfolio of available-for-sale investment securities in which $129.6 million in book value of lower-yielding investment securities with an average yield of 2.87% were sold for an after-tax realized loss of $9.3 million.

Investment securities sold included $121.1 million of mortgage-backed securities/collateralized mortgage obligations issued by the U.S.

government-sponsored agencies, $5.0 million of U.S.

government agency securities and $3.5 million of municipal securities.

The Bank then purchased $117.8 million of higher-yielding mortgage-backed securities/collateralized mortgage obligations issued by U.S government-sponsored agencies, municipal securities, subordinated debt investments and non-agency guaranteed securitizations with an expected tax-equivalent yield of approximately 5.43%.

This strategy is expected to add nearly 19 basis points to net interest margin (“NIM”) and approximately $0.40 to annual earnings per share.

The Company expects to recover the $9.3 million loss in approximately 4.2 years.

Loans, Allowance for Credit Losses (ACL) and Credit Quality

• Total loans increased $18.2 million, or 1.7%, to $1.11 billion at June 30, 2025 compared to $1.09 billion at December 31, 2024.

This was driven by increases in commercial real estate and commercial and industrial loans of $27.7 million and $26.2 million, respectively, partially offset by decreases in construction, consumer and residential real estate loans of $14.0 million, $13.1 million and $8.7 million, respectively.

• Total loans increased $50.8 million, or 4.6%, to $1.14 billion compared to $1.09 billion, and included increases in commercial real estate, commercial and industrial and other loans of $53.9 million, $31.9 million and $6.3 million, respectively, partially offset by decreases in consumer, construction and residential real estate loans of $20.9 million, $15.8 million and $4.6 million, respectively.

The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to the discontinuation of this product offering as of June 30, 2023.

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Loan production totaled $163.3 million while $73.4 million of loans were paid off since December 31, 2024 .

• The allowance for credit losses (ACL) was $9.7 million at June 30, 2025 and $9.8 million at December 31, 2024.

As a result, the ACL to total loans was 0.88% at June 30, 2025 and 0.90% at December 31, 2024.

The provision for credit losses recorded for the six months ended June 30, 2025 was a net recovery of $32,000.

The provision for credit losses - loans was a $68,000 recovery and was primarily due to a reduction of reserve required for individually assessed loans and changes in loan concentrations, partially offset by additional reserve required for overall loan growth and a change in qualitative factors relating to economic conditions.

The provision for credit losses - unfunded commitments was $36,000 and was due to an increase in unfunded commitments and an increase in funding rates.

• Net charge-offs for the six months ended June 30, 2025 were $15,000.

Net charge-offs for the six months ended June 30, 2024 were $50,000, or 0.01% of average loans on an annualized basis.

• Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $1.8 million at June 30, 2025 and December 31, 2024.

Nonperforming loans to total loans ratio was 0.16% at June 30, 2025 and December 31, 2024.

Total liabilities increased $35.4 million, or 2.7%, to $1.37 billion at June 30, 2025 compared to $1.33 billion at December 31, 2024.

• Total deposits increased $25.9 million, or 2.0%, to $1.31 billion as of June 30, 2025 compared to $1.28 billion at December 31, 2024.

Interest-bearing demand, non interest-bearing demand and savings deposits increased $36.7 million, $10.8 million and $1.5 million, respectively while time deposits decreased $16.7 million and money market deposits decreased $6.3 million, respectively.

This favorable change in the deposit mix was the result of an increased focus on building core banking relationships while strategically reducing time deposit-only relationships.

Brokered time deposits totaled $79.0 million as of June 30, 2025 and $39.0 million as of December 31, 2024, all of which mature within three months and were utilized to fund the purchase of floating rate CLO securities.

At June 30, 2025, FDIC insured deposits totaled approximately 61.0% of total deposits while an additional 14.8% of total deposits were collateralized with investment securities.

• The allowance for credit losses (ACL) was $10.1 million at September 30, 2025 and $9.8 million at December 31, 2024.

As a result, the ACL to total loans was 0.89% at September 30, 2025 and 0.90% at December 31, 2024.

During the nine months ended September 30, 2025, the Company recorded a net provision for credit losses of $227,000 including a provision for credit losses on loans of $269,000, partially offset by a recovery for credit loses on unfunded commitments of $42,000.

• Net recoveries for the nine months ended September 30, 2025 were $72,000, or 0.01% of average loans on an annualized basis.

Net charge-offs for the nine months ended September 30, 2024 were $123,000, or 0.02% of average loans on an annualized basis.

• Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $2.2 million at September 30, 2025 and $1.8 million at December 31, 2024.

Nonperforming loans to total loans ratio was 0.19% at September 30, 2025 and 0.16% at December 31, 2024.

Total liabilities increased $58.9 million, or 4.4%, to $1.39 billion at September 30, 2025 compared to $1.33 billion at December 31, 2024.

• Total deposits increased $50.9 million, or 4.0%, to $1.33 billion as of September 30, 2025 compared to $1.28 billion at December 31, 2024.

Interest-bearing demand, non interest-bearing demand and time deposits increased $49.2 million, $24.0 million and $4.5 million, respectively, while money market and savings deposits decreased $25.3 million and $1.5 million, respectively.

This favorable change in the deposit mix was the result of an increased focus on building core banking relationships while strategically reducing higher priced relationships.

Brokered time deposits totaled $98.5 million as of September 30, 2025 and $39.0 million as of December 31, 2024, all of which mature within three months and were utilized to fund the purchase of floating rate CLO securities.

At September 30, 2025, FDIC insured deposits

totaled approximately 59.6% of total deposits while an additional 16.3% of total deposits were collateralized with investment securities.

Accrued Interest Payable and Other Liabilities

• Accrued interest payable and other liabilities increased $9.5 million, or 59.6%, to $25.5 million at June 30, 2025, compared to $16.0 million at December 31, 2024 primarily due to the purchase of $9.0 million of syndicated loans not yet settled.

• Accrued interest payable and other liabilities increased $7.9 million, or 49.5%, to $23.9 million at September 30, 2025, compared to $16.0 million at December 31, 2024 primarily due to $4.0 million of syndicated national credits purchased and not yet settled and $4.0 million of securities purchased and not yet settled.

Stockholders’ Equity

Stockholders’ equity increased $984,000, or 0.7%, to $148.4 million at June 30, 2025, compared to $147.4 million at December 31, 2024.

The key factors positively impacting stockholders’ equity were $5.9 million of net income for the current year, a $2.9 million decrease in accumulated other comprehensive loss and $1.1 million of shares issued as a result of stock option exercises, partially offset by $6.8 million of treasury shares purchased under the stock repurchase program and the payment of $2.5 million in dividends since December 31, 2024.

Book value per common share (GAAP) was $29.84 at June 30, 2025 compared to $28.71 at December 31, 2024, an increase of $1.13.

Stockholders’ equity increased $5.1 million, or 3.5%, to $152.5 million at September 30, 2025, compared to $147.4 million at December 31, 2024.

The key factors positively impacting stockholders’ equity was a $13.2 million decrease in accumulated other comprehensive loss resulting primarily from the securities repositioning strategy, $1.7 million of shares issued as a result of stock option exercises and $164,000 of net income for the current year, partially offset by $6.8 million of treasury shares purchased under the stock repurchase program and the payment of $3.8 million in dividends since December 31, 2024.

Book value per common share (GAAP) was $30.50 at September 30, 2025 compared to $28.71 at December 31, 2024, an increase of $1.79.

Tangible book value per common share (Non-GAAP) increased $1.74, or 6.5%, to $28.56 compared to $26.82 at December 31, 2024.

Consolidated Results of Operations for the Three Months Ended June 30, 2025 and 2024

Net income was $3.9 million for the three months ended June 30, 2025, an increase of $1.3 million compared to net income of $2.7 million for the three months ended June 30, 2024.

Consolidated Results of Operations for the Three Months Ended September 30, 2025 and 2024

Net loss was $5.7 million for the three months ended September 30, 2025, a decrease of $8.9 million compared to net income of $3.2 million for the three months ended September 30, 2024.

Net Interest and Dividend Income.

Net interest and dividend income increased $1.1 million, or 9.3%, to $12.5 million for the three months ended June 30, 2025 compared to $11.5 million for the three months ended June 30, 2024.

Net interest margin (GAAP) increased 36 basis points (bps) to 3.54% for the three months ended June 30, 2025 compared to 3.18% for the three months ended June 30, 2024.

Fully Tax Equivalent (FTE) net interest margin (Non-GAAP) increased 36 bps to 3.55% for the three months ended June 30, 2025 compared to 3.19% for the three months ended June 30, 2024.

Net interest and dividend income increased $1.6 million, or 14.2%, to $13.1 million for the three months ended September 30, 2025 compared to $11.5 million for the three months ended September 30, 2024.

Net interest margin (GAAP) increased 53 basis points (bps) to 3.64% for the three months ended September 30, 2025 compared to 3.11% for the three months ended September 30, 2024.

Fully Tax Equivalent (FTE) net interest margin (Non-GAAP) increased 55 bps to 3.67% for the three months ended September 30, 2025 compared to 3.12% for the three months ended September 30, 2024.

Interest and Dividend Income

• Interest and dividend income decreased $179,000, or 0.9%, to $18.8 million for the three months ended June 30, 2025 compared to $18.9 million the three months ended June 30, 2024.

◦ Interest income on loans increased $822,000, or 5.6%, to $15.5 million for the three months ended June 30, 2025 compared to $14.7 million for the three months ended June 30, 2024.

The average yield on loans increased 18 bps to 5.68% from 5.50% despite a 100bp reduction in the federal funds rate since September 2024.

While this led to the downward repricing of variable and adjustable rate loans, the impact was negated by a reduction in lower yielding consumer loans due to the discontinuation of the indirect automobile loan product with the redeployment of those funds into higher yielding commercial loan products.

• Interest and dividend income decreased $432,000, or 2.2%, to $19.3 million for the three months ended September 30, 2025 compared to $19.8 million the three months ended September 30, 2024.

◦ Interest income on loans increased $1.0 million, or 6.9%, to $16.0 million for the three months ended September 30, 2025 compared to $14.9 million for the three months ended September 30, 2024.

The average balance of loans increased $56.1 million to $1.12 billion from $1.06 billion, causing an $830,000 increase in interest income on loans.

Additionally, the average yield on loans increased 8 bps to 5.68% from 5.60% despite a 125bp reduction in the federal funds rate since September 2024.

While this led to the downward repricing of variable and adjustable rate loans, the impact was partially negated by a reduction in lower yielding consumer loans due to the discontinuation of the indirect automobile loan product with the redeployment of those funds into higher yielding commercial loan products.

The increase in the average yield caused a $217,000 increase in interest income on loans.

Additionally, the average balance of loans increased $22.2 million to $1.10 billion from $1.08 billion, causing a $349,000 increase in interest income on loans.

◦ Interest income on taxable investment securities increased $16,000, or 0.6%, to $2.9 million for the three months ended June 30, 2025 compared to $2.8 million for the three months ended June 30, 2024 driven by a $18.5 million increase in average balances, partially offset by a 26 bp decrease in average yield.

The increase in volume was driven by a $22.9 million increase in the average balance of collateralized loan obligation (“CLO”) securities as the Bank executed a leverage strategy during 2024 to purchase these assets funded with cash reserves and brokered certificates of deposits.

The decrease in the yield resulted from the reductions in the federal funds rates since September 2024.

◦ Interest income on interest-earning deposits at other banks decreased $982,000 to $331,000 for the three months ended June 30, 2025 compared to $1.3 million for the three months ended June 30, 2024 driven by a 125 bp decrease in the average yield and a $67.7 million decrease in average balances.

The decrease in the yield was primarily related to the reductions in the federal funds rate since September 2024.

◦ Interest income on investment securities decreased $295,000, or 9.0%, to $3.0 million for the three months ended September 30, 2025 compared to $3.3 million for the three months ended September 30, 2024 driven by a $16.6 million decrease in average balances and a 9 bp decrease in average yield.

The decrease in volume was due to the timing of sales and subsequent repurchases in the securites repositioning strategy.

The decrease in yield resulted from the reductions in the federal funds rate since September 2024.

◦ Interest income on interest-earning deposits at other banks decreased $1.2 million to $293,000 for the three months ended September 30, 2025 compared to $1.4 million for the three months ended September 30, 2024 driven by a 126 bp decrease in the average yield and a $81.4 million decrease in average balances.

The decrease in the yield was primarily related to the Federal Reserve’s reductions in the federal funds rate while the decrease in the volume was due to the funding of loans and decrease in average deposits.

Interest Expense

• Interest expense decreased $1.2 million, or 16.7%, to $6.2 million for the three months ended June 30, 2025 compared to $7.5 million for the three months ended June 30, 2024.

◦ Interest expense on deposits decreased $1.3 million, or 19.0%, to $5.7 million for the three months ended June 30, 2025 compared to $7.1 million for the three months ended June 30, 2024.

The cost of interest-bearing deposits declined 47 bps to 2.28% for the three months ended June 30, 2025 from 2.75% for the three months ended June 30, 2024 due to the change in the deposit mix and the recent Federal Reserve federal funds rate decreases.

The decrease in the cost of interest-bearing deposits accounted for a $1.2 million reduction in interest expense.

Average interest-bearing deposit balances decreased $27.2 million, or 2.6%, to $1.01 billion as of June 30, 2025 compared to $1.03 billion as of June 30, 2024, primarily as the Bank strategically reduced brokered deposits and time deposit only relationships.

The decrease in average balances accounted for a $161,000 reduction in interest expense.

• Interest expense decreased $2.1 million, or 24.8%, to $6.2 million for the three months ended September 30, 2025 compared to $8.3 million for the three months ended September 30, 2024.

◦ Interest expense on deposits decreased $2.1 million, or 26.4%, to $5.8 million for the three months ended September 30, 2025 compared to $7.9 million for the three months ended September 30, 2024.

The cost of interest-bearing deposits declined 68 bps to 2.26% for the three months ended September 30, 2025 from 2.94% for the three months ended September 30, 2024 due to the change in the deposit mix and the recent Federal Reserve federal funds rate decreases.

The decrease in the cost of interest-bearing deposits accounted for a $1.8 million decrease in interest

Average interest-bearing deposit balances decreased $47.0 million, or 4.4%, to $1.02 billion as of September 30, 2025 compared to $1.07 billion as of September 30, 2024, primarily as the Bank strategically reduced time deposit only relationships.

The decrease in average balances accounted for a $320,000 decrease in interest expense.

Average Balances and Yields .

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The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

FTE yield adjustments have been made for tax exempt loan interest income utilizing a marginal federal income tax rate of 21.0% for the periods presented.

FTE yield adjustments have been made for tax exempt loan and security interest income utilizing a marginal federal income tax rate of 21.0% for the periods presented.

As such, amounts will not agree to income as reported in the consolidated financial statements.

The yields and costs for the periods indicated are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods presented.

Three Months Ended June 30,

Three Months Ended September 30,

Balance Interest

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Taxable 259,196 2,848 4.40 288,208 3,289 4.56

Exempt From Federal Tax 12,461 185 5.94 — — —

Equity Securities 1,000 7 2.80 2,693 28 4.16

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The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated.

FTE yield adjustments have been made for tax exempt loan income utilizing a marginal federal income tax rate of 21.0%.

FTE yield adjustments have been made for tax exempt loan and security income utilizing a marginal federal income tax rate of 21.0%.

The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).

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The total column represents the sum of the prior columns.

Three Months Ended June 30, 2025

Three Months Ended June 30, 2024

Three Months Ended September 30, 2025

Three Months Ended September 30, 2024

Increase (Decrease) Due to

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Taxable (329) (112) (441)

Exempt From Federal Tax 185 — 185

Equity Securities (14) (7) (21)

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Provision for Credit Losses.

A provision for credit losses of $8,000 was recorded for the three months ended June 30, 2025.

The provision for credit losses - loans was a $136,000 recovery and was primarily due to a reduction of reserve required for individually assessed loans and changes in loan concentrations, partially offset by additional reserve required for overall loan growth and a change in qualitative factors relating to economic conditions.

The provision for credit losses - unfunded commitments was $144,000 and was due to an increase in unfunded commitments and an increase in funding rates.

This compared to a net recovery of $36,000 recorded for the three months ended June 30, 2024 as the provision for credit losses - loans was $12,000 and was primarily due to an increase in the reserve required for individually assessed loans, partially offset by a decrease in loan balances while the provision for credit losses - unfunded commitments was a recovery of $48,000 and was due to a decrease in loss rates.

A provision for credit losses of $259,000 was recorded for the three months ended September 30, 2025.

The provision for credit losses on loans was $336,000 and was primarily due to additional reserves required for overall loan growth, changes in qualitative factors and an addition to individually assessed loans requiring specific reserves, partially offset by favorable changes in portfolio concentrations and the calculated loss rate.

This was partially offset by a $77,000 recovery for credit losses on unfunded commitments due to a decrease in unfunded commitments.

This compared to a net recovery of $41,000 recorded for the three months ended September 30, 2024 as the recovery for credit losses on unfunded commitments was $66,000 due to a decreases in unfunded commitments and the loss rate on construction loans and the provision for credit losses on loans was $25,000 due to changes in qualitative factors partially offset by changes in loan portfolio concentrations and an improvement in loss rates.

Noninterest Income .

Noninterest income increased $243,000, or 35.3%, to $931,000 for the three months ended June 30, 2025, compared to $688,000 for the three months ended June 30, 2024.

This resulted primarily from a $205,000 increase in service fees primarily related to corporate deposit and Individual Covered Health Reimbursement Arrangement accounts.

Noninterest income decreased $11.9 million, or 965.9%, to a loss of $10.7 million for the three months ended September 30, 2025, compared to income of $1.2 million for the three months ended September 30, 2024 as a result of $11.8 million in losses on the sale of securities from the securities repositioning strategy.

Excluding security gains and losses from both periods and a gain on the sale of a subsidiary recognized during the three months ended September 30, 2024, noninterest income increased $225,000, or 26.5%, to $1.1 million for the three months ended September 30, 2025, compared to $850,000 for the three months ended September 30, 2024.

This resulted primarily from a $123,000 increase in service fees primarily related to corporate deposit and Individual Covered Health Reimbursement Arrangement accounts and a $112,000 increase in other income related to hedge fees.

Noninterest Expense.

Noninterest expense decreased $236,000, or 2.6%, to $8.7 million for the three months ended June 30, 2025 compared to $9.0 million for the three months ended June 30, 2024.

Noninterest expense increased $401,000, or 4.6%, to $9.2 million for the three months ended September 30, 2025 compared to $8.8 million for the three months ended September 30, 2024.

Salaries and benefits increased $686,000, or 15.0%, to $5.2 million primarily due to merit increases, revenue producing staff additions and higher insurance benefit costs, partially offset by savings realized due to the reduction in force implemented earlier this year.

Legal and professional fees increased $114,000 due to timing of internal and external audit services.

Equipment expense increased $87,000 due to higher

depreciation expense associated with interactive teller machines, security system upgrades and other equipment placed into service in 2024.

These increases were partially offset as intangible amortization decreased $264,000 as the Bank’s core deposit intangibles were fully amortized in 2024.

Occupancy expense decreased $181,000 due to environmental remediation costs related to a construction project on one of the Bank’s office locations recognized only in 2024 and certain property management cost savings initiatives implemented in 2025.

Intangible amortization decreased $264,000 as the Bank’s core deposit intangibles were fully amortized in 2024.

Data processing expense decreased $64,000 due to costs associated with the implementation of a new loan origination system and financial dashboard platform during mid-2024.

Pennsylvania shares tax expense decreased $154,000 due to $217,000 of refunds received on amended returns filed for prior years.

Legal and professional fees decreased $91,000 primarily due to timing differences related to internal and external audit and tax services.

These decreases were partially offset as salaries and benefits increased $663,000, or 15.0%, to $5.1 million primarily due to merit increases, revenue producing staff additions and higher insurance benefit costs, partially offset by savings realized due to the reduction in force implemented earlier this year.

Equipment expense increased $74,000 due to higher depreciation expense associated with interactive teller machines, security system upgrades and other equipment placed into service in 2024.

Income Taxes.

Income tax expense was $766,000 for the three months ended June 30, 2025 compared to $560,000 for the three months ended June 30, 2024.

This change was primarily driven by a increase in pre-tax income to $4.7 million for the three months ended June 30, 2025 compared to $3.2 million for the three months ended June 30, 2024.

Results of Operations for the Six Months Ended June 30, 2025 and 2024

Net income was $5.9 million for the six months ended June 30, 2025, a decrease of $989,000 compared to $6.8 million for the six months ended June 30, 2024.

Income tax expense was a $1.3 million benefit for the three months ended September 30, 2025 compared to a $747,000 expense for the three months ended September 30, 2024.

This change was primarily driven by a decrease in pre-tax income to a $7.0 million loss for the three months ended September 30, 2025 compared to $4.0 million of income for the three months ended September 30, 2024.

This resulted from the loss recognized as a result of the securities repositioning strategy exectued during the three months ended September 30, 2025.

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

Net income was $164,000 for the nine months ended September 30, 2025, a decrease of $9.9 million compared to $10.1 million for the nine months ended September 30, 2024.

Net Interest and Dividend Income.

Net interest and dividend income increased $788,000, or 3.4%, to $23.9 million for the six months ended June 30, 2025 compared to $23.1 million for the six months ended June 30, 2024.

Net interest margin (GAAP) increased to 3.40% for the six months ended June 30, 2025 compared to 3.27% for the six months ended June 30, 2024.

Net interest margin (FTE) (Non-GAAP) increased 14 bps to 3.42% for the six months ended June 30, 2025 compared to 3.28% the six months ended June 30, 2024.

Net interest and dividend income increased $2.4 million, or 7.0%, to $36.9 million for the nine months ended September 30, 2025 compared to $34.5 million for the nine months ended September 30, 2024.

Net interest margin (GAAP) increased to 3.49% for the nine months ended September 30, 2025 compared to 3.21% for the nine months ended September 30, 2024.

Net interest margin (FTE) (Non-GAAP) increased 29 bps to 3.51% for the nine months ended September 30, 2025 compared to 3.22% the nine months ended September 30, 2024.

Interest and Dividend Income

• Interest and dividend income decreased $320,000, or 0.9%, to $36.6 million for the six months ended June 30, 2025 compared to $36.9 million for the six months ended June 30, 2024.

◦ Interest income on loans increased $512,000, or 1.7%, to $30.0 million during the six months ended June 30, 2025 compared to $29.5 million for the six months ended June 30, 2024.

The average yield on loans increased 9 bps to 5.59% for the six months ended June 30, 2025 compared to 5.50% for the six months ended June 30, 2024 resulting in a $485,000 increase in interest income on loans.

The increase in loan yield has been driven by a reduction in lower yielding consumer loans due to the discontinuation of the indirect automobile loan product with the redeployment of those funds into higher yielding commercial loan products.

The average balance of loans increased $4.8 million to $1.09 billion for the six months ended June 30, 2025 compared to $1.08 billion for the six months ended June 30, 2024 resulting in a $61,000 increase in interest income on loans.

◦ Interest income on taxable investment securities increased $489,000, or 9.5%, to $5.6 million during the six months ended June 30, 2025 compared to $5.1 million for the six months ended June 30, 2024 driven by a $30.5 million increase in average balances, partially offset by a 9 bp decrease in the average yield.

The increase in volume was driven by a $39.5 million increase in the average balance of CLO securities as the Company executed a leverage strategy to purchase these assets funded with brokered certificates of deposits.

• Interest and dividend income decreased $752,000, or 1.3%, to $55.9 million for the nine months ended September 30, 2025 compared to $56.7 million for the nine months ended September 30, 2024.

◦ Interest income on loans increased $1.5 million, or 3.5%, to $46.0 million during the nine months ended September 30, 2025 compared to $44.5 million for the nine months ended September 30, 2024.

The average balance of loans increased $22.1 million to $1.10 billion for the nine months ended September 30, 2025 compared to $1.08 billion for the nine months ended September 30, 2024 resulting in a $865,000 increase in interest income on loans.

Additionally, the average yield on loans increased 9 bps to 5.62% for the nine months ended September 30, 2025 compared to 5.53% for the nine months ended September 30, 2024 resulting in a $731,000 increase in interest income on loans.

The increase in the loan yield is despite a 125bp reduction in the federal funds rate since September 2024.

◦ Interest income on investment securities increased $194,000, or 2.3%, to $8.6 million during the nine months ended September 30, 2025 compared to $8.4 million for the nine months ended September 30, 2024 driven by a $14.7 million increase in average balances, partially offset by a 11 bp decrease in the average yield.

The increase in volume and decrease in yield was driven by a $25.5 million increase in the average balance of CLO securities as the Company executed a leverage strategy to purchase these assets funded with brokered certificates of deposits.

The increase in the volume resulted in a $515,000 increase in interest income.

The decrease in the average yield resulted in a $282,000 decrease in interest income and was the result of reductions in the federal funds rates since September 2024.

◦ Interest income on interest-earning deposits at other banks decreased $1.3 million, to $789,000 for the six months ended June 30, 2025 compared to $2.0 million for the six months ended June 30, 2024 as average balances decreased $40.8 million and the average yield decreased 109 bps.

The volume decreased as cash was utilized to fund security purchases and loan originations while the average yield decrease resulted from reductions in the federal funds rate since September 2024.

◦ Interest income on interest-earning deposits at other banks decreased $2.4 million, to $1.1 million for the nine months ended September 30, 2025 compared to $3.5 million for the nine months ended September 30, 2024 as average balances decreased $54.5 million and the average yield decreased 114 bps.

The volume decreased as cash was utilized to fund security purchases and loan originations and cover deposit fluctuations while the average yield decrease resulted from reductions in the federal funds rate since September 2024.

Interest Expense

• Interest expense decreased $1.1 million, or 8.0%, to $12.8 million for the six months ended June 30, 2025 compared to $13.9 million for the six months ended June 30, 2024.

◦ Interest expense on deposits decreased $1.2 million, or 9.4%, to $11.8 million for the six months ended June 30, 2025 compared to $13.1 million for the six months ended June 30, 2024.

Declining market interest rates led to the repricing of interest-bearing demand, money market and time deposits and resulted in a 24 bp decrease in the average cost of interest-bearing deposits compared to the six months ended June 30, 2024.

This accounted for a $1.2 million increase in interest expense.

◦ Interest expense on borrowed funds increased $115,000, or 14.2%, to $923,000 for the six months ended June 30, 2025 compared to $808,000 for the six months ended June 30, 2024.

The average balance of borrowed funds increased $5.6 million due to FHLB short-term advances utilized during the six months ended June 30, 2025.

• Interest expense decreased $3.2 million, or 14.3%, to $19.0 million for the nine months ended September 30, 2025 compared to $22.2 million for the nine months ended September 30, 2024.

◦ Interest expense on deposits decreased $3.3 million, or 15.8%, to $17.6 million for the nine months ended September 30, 2025 compared to $20.9 million for the nine months ended September 30, 2024.

Declining market interest rates led to the repricing of interest-bearing demand, money market and time deposits and resulted in a 40 bp decrease in the average cost of interest-bearing deposits compared to the nine months ended September 30, 2024.

This accounted for a $3.0 million decrease in interest expense.

Additionally, the average balance of interest-bearing deposits decreased $15.6 million resulting in a $276,000 decrease in interest expense.

◦ Interest expense on borrowed funds increased $140,000, or 11.5%, to $1.4 million for the nine months ended September 30, 2025 compared to $1.2 million for the nine months ended September 30, 2024.

The average balance of borrowed funds increased $5.6 million due to FHLB short-term advances utilized during the nine months ended September 30, 2025.

The increase in the average balance accounted for a $200,000 increase in interest expense.

Partially offsetting this increase, the average cost of borrowed funds decreased 19 bps as $20.0 million of long-term borrowings matured and were replaced at current market rates.

The decrease in the cost accounted for a $60,000 decrease in interest expense.

Average Balances and Yields.

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The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

FTE yield adjustments have been made for tax exempt loan interest income utilizing a marginal federal income tax rate of 21% for the periods presented.

FTE yield adjustments have been made for tax exempt loan and security interest income utilizing a marginal federal income tax rate of 21% for the periods presented.

As such, amounts will not agree to income as reported in the consolidated financial statements.

The yields and costs for the periods indicated are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods presented.

Six Months Ended June 30,

Nine Months Ended September 30,

Balance Interest

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Taxable 273,949 8,485 4.13 263,433 8,437 4.27

Tax Exempt 4,199 185 5.87 — — —

Equity Securities 1,552 44 3.78 2,693 82 4.06

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Average Interest-Earning Assets to Average Interest-Bearing Liabilities 134.82 135.28

(1) Annualized based on six months ended results.

(1) Annualized based on nine months ended results.

(2) Net of the allowance for credit losses and includes nonaccrual loans with a zero yield and Loans Held for Sale if applicable.

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The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated.

FTE yield adjustments have been made for tax exempt loan and income utilizing a marginal federal income tax rate of 21%.

FTE yield adjustments have been made for tax exempt loan and security income utilizing a marginal federal income tax rate of 21%.

The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).

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The total column represents the sum of the prior columns.

Six Months Ended June 30, 2025

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2025

Nine Months Ended September 30, 2024

Increase (Decrease) Due to

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Taxable 330 (282) 48

Exempt From Federal Tax 185 — 185

Equity Securities (32) (6) (38)

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Provision for Credit Losses.

The provision for credit losses was a recovery of $32,000 for the six months ended June 30, 2025.

The recovery was due to improvement of individually analyzed loans that required specific provision in prior periods, mainly offset by increases in loan balances.

This compared to a recovery for credit losses of $73,000 for the six months ended June 30, 2024 due to a decrease in loan balances.

The net provision for credit losses was $227,000 for the nine months ended September 30, 2025.

The provision for credit losses for loans was $269,000, partially offset by a recovery for credit losses for unfunded commitments of $42,000.

The increase for provision for credit losses for loans was due to loan growth and increases in qualitative factors, partially offset by improvement of individually analyzed loans that required specific provision in prior periods and a decline in calculated loss rates.

The recovery for unfunded commitments was due to a decline in the unfunded commitment balance.

This compared to a recovery for credit losses of $114,000 for the nine months ended September 30, 2024 due to a decrease in loan balances.

The prior period recovery for credit losses was comprised of $105,000 for loans and $9,000 for unfunded commitments.

Noninterest Income.

Noninterest income decreased $886,000, or 34.0%, to $1.7 million for the six months ended June 30, 2025, compared to $2.6 million for the six months ended June 30, 2024.

Net gain on bank-owned life insurance claims decreased as a $915,000 gain was realized for the six months ended June 30, 2024 and net gain on disposal of premises and equipment decreased as a gain of $274,000 was realized during six months ended June 30, 2024 from the sale of one branch office location.

Partially offsetting these decreases, service fees increased $252,000, or 32.8%, to $1.0 million for six months ended June 30, 2025, compared to $769,000 for the six months ended June 30, 2024 primarily related to increases in fees related to corporate deposit accounts, Individual Covered Health Reimbursement Arrangement (ICHRA) accounts and check card activity.

Additionally, the net loss on equity securities decreased $141,000 to a loss of $69,000 for the six months ended June 30, 2025 compared to a $197,000 loss for the six months ended June 30, 2024 which was primarily due to changes in the market value of equity securities, comprised mainly of bank stocks.

Noninterest income decreased $12.8 million, or 333.3%, to a $9.0 million loss for the nine months ended September 30, 2025, compared to $3.8 million of income for the nine months ended September 30, 2024.

This decrease was mainly due to loss on securities for the securities repositioning of $11.8 million and a $64,000 loss mainly related to the sale of equity securities for the nine months ended September 30, 2025 compared to a $49,000 loss for the nine months ended September 30, 2024 which was primarily due to changes in the market value of equity securities, comprised mainly of bank stocks.

Net gain on bank-owned life insurance claims decreased as a $915,000 gain was realized for the nine months ended September 30, 2024 and net gain on disposal of premises and equipment decreased as a gain of $274,000 was realized during nine months ended September 30, 2024 from the sale of one branch office location.

Partially offsetting these decreases, service fees increased $375,000, or 30.7%, to $1.6 million for nine months ended September 30, 2025, compared to $1.2 million for the nine months ended September 30, 2024 primarily related to increases in fees related to corporate deposit accounts, Individual Covered Health Reimbursement Arrangement (ICHRA) accounts and check card activity.

Noninterest Expense.

Noninterest expense increased $1.1 million, or 6.5%, to $18.5 million for the six months ended June 30, 2025 compared to $17.4 million for the six months ended June 30, 2024.

Salaries and benefits increased $2.1 million primarily due to $1.0 million of one-time non-recurring expense recognized for the six months ended June 30, 2025 associated with the previously announced reduction in force, merit increases, revenue producing staff additions and higher insurance and benefit costs.

Noninterest expense increased $1.5 million, or 5.9%, to $27.7 million for the nine months ended September 30, 2025 compared to $26.2 million for the nine months ended September 30, 2024.

Salaries and benefits increased $2.8 million primarily due to $1.0 million of one-time non-recurring expense recognized for the nine months ended September 30, 2025 associated with the previously announced reduction in force, merit increases, revenue producing staff additions and higher insurance and benefit costs.

Additionally, equipment expense increased $228,000 due to higher depreciation expense associated with interactive teller machines, security system upgrades and other equipment placed into service during late 2024 and FDIC expense increased $85,000.

Partially offsetting these increases, amortization of intangible assets decreased $605,000 as the Bank’s core deposit intangible was fully amortized in 2024, occupancy expense decreased $323,000 primarily due to environmental remediation costs recognized during the six months ended June 30, 2024 related to a construction project on one of the Bank’s office location, Pennsylvania shares tax expense decreased $195,000 due to $242,000 of refunds received during the six months ended June 30, 2025 as a result of amended prior year returns, and data processing expense decreased $145,000 due to higher 2024 costs associated with the initial implementation of a new loan origination system.

Partially offsetting these increases, amortization of intangible assets decreased $870,000 as the Bank’s core deposit intangible was fully amortized in 2024, occupancy expense decreased $505,000 primarily due to environmental remediation costs recognized during the nine months ended September 30, 2024 related to a construction project on one of the Bank’s office location and certain property management cost savings initiatives implemented during the nine months ended September 30, 2025, Pennsylvania shares tax expense decreased $154,000 due to $242,000 of refunds received during the nine months ended September 30, 2025 as a result of amended prior year returns, and data processing expense decreased $210,000 due to higher 2024 costs associated with the initial implementation of a new loan origination system.

Income Taxes.

Income tax expense decreased $287,000 to $1.2 million for the six months ended June 30, 2025 compared to $1.5 million for the six months ended June 30, 2024.

The change between the periods was driven by a decrease pre-tax income to $7.1 million for the six months ended June 30, 2025 compared to $8.3 million for the six months ended June 30, 2024.

Income tax expense decreased $2.4 million to a $131,000 income tax benefit for the nine months ended September 30, 2025 compared to $2.2 million of income tax expense for the nine months ended September 30, 2024.

The change between the periods was driven by a decrease in pre-tax income to $33,000 for the nine months ended September 30, 2025 compared to $12.3 million for the nine months ended September 30, 2024.

The decrease in pre-tax income was mainly due to the securities repositioning in the current year.

Off-Balance Sheet Arrangements

Other than loan commitments and standby and performance letters of credit, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a significant current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

Refer to Note 7 in the Notes to Consolidated Financial Statements of this report for a summary of commitments outstanding as of June 30, 2025 and December 31, 2024.

Refer to Note 7 in the Notes to Consolidated Financial Statements of this report for a summary of commitments outstanding as of September 30, 2025 and December 31, 2024.

Liquidity and Capital Management

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Excess liquid assets are invested generally in interest-earning deposits with other banks and short- and intermediate-term securities.

The Company believes that it had sufficient liquidity at June 30, 2025 to satisfy its short- and long-term liquidity needs.

The Company’s most liquid assets are cash and due from banks, which totaled $64.5 million at June 30, 2025.

The Company believes that it had sufficient liquidity at September 30, 2025 to satisfy its short- and long-term liquidity needs.

The Company’s most liquid assets are cash and due from banks, which totaled $55.9 million at September 30, 2025.

The levels of these assets depend on our operating, financing, lending and investing activities during any given period.

Unpledged securities, which provide an additional source of liquidity, totaled $100.9 million at June 30, 2025.

In addition, at June 30, 2025, the Company had the ability to borrow up to $516.2 million from the FHLB of Pittsburgh, of which $494.3 million was available.

The Company also has the ability to borrow up to $69.7 million from the FRB through its Borrower-In-Custody line of credit agreement and the Company also maintains multiple line of credit arrangements with various unaffiliated banks totaling $50.0 million as of both June 30, 2025 and December 31, 2024, currently these credit arrangements have remained unused.

At June 30, 2025, $238.5 million, or 85.1% of total time deposits mature within one year.

Unpledged securities, which provide an additional source of liquidity, totaled $93.2 million at September 30, 2025.

In addition, at September 30, 2025, the Company had the ability to borrow up to $500.4 million from the FHLB of Pittsburgh, of which $478.6 million was available.

The Company also has the ability to borrow up to $69.8 million from the FRB through its Borrower-In-Custody line of credit agreement and the Company also maintains multiple line of credit arrangements with various unaffiliated banks totaling $50.0 million as of both September 30, 2025 and December 31, 2024, currently these credit arrangements have remained unused.

At September 30, 2025, $264.9 million, or 87.9% of total time deposits mature within one year.

If these time deposits do not remain with the Company, the Company will be required to seek other sources of funds.

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The Company has the ability to attract and retain deposits by adjusting the interest rates offered.

At June 30, 2025, the Bank's current deposit portfolio is 61.0% insured by the FDIC, and with additional coverage of 14.8% from the Bank's investment securities;

At September 30, 2025, the Bank's current deposit portfolio is 59.6% insured by the FDIC, and with additional coverage of 16.3% from the Bank's investment securities;

of the total deposits held at the Bank only 24.1% are uninsured.

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We anticipate that we will have sufficient funds to meet our current funding commitments.

The marginal cost of new funding, however, whether from deposits or borrowings from the FHLB, will be carefully considered as we monitor our liquidity needs.

The marginal cost of new funding,

however, whether from deposits or borrowings from the FHLB, will be carefully considered as we monitor our liquidity needs.

Therefore, in order to minimize our cost of funds, we may consider additional borrowings from the FHLB in the future.

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The Bank’s ability to pay dividends to CB Financial is subject to regulatory limitations.

At June 30, 2025, CB Financial (on an

unconsolidated, stand-alone basis) had liquid assets of $9.8 million.

At September 30, 2025, CB Financial (on an unconsolidated, stand-alone basis) had liquid assets of $9.1 million.

The ability to pay future dividends or conduct stock repurchases may be limited under applicable banking regulations and regulatory policies due to expected losses for future periods and/or the inability to upstream funds from the Bank to the Company as a result of lower income or regulatory capital levels.

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Under the Regulatory Capital Rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity Tier I capital above its minimum risk-based capital requirements in an amount greater than 2.5% of total risk-weighted assets.

At June 30, 2025 and December 31, 2024, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.

At September 30, 2025 and December 31, 2024, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.

The following table presents the Bank’s regulatory capital amounts and ratios, as well as the minimum amounts and ratios required to be well capitalized as of the dates indicated.

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Amount Ratio Amount Ratio

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Refer to the "Lending Activities" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024 for a description of each loan portfolio segment.

At June 30, 2025, the Company's loans totaled $1.11 billion, representing a $18.2 million, or 1.7%, increase compared to $1.09 billion at December 31, 2024.

At September 30, 2025, the Company's loans totaled $1.14 billion, representing a $50.8 million, or 4.6%, increase compared to $1.09 billion at December 31, 2024.

The table below provides the composition of the loan portfolio:

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

(Dollars in thousands)

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Our concentration management policy is approved by the Company's Board of Directors and is used to ensure a high-quality, well diversified portfolio that is consistent with our overall objective of maintaining an acceptable level of risk.

The Company's CRE portfolio totaled $513.2 million at June 30, 2025, an increase of $27.7 million, or 5.7%, compared to December 31, 2024.

The Company's CRE portfolio totaled $539.4 million at September 30, 2025, an increase of $53.9 million, or 11.1%, compared to December 31, 2024.

CRE loans are concentrated in the Pittsburgh metropolitan area.

The tables below provides further detail of the composition of the CRE portfolio as of June 30, 2025:

The tables below provides further detail of the composition of the CRE portfolio as of September 30, 2025:

(Dollars in thousands) CRE Nonowner Occupied Loans

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Senior Housing 5,867 5.06 1,956 27.00

Multifamily 3,726 3.22 3,726 70.56

Manufacturing 2,887 2.49 289 54.34

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis