What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-11-07 compared with 2025-08-13 · 433 added, 387 removed, 1459 unchanged (36% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share and per share data)

September 30,

Cash and due from banks

25 unchanged sentences

Preferred stock, par value $ 2.00 per share;

authorized 1,000,000 shares as of June 30, 2025 and December 31, 2024;

issued 0 as of June 30, 2025 and December 31, 2024

authorized 1,000,000 shares as of September 30, 2025 and December 31, 2024;

issued 0 as of September 30, 2025 and December 31, 2024

Common stock, par value $ 2.00 per share;

authorized 20,000,000 shares as of June 30, 2025 and December 31, 2024;

issued 6,450,392 as of June 30, 2025 and 6,450,392 as of December 31, 2024;

outstanding 6,218,781 as of June 30, 2025 and 6,218,781 as of December 31, 2024

authorized 20,000,000 shares as of September 30, 2025 and December 31, 2024;

issued 6,477,768 as of September 30, 2025 and 6,450,392 as of December 31, 2024;

outstanding 6,246,157 as of September 30, 2025 and 6,218,781 as of December 31, 2024

Retained earnings

Accumulated other comprehensive loss

Treasury stock, at cost, 231,611 shares as of June 30, 2025 and December 31, 2024

Treasury stock, at cost, 231,611 shares as of September 30, 2025 and December 31, 2024

TOTAL STOCKHOLDERS’ EQUITY

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

INTEREST INCOME

11 unchanged sentences

Net interest income

(Release of) provision for credit losses

Net interest income after (release of) provision for credit losses

Provision for credit losses

Net interest income after provision for credit losses

NON-INTEREST INCOME

20 unchanged sentences

Income (loss) before income tax (benefit) expense

Income tax (benefit) expense

Income tax expense (benefit)

NET INCOME (LOSS)

7 unchanged sentences

Three Months Ended

September 30,

Other comprehensive income:

Unrealized net holding gain (loss) on debt securities available-for-sale arising during the period, net of income taxes of $ 107 and $( 875 ), respectively

Unrealized net holding gain on debt securities available-for-sale arising during the period, net of income taxes of $ 1,019 and $ 2,670 , respectively

Fair value adjustment on derivatives, net of income taxes of $ 245 and $ 1,506 , respectively

Total other comprehensive loss

Total comprehensive income (loss)

Total other comprehensive income

Total comprehensive income

(Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

Other comprehensive income (loss):

Unrealized net holding gains (loss) on debt securities available-for-sale arising during the period, net of income taxes of $ 534 and $( 1,053 ), respectively

Other comprehensive income:

Unrealized net holding gains on debt securities available-for-sale arising during the period, net of income taxes of $ 1,553 and $ 1,617 , respectively

Fair value adjustment on derivatives, net of income taxes of $ 911 and $ 753 , respectively

Total other comprehensive income (loss)

Total other comprehensive income

Total comprehensive income (loss)

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2025 AND 2024

NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(Dollars in thousands, except

12 unchanged sentences

Balance at June 30, 2025

Other comprehensive income, net of taxes

Issuance of common stock under dividend reinvestment plan

Dividends - $ 0.28 per share

Balance at September 30, 2025

Balance at January 1, 2024

7 unchanged sentences

Balance at June 30, 2024

Other comprehensive loss, net of taxes

Issuance of common stock under dividend reinvestment plan

Dividends - $ 0.28 per share

Balance at September 30, 2024

See accompanying notes to consolidated financial statements (unaudited).

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2025 AND 2024

NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(Dollars in thousands)

1 unchanged sentence

Net income (loss)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses on loans

2 unchanged sentences

Depreciation and amortization

Net premium amortization on securities

Deferred income tax (benefit)

Net (discount accretion) premium amortization on securities

Deferred income tax expense (benefit)

Net gains on sales of mortgage loans

2 unchanged sentences

Net securities (gains) losses

Decrease (Increase) in accrued interest receivable

Increase in accrued interest receivable

Increase in cash surrender value of bank owned life insurance

1 unchanged sentence

Net losses on disposals of premises and equipment

Decrease in other assets

Increase in other assets

Amortization of investment in low-income housing partnerships

Increase in accrued interest payable

Increase (decrease) in accrued interest payable

(Decrease) increase in other liabilities

8 unchanged sentences

Purchase of investment in real estate venture

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

NET CASH USED IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES:

1 unchanged sentence

Net (decrease) increase in short-term borrowings

Common stock issued

Dividends paid

Repayment of long-term borrowings

Dividends paid, net of reinvestment

NET CASH PROVIDED BY FINANCING ACTIVITIES

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING

4 unchanged sentences

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES

Common stock subscription receivable

Right-of-use assets obtained in exchange for lease liabilities

10 unchanged sentences

In the opinion of management, all adjustments considered necessary for fair presentation have been included.

Operating results for the three and six months ended June 30, 2025, are not necessarily indicative of the results for the year ending December 31, 2025.

Operating results for the three and nine months ended September 30, 2025, are not necessarily indicative of the results for the year ending December 31, 2025.

For further information, refer to the consolidated financial statements and notes thereto included in First Keystone Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024.

Subsequent Events

The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of June 30, 2025 for items that should potentially be recognized or disclosed in these consolidated financial statements.

The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2025 for items that should potentially be recognized or disclosed in these consolidated financial statements.

The evaluation was conducted through the date these consolidated financial statements were issued.

1 unchanged sentence

Adopted ASUs:

There were no ASUs adopted during the first half of 2025.

Pending ASUs:

In December of 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

In January of 2025, the Company adopted ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

Improvements to Income Tax Disclosure.

ASU 2023-09 was issued to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation table, as well as income taxes paid disaggregated by jurisdiction.

The amendments in this ASU should be applied prospectively with an option of retrospective application to prior periods presented.

The amendments in this update are effective for public business entities for annual reporting periods beginning after December 15, 2024.

The Company is currently evaluating the provisions of ASU 2023-09 and does not expect the adoption of the standard to have a material impact on the Company’s financial statements.

The amendments in this update were effective for public business entities for annual reporting periods beginning after December 15, 2024.

The Company adopted the provisions of ASU 2023-09 effective January 1, 2025.

This ASU did not have a material effect on the Company’s financial statements.

Pending ASUs:

In November 2024, the FASB issued ASU No.

12 unchanged sentences

Securities classified as Held-to-Maturity are carried at cost adjusted for amortization of premium and accretion of discount to maturity.

At June 30, 2025 and December 31, 2024, all debt securities held were classified as available-for-sale.

At September 30, 2025 and December 31, 2024, all debt securities held were classified as available-for-sale.

Debt securities not classified as Held-to-Maturity are included in the Available-for-Sale category and are carried at fair value.

13 unchanged sentences

Corporate debt securities consist of senior debt and subordinated debt holdings.

There was no allowance for credit losses for Available-For-Sale debt securities as of June 30, 2025;

There was no allowance for credit losses for Available-For-Sale debt securities as of September 30, 2025;

therefore, it is not present in the table below.

The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as Available-For-Sale were as follows at June 30, 2025 and December 31, 2024:

The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as Available-For-Sale were as follows at September 30, 2025 and December 31, 2024:

Debt Securities Available-for-Sale

(Dollars in thousands)

June 30, 2025:

September 30, 2025:

Treasury securities

17 unchanged sentences

Corporate debt securities

Debt securities Available-for-Sale with an aggregate fair value of $ 208,462,000 at June 30, 2025 and $ 251,961,000 at December 31, 2024, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase and the Federal Discount Window aggregating $ 161,683,000 at June 30, 2025 and $ 192,671,000 at December 31, 2024.

The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at June 30, 2025.

Debt securities Available-for-Sale with an aggregate fair value of $ 258,895,000 at September 30, 2025 and $ 251,961,000 at December 31, 2024, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase and the Federal Discount Window aggregating $ 219,124,000 at September 30, 2025 and $ 192,671,000 at December 31, 2024.

The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at September 30, 2025.

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

June 30, 2025

September 30, 2025

Debt Securities Available-For-Sale

11 unchanged sentences

Mortgage-backed securities are allocated for maturity reporting at their original maturity date.

At June 30, 2025 and December 31, 2024, the Corporation had holdings of securities from the following issuers in excess of ten percent of consolidated stockholders’ equity (excluding holdings of the U.S.

At September 30, 2025 and December 31, 2024, the Corporation had holdings of securities from the following issuers in excess of ten percent of consolidated stockholders’ equity (excluding holdings of the U.S.

Government and U.S.

1 unchanged sentence

(Dollars in thousands)

June 30, 2025:

September 30, 2025:

Sallie Mae Bank

7 unchanged sentences

Navient Student Loan Trust

There were no proceeds from sales of Debt Securities Available-For-Sale for the six months ended June 30, 2025 and 2024.

There were no proceeds from sales of Debt Securities Available-For-Sale for the nine months ended September 30, 2025 and 2024.

Therefore, there were no gains or losses realized during these periods.

The summary below shows the gross unrealized losses and fair value of the Company’s debt securities.

Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of June 30, 2025 and December 31, 2024:

June 30, 2025

Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of September 30, 2025 and December 31, 2024:

September 30, 2025

(Dollars in thousands)

23 unchanged sentences

Corporate debt securities

There were 164 individual debt securities in an unrealized loss position as of June 30, 2025, with a combined decline in value representing 7.17 % of the debt securities portfolio.

There were 154 individual debt securities in an unrealized loss position as of September 30, 2025, with a combined decline in value representing 5.47 % of the debt securities portfolio.

There were 167 individual debt securities in an unrealized loss position as of December 31, 2024, with their combined decline in value representing 7.36 % of the debt securities portfolio.

9 unchanged sentences

The Company made a policy election to exclude accrued interest receivable from the amortized cost basis of debt securities available for sale.

Accrued interest receivable on debt securities available for sale is reported as a component of accrued interest receivable on the Company’s consolidated balance sheet and totaled $ 2,124,000 as of June 30, 2025 as compared to $ 2,142,000 as of December 31, 2024.

Accrued interest receivable on debt securities available for sale is reported as a component of accrued interest receivable on the Company’s consolidated balance sheet and totaled $ 2,157,000 as of September 30, 2025 as compared to $ 2,142,000 as of December 31, 2024.

Accrued interest receivable on debt securities available for sale is excluded from the estimate of credit losses.

All debt securities available for sale in an unrealized loss position, as of June 30, 2025, continue to perform as scheduled and the Company does not believe that there is a credit loss or that a provision for credit losses is necessary.

All debt securities available for sale in an unrealized loss position, as of September 30, 2025, continue to perform as scheduled and the Company does not believe that there is a credit loss or that a provision for credit losses is necessary.

Also, as part of the Company’s evaluation of its intent and ability to hold debt securities for a period of time sufficient to allow for any anticipated recovery in the market, the Company considers its investment strategies, cash flow needs, liquidity position, capital adequacy and interest rate risk position.

The Company does not currently intend to sell the debt

securities within the portfolio and it is not more-likely-than-not that the Company will be required to sell the debt securities.

The Company does not currently intend to sell

the debt securities within the portfolio and it is not more-likely-than-not that the Company will be required to sell the debt securities.

Management continues to monitor all of the Company’s debt securities with a high degree of scrutiny.

3 unchanged sentences

Equity securities without readily determinable fair values are recorded at cost, adjusted for observable price changes and impairments, if any.

At June 30, 2025 and December 31, 2024, the Company had $ 1,606,000 and $ 1,587,000 , respectively, in equity securities recorded at fair value.

The following is a summary of realized gains and losses recognized in net income on equity securities during the three and six months ended June 30, 2025 and 2024:

At September 30, 2025 and December 31, 2024, the Company had $ 1,715,000 and $ 1,587,000 , respectively, in equity securities recorded at fair value.

The following is a summary of realized gains and losses recognized in net income on equity securities during the three and nine months ended September 30, 2025 and 2024:

(Dollars in thousands)

1 unchanged sentence

Three months ended

June 30, 2025

June 30, 2024

September 30, 2025

September 30, 2024

Net gains (losses) from market value fluctuations recognized during the period on equity securities

2 unchanged sentences

(Dollars in thousands)

Six months ended

June 30, 2025

June 30, 2024

Nine months ended

September 30, 2025

September 30, 2024

Net gains (losses) from market value fluctuations recognized during the period on equity securities

8 unchanged sentences

The Company monitors the equity securities portfolio monthly with particular attention given to securities in a continuous loss position of at least ten percent for over twelve months.

Based on the factors described above, management did not consider any equity securities to be impaired at June 30, 2025 or December 31, 2024.

Based on the factors described above, management did not consider any equity securities to be impaired at September 30, 2025 or December 31, 2024.

NOTE 4 — LOANS AND ALLOWANCE FOR CREDIT LOSSES

31 unchanged sentences

These loans are sold without recourse.

Loans held for sale amounted to $ 104,000 and $ 737,000 at June 30, 2025 and December 31, 2024, respectively.

Loans held for sale amounted to $ 103,000 and $ 737,000 at September 30, 2025 and December 31, 2024, respectively.

Agricultural Lending

25 unchanged sentences

Government) on all principal and the balance of interest accruing through ninety days beyond the date that demand is made to the originating bank for repurchase of the loan.

As of June 30, 2025, the Company's balance of GGLs was $ 3,974,000 , compared to $ 4,306,000 at December 31, 2024.

As of September 30, 2025, the Company's balance of GGLs was $ 3,939,000 , compared to $ 4,306,000 at December 31, 2024.

Consumer Lending

123 unchanged sentences

The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and, if necessary, is recorded in other liabilities on the consolidated balance sheets.

As of June 30, 2025 and December 31, 2024, the amount of the reserve for unfunded lending commitments was $ 97,000 and $ 102,000 , respectively.

As of September 30, 2025 and December 31, 2024, the amount of the reserve for unfunded lending commitments was $ 90,000 and $ 102,000 , respectively.

The Company made a policy election to exclude accrued interest receivable from the amortized cost basis of loans.

Accrued interest receivable on loans is reported as a component of accrued interest receivable on the Company’s consolidated balance sheets and totaled $ 2,589,000 as of June 30, 2025 compared to $ 2,575,000 at December 31, 2024.

Accrued interest receivable on loans is reported as a component of accrued interest receivable on the Company’s consolidated balance sheets and totaled $ 2,638,000 as of September 30, 2025 compared to $ 2,575,000 at December 31, 2024.

Accrued interest receivable on loans is excluded from the estimate of credit losses.

38 unchanged sentences

Loans are graded doubtful if they contain weaknesses so serious that collection or liquidation in full is questionable.

The following table presents outstanding loan balances by loan class prior to allocation of net deferred fees and costs, as well as the balance of total loans held for investment after allocation of net deferred fees and costs and net loans after allocation of the allowance for credit losses as of June 30, 2025 and December 31, 2024.

(Dollars in thousands)

September 30,

Commercial and Industrial

4 unchanged sentences

Allowance for Credit Losses

The following tables present the classes of the loan portfolio summarized by risk rating and year of origination and year-to-date gross charge-offs by loan portfolio summarized by year of origination as of June 30, 2025 and December 31, 2024.

June 30, 2025:

September 30, 2025:

(Dollars in thousands)

51 unchanged sentences

Total Gross Charge Offs

State and Political Subdivision Loans include loans categorized as tax-free in the amount of $ 22,016,000 at June 30, 2025 and $ 22,138,000 at December 31, 2024.

Commercial and Industrial Loans include $ 3,974,000 of GGLs as of June 30, 2025 and $ 4,306,000 of GGLs as of December 31, 2024.

The activity in the allowance for credit losses by loan class is summarized below for the three and six months ended June 30, 2025 and 2024 and the year ended December 31, 2024.

State and Political Subdivision Loans include loans categorized as tax-free in the amount of $ 20,362,000 at September 30, 2025 and $ 22,138,000 at December 31, 2024.

Commercial and Industrial Loans include $ 3,939,000 of GGLs as of September 30, 2025 and $ 4,306,000 of GGLs as of December 31, 2024.

The activity in the allowance for credit losses by loan class is summarized below for the three and nine months ended September 30, 2025 and 2024 and the year ended December 31, 2024.

(Dollars in thousands)

and Industrial

As of and for the three months ended June 30, 2025:

As of and for the three months ended September 30, 2025:

Allowance for Credit Losses:

4 unchanged sentences

and Industrial

As of and for the six months ended June 30, 2025:

As of and for the nine months ended September 30, 2025:

Allowance for Credit Losses:

15 unchanged sentences

and Industrial

As of and for the three months ended June 30, 2024:

As of and for the three months ended September 30, 2024:

Allowance for Loan Losses:

Beginning balance

Provision for Credit Losses

Provision (release of provision) for Credit Losses

Ending Balance

1 unchanged sentence

and Industrial

As of and for the six months ended June 30, 2024:

As of and for the nine months ended September 30, 2024:

Allowance for Credit Losses:

31 unchanged sentences

evaluated for impairment

The Company's activity in the allowance for credit losses on unfunded commitments for the six months ended June 30, 2025 and 2024 was as follows:

The Company's activity in the allowance for credit losses on unfunded commitments for the nine months ended September 30, 2025 and 2024 was as follows:

(Dollars in thousands)

1 unchanged sentence

(Release of) provision for credit losses on unfunded commitments

Balance at June 30

During the six months ended June 30, 2025, there was one modification granted on a loan to a borrower experiencing financial difficulty which carried a post modification recorded investment of $ 107,000 .

The loan modification granted during the six months ended June 30, 2025 was a payment modification that allowed a period of interest-only payments of eleven months .

There was one loan modification granted on a loan to a borrower experiencing financial difficulty during the six months ended June 30, 2024 which was completed to allow a period of interest-only payments of six months and carried a post modification recorded investment of $ 9,455,000 .

The outstanding recorded investment of loans to borrowers experiencing financial difficulty was $ 107,000 at June 30, 2025 and $ 10,193,000 at December 31, 2024.

There were no unfunded commitments on modified loans to borrowers experiencing financial difficulty as of June 30, 2025 or December 31, 2024.

At June 30, 2025, the modification of the loan to a borrower experiencing financial difficulty with an outstanding recorded investment of $ 107,000 was not in compliance with the terms of its restructure.

At December 31, 2024, there were no modifications of loans to borrowers experiencing financial difficulty that were not in compliance with the terms of there restructure.

The following tables present the outstanding recorded investment and number of modifications of loans to borrowers experiencing financial difficulty at June 30, 2025 and December 31, 2024.

Balance at September 30

During the nine months ended September 30, 2025, there was one modification granted on a loan to a borrower experiencing financial difficulty which carried a post modification recorded investment of $ 107,000 .

The loan modification granted during the nine months ended September 30, 2025 was a payment modification that allowed a period of interest-only payments of eleven months .

There were two loan modification granted on loans to borrowers experiencing financial difficulty during the nine months ended September 30, 2024 which carried a post modification recorded investment of $ 9,575,000 .

One modification on a loan carrying a post modification recorded investment of $ 120,000 was granted to extend the maturity date of the loan by ten months and one modification was a payment modification granting a period of interest-only payments of six months on a loan carrying a post modification recorded investment of $ 9,455,000 .

The outstanding recorded investment of loans to borrowers experiencing financial difficulty was $ 107,000 at September 30, 2025 and $ 10,193,000 at December 31, 2024.

There were no unfunded commitments on modified loans to borrowers experiencing financial difficulty as of September 30, 2025 or December 31, 2024.

At September 30, 2025, the modification of the loan to a borrower experiencing financial difficulty with an outstanding recorded investment of $ 107,000 was not in compliance with the terms of its restructure.

At December 31, 2024, there were no modifications of loans to borrowers experiencing financial difficulty that were not in compliance with the terms of their restructure.

The following tables present the outstanding recorded investment and number of modifications of loans to borrowers experiencing financial difficulty at September 30, 2025 and December 31, 2024.

(Dollars in thousands)

June 30, 2025

September 30, 2025

Modifications of Loans to Borrowers Experiencing Financial Difficulty:

8 unchanged sentences

Subtotal - Commercial and Industrial:

Of the modifications of loans to borrowers experiencing financial difficulty that were completed during the twelve months preceding June 30, 2025, three loans experienced payment defaults during the six months ended June 30, 2025.

One loan carrying a balance of $ 120,000 experienced a payment default during the three and six months ended June 30, 2025 and remained in past due status as of June 30, 2025.

A loan carrying a balance of $ 421,000 experienced a payment default during the three and six months ended June 30, 2025 and remained in past due status as of June 30, 2025.

One loan carrying a balance of $ 107,000 experienced a payment default during the three months ended June 30, 2025 and remained in past due status as of June 30, 2025.

Of the modifications of loans to borrowers experiencing financial difficulty that were completed during the twelve months preceding June 30, 2024, one loan carrying a balance of $ 9,455,000 experienced a payment default during the six months ended June 30, 2024.

There were no payment defaults on the modification of a loan to a borrower experiencing financial difficulty during the three months ended June 30, 2024, and the loan was paid current by the customer as of June 30, 2024.

The following table presents information regarding modifications of loans to borrowers experiencing financial difficulty that were completed during the three and six months ended June 30, 2025 and the six months ended June 30, 2024.

There were no modifications of loans to borrowers experiencing financial difficulty completed during the three months ended June 30, 2024.

Of the modifications of loans to borrowers experiencing financial difficulty that were completed during the twelve months preceding September 30, 2025, two loans experienced payment defaults during the nine months ended September 30, 2025.

One loan carrying a balance of $ 421,000 experienced a payment default during the three and nine months ended September 30, 2025 and remained in past due status as of September 30, 2025.

One loan carrying a balance of $ 107,000 experienced a payment default during the three and nine months ended September 30, 2025 and remained in past due status as of September 30, 2025.

Of the modifications of loans to borrowers experiencing financial difficulty that were completed during the twelve months preceding September 30, 2024, one loan carrying a balance of $ 9,427,000 experienced a payment default during the nine months ended September 30, 2024 but the loan was paid current by the customer as of September 30, 2024.

The following table presents information regarding modifications of loans to borrowers experiencing financial difficulty that were completed during the nine months ended September 30, 2025 and the three and nine months ended September 30, 2024.

There were no modifications of loans to borrowers experiencing financial difficulty completed during the three months ended September 30, 2025.

(Dollars in thousands)

For the Three Months Ended June 30, 2025

For the Nine Months Ended September 30, 2025

Pre-Modification

1 unchanged sentence

(Dollars in thousands)

For the Six Months Ended June 30, 2025

For the Three Months Ended September 30, 2024

Pre-Modification

1 unchanged sentence

(Dollars in thousands)

For the Six Months Ended June 30, 2024

For the Nine Months Ended September 30, 2024

Pre-Modification

Post-Modification

The following table provides detail regarding the types of loan modifications made for borrowers experiencing financial difficulty during the three and six months ended June 30, 2025 and the six months ended June 30, 2024.

There were no modifications of loans to borrowers experiencing financial difficulty completed during the three months ended June 30, 2024.

For the Three Months Ended June 30, 2025

For the Six Months Ended June 30, 2025

For the Six Months Ended June 30, 2024

The recorded investment, unpaid principal balance, and the related allowance of the Company’s non-accrual loans are summarized below at June 30, 2025 and December 31, 2024:

The following table provides detail regarding the types of loan modifications made for borrowers experiencing financial difficulty during the nine months ended September 30, 2025 and the three and nine months ended Septmber 30, 2024.

There were no modifications of loans to borrowers experiencing financial difficulty completed during the three months ended September 30, 2025.

For the Nine Months Ended September 30, 2025

For the Three Months Ended September 30, 2024

For the Nine Months Ended September 30, 2024

The recorded investment, unpaid principal balance, and the related allowance of the Company’s non-accrual loans are summarized below at September 30, 2025 and December 31, 2024:

(Dollars in thousands)

June 30, 2025

Commercial and Industrial

September 30, 2025

(Dollars in thousands)

2 unchanged sentences

The unpaid balance is equal to the gross amount due on the loan.

The following table presents the Company’s individually evaluated, collateral-dependent loans by segment as of June 30, 2025 and December 31, 2024.

The following table presents the Company’s individually evaluated, collateral-dependent loans by segment as of September 30, 2025 and December 31, 2024.

(Dollars in thousands)

June 30, 2025

September 30, 2025

Loan Segment/Collateral Type

5 unchanged sentences

Subtotal - Agricultural:

Commercial and Industrial:

Business Assets

Subtotal - Commercial and Industrial:

(Dollars in thousands)

7 unchanged sentences

Subtotal - Agricultural:

At June 30, 2025 and December 31, 2024, there were no commitments to lend additional funds with respect to individually evaluated loans.

Total non-performing assets (which includes loans held for investment on non-accrual status, foreclosed assets held for resale and loans past-due 90 days or more and still accruing interest) as of June 30, 2025 and December 31, 2024 were as follows:

At September 30, 2025 and December 31, 2024, there were no commitments to lend additional funds with respect to individually evaluated loans.

Total non-performing assets (which includes loans held for investment on non-accrual status, foreclosed assets held for resale and loans past-due 90 days or more and still accruing interest) as of September 30, 2025 and December 31, 2024 were as follows:

(Dollars in thousands)

September 30,

Commercial and Industrial

4 unchanged sentences

Total non-performing assets

There were no foreclosed assets held for resale at June 30, 2025 or December 31, 2024.

Consumer mortgage loans secured by residential real estate for which the Company has entered into formal foreclosure proceedings but for which physical possession has yet to be obtained amounted to $ 0 at June 30, 2025 and December 31, 2024.

There were no foreclosed assets held for resale at September 30, 2025 or December 31, 2024.

When applicable, consumer mortgage loans secured by residential real estate for which the Company has entered into formal foreclosure proceedings but for which physical possession has yet to be obtained are not included in foreclosed asset balances.

The following tables present the classes of the loan portfolio, including individually evaluated loans, summarized by past-due status at June 30, 2025 and December 31, 2024.

The following tables present the classes of the loan portfolio, including individually evaluated loans, summarized by past-due status at September 30, 2025 and December 31, 2024.

(Dollars in thousands)

June 30, 2025:

September 30, 2025:

Commercial and Industrial

5 unchanged sentences

NOTE 5 — DEPOSITS

Major classifications of deposits at June 30, 2025 and December 31, 2024 consisted of:

Major classifications of deposits at September 30, 2025 and December 31, 2024 consisted of:

(Dollars in thousands)

September 30,

Non-interest bearing demand

3 unchanged sentences

Total deposits

The following table represents scheduled maturities of the Company’s time deposits, that are greater than or equal to $100K, by time remaining until maturity as of June 30, 2025.

The following table represents scheduled maturities of the Company’s time deposits, that are greater than or equal to $100K, by time remaining until maturity as of September 30, 2025.

(Dollars in thousands)

June 30, 2025

September 30, 2025

3 months or less

5 unchanged sentences

Short-term borrowings include federal funds purchased, securities sold under agreements to repurchase, the Federal Discount Window, and Federal Home Loan Bank of Pittsburgh (“FHLB”) advances, which generally represent overnight or less than 30-day borrowings.

Short-term borrowings and weighted–average interest rates at June 30, 2025 and December 31, 2024 are as follows:

Short-term borrowings and weighted–average interest rates at September 30, 2025 and December 31, 2024 are as follows:

(Dollars in thousands)

June 30, 2025

September 30, 2025

December 31, 2024

13 unchanged sentences

The counterparty has the right to sell or repledge the investment securities.

The following table presents the repurchase agreements subject to enforceable master netting arrangements as of June 30, 2025 and December 31, 2024.

The following table presents the repurchase agreements subject to enforceable master netting arrangements as of September 30, 2025 and December 31, 2024.

(Dollars in thousands)

3 unchanged sentences

Balance Sheet

June 30, 2025

September 30, 2025

Repurchase agreements (a)

1 unchanged sentence

Repurchase agreements (a)

(a) As of June 30, 2025 and December 31, 2024, the fair value of securities pledged in connection with repurchase agreements was $ 34,847,000 and $ 36,216,000 , respectively.

The following table presents the remaining contractual maturity of the master netting arrangement or repurchase agreements as of June 30, 2025:

(a) As of September 30, 2025 and December 31, 2024, the fair value of securities pledged in connection with repurchase agreements was $ 34,092,000 and $ 36,216,000 , respectively.

The following table presents the remaining contractual maturity of the master netting arrangement or repurchase agreements as of September 30, 2025:

(Dollars in thousands)

Remaining Contractual Maturity of the Agreements

June 30, 2025:

September 30, 2025:

Repurchase agreements and repurchase-to-maturity transactions:

5 unchanged sentences

In addition, the FHLB shall not be required to fund advances under any outstanding commitments.

As of June 30, 2025 and December 31, 2024, the Company had $ 106,000,000 in long-term borrowings outstanding with the FHLB.

As of September 30, 2025 and December 31, 2024, the Company had $ 106,000,000 in long-term borrowings outstanding with the FHLB.

Irrevocable standby letters of credit may be issued to a customer/beneficiary by the FHLB on the Company’s behalf in order to secure public/municipal unit deposits, provide credit enhancement to certain transaction types, or to support payment obligations to third parties.

These irrevocable standby letters of credit are supported by an irrevocable and independent guarantee by the FHLB for the Company’s pledging obligation to secure public/municipal unit deposits which eliminates the need for the Company to pledge collateral in the amount necessary to secure these funds.

There were no irrevocable standby letters of credit which could be drawn on through the FHLB’s close of business on June 30, 2025 or December 31, 2024.

There were no irrevocable standby letters of credit which could be drawn on through the FHLB’s close of business on September 30, 2025 or December 31, 2024.

Any irrevocable standby letters of credit are issued as necessary in an amount appropriate to secure specific public/municipal unit deposits.

1 unchanged sentence

Principal qualifying assets are certain real estate mortgages and investment securities.

As of June 30, 2025, loans of $ 778,572,000 were pledged to the FHLB which resulted in a FHLB maximum borrowing capacity of $ 543,556,000 .

As of June 30, 2025, no securities were pledged as collateral to the FHLB to secure FHLB loans and letters of credit.

As of September 30, 2025, loans of $ 772,448,000 were pledged to the FHLB which resulted in a FHLB maximum borrowing capacity of $ 539,461,000 .

As of September 30, 2025, no securities were pledged as collateral to the FHLB to secure FHLB loans and letters of credit.

NOTE 7 — SUBORDINATED DEBT

11 unchanged sentences

The Company currently leases two branch banking facilities and one parcel of land under operating leases.

At June 30, 2025, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $ 1,380,000 and $ 1,908,000 , respectively.

At September 30, 2025, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $ 1,353,000 and $ 1,885,000 , respectively.

At December 31, 2024, right-of-use assets and lease liabilities stood at $ 1,400,000 and $ 1,920,000 , respectively, in the consolidated balance sheets.

The Company recognized total operating lease costs for the six months ended June 30, 2025 and 2024 of $ 97,000 and $ 107,000 , respectively.

The Company recognized total operating lease costs for the nine months ended September 30, 2025 and 2024 of $ 151,000 and $ 142,000 , respectively.

Operating lease costs are included in occupancy, net in the accompanying statements of income.

Cash payments totaled $ 89,000 and $ 99,000 , respectively, for the six months ended June 30, 2025 and 2024.

Cash payments totaled $ 139,000 and $ 132,000 , respectively, for the nine months ended September 30, 2025 and 2024.

The Company currently has one finance lease for equipment.

At June 30, 2025, right-of-use assets and lease liabilities were recorded related to the finance lease totaling $ 44,000 and $ 37,000 , respectively.

At September 30, 2025, right-of-use assets and lease liabilities were recorded related to the finance lease totaling $ 44,000 and $ 35,000 , respectively.

At December 31, 2024, right-of-use assets and lease liabilities stood at $ 0 .

Amounts recognized as right-of-use assets and lease liabilities related to finance leases are included in premises and equipment, net and other liabilities, respectively, in the accompanying balance sheet.

Total finance lease costs that were recognized by the Company for the six months ended June 30, 2025 and 2024 were immaterial.

Cash payments totaled $ 2,000 and $ 0 for the six months ended June 30, 2025 and 2024, respectively.

Total finance lease costs that were recognized by the Company for the nine months ended September 30, 2025 and 2024 were immaterial.

Cash payments totaled $ 5,000 and $ 0 for the nine months ended September 30, 2025 and 2024, respectively.

Options to extend or terminate a lease may be included in the Company’s lease agreements.

3 unchanged sentences

therefore, the Company’s incremental borrowing rate was used for each of the leases.

The following table displays the weighted-average term and discount rates for operating and finance leases outstanding as of June 30, 2025 and December 31, 2024.

The following table displays the weighted-average term and discount rates for operating and finance leases outstanding as of September 30, 2025 and December 31, 2024.

September 30,

Weighted-average term (years)

2 unchanged sentences

(Dollars in thousands)

September 30,

Minimum Lease Payments due:

12 unchanged sentences

The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and cash payments principally related to specific assets and short-term wholesale funding positions.

The Company entered into four swap contracts effective September 20, 2023 and one additional swap contract effective September 4, 2024.

The Company began utilizing swap contracts in the third quarter of 2023.

Net Fair Values of Derivative Instruments on the Statement of Financial Condition

The tables below present the net fair value of the Company’s derivative financial instruments as well as the classification on the Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024:

The tables below present the net fair value of the Company’s derivative financial instruments as well as the classification on the Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024:

(Dollars in thousands)

June 30, 2025

September 30, 2025

Derivative Assets

10 unchanged sentences

Other Liabilities

The following table presents the derivative liabilities subject to an enforceable master netting arrangement as of June 30, 2025 and December 31, 2024:

The following table presents the derivative liabilities subject to an enforceable master netting arrangement as of September 30, 2025 and December 31, 2024:

Gross Amounts Not Offset in the Consolidated Balance Sheet

5 unchanged sentences

Balance Sheet

June 30, 2025

September 30, 2025

December 31, 2024

The following table presents the remaining contractual maturity of the master netting arrangements as of June 30, 2025:

The following table presents the remaining contractual maturity of the master netting arrangements as of September 30, 2025:

Remaining Contractual Maturity of the Agreements

(Dollars in thousands)

June 30, 2025:

September 30, 2025:

Derivative Assets

6 unchanged sentences

Such derivatives are used to hedge the changes in fair value of certain of its pools of fixed rate assets.

As of June 30, 2025, the Company had a total of two interest rate swaps with a combined notional amount of $ 50,000,000 hedging fixed-rate available-for-sale debt securities and one interest rate swap with a notional amount of $ 75,000,000 hedging fixed-rate loans.

As of June 30, 2025 and December 31, 2024, the following amounts were recorded on the balance sheet related to the cumulative basis adjustment for fair value hedges:

As of September 30, 2025, the Company had a total of four interest rate swaps with a combined notional amount of $ 97,760,000 hedging fixed-rate available-for-sale debt securities and one interest rate swap with a notional amount of $ 75,000,000 hedging fixed-rate loans.

As of September 30, 2025 and December 31, 2024, the following amounts were recorded on the balance sheet related to the cumulative basis adjustment for fair value hedges:

(Dollars in thousands)

September 30,

Carrying amount of hedged assets:

6 unchanged sentences

(Dollars in thousands)

September 30,

Cumulative amount of fair value hedging adjustment included in the carrying amount of assets:

2 unchanged sentences

Available-for-sale - MBS

The table below presents the pre-tax effects of the Company’s derivative instruments designated as fair value hedges on the Consolidated Statements of Income for the year-to-date periods ended June 30, 2025 and 2024:

(Dollars in thousands)

September 30,

Amount of loss recognized in other comprehensive loss

4 unchanged sentences

These interest rate products are designated as cash flow hedges.

As of June 30, 2025, the Company had a total of two interest rate swaps with a combined notional amount of $ 100,000,000 hedging specific short-term wholesale funding positions.

As of September 30, 2025, the Company had a total of two interest rate swaps with a combined notional amount of $ 100,000,000 hedging specific short-term wholesale funding positions.

For derivatives designated as cash flow hedges, the gain or loss on the derivatives is recorded in other comprehensive loss and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

2 unchanged sentences

For cash flow hedges on the Company's short-term wholesale funding positions, amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s hedged variable rate short-term wholesale funding positions.

During the year-to-date period ended June 30, 2025, the Company reclassified $ 1,000 as a reduction in interest expense.

The table below presents the pre-tax effects of the Company’s derivative instruments designated as cash flow hedges on the Consolidated Statements of Income for the year-to-date periods ended June 30, 2025 and 2024:

During the year-to-date period ended September 30, 2025, the Company reclassified $ 1,000 as a reduction in interest expense.

(Dollars in thousands)

September 30,

Amount of loss recognized in other comprehensive loss

5 unchanged sentences

counterparty.

As of June 30, 2025 and December 31, 2024, the Company’s derivatives were in a net liability position resulting in the Company having collateral in the amount of $ 6,570,000 posted with the counterparty at June 30, 2025 and December 31, 2024.

As of September 30, 2025 and December 31, 2024, the Company’s derivatives were in a net liability position resulting in the Company having collateral in the amount of $ 6,570,000 posted with the counterparty at September 30, 2025 and December 31, 2024.

NOTE 10 — FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK

8 unchanged sentences

The Company may require collateral or other security to support financial instruments with off-balance sheet credit risk.

The contract or notional amounts at June 30, 2025 and December 31, 2024 were as follows:

The contract or notional amounts at September 30, 2025 and December 31, 2024 were as follows:

(Dollars in thousands)

June 30, 2025

September 30, 2025

December 31, 2024

15 unchanged sentences

The ability of the majority of the Company’s customers to honor their contractual loan obligations is dependent on the economy and real estate market in this area.

At June 30, 2025, the Company had $ 864,608,000 in loans secured by real estate, which represented 90.2 % of total loans.

At September 30, 2025, the Company had $ 866,145,000 in loans secured by real estate, which represented 90.5 % of total loans.

The real estate loan portfolio is largely secured by lessors of residential buildings and dwellings, lessors of non-residential buildings, and lessors of hotels/motels.

As of June 30, 2025 and December 31, 2024, management is of the opinion that there were no concentrations exceeding 10% of total loans with regard to loans to borrowers who were engaged in similar activities that were similarly impacted by economic or other conditions.

As of September 30, 2025 and December 31, 2024, management is of the opinion that there were no concentrations exceeding 10% of total loans with regard to loans to borrowers who were engaged in similar activities that were similarly impacted by economic or other conditions.

As all financial instruments are subject to some level of credit risk, the Company requires collateral and/or guarantees for all loans.

25 unchanged sentences

Financial Assets Measured at Fair Value on a Recurring Basis

At June 30, 2025 and December 31, 2024, securities measured at fair value on a recurring basis and the valuation methods used are as follows:

At September 30, 2025 and December 31, 2024, securities measured at fair value on a recurring basis and the valuation methods used are as follows:

(Dollars in thousands)

June 30, 2025

September 30, 2025

Debt Securities Available-for-Sale:

40 unchanged sentences

There were no transfers between valuation levels in 2025 and 2024.

Individually evaluated loans measured at fair value on a nonrecurring basis as of June 30, 2025 and December 31, 2024 are as follows:

Individually evaluated loans measured at fair value on a nonrecurring basis as of September 30, 2025 and December 31, 2024 are as follows:

(Dollars in thousands)

Assets at June 30, 2025

Assets at September 30, 2025

Individually evaluated loans:

Commercial and Industrial

Total individually evaluated loans

4 unchanged sentences

Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis

There were no foreclosed assets held for resale measured at fair value on a nonrecurring basis at June 30, 2025 and December 31, 2024.

There were no foreclosed assets held for resale measured at fair value on a nonrecurring basis at September 30, 2025 and December 31, 2024.

The Company’s foreclosed asset valuation procedure requires an appraisal or a Certificate of Inspection, which considers the sales prices of similar properties in the proximate vicinity, to be completed periodically with the exception of those cases in which the Bank has obtained a sales agreement.

4 unchanged sentences

Quantitative Information about Level 3 Fair Value Measurements

June 30, 2025

September 30, 2025

Valuation Technique

20 unchanged sentences

Collateral values may be adjusted downward/discounted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

Fair Value of Financial Instruments Measured on a Nonrecurring Basis

Fair Value of Financial Instruments

(Dollars in thousands)

Fair Value Measurements at June 30, 2025

Fair Value Measurements at September 30, 2025

FINANCIAL ASSETS:

43 unchanged sentences

Wealth management fees are included within non-interest income in the consolidated statements of income.

As of June 30, 2025 and December 31, 2024, the fair value of trust assets under management was $ 121,117,000 and $ 120,857,000 , respectively.

The costs of acquiring asset management customers are incremental and recognized within non-interest expense in the consolidated statements of income.

As of September 30, 2025 and December 31, 2024, the fair value of trust assets under management was $ 120,725,000 and $ 120,857,000 , respectively.

The costs of acquiring asset

management customers are incremental and recognized within non-interest expense in the consolidated statements of income.

Interchange Fees and Surcharges

8 unchanged sentences

Diluted earnings (losses) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Corporation.

At June 30, 2025 and 2024, there were no potential dilutive common shares outstanding.

At September 30, 2025 and 2024, there were no potential dilutive common shares outstanding.

The following table sets forth the computation of basic and diluted earnings (losses) per share.

1 unchanged sentence

Three Months Ended

September 30,

Weighted-average common shares outstanding

1 unchanged sentence

(In thousands, except earnings per share)

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

5 unchanged sentences

In accordance with current accounting standards, goodwill is not amortized.

Goodwill totaled $ 0 at June 30, 2025 and December 31, 2024.

Goodwill totaled $ 0 at September 30, 2025 and December 31, 2024.

When applicable, impairment testing is performed on an annual basis, using either a qualitative or quantitative approach.

3 unchanged sentences

Due primarily to the decrease in the Company’s stock price during the first quarter of 2024 as a triggering event, management evaluated the need for an interim goodwill impairment analysis.

The decrease prompted the Company to assess its goodwill utilizing a quantitative impairment test and determined it was more likely than not the fair value of the Company was less than the carrying amount as of March 31, 2024.

the results of the impairment test, the Company recorded a goodwill impairment charge of $ 19,133,000 effective March 31, 2024.

decrease prompted the Company to assess its goodwill utilizing a quantitative impairment test and determined it was more likely than not the fair value of the Company was less than the carrying amount as of March 31, 2024.

Based on the results of the impairment test, the Company recorded a goodwill impairment charge of $ 19,133,000 effective March 31, 2024.

First Keystone Corporation Management’s Discussion and Analysis of Financial Condition and Results of Operation

34 unchanged sentences

The Company does not revise or update these forward-looking statements to reflect events or changed circumstances.

Please carefully review the risk factors described in other documents the Company files from time to time with the SEC, including the Annual Reports

on Form 10-K and the Quarterly Reports on Form 10-Q.

Please carefully review the risk

factors described in other documents the Company files from time to time with the SEC, including the Annual Reports on Form 10-K and the Quarterly Reports on Form 10-Q.

Please also carefully review any Current Reports on Form 8-K filed by the Company with the SEC.

3 unchanged sentences

RESULTS OF OPERATIONS

Quarter ended June 30, 2025 compared to quarter ended June 30, 2024

First Keystone Corporation realized earnings for the three months ended June 30, 2025 of $2,914,000, an increase of $1,534,000 from the second quarter of 2024.

The increase in net income for the three months ended June 30, 2025 was primarily due to increased interest and fees on loans related to growth in commercial real estate loans.

On a per share basis, for the three months ended June 30, 2025, net income was $0.47 compared to earnings of $0.23 per share for the same three month period of 2024.

Quarterly regular cash dividends amounted to $0.28 per share for the three months ended June 30, 2025 and 2024.

Quarter ended September 30, 2025 compared to quarter ended September 30, 2024

First Keystone Corporation realized earnings for the three months ended September 30, 2025 of $2,808,000, an increase of $1,301,000 from the third quarter of 2024.

The increase in net income for the three months ended September 30, 2025 was primarily due to increased interest and fees on loans related to growth in commercial real estate loans.

On a per share basis, for the three months ended September 30, 2025, net income was $0.45 compared to earnings of $0.25 per share for the same three month period of 2024.

Quarterly regular cash dividends amounted to $0.28 per share for the three months ended September 30, 2025 and 2024.

NET INTEREST INCOME

The major source of operating income for the Company is net interest income, defined as interest and loan fee income less interest expense.

In the three months ended June 30, 2025, interest income amounted to $18,884,000, an increase of $1,291,000 or 7.3% from the three months ended June 30, 2024, while interest expense amounted to $9,379,000 in the three months ended June 30, 2025, a decrease of $213,000 or 2.2% from the three months ended June 30, 2024.

In the three months ended September 30, 2025, interest income amounted to $19,760,000, an increase of $1,518,000 or 8.3% from the three months ended September 30, 2024, while interest expense amounted to $10,256,000 in the three months ended September 30, 2025, an increase of $168,000 or 1.7% from the three months ended September 30, 2024.

As a result, net interest income increased $1,350,000 or 16.6% to $9,504,000 from $8,154,000 for the same period in 2024.

The Company’s net interest margin for the three months ended June 30, 2025 was 2.78% compared to 2.38% for the same period in 2024.

The Company’s net interest margin for the three months ended September 30, 2025 was 2.64% compared to 2.42% for the same period in 2024.

The increase in net interest margin was primarily a result of increased interest and fees on loans.

PROVISION FOR CREDIT LOSSES

The provision for credit losses for the three months ended June 30, 2025, carried a credit balance of $237,000, compared to a provision balance of $510,000 for the three months ended June 30, 2024.

The provision for credit losses for the three months ended September 30, 2025 and 2024 was $255,000 and $718,000, respectively.

The decrease in the provision for credit losses resulted from the Company’s analysis of the current loan portfolio, including historic losses, past-due trends, current economic conditions, loan portfolio growth, and other relevant factors.

Charge-off and recovery activity in the allowance for credit losses resulted in net charge-offs of $69,000 and $19,000 for the three months ended June 30, 2025 and 2024, respectively.

The increase in net charge-offs for the three months ended June 30, 2025 was mainly the result of one charge-off completed during the second quarter of 2025 in the amount of $46,000 on a loan to a trucking transportation business.

Charge-off and recovery activity in the allowance for credit losses resulted in net charge-offs of $17,000 and $748,000 for the three months ended September 30, 2025 and 2024, respectively.

The decrease in net charge-offs for the three months ended September 30, 2025 was mainly the result of $741,000 in aggregate charge-offs completed on four loans during the third quarter of 2024 for a plastic processing company focused on non-post-consumer recycling.

See Allowance for Credit Losses on page 52 for further discussion.

NON-INTEREST INCOME

Total non-interest income was $1,798,000 for the three months ended June 30, 2025, as compared to $1,621,000 for the same period in 2024, an increase of $177,000, or 10.9%.

Net securities gains increased $115,000 to $105,000 for the three months ended June 30, 2025 as compared to net securities losses of $10,000 for the three months ended June 30, 2024.

The improvement in net securities gains

(losses) was the result of an improvement in the mark-to-market adjustment on held equity securities during the quarter ended June 30, 2025 compared to the quarter ended June 30, 2024.

Trust department income increased $26,000 or 10.2% to $280,000 for the three months ended June 30, 2025 as compared to the same period in 2024.

ATM fees and debit card income increased $11,000 or 1.9% to $576,000 for the three months ended June 30, 2025.

Other non-interest income increased $21,000 or 33.3% to $84,000 for the three months ended June 30, 2025.

There were also gains from life insurance proceeds in the second quarter of 2025 in the amount of $20,000 as compared the second quarter of 2024 when no gains from life insurance proceeds were recognized.

Total non-interest income was $1,906,000 for the three months ended September 30, 2025, as compared to $1,860,000 for the same period in 2024, an increase of $46,000, or 2.5%.

Net securities gains decreased $37,000 to $109,000 for the three months ended September 30, 2025 as compared to $146,000 for the three months ended September 30, 2024.

The decrease in net securities gains was the result of an decrease in the mark-to-market adjustment on held equity securities during the quarter ended September 30, 2025 compared to the quarter ended September 30, 2024.

Trust department income increased $19,000 or 7.9% to $259,000 for the three months ended September 30, 2025 as compared to the same period in 2024.

Service charges and fees income increased $57,000 or 9.6% for the three months ended September 30, 2025 as compared to the same period in 2024.

ATM fees and debit card income increased $3,000 or 0.5% to $577,000 for the three months ended September 30, 2025.

Gains on sales of mortgage loans increased $19,000 or 47.5% for the three months ended September 30, 2025.

The increase was due to more loans sold during the third quarter of 2025 as compared to the same period of 2024.

Other non-interest income decreased $15,000 or 15.8% to $80,000 for the three months ended September 30, 2025.

NON-INTEREST EXPENSE

Total non-interest expense was $8,261,000 for the three months ended June 30, 2025, as compared to $7,666,000 for the three months ended June 30, 2024.

Salaries and benefits amounted to $4,303,000 or 52.1% of total non-interest expense for the three months ended June 30, 2025, as compared to $4,153,000 or 54.2% of total non-interest expense for the three months ended June 30, 2024.

The increase was mainly due to increased costs associated with employee health insurance in the second quarter of 2025 as compared to the same period in 2024.

Net occupancy, furniture and equipment, and computer expense amounted to $1,189,000 for the three months ended June 30, 2025, an increase of $163,000 or 15.9% which was mainly due to increased depreciation on furniture and equipment resulting from the replacement of the Bank’s ATM fleet, an increase in disaster recovery expense as the Bank put new disaster recovery systems in place in late 2024, and an increase in expense related to various new software systems that were implemented in 2025.

Professional services decreased $92,000 or 19.7% to $374,000 as of the quarter ended June 30, 2025 compared to the same quarter of 2024.

The decrease was due to higher audit expense recognized in the second quarter of 2024 related to the goodwill impairment analysis from the first quarter of 2024.

Pennsylvania shares tax expense amounted to $267,000 for the three months ended June 30, 2025, an increase of $23,000 or 9.4% as compared to the three months ended June 30, 2024.

Federal Deposit Insurance Corporation (“FDIC”) insurance expense amounted to $304,000 for the three months ended June 30, 2025, an increase of $86,000 or 39.4% as compared to the same period in 2024.

Total non-interest expense was $8,002,000 for the three months ended September 30, 2025, as compared to $7,820,000 for the three months ended September 30, 2024.

Salaries and employee benefits amounted to $4,073,000 or 50.9% of total non-interest expense for the three months ended September 30, 2025, as compared to $4,375,000 or 55.9% of total non-interest expense for the three months ended September 30, 2024.

The decrease was mainly due to decreased employee health insurance costs in the third quarter of 2025 as compared to the same period in 2024.

Net occupancy, furniture and equipment, and computer expense amounted to $1,203,000 for the three months ended September 30, 2025, an increase of $155,000 or 14.8% which was mainly due to an increase in expense related to various new software systems that were implemented in 2025.

Professional services increased $61,000 or 17.6% to $407,000 as of the quarter ended September 30, 2025 compared to the same quarter of 2024.

The increase was due to normal annual increases in accounting audit expenses in the third quarter of 2025 as related to the same period in 2024.

Pennsylvania shares tax expense amounted to $352,000 for the three months ended September 30, 2025, an increase of $38,000 or 12.1% as compared to the three months ended September 30, 2024.

Federal Deposit Insurance Corporation (“FDIC”) insurance expense amounted to $303,000 for the three months ended September 30, 2025, an increase of $32,000 or 11.8% as compared to the same period in 2024.

FDIC insurance expense varies with changes in net asset size, risk ratings, and FDIC derived assessment rates.

ATM and debit card fees expense amounted to $306,000 for the three months ended June 30, 2025, an increase of $48,000 or 18.6% as compared to the three months ended June 30, 2024.

The increase was mainly due to increased electronic funds transfer fees in the second quarter of 2025.

Data processing expenses amounted to $385,000 for the three months ended June 30, 2025 as compared to $235,000 for the same period of 2024, an increase of $150,000 or 63.8% mainly due to increases in internet banking and core service fees.

Advertising expense amounted to $138,000 in the second quarter of 2025, a decrease of $25,000 or 15.3% as compared to the three months ended June 30, 2024.

Other non-interest expense amounted to $995,000 for the three months ended June 30, 2025, an increase of $92,000 or 10.2% as compared to the three months ended June 30, 2024.

Income tax expense amounted to $365,000 for the three months ended June 30, 2025, as compared to income tax expense of $66,000 for the three months ended June 30, 2024, an increase of $299,000.

The effective total income tax rate was 11.1% for the three months ended June 30, 2025 as compared to 4.6% for the three months ended June 30, 2024.

The increase in the effective tax rate was mainly due to higher overall operating income, with minimal change to tax-exempt income.

The Company recognized $210,000 of tax credits from low-income housing partnerships during both the three months ended June 30, 2025 and 2024.

Six months ended June 30, 2025 compared to six months ended June 30, 2024

First Keystone Corporation realized earnings for the six months ended June 30, 2025 of $3,967,000, an increase of $20,964,000 from the same period in 2024.

The increase in net income for the six months ended June 30, 2025 was primarily due to the Company recognizing goodwill impairment expense of $19,133,000 during the first quarter of 2024 as well as increased interest and fees on loans related to growth in commercial real estate loans recognized during the six months ended June 30, 2025.

On a per share basis, net income was $0.64 for the six months ended June 30, 2025 versus net losses of $2.77 for the same period in 2024.

Cash dividends amounted to $0.56 per share for the six months ended June 30, 2025 and 2024.

ATM and debit card fees expense amounted to $321,000 for the three months ended September 30, 2025, an increase of $76,000 or 31.0% as compared to the three months ended September 30, 2024.

The increase was mainly due to increased electronic funds transfer fees in the third quarter of 2025.

Data processing expenses amounted to $366,000 for the three months ended September 30, 2025 as compared to $232,000 for the same period of 2024, an increase of $134,000 or 57.8% mainly due to increases in internet banking and core service fees.

Advertising expense amounted to $97,000 in the third quarter of 2025, a decrease of $58,000 or 37.4% as compared to the three months ended September 30, 2024.

Other non-interest expense amounted to $880,000 for the three months ended September 30, 2025, an increase of $46,000 or 5.5% as compared to the three months ended September 30, 2024.

Income tax expense amounted to $345,000 for the three months ended September 30, 2025, as compared to income tax benefit of $31,000 for the three months ended September 30, 2024, an increase of $376,000.

The effective total income tax rate was 10.9% for the three months ended September 30, 2025 as compared to (2.1)% for the three months ended September 30, 2024.

The increase in the effective tax rate was mainly due to higher overall operating

income, with minimal change to tax-exempt income.

The Company recognized $210,000 of tax credits from low-income housing partnerships during both the three months ended September 30, 2025 and 2024.

Nine months ended September 30, 2025 compared to nine months ended September 30, 2024

First Keystone Corporation realized earnings for the nine months ended September 30, 2025 of $6,775,000, an increase of $22,265,000 from the same period in 2024.

The increase in net income for the nine months ended September 30, 2025 was primarily due to the Company recognizing goodwill impairment expense of $19,133,000 during the first quarter of 2024 as well as increased interest and fees on loans related to growth in commercial real estate loans recognized during the nine months ended September 30, 2025.

On a per share basis, net income was $1.09 for the nine months ended September 30, 2025 versus net losses of $2.52 for the same period in 2024.

Cash dividends amounted to $0.84 per share for the nine months ended September 30, 2025 and 2024.

NET INTEREST INCOME

The major source of operating income for the Company is net interest income, defined as interest and loan fee income less interest expense.

For the six months ended June 30, 2025, interest income amounted to $37,094,000, an increase of $2,555,000 or 7.4% from the six months ended June 30, 2024, while interest expense amounted to $18,819,000 in the six months ended June 30, 2025 a decrease of $244,000 or 1.3% from the six months ended June 30, 2024.

For the nine months ended September 30, 2025, interest income amounted to $56,854,000, an increase of $4,073,000 or 7.7% from the nine months ended September 30, 2024, while interest expense amounted to $29,075,000 in the nine months ended September 30, 2025 a decrease of $76,000 or 0.3% from the nine months ended September 30, 2024.

As a result, net interest income increased $4,149,000 or 17.6% to $27,779,000 from $23,630,000 for the same period in 2024.

The increase was primarily due to growth in commercial real estate loans during the six months ended June 30, 2025, offset by decreases in the balance of taxable securities due to run-off of principal and interest without replacement.

The Company’s net interest margin for the six months ended June 30, 2025 was 2.68% compared to 2.32% for same period in 2024.

The increase was primarily due to growth in commercial real estate loans and interest bearing deposits in banks during the nine months ended September 30, 2025, offset by decreases in the balance of taxable securities due to run-off of principal and interest without replacement.

The Company’s net interest margin for the nine months ended September 30, 2025 was 2.67% compared to 2.35% for same period in 2024.

The increase in net interest margin was primarily a result of increased interest and fees on loans.

PROVISION FOR CREDIT LOSSES

The provision for credit losses for the six months ended June 30, 2025 was $514,000, compared to $774,000 for the six months ended June 30, 2024.

The provision for credit losses for the nine months ended September 30, 2025 and 2024 was $769,000 and $1,492,000, respectively.

Charge-off and recovery activity in the allowance for credit losses resulted in net charge-offs of $424,000 and $12,000 for the six months ended June 30, 2025 and 2024, respectively.

The increase in net charge-offs for the six months ended June 30, 2025 was mainly the result of charge-offs completed on two loans during the first six months of 2025.

Charge-offs of $162,000 were completed on a loan to a trucking transportation business and a charge off of $245,000 was completed on a loan to a manufacturer of hemp-based biodegradable plastic food containers.

Charge-off and recovery activity in the allowance for credit losses resulted in net charge-offs of $441,000 and $760,000 for the nine months ended September 30, 2025 and 2024, respectively.

The decrease in net charge-offs for the nine months ended September 30, 2025 was mainly the result of $741,000 in aggregate charge-offs completed on four loans during the third quarter of 2024 for a plastic processing company focused on non-post-consumer recycling, offset with charge-offs totaling $182,000 completed on a loan to a trucking transportation business and a charge-off of $245,000 completed on a loan to a manufacturer of hemp-based biodegradable food containers during the nine months ended September 30, 2025.

See Allowance for Credit Losses on page 52 for further discussion.

NON-INTEREST INCOME

Total non-interest income was $3,557,000 for the six months ended June 30, 2025, as compared to $2,965,000 for the same period in 2024, an increase of $592,000, or 20.0%.

ATM fees and debit card income increased $37,000 or 3.4% to $1,119,000 for the six months ended June 30, 2025.

Service charges and fee income increased $13,000 or 1.2% for the six months ended June 30, 2025.

Gains on sales of mortgage loans increased $10,000 or 35.7% due to more loans sold and at a higher average gain on individual loans sold in the first six months of 2025 as compared to the same period in 2024.

Trust department income was $541,000 for the six months ended June 30, 2025 an increase of $43,000 or 8.6% as compared to the same period in 2024 due to more new account openings in 2025.

Net securities gains (losses) increased $213,000 or 109.8% to net gains of $19,000 for the six months ended June 30, 2025 as compared to net losses

of $194,000 for the six months ended June 30, 2024.

The increase in securities gains (losses) was due to an improvement in the mark-to-market valuation on the Company’s held equity securities during the six months ended June 30, 2025.

Total non-interest income was $5,463,000 for the nine months ended September 30, 2025, as compared to $4,825,000 for the same period in 2024, an increase of $638,000, or 13.2%.

ATM fees and debit card income increased $40,000 or 2.4% to $1,696,000 for the nine months ended September 30, 2025.

Service charges and fee income increased $70,000 or 4.2% for the nine months ended September 30, 2025.

Gains on sales of mortgage loans increased $29,000 or 42.6% due to more loans sold and at a higher average gain on individual loans sold in the first nine months of 2025 as compared to the same period in 2024.

Trust department income was $800,000 for the nine months ended September 30, 2025 an increase of $62,000 or 8.4% as compared to the same period in 2024.

Net securities gains (losses) increased $176,000 or 366.7% to net gains of $128,000 for the nine months ended September 30, 2025 as compared to net losses of $48,000 for the nine months ended September 30, 2024.

The increase in securities gains (losses) was due to an improvement in the mark-to-market valuation on the Company’s held equity securities during the nine months ended September 30, 2025.

NON-INTEREST EXPENSE

Total non-interest expense was $16,910,000 for the six months ended June 30, 2025, as compared to $34,811,000 for the six months ended June 30, 2024.

Total non-interest expense was $24,912,000 for the nine months ended September 30, 2025, as compared to $42,631,000 for the nine months ended September 30, 2024.

Non-interest expense decreased $17,719,000 or 41.6%.

The significant decrease in total non-interest expense for the six months ended June 30, 2025 was mainly the result of the full, one-time, goodwill impairment charge of $19,133,000 that was recorded during the first quarter of 2024.

Salaries and benefits amounted to $8,933,000 or 52.8% of total non-interest expense for the six months ended June 30, 2025, as compared to $8,707,000 or 25.0% for the six months ended June 30, 2024.

The increase was mainly due to increased costs associated with employee health insurance which were $213,000 greater for the six months ended June 30, 2025, compared to the same period in 2024.

Net occupancy, furniture and equipment, and computer expense amounted to $2,404,000 for the six months ended June 30, 2025, an increase of $292,000 or 13.8%.

The significant decrease in total non-interest expense for the nine months ended September 30, 2025 was mainly the result of the full, one-time, goodwill impairment charge of $19,133,000 that was recorded during the first quarter of 2024.

Salaries and employee benefits amounted to $13,006,000 or 52.2% of total non-interest expense for the nine months ended September 30, 2025, as compared to $13,082,000 or 30.7% for the nine months ended September 30, 2024.

The decrease was mainly due to decreased costs associated with employee health insurance which were $163,000 less for the nine months ended September 30, 2025, compared to the same period in 2024.

Net occupancy, furniture and equipment, and computer expense amounted to $3,607,000 for the nine months ended September 30, 2025, an increase of $447,000 or 14.1%.

The increase was mainly due to increased depreciation on furniture and equipment resulting from the replacement of the Bank’s ATM fleet, an increase in disaster recovery expense as the Bank put new disaster recovery systems in place in late 2024, and an increase in expense related to various new software systems that were implemented in 2025.

Professional services decreased $147,000 or 16.4% to $752,000 for the six months ended June 30, 2025.

The decrease was mainly the result of increased audit fees and expenses relating to the adoption of CECL and the goodwill impairment analysis in 2024.

Pennsylvania shares tax expense amounted to $488,000 for the six months ended June 30, 2025, an increase of $38,000 or 8.4% as compared to the six months ended June 30, 2024

FDIC insurance expense increased $207,000 or 51.0% for the six months ended June 30, 2025.

Professional services decreased $86,000 or 6.9% to $1,159,000 for the nine months ended September 30, 2025.

The decrease in 2025 was mainly the result of increased audit fees and expenses relating to the adoption of CECL and the goodwill impairment analysis in 2024.

Pennsylvania shares tax expense amounted to $840,000 for the nine months ended September 30, 2025, an increase of $76,000 or 9.9% as compared to the nine months ended September 30, 2024.

FDIC insurance expense increased $239,000 or 35.3% for the nine months ended September 30, 2025.

FDIC insurance expense varies with changes in net asset size, risk ratings, and FDIC derived assessment rates.

ATM and debit card fees expense amounted to $553,000 for the six months ended June 30, 2025, an increase of $73,000 or 15.2% as compared to the six months ended June 30, 2024.

This increase was a result of higher electronic funds transfer expenses for the six months ended June 30, 2025, as compared to the same period in 2024, as vendor relationship credits resulting from contract negotiations were applied against billings in 2024 which were fully utilized and no longer available in 2025.

Data processing expenses amounted to $742,000 for the six months ended June 30, 2025, an increase of $218,000 or 41.6% as compared to the six months ended June 30, 2024.

ATM and debit card fees expense amounted to $874,000 for the nine months ended September 30, 2025, an increase of $149,000 or 20.6% as compared to the nine months ended September 30, 2024.

This increase was a result of higher electronic funds transfer expenses for the nine months ended September 30, 2025, as compared to the same period in 2024, as vendor relationship credits resulting from contract negotiations were applied against billings in 2024 which were fully utilized and no longer available in 2025.

Data processing expenses amounted to $1,108,000 for the nine months ended September 30, 2025, an increase of $352,000 or 46.6% as compared to the nine months ended September 30, 2024.

The increase was the result of increased internet banking expenses and core system fees due to vendor relationship credits that were applied against billings in 2024 which were fully utilized and no longer available in 2025.

Advertising expense decreased $24,000 or 9.0% during the six months ended June 30, 2025.

This decrease was mainly the result of the Company utilizing less television and radio advertising during the six months ended June 30, 2025, as compared to the same period in 2024.

The Company recognized a full, one-time, goodwill impairment in the amount of $19,133,000 during the first six months of 2024.

Advertising expense decreased $82,000 or 19.4% during the nine months ended September 30, 2025.

This decrease was mainly the result of the Company utilizing less television and radio advertising during the nine months ended September 30, 2025, as compared to the same period in 2024.

The Company recognized a full, one-time, goodwill impairment in the amount of $19,133,000 during the first quarter of 2024.

This was the result of goodwill impairment testing performed due to the decrease of the Company’s stock price during the first quarter of 2024 as a triggering event.

The goodwill impairment has no impact on regulatory capital ratios, liquidity or the Company’s cash balances.

Other non-interest expense amounted to $2,182,000 for the six months ended June 30, 2025, an increase of $349,000 or 19.0% as compared to the six months ended June 30, 2024.

Other non-interest expense amounted to $3,062,000 for the nine months ended September 30, 2025, an increase of $395,000 or 14.8% as compared to the nine months ended September 30, 2024.

The increase was mainly the result of a customer-related fraud write-off of $307,000 during the first quarter of 2025.

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These non-GAAP measures should not be considered a substitute for GAAP-basis measures and results.

Our non-GAAP measures may not be comparable to non-GAAP

measures of other companies.

Our non-GAAP measures may not be comparable to non-GAAP measures of other companies.

The following Non-GAAP Reconciliation Schedule provides a reconciliation of these non-GAAP financial measures to the most closely analogous measure determined in accordance with GAAP.

1 unchanged sentence

FIRST KEYSTONE CORPORATION AND SUBSIDIARY

Six Months Ended

Nine Months Ended

(Dollars in thousands)

September 30,

Net interest income after provision for credit losses

8 unchanged sentences

Adjusted net income

Income tax expense amounted to $441,000 for the six months ended June 30, 2025, as compared to income tax benefit of $147,000 for the six months ended June 30, 2024, an increase of $588,000.

The effective total income tax rate was 10.0% for the six months ended June 30, 2025 as compared to 0.9% for the six months ended June 30, 2024.

The increase in the effective tax rate was mainly due to higher overall operating income in relation to tax-exempt income.

The Company recognized $420,000 of tax credits from low-income housing partnerships during both the three months ended June 30, 2025 and 2024.

Income tax expense amounted to $786,000 for the nine months ended September 30, 2025, as compared to income tax benefit of $178,000 for the nine months ended September 30, 2024, an increase of $964,000.

The effective total income tax rate was 10.4% for the nine months ended September 30, 2025 as compared to 1.1% for the nine months ended September 30, 2024.

The increase in the effective tax rate was mainly due to higher overall operating income with minimal change to tax-exempt income.

The Company recognized $630,000 of tax credits from low-income housing partnerships during both the nine months ended September 30, 2025 and 2024.

FINANCIAL CONDITION

Total assets increased to $1,437,389,000 as of June 30, 2025, an increase of $8,806,000 from year-end 2024.

Total assets increased to $1,582,377,000 as of September 30, 2025, an increase of $153,794,000 from year-end 2024.

Total assets as of December 31, 2024 amounted to $1,428,538,000.

Total debt securities available-for-sale decreased $21,947,000 or 5.6% to $368,341,000 as of June 30, 2025 from $390,288,000 at December 31, 2024 mainly due to $26,887,000 in maturities, paydowns, and calls completed during the six months ended June 30, 2025, offset by $2,500,000 in securities purchased and an increase of $2,386,000 in FHLB capital stock during the same period.

Total net loans increased $11,229,000 or 1.2% to $952,008,000 as of June 30, 2025 from December 31, 2024.

Real estate loans, the largest segment of the Company’s loan portfolio, increased by $13,952,000 during the six months ended June 30, 2025 and commercial and industrial loans, the second largest segment of the Company’s loan portfolio, decreased by $1,798,000 during the six months ended June 30, 2025.

Total deposits increased $11,398,000 or 1.1% to $1,057,278,000 as of June 30, 2025 from December 31, 2024, mainly due to an increase of $12,004,000 in the balance of interest bearing deposits, driven by an increase of $66,170,000 in the balance of retail CDs, offset by a decrease of $54,304,000 in other interest bearing retail deposit accounts.

Total cash and cash equivalents increased by $130,001,000 to $147,255,000 as of September 30, 2025 from $17,254,000 as of December 31, 2024.

The increase was mainly the result of excess cash balances resulting from increased deposit balances and excess cashflows from activity in the debt securities available-for-sale portfolio which were not reinvested during the nine months ended September 30, 2025.

Total debt securities available-for-sale increased $17,482,000 or 4.5% to $407,770,000 as of September 30, 2025 from $390,288,000 at December 31, 2024 mainly due to $41,836,000 in maturities, paydowns, and calls completed during the nine months ended September 30, 2025, offset by $51,918,000 in securities purchased and an improvement of $7,395,000 in unrealized loss on securities during the same period.

Total net loans increased $8,954,000 or 1.0% to $949,733,000 as of September 30, 2025 from $940,779,000 as of December 31, 2024.

Real estate loans, the largest segment of the Company’s loan portfolio, increased by $15,489,000 during the nine months ended September 30, 2025 and commercial and industrial loans, the second largest segment of the Company’s loan portfolio, decreased by $2,718,000 during the nine months ended September 30, 2025.

Total deposits increased $146,614,000 or 14.0% to $1,192,494,000 as of September 30, 2025 from $1,045,880,000 as of December 31, 2024, mainly due to an increase of $135,031,000 in the balance of interest bearing deposits, driven by an increase of $111,919,000 in the balance of retail CDs and an increase of $35,137,000 in brokered CDs.

The Company continues to maintain and manage its asset growth.

The Company’s strong equity capital position provides an opportunity to further leverage its asset growth.

Total borrowings decreased in the six months ended June 30, 2025 by $4,875,000 to $235,551,000 from $240,426,000 as of December 31, 2024.

The decrease in borrowings was mainly the result of a decrease of $3,381,000 in the balance of securities sold under agreements to repurchase.

Total stockholders’ equity amounted to $107,547,000 at June 30, 2025, an increase of $765,000 or 0.7% from December 31, 2024 mainly due to an increase in retained earnings of $485,000 and an improvement of $280,000 in accumulated other comprehensive loss.

Total borrowings decreased in the nine months ended September 30, 2025 by $1,570,000 to $238,856,000 from $240,426,000 as of December 31, 2024.

The decrease in borrowings was mainly the result of a decrease of $1,494,000 in the balance of short-term borrowings held at the FHLB.

Total stockholders’ equity amounted to $112,252,000 at September 30, 2025, an increase of $5,470,000 or 5.1% from December 31, 2024 mainly due to an increase in retained earnings of $1,552,000 and an improvement of $3,452,000 in accumulated other comprehensive loss.

SEGMENT REPORTING

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By maintaining a healthy asset utilization rate, i.e., the volume of earning assets as a percentage of total assets, the Company maximizes income.

The earning asset ratio (average interest earning assets divided by average total assets) equaled 95.0% at June 30, 2025 and 94.2% at June 30, 2024.

The earning asset ratio (average interest earning assets divided by average total assets) equaled 95.1% at September 30, 2025 and 94.4% at September 30, 2024.

This indicates that the management of earning assets is a priority and non-earning assets, primarily cash and due from banks, fixed assets and other assets, are maintained at minimal levels.

The primary earning assets are loans and securities.

The Company’s primary earning asset, the loans held for investment portfolio, increased to $959,666,000 as of June 30, 2025, up $11,952,000 or 1.3% since year-end 2024.

The Company’s primary earning asset, the loans held for investment portfolio, increased to $957,630,000 as of September 30, 2025, up $9,916,000 or 1.0% since year-end 2024.

The loan portfolio continues to be well diversified and asset quality has remained consistent.

Total non-performing assets were $4,839,000 as of June 30, 2025, a decrease of $131,000, or 2.6% from $4,970,000 reported in non-performing assets as of December 31, 2024.

Total allowance for credit losses to total non-performing assets was 160.41% as of June 30, 2025 and 154.37% at December 31, 2024.

Total non-performing assets were $6,580,000 as of September 30, 2025, an increase of $1,610,000, or 32.4% from $4,970,000 reported in non-performing assets as of December 31, 2024.

Total allowance for credit losses to total non-performing assets was 121.58% as of September 30, 2025 and 154.37% at December 31, 2024.

See the Non-Performing Assets section on page 54 for more information.

In addition to loans, another primary earning asset is our overall securities portfolio, which decreased in size from December 31, 2024 to June 30, 2025 mainly due to normal activity in the securities portfolio.

Debt securities available-for-sale amounted to $368,341,000 as of June 30, 2025, a decrease of $21,947,000 from year-end 2024.

The decrease in debt securities available-for-sale is mainly due to $26,887,000 in maturities, paydowns, and calls completed during the six months ended June 30, 2025, offset by $2,500,000 in securities purchased and an increase of $2,386,000 in FHLB capital stock during the same period.

Interest-bearing deposits in other banks increased $20,919,000 as of June 30, 2025, to $28,240,000 from $7,321,000 at year-end 2024 mainly due to an increase in cash balances held at the Federal Reserve as a result of excess cashflows from activity in the debt securities available-for-sale portfolio which were not reinvested during the six months ended June 30, 2025.

Total loans increased to $958,935,000 as of June 30, 2025 as compared to $946,826,000 as of December 31, 2024.

In addition to loans, another primary earning asset is our overall securities portfolio, which increased in size from December 31, 2024 to September 30, 2025 mainly due to a purchase strategy completed during the three months ended September 30, 2025, along with other normal activity in the securities portfolio.

Debt securities available-for-sale amounted to $407,770,000 as of September 30, 2025, an increase of $17,482,000 from year-end 2024.

The increase in debt securities available-for-sale is mainly due to $41,836,000 in maturities, paydowns, and calls completed during the nine months ended September 30, 2025, offset by $51,918,000 in securities purchased and an improvement of $7,395,000 in unrealized loss on securities during the same period.

Interest-bearing deposits in other banks increased $126,918,000 as of September 30, 2025, to $134,239,000 from $7,321,000 at year-end 2024 mainly due to an increase in cash balances held at the Federal Reserve as a result of increased deposit balances and excess cashflows from activity in the debt securities available-for-sale portfolio which were not reinvested during the nine months ended September 30, 2025.

Total loans increased to $957,012,000 as of September 30, 2025 as compared to $946,826,000 as of December 31, 2024.

The table on page 20 provides data relating to the composition of the Company’s loan portfolio on the dates indicated.

Total loans increased by $10,186,000 or 1.1%.

The Real Estate portfolio increased $13,952,000 or 1.6% from $850,656,000 at December 31, 2024 to $864,608,000 at June 30 2025.

The increase in the Real Estate portfolio for the six months ended June 30, 2025 was mainly the result of an increase of $60,139,000 in new loan originations, which were offset by a decrease in utilization of existing real estate lines of credit of $15,360,000 and loan payoffs of $29,192,000, along with regular principal payments and other typical fluctuations in the Real Estate portfolio.

The Agricultural portfolio increased $172,000 or 18.4% from $936,000 at December 31, 2024 to $1,108,000 at June 30, 2025.

The increase in the Agricultural portfolio for the six

months ended June 30, 2025 was mainly the result of new loan originations in the amount of $30,000 and two loans totaling $228,000 that were reclassed from the Commercial and Industrial portfolio to the Agricultural portfolio during the six months ended June 30, 2025, along with an increase of $13,000 in utilization of existing agricultural lines of credit, offset by regular principal payments and other typical fluctuations in the Agricultural portfolio.

The Commercial and Industrial portfolio decreased $1,798,000 or 2.7% from $66,706,000 at December 31, 2024 to $64,908,000 at June 30, 2025.

The decrease was attributable to an increase of $3,421,000 in new loan originations and $2,723,000 in utilization of existing commercial and industrial lines of credit, offset by loan payoffs of $2,692,000 and regular principal payments and other typical amortization in the Commercial and Industrial portfolio.

The Consumer portfolio decreased $95,000 or 1.5% from $6,390,000 at December 31, 2024 to $6,295,000 at June 30, 2025.

The decrease is mainly attributable to new loan originations of $1,354,000, offset by a decrease of $51,000 in utilization of existing consumer lines of credit, loan payoffs of $543,000 and regular principal payments.

The State and Political Subdivisions portfolio decreased $122,000 or 0.6% from $22,138,000 at December 31, 2024 to $22,016,000 at June 30, 2025.

The decrease is mainly the result of new loan originations totaling $2,615,000, offset by loan payoffs of $2,593,000 and regular principal payments on state and political subdivisions loans completed during the six months ended June 30, 2025.

The Real Estate portfolio increased $15,489,000 or 1.8% from $850,656,000 at December 31, 2024 to $866,145,000 at September 30 2025.

The increase in the Real Estate portfolio for the nine months ended September 30, 2025 was mainly the result of an increase of $87,752,000 in new loan originations, which were offset by a decrease in utilization of existing real estate lines of credit of $21,243,000 and loan payoffs of $45,135,000, along with regular principal payments and other typical fluctuations in the Real Estate portfolio.

The Agricultural portfolio increased $135,000 or 14.4% from $936,000 at December 31, 2024 to $1,071,000 at September 30, 2025.

The increase in the Agricultural portfolio for the nine months ended September 30, 2025 was mainly the result of new loan originations in the amount of $30,000 and two loans totaling $219,000 that were reclassed from the Commercial and Industrial portfolio to the Agricultural portfolio during the nine months ended September 30, 2025, along with an increase of $1,000 in utilization of existing agricultural lines of credit, offset by regular principal payments and other typical fluctuations in the Agricultural portfolio.

The Commercial and Industrial portfolio decreased $2,718,000 or 4.1% from $66,706,000 at December 31, 2024 to $63,988,000 at September 30, 2025.

The decrease was attributable to $7,893,000 in new loan originations and an increase of $4,357,000 in utilization of existing commercial and industrial lines of credit, offset by loan payoffs of $6,104,000 and regular principal payments and other typical amortization in the Commercial and Industrial portfolio.

The Consumer portfolio decreased $944,000 or 14.8% from $6,390,000 at December 31, 2024 to $5,446,000 at September 30, 2025.

The decrease is mainly attributable to new loan originations of $1,513,000 and an increase of $3,000 in utilization of existing consumer lines of credit, offset by loan payoffs of $1,236,000 and regular principal payments.

The State and Political Subdivisions portfolio decreased $1,776,000 or 8.0% from $22,138,000 at December 31, 2024 to $20,362,000 at September 30, 2025.

The decrease is mainly the result of new loan originations totaling $2,615,000, offset by loan payoffs of $2,595,000 and regular principal payments on state and political subdivisions loans completed during the nine months ended September 30, 2025.

The Company continues to originate and sell certain long-term fixed rate residential mortgage loans, which conform to secondary market requirements, when the market pricing is favorable.

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See Note 4 — Loans and Allowance for Credit Losses for risk grading tables.

Overall, non-pass grades decreased $880,000 to $26,954,000 at June 30, 2025, as compared to $27,834,000 at December 31, 2024.

Real Estate non-pass grades decreased $461,000 to $26,910000 as of June 30, 2025 as compared to $27,371,000 as of December 31, 2024.

Commercial and Industrial non-pass grades decreased $423,000 to $34,000 as of June 30, 2025 as compared to $457,000 as of December 31, 2024.

Consumer non-pass grades increased $4,000 to $10,000 as of June 30, 2025 as compared to $6,000 as of December 31, 2024.

There were no Agricultural or State and Political Subdivision non-pass grades at June 30, 2025 or December 31, 2024.

Overall, non-pass grades increased $3,984,000 to $31,818,000 at September 30, 2025, as compared to $27,834,000 at December 31, 2024.

Real Estate non-pass grades increased $4,090,000 to $31,461,000 as of September 30, 2025 as compared to $27,371,000 as of December 31, 2024.

Commercial and Industrial non-pass grades decreased $139,000 to $318,000 as of September 30, 2025 as compared to $457,000 as of December 31, 2024.

Consumer non-pass grades increased $33,000 to $39,000 as of September 30, 2025 as compared to $6,000 as of December 31, 2024.

There were no Agricultural or State and Political Subdivision non-pass grades at September 30, 2025 or December 31, 2024.

The Company continues to internally underwrite each of its loans to comply with prescribed policies and approval levels established by its Board of Directors.

(Dollars in thousands)

September 30,

Commercial and Industrial

2 unchanged sentences

The allowance for credit losses constitutes the amount available to absorb losses within the loan portfolio.

As of June 30, 2025, the allowance for credit losses was $7,762,000 as compared to $7,672,000 as of December 31, 2024.

As of September 30, 2025, the allowance for credit losses was $8,000,000 as compared to $7,672,000 as of December 31, 2024.

The allowance for credit losses is established through a provision for credit losses charged to expenses.

Loans are charged against the allowance for possible credit losses when management believes that the collectability of the principal is

Loans are charged against the allowance for possible credit losses when management believes that the collectability of the principal is unlikely.

The risk characteristics of the loan portfolio are managed through various control processes, including credit evaluations of individual borrowers, periodic reviews, and diversification by industry.

7 unchanged sentences

On a quarterly basis, management evaluates the qualitative factors utilized in the calculation of the Company’s allowance for credit losses and various adjustments are made to these factors as deemed necessary at the time of evaluation.

The following table summarizes the qualitative factor adjustments made during the first two quarters of 2025.

The following table summarizes the qualitative factor adjustments made during the first three quarters of 2025.

Quarter Ended March 31, 2025:

38 unchanged sentences

Volume Trends

The Analysis of Allowance for Credit Losses table contains an analysis of the allowance for credit losses indicating charge-offs and recoveries for the six months ended June 30, 2025 and 2024.

Net charge-offs as a percentage of average loans was 0.044% for the six months ended June 30, 2025, compared to net recoveries of 0.001% for the six months ended June 30, 2024.

Net charge-offs amounted to $424,000 for the six months ended June 30, 2025 and $12,000 for the six months ended June 30, 2024.

The increase in net charge-offs for the six months ended June 30, 2025

was mainly the result of larger charge-offs related to two loan relationships completed during the six months ended June 30, 2025, which included charge-offs totaling $162,000 on a loan to a trucking transportation business and a charge-off of $245,000 on a loan to a manufacturer of hemp-based biodegradable plastic food containers and utensils.

For the six months ended June 30, 2025, the provision for credit losses was $514,000, compared to the six months ended June 30, 2024, when the provision for credit losses was $774,000.

Quarter Ended September 30, 2025:

Qualitative Factor

Basis Point Increase (Decrease)

Loans secured by revolving, open-end 1-4 family residential properties

Delinquency Trends

Loans secured by first liens

Delinquency Trends

Loans secured by junior liens

Delinquency Trends

Loans secured by multifamily properties

Delinquency Trends

Loans secured by owner occupied, non-farm, non-residential properties

Delinquency Trends

Loans secured by other non-farm, non-residential properties

Delinquency Trends

Other revolving credit plans

Delinquency Trends

Commercial and industrial loans

Volume Trends

The Analysis of Allowance for Credit Losses table contains an analysis of the allowance for credit losses indicating charge-offs and recoveries for the nine months ended September 30, 2025 and 2024.

Net charge-offs as a percentage of average loans was 0.05% and 0.08% for the nine months ended September 30, 2025 and 2024, respectively.

Net charge-offs amounted to $441,000 for the nine months ended September 30, 2025 and $760,000 for the nine months ended September 30, 2024.

The decrease in net charge-offs for the nine months ended September 30, 2025 was mainly the result of $741,000 in aggregate charge-offs completed during the third quarter of 2024 on four loans to a plastic processing company focused on non-post-consumer recycling, offset with charge-offs totaling $182,000 completed on a loan to a trucking transportation business and a charge-off of $245,000 completed on a loan to a manufacturer of hemp-based biodegradable food containers during the nine months ended September 30, 2025.

For the nine months ended September 30, 2025, the provision for credit losses was $769,000, compared to the nine months ended September 30, 2024, when the provision for credit losses was $1,492,000.

The provision, net of charge-offs and recoveries, resulted in the quarter end allowance for credit losses of $8,000,000, of which 94.0% was attributed to the Real Estate component, 0.1% attributed to the Agricultural component, 4.3% attributed to the Commercial and Industrial component, 1.0% attributed to the Consumer component, and 0.6% attributed to the State and Political Subdivisions component (refer to the activity in Note 4 – Loans and Allowance for Credit Losses on page 13).

1 unchanged sentence

(Dollars in thousands)

As of and for the six months ended:

September 30,

As of and for the nine months ended:

Beginning Balance

4 unchanged sentences

Net charge-offs

Provision (credit) charged to operations

Provision charged to operations

Balance at end of period

6 unchanged sentences

A detailed quarterly analysis to determine the adequacy of the Company’s allowance for credit losses is reviewed by the Board of Directors.

With the Bank’s manageable level of net charge-offs and recoveries along with the additions to the reserve from the provision out of operations, the allowance for credit losses as a percentage of year-to-date average loans amounted to 0.810% and 0.843% at June 30, 2025 and 2024, respectively.

With the Bank’s manageable level of net charge-offs and recoveries along with the additions to the reserve from the provision out of operations, the allowance for credit losses as a percentage of year-to-date average loans amounted to 0.83% and 0.84% at September 30, 2025 and 2024, respectively.

NON-PERFORMING ASSETS

2 unchanged sentences

A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured.

When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against current period income.

When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against current period

Foreclosed assets held for resale represent property acquired through foreclosure, or considered to be an in-substance foreclosure.

Total non-performing assets amounted to $4,839,000 as of June 30, 2025, as compared to $4,970,000 as of December 31, 2024.

The economic growth for the second quarter of 2025 leveled off from the higher-than-expected growth in the first quarter of 2025.

Total non-performing assets amounted to $6,580,000 as of September 30, 2025, as compared to $4,970,000 as of December 31, 2024.

The economic growth for the third quarter of 2025 has remained relativey stagnant from the higher-than-expected growth in the first quarter of 2025.

Consumer spending remains at high levels.

The inflation rate increased from 2.4% in March 2025 to 2.7% in June 2025, above the Federal Reserve Board’s desired rate of 2.0%.

Business sentiment saw a slight lag as rates remained constant, inflation increased, and the currently imposed tariffs and threat of higher tariffs could potentially push inflation higher.

The inflation rate increased from 2.4% in March 2025 to 3.0% in September 2025, above the Federal Reserve Board’s desired rate of 2.0%.

Inflation has been on the rise in the second and third quarters of 2025, with currently imposed tariffs and threat of higher tariffs leading to the surge and potentially pushing inflation even higher.

Additionally, mass layoffs from the federal government increased unemployment levels.

Layoffs from large corporations from the public sector have also had an effect.

Many economists and influential thinkers still believe that the economy is moving forward in spite of certain forecasts and predictors.

The concern of a recession, however, has lessened.

The concern of a recession, although lessened this year, is still being discussed.

Inflation had been receding in the middle of 2024, although it has seen a slow but steady rise in the last few quarters.

12 unchanged sentences

The Company is closely monitoring all segments of its loan portfolio because of the current uncertain economic environment.

Non-accrual loans totaled $4,218,000 as of June 30, 2025, as compared to $4,214,000 as of December 31, 2024.

There were no foreclosed assets held for resale as of June 30, 2025 and December 31, 2024.

There were four loans past-due 90 days or more and still accruing interest at June 30, 2025 that carried an aggregate balance of $621,000, compared to December 31, 2024 when there were six loans past-due 90 days or more and still accruing interest which carried an aggregate balance of $756,000.

The loans past-due 90 days or more and still accruing interest as of June 30, 2025 were secured by commercial real estate and residential real estate, all of which were well secured and in the process of collection.

Non-performing assets to total loans was 0.50% at June 30, 2025 and 0.52% at December 31, 2024.

Non-performing assets to total assets was 0.34% at June 30, 2025 and 0.35% at December 31, 2024.

The allowance for credit losses to total non-performing assets was 160.41% as of June 30, 2025 as compared to 154.37% as of December 31, 2024.

Non-accrual loans totaled $4,165,000 as of September 30, 2025, as compared to $4,214,000 as of December 31, 2024.

There were no foreclosed assets held for resale as of September 30, 2025 and December 31, 2024.

There were eight loans past-due 90 days or more and still accruing interest at September 30, 2025 that carried an aggregate balance of $2,415,000, compared to December 31, 2024 when there were six loans past-due 90 days or more and still accruing interest which carried an aggregate balance of $756,000.

The loans past-due 90 days or more and still accruing interest as of September 30, 2025 were secured by commercial real estate and residential real estate, all of which were well secured and in the process of collection.

Non-performing assets to total loans was 0.69% at September 30, 2025 and 0.52% at December 31, 2024.

Non-performing assets to total assets was 0.42% at September 30, 2025 and 0.35% at December 31, 2024.

The allowance for credit losses to total non-performing assets was 121.58% as of September 30, 2025 as compared to 154.37% as of December 31, 2024.

Additional detail can be found on page 57 in the Non-Performing Assets and Individually Evaluated Loans table and page 29 in the Non-Performing Assets table.

1 unchanged sentence

Performing substandard loans, which have not been designated for individual evaluation to determine expected credit losses, have characteristics that cause management to have doubts regarding the ability of the borrower to perform under present loan repayment terms and which may result in reporting these loans as non-performing loans in the future.

Performing substandard loans not designated for individual evaluation amounted to $20,489,000 at June 30, 2025 and $20,080,000 at December 31, 2024.

Individually evaluated loans were $4,527,000 at June 30, 2025, compared to $4,523,000 at December 31, 2024.

The largest individually evaluated loan relationship at June 30, 2025 consisted of a non-performing loan to a student housing holding company which is secured by commercial real estate.

At June 30, 2025, the loan carried a balance of $1,603,000, net of $1,989,000 that had been charged off to date.

The second largest individually evaluated loan relationship at June 30, 2025 consisted of two non-performing loans granted to an individual for the purpose of renovating a multi-use property slated to be converted into apartments and a retail storefront.

Both loans are secured by commercial real estate, and carried an aggregate balance of $1,441,000 at June 30, 2025.

The third largest individually evaluated loan relationship at June 30, 2025 consisted of a non-performing loan to a manufacturer of hemp-based biodegradable plastic food containers and utensils.

As of June 30, 2025, the loan carried a balance of $548,000.

Performing substandard loans not designated for individual evaluation amounted to $21,694,000 at September 30, 2025 and $20,080,000 at December 31, 2024.

Individually evaluated loans were $4,474,000 at September 30, 2025, compared to $4,523,000 at December 31, 2024.

The largest individually evaluated loan relationship at September 30, 2025 consisted of a non-performing loan to a student housing holding company which is secured by commercial real estate.

At September 30, 2025, the loan carried a balance of $1,603,000, net of $1,989,000 that had been charged off to date.

The second largest individually evaluated loan relationship at September 30, 2025 consisted of two non-performing loans granted to an individual for the purpose of renovating a multi-use property slated to be converted into apartments and a retail storefront.

Both loans are secured by commercial real estate, and carried an aggregate balance of $1,441,000 at September 30, 2025.

The third largest individually evaluated loan relationship at September 30, 2025 consisted of a non-performing loan to a manufacturer of

hemp-based biodegradable plastic food containers and utensils.

As of September 30, 2025, the loan carried a balance of $537,000.

The Company determines the need for individual evaluation of loans based on its analysis of the cash flows or collateral estimated at fair value less cost to sell.

For collateral dependent loans, the estimated appraisal or other qualitative adjustments and cost to sell percentages are determined based on the market area in which the real estate securing the loan is located, among other factors, and therefore, can differ from one loan to another.

Of the $4,527,000 in individually evaluated loans at June 30, 2025, none were located outside of the Company’s primary market area.

The outstanding recorded investment of modified loans to borrowers experiencing financial difficulty was $107,000 at June 30, 2025, which consisted on one loan classified in the Real Estate portfolio.

Of the $4,474,000 in individually evaluated loans at September 30, 2025, none were located outside of the Company’s primary market area.

The outstanding recorded investment of modified loans to borrowers experiencing financial difficulty was $107,000 at September 30, 2025, which consisted on one loan classified in the Real Estate portfolio.

The outstanding recorded investment of modified loans to borrowers experiencing financial difficulty as of December 31, 2024 amounted to $10,193,000, with $10,019,000 classified in the Real Estate portfolio and $174,000 classified in the Commercial and Industrial portfolio.

The modification of a loan to a borrower experiencing financial difficulty as of June 30, 2025 was a payment modification that allowed a period of interest-only payments of eleven months and the modifications of loans to borrowers experiencing financial difficulty as of December 31, 2024 consisted of term modifications on two loans which allowed an extension of the maturity date for each respective loan, one payment modification which allowed a period of interest-only payments on the loan, and one loan experienced a release of a piece of collateral securing the loan.

There were no unfunded commitments on modified loans to borrowers experiencing financial difficulty as of June 30, 2025 or December 31, 2024.

At June 30, 2025, the modified loan to a borrower experiencing financial difficulty was not in compliance with the terms of its restructure, compared to December 31, 2024 when there were no modifications of loans to borrowers experiencing financial difficulty that were not in compliance with the terms of their restructure.

Of the modifications of loans to borrowers experiencing financial difficulty that were completed during the twelve months preceeding June 30, 2025, three loans experienced payment defaults during the six months ended June 30, 2025.

Two loans carrying a balances of $120,000 and $421,000, respectively, experienced payment defaults during the three and six months ended June 30, 2025 and both loans remained in past due status as of June 30, 2025.

One loan carrying a balance of $107,000 experienced a payment default during the three months ended June 30, 2025 and remained in past due status as of June 30, 2025.

Of the modifications of loans to borrowers experiencing financial difficulty that were completed during the twelve months preceeding June 30, 2024, one loan carrying a balance of $9,455,000 experienced a payment default during the six months ended June 30, 2024.

There were no payment defaults on the modification of the loan to a borrower experiencing financial difficulty during the three months ended June 30, 2024, and the loan was paid current by the customer as of June 30, 2024.

The modification of a loan to a borrower experiencing financial difficulty as of September 30, 2025 was a payment modification that allowed a period of interest-only payments of eleven months and the modifications of loans to borrowers experiencing financial difficulty as of December 31, 2024 consisted of term modifications on two loans which allowed an extension of the maturity date for each respective loan, one payment modification which allowed a period of interest-only payments on the loan, and one loan experienced a release of a piece of collateral securing the loan.

There were no unfunded commitments on modified loans to borrowers experiencing financial difficulty as of September 30, 2025 or December 31, 2024.

At September 30, 2025, the modified loan to a borrower experiencing financial difficulty was not in compliance with the terms of its restructure, compared to December 31, 2024 when there were no modifications of loans to borrowers experiencing financial difficulty that were not in compliance with the terms of their restructure.

One loan carrying a balance of $421,000 experienced a payment default during the three and nine months ended September 30, 2025 and remained in past due status as of September 30, 2025.

One loan carrying a balance of $107,000 experienced a payment default during the three and nine months ended September 30, 2025 and remained in past due status as of September 30, 2025.

Of the modifications of loans to borrowers experiencing financial difficulty that were completed during the twelve months preceding September 30, 2024, one loan carrying a balance of $9,427,000 experienced a payment default during the nine months ended September 30, 2024, but the loan was paid current by the customer as of September 30, 2024.

The Company’s non-accrual loan valuation procedure for any loans greater than $250,000 requires an appraisal to be obtained and reviewed annually at year end, unless the Board of Directors waives such requirement for a specific loan, in favor of obtaining a Certificate of Inspection instead, defined as an internal evaluation completed by the Company.

3 unchanged sentences

The Company actively works with borrowers to resolve credit problems and will continue its close monitoring efforts in 2025.

Excluding the assets disclosed in the Non-Performing Assets and Individually Evaluated Loans table below and the Non-Performing Assets table in Note 4 – Loans and Allowance for

Credit Losses, management is not aware of any information about borrowers’ possible credit problems which cause serious doubt as to their ability to comply with present loan repayment terms.

Excluding the assets disclosed in the Non-Performing Assets and Individually Evaluated Loans table below and the Non-Performing Assets table in Note 4 – Loans and Allowance for Credit Losses, management is not aware of any information about borrowers’ possible credit problems which cause serious doubt as to their ability to comply with present loan repayment terms.

In addition, regulatory authorities, as an integral part of their examinations, periodically review the allowance for possible loan losses.

1 unchanged sentence

The economic climate remains unstable.

The war between Ukraine and Russia moves into its fourth year and the Israeli conflict in the Gaza strip has intensified and incited worldwide hostilities.

Inflationary pressures remain elevated and have seen an increase in the last few months based in large part on newly enacted presidential policies.

This continues to create much debate, speculation, and concern regarding the appropriate actions to be taken to overcome the effects of monetary policy adjustments, tariffs, and mass federal layoffs, that have been and will be made to affect the change.

Intense political turmoil, commodity prices remaining high, gas prices fluctuating widely from week to week, small businesses closing, larger corporations cutting jobs, unprecedented weather conditions seen around the world, and the uncertainty of where the Federal Reserve may go from here in regards to rates have all exacerbated the difficulties in the national and state economy.

The war between Ukraine and Russia continues into its fourth year and the Israeli conflict in the Gaza strip has moved to exploring yet another cease fire attempt.

Inflationary pressures remain elevated and have seen an increase in the last few months, exacerbated by recently enacted presidential policies.

This continues to create much debate, speculation, and concern regarding the appropriate actions to be taken to overcome the effects of monetary policy adjustments, tariffs, federal government shutdown, and continuing large federal layoffs, that have been and will be made to affect the change.

Intense political turmoil, commodity prices remaining high, gas prices fluctuating widely from week to week, small businesses closing, larger corporations cutting jobs, unprecedented weather conditions seen around the world, and the uncertainty of where the Federal Reserve may go from here in regard to rates have all exacerbated the difficulties in the national and state economy.

Experts at all levels continue to ascertain the intermediate or long term effects of such issues.

5 unchanged sentences

A concentration of credit exists when the total amount of loans to borrowers, who are engaged in similar activities that are similarly impacted by economic or other conditions, exceed 10% of total loans.

As of June 30, 2025 and December 31, 2024, management is of the opinion that there were no loan concentrations exceeding 10% of total loans.

As of September 30, 2025 and December 31, 2024, management is of the opinion that there were no loan concentrations exceeding 10% of total loans.

Non-Performing Assets and Individually Evaluated Loans

(Dollars in thousands)

September 30,

Non-performing assets

18 unchanged sentences

Allowance for credit losses to total non-performing assets

Real estate mortgages comprise 90.2% of the loan portfolio as of June 30, 2025, as compared to 89.8% as of December 31, 2024.

Real estate mortgages comprise 90.5% of the loan portfolio as of September 30, 2025, as compared to 89.8% as of December 31, 2024.

Real estate mortgages consist of both loans secured by residential and commercial real estate.

10 unchanged sentences

The Company regularly reviews competing financial institutions’ interest rates, especially when establishing interest rates on certificates of deposit and municipal deposits.

Total deposits increased $11,398,000 to $1,057,278,000 as of June 30, 2025 as non-interest bearing deposits decreased by $606,000 and interest bearing deposits increased by $12,004,000 from year-end 2024.

The overall increase in interest bearing deposits was mainly the result of an increase of $66,170,000 in the balance of retail CDs resulting from new higher rate CD promotions offered during the first six months of 2025, offset by a decrease of $54,304,000 in the balance of other interest bearing retail deposit accounts.

Total short-term and long-term borrowings decreased to $235,551,000 as of June 30, 2025, from $240,426,000 at year-end 2024, a decrease of $4,875,000 or 2.0%.

The decrease in borrowings during the six months ended June 30, 2025 was mainly attributable to a decrease of $3,381,000 in the balance of securities sold under agreements to repurchase.

Total deposits increased $146,614,000 to $1,192,494,000 as of September 30, 2025 as non-interest bearing deposits increased by $11,583,000 and interest bearing deposits increased by $135,031,000 from year-end 2024.

The overall increase in interest bearing deposits was mainly the result of an increase of $111,919,000 in the balance of retail CDs resulting from new higher rate CD promotions offered during the throughout 2025 along with an increase in brokered CDs of $35,137,000 in 2025.

These were offset by a decrease of $12,025,000 in the balance of other interest bearing retail deposit accounts.

Total short-term and long-term borrowings decreased to $238,856,000 as of September 30, 2025, from $240,426,000 at year-end 2024, a decrease of $1,570,000 or 0.7%.

The decrease in borrowings during the nine months ended September 30, 2025 was mainly attributable to a decrease of $1,494,000 in short-term borrowings from the Federal Home Loan Bank.

On December 10, 2020, the Corporation issued $25,000,000 aggregate principal amount of Subordinated Notes due December 31, 2030 (the “2020 Notes”).

3 unchanged sentences

Normal increases in capital are generated by net income, less dividends paid out.

During the six months ended June 30, 2025, net income for the period, net of continued payment of dividends, increased capital by $485,000.

During the nine months ended September 30, 2025, net income for the period, net of continued payment of dividends, increased capital by $1,552,000.

Accumulated other comprehensive loss derived from net unrealized gains on debt securities available-for-sale and interest rate derivatives also impacts capital.

At December 31, 2024 accumulated other comprehensive loss was $25,630,000.

Accumulated other comprehensive loss stood at $25,350,000 at June 30, 2025, an improvement of $280,000.

Accumulated other comprehensive loss stood at $22,178,000 at September 30, 2025, an improvement of $3,452,000.

Fluctuations in interest rates have regularly impacted the gain/loss position in the Bank’s securities portfolio, as well as its decision to sell securities at a gain or loss.

The fluctuations from net unrealized gains on debt securities available-for-sale and derivatives do not affect regulatory capital, as the Bank elected to opt-out of the inclusion of this item with the filing of the March 31, 2015 Call Report.

The Company held 231,611 shares of common stock as treasury stock at June 30, 2025 and December 31, 2024, respectively.

This had an effect of reducing our total stockholders’ equity by $5,709,000 as of June 30, 2025 and December 31, 2024.

Total stockholders’ equity was $107,547,000 as of June 30, 2025, and $106,782,000 as of December 31, 2024.

At June 30, 2025 the Bank met the definition of a “well-capitalized” institution under the regulatory framework for prompt corrective action and the minimum capital requirements under Basel III.

The following table presents the Bank’s capital ratios as of June 30, 2025 and December 31, 2024:

The Company held 231,611 shares of common stock as treasury stock at September 30, 2025 and December 31, 2024, respectively.

This had an effect of reducing our total stockholders’ equity by $5,709,000 as of September 30, 2025 and December 31, 2024.

Total stockholders’ equity was $112,252,000 as of September 30, 2025, and $106,782,000 as of December 31, 2024.

At September 30, 2025 the Bank met the definition of a “well-capitalized” institution under the regulatory framework for prompt corrective action and the minimum capital requirements under Basel III.

The following table presents the Bank’s capital ratios as of September 30, 2025 and December 31, 2024:

Minimum Capital

September 30,

Adequacy with

8 unchanged sentences

The capital buffer requirement effectively raises the minimum required common equity Tier 1 capital ratio to 7.0%, the Tier 1 capital ratio to 8.5%, and the total capital ratio to 10.5% on a fully phased-in basis as of January 1, 2019.

As of June 30, 2025, the Bank meets all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis.

As of September 30, 2025, the Bank meets all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis.

The Corporation’s capital ratios are not materially different than those of the Bank.

8 unchanged sentences

● Brokered CDs.

At June 30, 2025, the Company had $543,556,000 in maximum borrowing capacity at FHLB (inclusive of the outstanding balances of FHLB long-term notes, FHLB short-term borrowings, and irrevocable standby letters of credit issued by FHLB);

At September 30, 2025, the Company had $539,461,000 in maximum borrowing capacity at FHLB (inclusive of the outstanding balances of FHLB long-term notes, FHLB short-term borrowings, and irrevocable standby letters of credit issued by FHLB);

the maximum borrowing capacity at ACBB was $15,000,000 and the maximum borrowing capacity of the Federal Discount Window was $7,271,000.

1 unchanged sentence

Because the agreement both entitles and obligates the Company to repurchase the assets, the Company may transfer legal control of the securities while still retaining effective control.

As a result, the repurchase agreements are accounted for as collateralized financing agreements (secured borrowings) and act as an additional source of liquidity.

Securities sold under agreements to repurchase were $29,551,000 at June 30, 2025.

As a result, the repurchase agreements are accounted for as collateralized financing agreements (secured borrowings) and

act as an additional source of liquidity.

Securities sold under agreements to repurchase were $32,856,000 at September 30, 2025.

Asset liquidity is provided by securities maturing in one year or less, other short-term investments, federal funds sold, and cash and due from banks.

2 unchanged sentences

Also, short-term borrowings provide funds to meet liquidity needs.

Net cash flows provided by operating activities were $5,729,000 for the six months ended June 30, 2025 and $5,534,000 for the six months ended June 30, 2024.

Net income amounted to $3,967,000 for the six months ended June 30, 2025, compared to a net loss of $16,997,000 for the six months ended June 30, 2024.

The goodwill impairment recorded during the first quarter of 2024 was a non-cash charge and amounted to $19,133,000 for the six months ended June 30, 2024;

Net cash flows provided by operating activities were $9,195,000 for the nine months ended September 30, 2025 and $6,564,000 for the nine months ended September 30, 2024.

Net income amounted to $6,775,000 for the nine months ended September 30, 2025, compared to a net loss of $15,490,000 for the nine months ended September 30, 2024.

The goodwill impairment recorded during the first quarter of 2024 was a non-cash charge and amounted to $19,133,000 for the nine months ended September 30, 2024;

therefore, it had no effect on liquidity.

For the six months ended June 30, 2025, there was no goodwill impairment.

During the six months ended June 30, 2025 and 2024, net premium amortization on securities amounted to $104,000 and $285,000, respectively.

Net gains on sales of mortgage loans amounted to $38,000 for the six months ended June 30, 2025 and $28,000 for the six months ended June 30, 2024.

Proceeds (net of gains/losses) from sales of mortgage loans originated for sale exceeded originations of mortgage loans originated for resale by $663,000 for the six months ended June 30, 2025 and originations of mortgage loans originated for resale exceeded proceeds (net of gains/losses) from sales of mortgage loans originated for sale by $63,000 for the six months ended June 30, 2024.

Net securities gains amounted to $19,000 for the six months ended June 30, 2025, compared to net securities losses of $194,000 for the six months ended June 30, 2024.

Accrued interest receivable decreased by $39,000 for the six months ended June 30, 2025 and increased by $127,000 for the six months ended June 30, 2024.

Accrued interest payable increased by $167,000 for the six months ended June 30, 2025 and increased by $875,000 for the six months ended June 30, 2024.

Amortization of investment in low-income housing partnerships amounted to $409,000 for both the six months ended June 30, 2025 and 2024, respectively.

Other assets decreased $516,000 for the six months ended June 30, 2025, compared to a decrease of $201,000 for the six months ended June 30, 2024.

Other liabilities decreased $833,000 during the six months ended June 30, 2025, compared to an increase of $122,000 during the six months ended June 30, 2024.

gain from bank-owned life insurance proceeds of $255,000 was recognized during the six months ended June 30, 2025, compared to the six months ended June 30, 2024 when no gains were recognized in relation to bank-owned life insurance proceeds.

Investing activities provided cash of $13,029,000 during the six months ended June 30, 2025 and used cash of $28,452,000 during the six months ended June 30,2024.

Net activity in the available-for-sale securities portfolio (including proceeds from sale, maturities, and redemptions, net against purchases) provided cash of $24,387,000 during the six months ended June 30, 2025 and used cash of $15,921,000 during the six months ended June 30, 2024.

Changes in restricted investment in bank stocks provided cash of $40,000 during the six months ended June 30, 2025 and used cash of $608,000 during the six months ended June 30, 2024.

Net cash used to originate loans amounted to $12,368,000 for the six months ended June 30, 2025, compared $11,337,000 for the six months ended June 30, 2024.

Proceeds from bank-owned life insurance provided cash of $1,237,000 for the six months ended June 30, 2025, compared to the six months ended June 30, 2024 when there were no proceeds from bank-owned life insurance.

Purchases of premises and equipment used cash of $267,000 and $576,000 during the six months ended June 30, 2025 and 2024, respectively.

Purchase of investment in real estate ventures used cash of $0 and $10,000 during the six months ended June 30, 2025 and 2024, respectively.

Financing activities provided cash of $3,041,000 and $23,031,000 during the six months ended June 30, 2025 and 2024, respectively.

Deposits increased by $11,398,000 during the six months ended June 30, 2025 and increased by $3,770,000 during the six months ended June 30, 2024.

Short-term borrowings decreased by $4,875,000 during the six months ended June 30, 2025 and increased by $21,843,000 during the six months ended June 30, 2024.

Dividends paid amounted to $3,482,000 for the six months ended June 30, 2025, compared to $3,437,000 for the six months ended June 30, 2024.

For the nine months ended September 30, 2025, there was no goodwill impairment.

During the nine months ended September 30, 2025, net discount accretion on securities amounted to $5,000 compared to net premium amortization of $276,000 for the nine months ended September 30, 2024.

Net gains on sales of mortgage loans amounted to $97,000 for the nine months ended September 30, 2025 and $68,000 for the nine months ended September 30, 2024.

Proceeds (net of gains/losses) from sales of mortgage loans originated for sale exceeded originations of mortgage loans originated for resale by $721,000 for the nine months ended September 30, 2025 and originations of mortgage loans originated for resale exceeded proceeds (net of gains/losses) from sales of mortgage loans originated for sale by $146,000 for the nine months ended September 30, 2024.

Net securities gains amounted to $128,000 for the nine months ended September 30, 2025, compared to net securities losses of $48,000 for the nine months ended September 30, 2024.

Accrued interest receivable increased by $82,000 and $58,000 for the nine months ended September 30, 2025 and 2024, respectively.

Accrued interest payable increased by $1,023,000 for the nine months ended September 30, 2025 and decreased by $233,000 for the nine months ended September 30, 2024.

Amortization of investment in low-income housing partnerships amounted to $614,000 for both the nine months ended September 30, 2025 and 2024, respectively.

Other assets increased by $94,000 and $277,000 during the nine months ended September 30, 2025 and 2024, respectively.

Other liabilities decreased $749,000 during the nine months ended September 30, 2025, compared to an increase of $1,079,000 during the nine months ended September 30, 2024.

A gain from bank-owned life insurance proceeds of $255,000 was recognized during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024 when no gains were recognized in relation to bank-owned life insurance proceeds.

Investing activities used cash of $19,481,000 and $30,071,000 during the nine months ended September 30, 2025 and 2024, respectively.

Net activity in the available-for-sale securities portfolio (including proceeds from sale, maturities, and redemptions, net against purchases) used cash of $10,082,000 and $4,690,000 during the nine months ended September 30, 2025 and 2024, respectively.

Changes in restricted investment in bank stocks provided cash of $40,000 during the nine months ended September 30, 2025 and provided cash of $120,000 during the nine months ended September 30, 2024.

Net cash used to originate loans amounted to $10,347,000 for the nine months ended September 30, 2025, compared $24,067,000 for the nine months ended September 30, 2024.

Proceeds from bank-owned life insurance provided cash of $1,237,000 for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024 when there were no proceeds from bank-owned life insurance.

Purchases of premises and equipment used cash of $329,000 and $1,424,000 during the nine months ended September 30, 2025 and 2024, respectively.

Purchase of investment in real estate ventures used cash of $0 and $10,000 during the nine months ended September 30, 2025 and 2024, respectively.

Financing activities provided cash of $140,287,000 and $30,518,000 during the nine months ended September 30, 2025 and 2024, respectively.

Deposits increased by $146,614,000 during the nine months ended September 30, 2025 and increased by $39,470,000 during the nine months ended September 30, 2024.

Short-term borrowings decreased by $1,570,000 during the nine months ended September 30, 2025 and increased by $14,007,000 during the nine months ended September 30, 2024.

Dividends paid, net of reinvestment amounted to $4,757,000 for the nine months ended September 30, 2025, compared to $2,959,000 for the nine months ended September 30, 2024.

Managing liquidity remains an important segment of asset/liability management.

14 unchanged sentences

Asset/Liability Management

The principal objective of asset/liability management is to manage the sensitivity of the net interest margin to potential movements in interest rates and to enhance profitability through returns from managed levels of interest rate

The Company actively manages the interest rate sensitivity of its assets and liabilities.

5 unchanged sentences

This position would contribute positively to net interest income in a falling rate environment.

The Company’s cumulative gap at one year indicates the Company is liability sensitive at June 30, 2025.

The Company’s cumulative gap at one year indicates the Company is liability sensitive at September 30, 2025.

Earnings at Risk

16 unchanged sentences

The calculated estimates of change in net interest income and net present value of the balance sheet are compared to current limits approved by ALCO and the Board of Directors.

The earnings simulation model projects net interest income would decrease 0.99%, 1.42%, and 1.64% in the 100, 200 and 300 basis point increasing rate scenarios presented.

The earnings simulation model projects net interest income would increase 1.86%, 4.07%, and 5.92% in the 100, 200 and 300 basis point increasing rate scenarios presented.

In addition, the earnings simulation model projects net interest income would decrease 3.94%, 9.72%, and 14.68% in the 100, 200 and 300 basis point decreasing rate scenarios presented.

3 unchanged sentences

However, the Company’s interest-sensitive assets are able to decline by these amounts.

For the six months ended June 30, 2025 the cost of interest-bearing liabilities averaged 3.38%, and the yield on interest-earning assets, on a fully taxable equivalent basis, averaged 5.44%.

For the nine months ended September 30, 2025 the cost of interest-bearing liabilities averaged 3.40%, and the yield on interest-earning assets, on a fully taxable equivalent basis, averaged 5.45%.

Net Present Value Estimation

1 unchanged sentence

The net present value of the balance sheet is defined as the discounted present value of asset cash flows minus the discounted present value of liability cash flows.

At June 30, 2025, net present value is projected to increase 0.97% in the 100 basis point immediate increase scenario and decrease 0.38%, and 3.08% in the 200, and 300 basis point immediate increase scenarios, respectively.

At September 30, 2025, net present value is projected to decrease 0.50%, 2.45%, and 5.21% in the 100, 200, and 300 basis point immediate increase scenarios, respectively.

Additionally, the 100, 200 and 300 basis point immediate decreases in rates are estimated to affect net present value with decreases of 1.15%, 6.53%, and 16.71%.

3 unchanged sentences

Effect of Change in Interest Rates

June 30, 2025:

September 30, 2025:

Projected Change

18 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-Q

Item 1. Financial Statements