What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-13 compared with 2025-03-19 · 126 added, 139 removed, 707 unchanged (27% of the section changed)

17 unchanged sentences

Deposits 1,339,805 1,283,517 1,267,159

Short-Term Borrowings — — 8,060

Other Borrowed Funds 34,758 34,718 34,678

9 unchanged sentences

Net Interest and Dividend Income After Net Provision (Recovery) for Credit Losses 50,186 45,498 45,055

Noninterest Income 5,494 24,012 9,820

Noninterest (Loss) Income (7,230) 5,494 24,012

Noninterest Expense 37,656 35,649 38,782

Income Before Income Tax Expense

5,300 15,343 30,285

Income Tax Expense 397 2,749 7,735

30 unchanged sentences

Allowance for Credit Losses to Nonperforming Loans 190.51 548.07 433.35

Allowance for Credit Losses to Nonaccrual Loans 548.07 433.35 320.64

Delinquent and Nonaccrual Loans to Total Loans 0.86 0.72 0.62

23 unchanged sentences

Allowance for Credit Losses (ACL).

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss methodology.

The Company adopted ASU 2016-13 using a modified retrospective approach.

Results for reporting periods beginning after January 1, 2023 are presented under Topic 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The adoption resulted in a decrease of $3.4 million to the Company’s ACL related to loans receivable (ACL - Loans) and an increase of $718,000 in ACL for unfunded commitments (ACL - Unfunded Commitments).

The net impact resulted in a $2.1 million increase to retained earnings, net of deferred taxes.

The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date.

31 unchanged sentences

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 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.

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

1 unchanged sentence

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 $4.4 million at December 31, 2025 and is excluded from the estimate of credit losses.

Accrued interest receivable on available of sale securities, also a component of accrued interest receivable and other assets on the Consolidated Statement of Financial Condition, totaled $1.7 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 $2.0 million, at December 31, 2025 and is excluded from the estimate of credit losses.

Fair Value Measurements.

1 unchanged sentence

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

A three-level of fair value hierarchy prioritizes the inputs used to measure fair value:

A three-level fair value hierarchy prioritizes the inputs used to measure fair value:

Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets.

10 unchanged sentences

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired.

Deemed to have an indefinite life and not subject to amortization, goodwill is instead tested for impairment at the reporting unit level at least annually on October 31 or more frequently if triggering events occur or impairment indicators exist.

The Company operates two segments – Community Banking segment and Insurance Brokerage Services segment.

Deemed to have an indefinite life and not subject to amortization, goodwill is instead tested for impairment at the reporting unit level at least annually or more frequently if triggering events occur or impairment indicators exist.

The Company operates one segments – Community Banking.

The Company has assigned 100% of the goodwill to the Community Banking segment.

14 unchanged sentences

These rates are calculated using the appropriate measure for the size and type of company, using financial models and market data as required.

A discount rate may be derived based on a modified capital asset pricing model.

which is comprised of a risk-free rate of return, an equity risk premium, a size premium and a factor covering the systemic market risk and a company specific risk premium.

A discount rate may be derived based on a modified capital asset pricing model, which is comprised of a risk-free rate of return, an equity risk premium, a size premium and a factor covering the systemic market risk and a company specific risk premium.

The values for the factors applied are determined primarily using external sources of information.

11 unchanged sentences

The control premium is management's estimate of how much a market participant would be willing to pay over the fair market value in consideration of synergies and other benefits that flow from control of the entity.

The Guideline Public Company method using trading activity of publicly traded companies that are most similar to the Company may also be considered when the banking industry has a sufficient level of mergers and acquisitions activity.

The results of the income and market approaches may be weighted to determine the concluded fair value of the reporting unit.

The weighting is judgmental and is based on the perceived level of appropriateness of the valuation methodology.

Estimating the fair value involves the use of estimates and significant judgments that are based on a number of factors including

actual operating results.

Estimating the fair value involves the use of estimates and significant judgments that are based on a number of factors including actual operating results.

If current conditions change from those expected, it is reasonably possible that the judgments and estimates described above could change in future periods and require management to further evaluate goodwill for impairment.

20 unchanged sentences

Cash and due from banks decreased $17.9 million, or 36.1%, to $31.7 million at December 31, 2025, compared to $49.6 million at December 31, 2024.

The change is primarily related to net funding of loans.

The change is primarily related to net funding of loans and securities.

Securities increased $17.7 million, or 6.8%, to $279.9 million at December 31, 2025, compared to $262.2 million at December 31, 2024.

The securities balance was primarily impacted by the purchase of $69.8 million of collateralized loan obligation securities, partially offset by $15.4 million of repayments on amortizing securities.

During the year, 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 $11.8 million loss ($9.3 million after-tax).

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 and approximately $0.40 to annual earnings per share.

Securities Portfolio.

8 unchanged sentences

Collateralized Mortgage Obligations - Government-Sponsored Enterprises 72,266 67,575 111,076 94,957

Collateralized Mortgage Obligations - Non-Agency 10,671 10,547 — —

Collateralized Loan Obligations 101,409 101,218 98,741 98,779

21 unchanged sentences

(Dollars in Thousands)

Government Agencies $ — — % $ — — % $ 3,945 1.26 % $ — — % $ 3,945 1.26 %

Obligations of States and Political Subdivisions — — — — — — 36,224 4.72 36,224 4.72

1 unchanged sentence

Collateralized Mortgage Obligations - Government-Sponsored Enterprises — — — — — — 67,575 3.80 67,575 3.80

Collateralized Mortgage Obligations - Non-Agency — — — — — — 10,547 5.45 10,547 5.45

Collateralized Loan Obligations — — — — 14,639 6.35 86,579 5.47 101,218 5.59

1 unchanged sentence

Total Debt Securities $ — — % $ 47 1.92 % $ 36,972 6.28 % $ 241,967 4.76 % $ 278,986 4.96 %

Total loans decreased $17.8 million, or 1.6%, to $1.09 billion at December 31, 2024 compared to $1.11 billion at December 31, 2023.

The change was driven by decreases in consumer loans and residential mortgage loans of $41.1 million and $9.8 million, respectively, partially offset by increases in commercial real estate loans, construction real estate loans, other loans and commercial and industrial loans of $18.4 million, $11.6 million, $2.5 million and $769,000, respectively.

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

Total loans increased $69.6 million, or 6.4%, to $1.16 billion at December 31, 2025 compared to $1.09 billion at December 31, 2024.

The change was driven by increases in commercial real estate loans and commercial and industrial loans of $66.7 million and $49.0 million, respectively, partially offset by decreases in consumer loans, residential mortgage loans, construction real estate loans and other loans of $27.6 million, $9.3 million, $8.8 million and $396,000, 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.

This portfolio is expected to continue to decline as resources are allocated and production efforts are focused on more profitable commercial products.

Excluding the $29.6 million decrease in indirect automobile loans, total loans increased $99.3 million, or 9.6%.

Average loans, net for the year ended December 31, 2024 decreased $3.3 million compared to the year ended December 31, 2023.

Average net loans for the year ended December 31, 2025 increased $34.7 million compared to the year ended December 31, 2024.

Loan Portfolio Composition.

28 unchanged sentences

Medical Facilities 18,103 4.17 % 1,207 55.74 %

Senior Housing 13,877 3.71 % 1,388 59.85 %

Hotels 13,445 3.10 % 1,921 58.94 %

Oil & Gas 4,740 1.09 % 1,580 57.94 %

Senior Housing 3,223 0.74 % 3,223 41.29 %

Other 25,638 5.90 % 884 59.26 %

5 unchanged sentences

Warehouse Space 20,558 17.42 % 791 42.23 %

Medical Facilities 9,064 8.11 % 697 76.69 %

Office Space 9,000 7.63 % 429 72.60 %

Hotels 5,943 5.31 % 1,981 27.31 %

Manufacturing 3,404 3.04 % 309 57.44 %

Medical Facilities 8,672 7.35 % 667 74.45 %

Senior Housing 5,841 4.95 % 1,947 26.90 %

Oil & Gas 4,616 3.91 % 659 65.96 %

Manufacturing 2,928 2.48 % 325 58.44 %

Hotels 1,993 1.69 % 1,993 74.73 %

Other $ 37,669 31.92 % $ 477 53.02 %

36 unchanged sentences

Total deposits increased $56.3 million, or 4.4%, to $1.34 billion as of December 31, 2025 compared to $1.28 billion at December 31, 2024.

Time deposits increased $66.2 million and money market deposits increased $30.4 million, while interest-bearing demand deposits decreased $46.2 million, savings deposits decreased $24.2 million and non interest-bearing demand deposits decreased $9.9 million.

The current interest rate environment has resulted in a shift in deposit products to

higher priced money market and time deposits.

Interest-bearing demand deposits, non interest-bearing demand deposits and time deposits increased $40.4 million, $23.8 million and $15.6 million, respectively, while money market deposits and savings deposits decreased $22.3 million and $1.2 million respectively.

This favorable change in the deposit mix occurred as the Bank continues to focus on building core banking relationships while strategically reducing higher priced funding.

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

55 unchanged sentences

Other borrowed funds increased $40,000 to $34.76 million at December 31, 2025, compared to $34.72 million at December 31, 2024.

Borrowings for each period consisted of $20.0 million of FHLB advances entered into during 2023 for a term of 24 months at 4.92%, the proceeds of which were utilized to match fund originations within the Bank’s commercial and industrial loan portfolio and $14.7 million related to the Company's unsecured subordinated debt obligation.

Borrowings for December 31, 2025 consisted of $20.0 million of FHLB advances entered into in June 2025 for a term of 24 months at 4.08%.

Borrowings at December 31, 2024 consisted of $20.0 million of FHLB advances entered into in June 2023 for a term of 24 months at 4.92%.

The proceeds of the FHLB borrowings were utilized to match fund originations within the Bank’s commercial and industrial loan portfolio.

Borrowings at both period ends also included $14.7 million related to the Company's unsecured subordinated debt obligation.

Stockholders’ Equity.

Stockholders’ equity increased $10.2 million, or 6.9%, to $157.5 million at December 31, 2025, compared to $147.4 million at December 31, 2024.

• Key factors positively impacting stockholders’ equity included $12.6 million of net income for the current period, partially offset by the payment of $5.1 million in dividends since December 31, 2023 and a $488,000 change in accumulated other comprehensive loss.

• Key factors positively impacting stockholders’ equity included a $13.8 million decrease in accumulated other comprehensive loss resulting from the securities repositioning strategy, $4.9 million of net income for the current period and $2.6 million of shares issued as a result of stock option exercises, partially offset by $6.8 million in treasury stock repurchases and the payment of $5.1 million in dividends since December 31, 2024.

• Book value per share was $31.28 at December 31, 2025 compared to $28.71 at December 31, 2024, an increase of $2.57.

2 unchanged sentences

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

2024 and 2023 Annual Results were impacted by the following significant items:

• 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 on December 8, 2023 and resulted in a pre-tax gain of $24.6 million.

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.

• During the fourth quarter of 2023, the Bank executed a balance sheet repositioning strategy of its portfolio of available-for-sale securities.

The Bank sold $69.3 million in market value of its lower-yielding U.S government agency, mortgage-backed and municipal securities with an average yield of 1.89% and purchased $69.3 million of higher-yielding mortgage-backed and collateralized mortgage obligation securities with an average yield of 5.49%, resulting in a pre-tax loss of $10.1 million.

• Provision for credit losses totaled $570,000 for 2024 and was primarily due to growth in construction and land development loans, while the Bank recorded a recovery for credit losses of $502,000 for 2023 as the Bank recovered $750,000 related to the prior year $2.7 million charged-off commercial and industrial loan.

2025 and 2024 Annual Results were impacted by the following significant item:

• During the third quarter of 2025, the Company 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 $11.8 million loss.

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.

Net Interest Income.

Net interest income increased $4.7 million, or 10.2%, to $50.8 million for the year ended December 31, 2025 compared to $46.1 million for the year ended December 31, 2024.

Net interest margin (Non-GAAP) decreased 9 bps to 3.20% for the year ended December 31, 2024 compared to 3.29% the year ended December 31, 2023.

Net interest margin (GAAP) decreased to 3.19% for the year ended December 31, 2024 compared to 3.28% for the year ended December 31, 2023.

Interest and dividend income increased $13.9 million, or 22.3%, to $76.1 million for the year ended December 31, 2024 compared to $62.2 million for the year ended December 31, 2023.

This increase was largely due to a 69 basis point increase in the yield on interest-earning assets to 5.28% for the year ended December 31, 2024 compared to 4.59% for the year ended December 31, 2023, contributing an additional $11.0 million to interest income.

Net interest margin (Non-GAAP) increased 38 bps to 3.58% for the year ended December 31, 2025 compared to 3.20% the year ended December 31, 2024.

Net interest margin (GAAP) increased to 3.55% for the year ended December 31, 2025 compared to 3.19% for the year ended December 31, 2024.

Interest and dividend income decreased $192,000, or 0.3%, to $75.9 million for the year ended December 31, 2025 compared to $76.1 million for the year ended December 31, 2024.

• Interest income on loans increased $2.7 million, or 4.5%, to $62.1 million for the year ended December 31, 2025 compared to $59.4 million for the year ended December 31, 2024.

Average loans decreased $3.3 million while the loan yield increased 46 bps to 5.55% for the year ended December 31, 2024 compared to 5.09% for the year ended December 31, 2023.

• Interest income on taxable investment securities increased $7.5 million, or 187.1%, to $11.5 million for the year ended December 31, 2024 compared to $4.0 million for the year ended December 31, 2023.

Average loans increased $34.7 million and the loan yield increased 7 bps to 5.62% for the year ended December 31, 2025 compared to 5.55% for the year ended December 31, 2024.

• Interest income on investment securities increased $548,000, or 4.8%, to $12.1 million for the year ended December 31, 2025 compared to $11.5 million for the year ended December 31, 2024.

Average investment securities increased $9.2 million and there was a 11 bps increase in average yield.

• Interest from other interest-earning assets, which primarily consists of interest-earning cash, increased $1.8 million, or 54.9%, to $5.1 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023.

Average interest bearing deposits at other banks increased $34.8 million, primarily related to changes in deposits and loans, and there was a 1 bps increase in average yield due to an increase in Fed interest rates.

Interest expense increased $12.4 million, or 70.1%, to $30.1 million for the year ended December 31, 2024 compared to $17.7 million for the year ended December 31, 2023.

This increase was largely due to an 86 basis point increase in the cost of interest-bearing liabilities to 2.24% for the year ended December 31, 2024 compared to 1.38% for the year ended December 31, 2023, adding an additional $9.9 million to interest expense.

• Interest expense on deposits increased $12.0 million, or 73.1%, to $28.4 million for the year ended December 31, 2024 compared to $16.4 million for the year ended December 31, 2023.

Rising market interest rates led to the repricing of interest-bearing demand and money market deposits and a shift in deposits from noninterest-bearing and interest-bearing demand and savings deposits to money market and time deposits resulted in a 97 bps increase in average cost compared to the year ended December 31, 2023., adding $9.9 million to interest expense.

Additionally, average interest-bearing deposits increased $106.6 million, adding $2.1 million to interest expense.

• Interest expense on other borrowed funds increased $415,000, or 34.4%, to $1.6 million for the year ended December 31, 2024 compared to $1.2 million for the year ended December 31, 2023 primarily due to an $8.4 million increase in average balances due to $20.0 million of FHLB long-term advances added during the second quarter of 2023.

Provision (Recovery) for Credit Losses.

The provision for credit losses was $570,000 for the year ended December 31, 2024, compared to a $502,000 recovery for the year ended December 31, 2023.

The provision for loan losses in 2024 was primarily due to growth in construction and land development loans.

Net charge-offs for the year ended December 31, 2024 were $281,000 while net recoveries for the year ended December 31, 2023 were $557,000 primarily due to recoveries totaling $750,000 related to the prior year $2.7 million charged-off commercial and industrial loan.

Noninterest Income .

The breakdown of noninterest income for the year ended December 31, 2024 compared to year ended December 31, 2023 is as follows:

These changes were primarily due to the securites repositioning strategy.

• Interest from other interest-earning assets, which primarily consists of interest-earning cash, decreased $3.4 million, or 66.0%, to $1.7 million for the year ended December 31, 2025 compared to $5.1 million for the year ended December 31, 2024.

Average interest bearing deposits at other banks decreased $59.1 million, primarily related to changes in deposits and loans, and there was a 108 bps decrease in average yield due to recent decreases in Fed interest rates.

Interest expense decreased $4.9 million, or 16.3%, to $25.2 million for the year ended December 31, 2025 compared to $30.1 million for the year ended December 31, 2024.

This decrease was largely due to a 43 basis point decrease in the cost of interest-bearing liabilities to 2.37% for the year ended December 31, 2025 compared to 2.80% for the year ended December 31, 2024, causing a $4.7 million decrease in interest expense.

• Interest expense on deposits decreased $5.0 million, or 17.6%, to $23.4 million for the year ended December 31, 2025 compared to $28.4 million for the year ended December 31, 2024.

The cost of interest-bearing deposits decreased 45 basis points to 2.29% for the year ended December 31, 2025 compared to 2.74% for the year ended December 31, 2024 causing a $4.6 million decrease in interest expense.

Additionally, average interest-bearing deposits decreased $15.0 million, causing a $391,000 million decrease in interest expense.

Declining market interest rates led to the repricing of interest-bearing demand and money market deposits and the deposit mix shifted from time deposits into noninterest-bearing and interest-bearing demand deposits as the Bank focused on building core banking relationships while strategically reducing higher priced time deposits.

• Interest expense on borrowed funds increased $97,000, or 6.0%, to $1.7 million for the year ended December 31, 2025 compared to $1.6 million for the year ended December 31, 2024 primarily due to a $4.2 million increase in average balances due to utilization of short-term borrowings to fund loan growth, partially offset by a 29 basis point decrease in the rate on other borrowings as a $20.0 million FHLB advance matured in June 2025 and was replaced at a lower cost.

Provision for Credit Losses.

The provision for credit losses was $589,000 for the year ended December 31, 2025, compared to $570,000 for the year ended December 31, 2024.

The provision for loan losses in 2025 was primarily due to growth in non-owner occupied commercial real estate and commercial and industrial loans.

Net charge-offs for the year ended December 31, 2025 were $223,000 while net charge-offs for the year ended December 31, 2024 were $281,000 due to a decline in charge-offs for indirect auto loans, partially offset by current year increases in charge-offs for commercial and industrial and other consumer loans.

Total recoveries remained constant year over year with an increase in recoveries on other consumer loans, mainly offset by a decline in recoveries on commercial and industrial loans.

Noninterest (Loss) Income .

The breakdown of noninterest (loss) income for the year ended December 31, 2025 compared to year ended December 31, 2024 is as follows:

2025 2024 Dollar Change Percent Change

3 unchanged sentences

Other Commissions 252 251 1 0.4 %

Net Gain on Sales of Loans 52 — 52 — %

Net Gain (Loss) on Securities 51 (10,199) 10,250 100.5 %

Net Gain on Sale of Loans 105 52 53 101.9 %

Net (Loss) Gain on Investment Securities (11,807) 51 (11,858) (23251.0) %

Net Gain on Purchased Tax Credits 14 49 (35) (71.4) %

4 unchanged sentences

Other Income 1,379 1,484 (105) (7.1) %

Total Noninterest Income $ 5,494 $ 24,012 $ (18,518) (77.1) %

Noninterest income decreased $18.5 million, or 77.1%, to $5.5 million for the year ended December 31, 2024, compared to $24.0 million for the year ended December 31, 2023.

• The Company recorded a $24.6 million pre-tax gain on the sale of EU assets during the year ended December 31, 2023.

Total Noninterest (Loss) Income $ (7,230) $ 5,494 $ (12,724) (231.6) %

Noninterest income decreased $12.7 million, or 231.6%, to a $7.2 million loss for the year ended December 31, 2025, compared to income of $5.5 million for the year ended December 31, 2024.

• Net (loss) gain on investment securities was an $11.8 million loss for the year ended December 31, 2025, compared to a gain of $51,000 for the year ended December 31, 2024.

The loss recognized during 2025 was primarily attributable to the securities repositioning strategy implemented during the third quarter of the year.

• The Company recorded a $40,000 net gain on disposal of premises and equipment in the current year related to the sale of a corporate storage warehouse, compared to a $274,000 gain in the prior year related to the sale of one branch location.

• On December 1, 2023, the Company announced that the Bank and EU entered into an Asset Purchase Agreement with 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 on December 8, 2023.

The sale of assets was completed on December 8, 2023 at which time the Company recognized a $24.6 million pre-tax gain on the sale of EU assets.

During 2024, the Company recognized an additional gain of $138,000 following the final settlement of all liabilities.

• Net gain on securities was $51,000 for the year ended December 31, 2024, compared to a loss of $10.2 million for the year ended December 31, 2023.

During 2023, the Company sold $79.4 million in book value of its lower-yielding U.S government agency, mortgage-backed and municipal securities with an average yield of 1.89% and purchased $69.3 million of higher-yielding mortgage-backed and collateralized mortgage obligation securities with an average yield of 5.49%, resulting in a pre-tax loss of $10.1 million.

The Company's equity securities, which are primarily comprised of bank stocks, reflected a gain in value of $51,000 for the current period compared to a loss of $110,000 in value in the prior period primarily from a change in market value of these securities.

• Insurance commissions decreased $5.8 million due to the sale of EU during the year ended December 31, 2023.

• Other income for the year ended December 31, 2024 includes a $708,000 earn-out payment related to EU.

• The Company recorded a $274,000 net gain on disposal of fixed assets in the current year related to the sale of one branch location, compared to a $11,000 gain in the prior year.

In addition, other income for the year ended December 31, 2025 and 2024 includes a $750,000 and $708,000 earn-out payment related to the sale of EU, respectively.

• Service fees increased $500,000, or 27.2% to $2.2 million for the year ended December 31, 2025, compared to $1.7 million for the year ended December 31, 2024 primarily related to fees on corporate deposit and Individual Covered Health Reimbursement Arrangement accounts.

Noninterest Expense.

15 unchanged sentences

Total Noninterest Expense $ 37,656 $ 35,649 $ 2,007 5.6 %

Noninterest expense decreased $3.1 million, or 8.1%, to $35.6 million for the year ended December 31, 2024 compared to $38.8 million for the year ended December 31, 2023.

• Salaries and employee benefits decreased $3.1 million to $18.8 million for the year ended December 31, 2024 compared to $21.9 million for the year ended December 31, 2023.

The decrease was primarily due to no expense related to EU for the year ended December 31, 2024, compared to $3.1 million for year ended December 31, 2023.

• Amortization of intangible assets decreased $808,000 to $958,000 for the year ended December 31, 2024 compared to $1.8 million for the year ended December 31, 2023 as a component of the Bank’s core deposit intangible was fully amortized in February 2024 and there was no expense related to EU recognized for the year ended December 31, 2024 compared to $174,000 of expense recognized for the year ended December 31, 2023.

• Other noninterest expense decreased $366,000 to $3.4 million for the year ended December 31, 2024 compared to $3.7 million for the year ended December 31, 2023.

The decrease was primarily due to no expense related to EU for the year ended December 31, 2024, compared to $422,000 for year ended December 31, 2023

• Contracted services increased $457,000 to $1.6 million for the year ended December 31, 2024 compared to $1.2 million for the year ended December 31, 2023 due primarily to costs associated with cybersecurity support, website administration, equity compensation management and product consulting.

• Data processing expense increased $294,000 to $3.3 million for the year ended December 31, 2024 compared to $3.0 million for the year ended December 31, 2023.

The increase was primarily related to costs related to the implementation of a new loan origination system and a financial dashboard program.

• Pennsylvania shares tax expense increased $272,000 to $1.2 million for the year ended December 31, 2024 compared to $889,000 for the year ended December 31, 2023 due to an increase in the Bank's taxable base resulting from the increase in equity from the sale of EU.

Noninterest expense increased $2.0 million, or 5.6%, to $37.7 million for the year ended December 31, 2025 compared to $35.6 million for the year ended December 31, 2024.

• Salaries and employee benefits increased $3.4 million to $22.2 million for the year ended December 31, 2025 compared to $18.8 million for the year ended December 31, 2024.

The increase was primarily due to higher salaries, insurance and retirement benefits and tax expense related to the addition of revenue producing staff in the Bank's Commercial Banking and Treasury divisions, merit increases and higher incentive compensation costs.

• Equipment expense increased $297,000 to $1.5 million for the year ended December 31, 2025 compared to $1.2 for the year ended December 31, 2024 due to higher depreciation and maintenance expenses associated with interactive teller machines, security system upgrades and other equipment placed into service in late 2024.

• Amortization of intangible assets decreased $958,000 as the Bank’s core deposit intangible was fully amortized in 2024 and there was no expense recorded for the year ended December 31, 2025.

• Occupancy expense decreased $583,000 to $2.5 million for the year ended December 31, 2025 compared to $3.1 million for the year ended December 31, 2024 due to certain property management cost savings initiatives implemented in 2025.

• Data processing expense decreased $253,000 to $3.1 million for the year ended December 31, 2025 compared to $3.3 million for the year ended December 31, 2024.

The decrease was primarily related to the utilization of certain vendor credits in 2025 and higher costs in 2024 related to the implementation of a new loan origination system and a financial dashboard program.

• Pennsylvania shares tax expense decreased $213,000 to $948,000 for the year ended December 31, 2025 compared to $1.2 million for the year ended December 31, 2024 due to $242,000 of refunds received in 2025 on amended returns filed for prior years.

Income Tax Expense.

Income tax expense decreased $5.0 million to $2.7 million for the year ended December 31, 2024, compared to $7.7 million for the year ended December 31, 2023 and is primarily attributed to the decrease in pre-tax income.

Income tax expense decreased $2.4 million to $397,000 for the year ended December 31, 2025, compared to $2.7 million for the year ended December 31, 2024 and is primarily attributed to the decrease in pre-tax income.

Average Balances and Yields.

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Nonaccrual Loans:

$ 1,388 $ — $ — $ 1,388

Residential $ 2,210 $ 521 $ — $ 2,731

Commercial 2,057 — — 2,057

Construction 131 284 — 415

Consumer 107 — — 107

Total Nonaccrual Loans $ 4,505 $ 805 $ — 5,310

$ 1,789 $ — $ — 1,789

Other Real Estate Owned:

Total Other Real Estate Owned —

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Nonaccrual Loans:

$ 1,476 $ — $ — $ 1,476

Commercial and Industrial 316 — — 316

Total Nonaccrual Loans

$ 2,240 $ — $ — 2,240

Other Real Estate Owned:

Residential $ 1,388 $ — $ — $ 1,388

Commercial 188 — — 188

Consumer 213 — — 213

Total Nonaccrual Loans $ 1,789 $ — $ — 1,789

Total Other Real Estate Owned —

2 unchanged sentences

At December 31, 2025 and December 31, 2024, we had no loans that were not classified as nonaccrual or 90 days past due where known information about possible credit problems of borrowers caused management to have serious concerns as to the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure as nonaccrual or 90 days past due.

Nonperforming assets decreased $613,000 to $1.8 million at December 31, 2024, compared to $2.4 million at December 31, 2023.

Nonperforming loans decreased $451,000 to $1.8 million at December 31, 2024 compared to $2.2 million at December 31, 2023.

The respective decreases are primarily attributable to the sale of a $162,000 other real estate owned residential property in the current year, the payoff of a commercial non-owner occupied purchased participation loan for $358,000 and a $316,000 commercial and industrial loan that was placed back on accrual status based on consistent timely loan payments.

This was partially offset by a $175,000 commercial non-owner occupied loan moved to nonaccrual status during the year and increases of $72,000 in nonaccrual personal consumer loans and $52,000 in nonaccrual indirect loans in the current year.

Nonperforming loans increased $3.5 million to $5.3 million at December 31, 2025 compared to $1.8 million at December 31, 2024.

The increase in was due to the addition of two loan relationships to nonaccrual status during the year.

The first relationship consists of three residential real estate loans totaling $2.1 million which are well-secured with first liens on multiple rental properties.

The Bank has executed assignments of rents and leases, is in the process of foreclosure on the properties and currently does not expect to incur losses on the loans.

The second is a $2.0 million commercial real estate loan fully secured by an owner-occupied distribution warehouse, which is currently under a sales agreement, and other assets of the borrower.

The Bank is currently working with the borrower to achieve a successful resolution and expects to be repaid in full in 2026.

The following table presents the components of the ratio of nonaccrual loans to total loans at the dates indicated.

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The Company designates an asset as “special mention” if the asset has a potential weakness that warrants management’s close attention.

The Company uses an nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio.

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 one to four “pass” and five "pass-watch" rated.

The Company moved to the nine-point internal risk rating system in the current year, which aligned the Company with risk rating systems that are common to community banking peers.

The criticized rating categories used by management generally follow bank regulatory definitions.

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The total amount of special mention and classified loans decreased $14.5 million, or 36.0%, to $25.8 million at December 31, 2025, compared to $40.4 million at December 31, 2024.

The decrease of $21.4 million in the special mention loan category is primarily due to loan risk rating upgrades due to the receipt of borrowers' current financial information.

decrease of $7.6 million in the substandard category is primarily due to a substantial principal reduction in loans for one commercial borrower previously secured by a pledge of revenues and commercial real estate with the remaining principal balance being refinanced into loans fully secured with commercial real estate.

The decrease of $13.3 million in the special mention category is primarily due to the upgrade of three credit relationships due to improved financial performance.

The first relationship consisted loans to secure non-owner occupied commercial real estate and totaled $7.0 million;

the second relationship consisted of commercial and industrial loans and totaled $5.9 million;

and the third relationship consisted of loans to secure owner occupied commercial real estate and totaled $5.0 million.

These improvements were partially offset by a downgrade of one credit relationship due to the non-receipt of updated financial information.

This relationship consisted of loans to secure non-owner occupied commercial real estate which totaled $4.4 million.

Allowance for Credit Losses.

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This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available.

Although we maintain our allowance for credit losses at a level that we consider to be adequate to provide for potential losses, there can be no assurance that such losses will not exceed the estimated amounts or that we will not be required to make additions to the allowance for credit losses in the future.

There can be no assurance that such losses will not exceed the estimated amounts or that we will not be required to make additions to the allowance for credit losses in the future.

Future additions to our allowance for credit losses and changes in the related ratio of the allowance for credit losses to nonperforming loans are dependent upon the economy, changes in real estate values and interest rates, the view of the regulatory authorities toward adequate credit loss reserve levels, and inflation.

5 unchanged sentences

Balance at Beginning of Year $ 9,805 $ 9,707

Impact of ASC 326 - Loans — (3,385)

Provision (Recovery) for Loan Losses 379 (284)

Provision for Credit Losses - Loans 534 379

Residential (25) (28)

Commercial (19) (127)

Commercial and Industrial (223) (12)

2 unchanged sentences

Residential 10 14

Commercial — 32

Commercial and Industrial 136 175

1 unchanged sentence

Total Recoveries 346 371

Net (Charge-offs) Recoveries (281) 557

Net Charge-offs (223) (281)

Balance at End of Year $ 10,116 $ 9,805

Allowance for Credit Losses to Total Loans 0.87 % 0.90 %

Allowance for Credit Losses to Nonaccrual Loans 548.07 433.35

Allowance for Credit Losses to Nonperforming Loans 190.51 548.07

Net (Recoveries) Charge-offs to Average Loans 0.03 (0.05)

Net Charge-offs to Average Loans 0.02 0.03

The allowance for credit losses increased $311,000, or 3.2%, to $10.1 million at December 31, 2025, compared to $9.8 million at December 31, 2024.

Allowance for credit losses to total loans increased 3 basis points to 0.90% at December 31, 2024 compared to 0.87% at December 31, 2023.

The increase in the allowance for credit losses was primarily due to specific reserves for individually analyzed loans of $331,000 for a commercial and industrial loan relationship and two CRE non-owner occupied loans of $68,000 at December 31, 2024.

This was mainly offset by a recovery in the allowance for credit losses of $301,000 due to a decrease in historical loss rates, partially offset by an increase in qualitative factors related to growth in the

loan portfolio.

This compared to $284,000 in recovery for credit losses for the year ended December 31, 2023 due to a $2.7 million charge-off of one loan in the commercial and industrial pool.

The ratio of allowance for credit losses to nonaccrual loans ratio increased to 548.07% at December 31, 2024, compared to 433.35% at December 31, 2023.

Nonaccrual loans decreased $451,000 to $1.8 million at December 31, 2024 compared to $2.2 million at December 31, 2023.

Nonaccrual commercial real estate loans decreased $172,000 to $188,000 at December 31, 2024 compared to $360,000 at December 31, 2023 primarily related to the payoff of a commercial non-owner occupied purchased participation loan for $358,000 and a $316,000 commercial and industrial loan that was placed back on accrual status based on consistent timely loan payments.

Allowance for credit losses to total loans decreased three basis points to 0.87% at December 31, 2025 compared to 0.90% at December 31, 2024.

The increase in the allowance for credit losses was mainly due to $2.1 million of allowance necessary for loan growth attributed primarily to non-owner occupied commercial real estate and commercial and industrial loan originations.

Additionally, an increase of $495,000 in the allowance was related changes in qualitative factors primarily related to loan growth.

This was mainly offset by declines in the allowance of $1.4 million due to changes in loan concentrations, $608,000 due to improvement in loss rate factors and $269,000 in specific reserves for individually analyzed loans.

The ratio of allowance for credit losses to nonaccrual loans ratio decreased to 190.51% at December 31, 2025, compared to 548.07% at December 31, 2024.

Nonaccrual loans increased $3.5 million to $5.3 million at December 31, 2025 compared to $1.8 million at December 31, 2024.

The increase in nonaccrual loans was due to the addition of two loan relationships to nonaccrual status during the year.

The first relationship consists of three residential real estate loans totaling $2.1 million which are well-secured with first liens on multiple rental properties.

The Bank has executed assignments of rents and leases, is in the process of foreclosure on the properties and currently does not expect to incur losses on the loans.

The second is a $2.0 million commercial real estate loan fully secured by an owner-occupied distribution warehouse, which is currently under a sales agreement, and other assets of the borrower.

The Bank is currently working with the borrower to achieve a successful resolution and expects to be repaid in full in 2026.

Net charge-offs for the year ended December 31, 2025 were $223,000 primarily due to charge-offs of $164,000 for consumer revolving lines of credit, $137,000 for consumer indirect automobile loans and $127,000 for commercial and industrial.

This was partially offset by recoveries of $136,000 for commercial and industrial loans, $106,000 for consumer indirect automobile loans and $94,000 for consumer revolving lines of credit.

Net charge-offs for the year ended December 31, 2024 were $281,000 primarily due to charge-offs of $357,000 for consumer indirect, $127,000 for CRE non-owner occupied and $114,000 for consumer revolving lines of credit.

This was partially offset by recoveries of $175,000 for commercial and industrial and $133,000 for consumer indirect loans.

Net recoveries for the year ended December 31, 2023 were $557,000 primarily due to recoveries totaling $750,000 related to the prior year $2.7 million charged-off commercial and industrial loan.

The following table presents the ratio of net charge-offs (recoveries) as a percent of average loans for the periods indicated.

The following table presents the ratio of net charge-offs as a percent of average loans for the periods indicated.

Year Ended December 31, 2025 2024

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(Dollars in Thousands, Except Share and Per Share Data)

Assets (GAAP) $ 1,547,693 $ 1,481,564

Goodwill and Other Intangible Assets, Net (9,732) (9,732)

Tangible Assets (Non-GAAP) $ 1,537,961 $ 1,471,832

Stockholders' Equity (GAAP) (Numerator) $ 157,537 $ 147,378

1 unchanged sentence

Tangible Common Equity or Tangible Book Value (Non-GAAP) (Numerator) $ 147,805 $ 137,646

Tangible Common Equity to Tangible Assets (Non-GAAP) 9.6 % 9.4 %

Common Shares Outstanding (Denominator) 5,036,509 5,132,654

9 unchanged sentences

Unpledged securities, which provide an additional source of liquidity, totaled $107.3 million.

In addition, the Bank maintains a credit

arrangement with the FHLB with a maximum borrowing limit of approximately $489.5 million and available borrowing capacity of $467.6 million as of December 31, 2024.

In addition, the Bank maintains a credit arrangement with the FHLB with a maximum borrowing limit of approximately $528.0 million and available borrowing capacity of $506.1 million as of December 31, 2025.

At December 31, 2025, there were no standby letters of credit utilized to collateralize public deposits in excess of the level insured by the FDIC.

60 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis