First Bancorp, Inc /ME/ 10-Q

Item 1 – Financial Statements Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders The First Bancorp, Inc. Results of Review of Interim Financial Information We have reviewed the accompanying interim consolidated financial information of The First Bancorp, Inc. and Subsidiary as of March 31, 2025 and 2024 and for the three-month periods then ended, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for them to be in conformity with accounting principles generally accepted in the United States of America. Basis for Review Results This consolidated interim financial information is the responsibility of the Company's management. We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. /s/ Berry Dunn McNeil & Parker, LLC Portland, Maine May 9, 2025 2 Consolidated Balance Sheets (Unaudited) The First Bancorp, Inc. and Subsidiary March 31, 2025 December 31, 2024 March 31, 2024 Assets Cash and cash equivalents $ 26,432,000 $ 27,636,000 $ 23,875,000 Interest bearing deposits in other banks 2,938,000 22,100,000 2,911,000 Securities available for sale 280,764,000 274,680,000 274,451,000 Securities held-to-maturity (net of ACL), fair value of $ 312,788,000 at March 31, 2025, $ 314,993,000 at December 31, 2024 and $ 327,816,000 at March 31, 2024 368,571,000 369,704,000 379,453,000 Restricted equity securities, at cost 7,509,000 7,203,000 5,933,000 Loans 2,383,150,000 2,340,940,000 2,173,746,000 Less allowance for credit losses 25,114,000 24,871,000 24,207,000 Net loans 2,358,036,000 2,316,069,000 2,149,539,000 Accrued interest receivable 17,923,000 13,976,000 15,970,000 Premises and equipment, net 28,626,000 27,855,000 28,435,000 Other real estate owned — 173,000 — Goodwill 30,646,000 30,646,000 30,646,000 Other assets 65,927,000 66,968,000 66,957,000 Total assets $ 3,187,372,000 $ 3,157,010,000 $ 2,978,170,000 Liabilities Demand deposits $ 267,876,000 $ 292,255,000 $ 262,652,000 NOW deposits 613,245,000 676,107,000 618,554,000 Money market deposits 398,966,000 376,627,000 321,822,000 Savings deposits 261,732,000 265,451,000 280,533,000 Certificates of deposit 1,169,516,000 1,114,811,000 1,065,427,000 Total deposits 2,711,335,000 2,725,251,000 2,548,988,000 Borrowed funds – short term 115,444,000 51,278,000 84,779,000 Borrowed funds – long term 70,000,000 95,000,000 70,000,000 Other liabilities 30,912,000 32,988,000 31,779,000 Total liabilities 2,927,691,000 2,904,517,000 2,735,546,000 Shareholders' equity Common stock, one cent par value per share 112,000 112,000 111,000 Additional paid-in capital 72,355,000 71,832,000 70,506,000 Retained earnings 225,592,000 222,823,000 213,839,000 Accumulated other comprehensive income (loss) Net unrealized loss on securities available-for-sale ( 38,702,000 ) ( 42,671,000 ) ( 42,816,000 ) Net unrealized loss on securities transferred from available-for-sale to held-to-maturity ( 45,000 ) ( 47,000 ) ( 54,000 ) Net unrealized gain on cash flow hedging derivative instruments 82,000 157,000 735,000 Net unrealized gain on postretirement costs 287,000 287,000 303,000 Total shareholders' equity 259,681,000 252,493,000 242,624,000 Total liabilities & shareholders' equity $ 3,187,372,000 $ 3,157,010,000 $ 2,978,170,000 Common Stock Number of shares authorized 18,000,000 18,000,000 18,000,000 Number of shares issued and outstanding 11,196,881 11,155,528 11,130,933 Book value per common share $ 23.19 $ 22.63 $ 21.80 Tangible book value per common share $ 20.44 $ 19.87 $ 19.03 See Report of Independent Registered Public Accounting Firm. The accompanying notes are an integral part of these consolidated financial statements. 3 Consolidated Statements of Income and Comprehensive Income (Unaudited) The First Bancorp, Inc. and Subsidiary For the three months ended March 31, 2025 2024 Interest income Interest and fees on loans (includes YTD tax-exempt income of $ 721,000 for March 31, 2025 and $ 521,000 for March 31, 2024) $ 33,924,000 $ 30,204,000 Interest on deposits with other banks 56,000 78,000 Interest and dividends on investments (includes YTD tax-exempt income of $ 1,955,000 for March 31, 2025 and $ 1,995,000 for March 31, 2024) 4,729,000 4,706,000 Total interest income 38,709,000 34,988,000 Interest expense Interest on deposits 19,269,000 19,177,000 Interest on borrowed funds 1,641,000 931,000 Total interest expense 20,910,000 20,108,000 Net interest income 17,799,000 14,880,000 Credit loss expense - loans 396,000 99,000 Credit loss expense (reduction) - debt securities HTM 1,000 ( 252,000 ) Credit loss reduction - off-balance sheet credit exposures ( 5,000 ) ( 360,000 ) Total credit loss expense (reduction) 392,000 ( 513,000 ) Net interest income after provision for credit losses 17,407,000 15,393,000 Non-interest income Investment management and fiduciary income 1,317,000 1,188,000 Service charges on deposit accounts 531,000 499,000 Mortgage origination and servicing income, net of amortization 195,000 130,000 Debit card income 1,170,000 1,186,000 Other operating income 789,000 637,000 Total non-interest income 4,002,000 3,640,000 Non-interest expense Salaries and employee benefits 6,850,000 6,057,000 Occupancy expense 877,000 866,000 Furniture and equipment expense 1,462,000 1,389,000 FDIC insurance premiums 694,000 564,000 Amortization of identified intangibles 7,000 7,000 Other operating expense 2,954,000 2,878,000 Total non-interest expense 12,844,000 11,761,000 Income before income taxes 8,565,000 7,272,000 Income tax expense 1,488,000 1,251,000 NET INCOME $ 7,077,000 $ 6,021,000 Basic earnings per common share $ 0.64 $ 0.55 Diluted earnings per common share $ 0.63 $ 0.54 Other comprehensive income (loss) net of tax Net unrealized gain (loss) on securities available for sale, net of taxes $ 3,969,000 $ ( 3,241,000 ) Net unrealized gain on transferred securities, net of taxes 2,000 2,000 Net unrealized (loss) gain on hedging derivative instruments ( 75,000 ) 435,000 Other comprehensive gain (loss) 3,896,000 ( 2,804,000 ) Comprehensive income $ 10,973,000 $ 3,217,000 See Report of Independent Registered Public Accounting Firm. The accompanying notes are an integral part of these consolidated financial statements. 4 Consolidated Statements of Changes in Shareholders' Equity (Unaudited) The First Bancorp, Inc. and Subsidiary Three Month Period Ended March 31, 2025 and 2024 Common stock and additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total shareholders' equity Shares Amount Balance at December 31, 2023 11,098,057 $ 70,182,000 $ 211,925,000 $ ( 39,028,000 ) $ 243,079,000 Net income — — 6,021,000 — 6,021,000 Net unrealized loss on securities available for sale, net of tax — — — ( 3,241,000 ) ( 3,241,000 ) Net unrealized gain on securities transferred from available for sale to held to maturity, net of tax — — — 2,000 2,000 Net unrealized gain on hedging derivative instruments, net of tax — — — 435,000 435,000 Comprehensive income (loss) — — 6,021,000 ( 2,804,000 ) 3,217,000 Cash dividends declared ($ 0.35 per share) — — ( 3,896,000 ) — ( 3,896,000 ) Equity compensation expense — 231,000 — — 231,000 Payment to repurchase common stock ( 8,031 ) — ( 211,000 ) — ( 211,000 ) Issuance of restricted stock 32,859 — — — — Proceeds from sale of common stock 8,048 204,000 — — 204,000 Balance at March 31, 2024 11,130,933 $ 70,617,000 $ 213,839,000 $ ( 41,832,000 ) $ 242,624,000 Balance at December 31, 2024 11,155,528 $ 71,944,000 $ 222,823,000 $ ( 42,274,000 ) $ 252,493,000 Net income — — 7,077,000 — 7,077,000 Net unrealized gain on securities available for sale, net of tax — — — 3,969,000 3,969,000 Net unrealized gain on securities transferred from available for sale to held to maturity, net of tax — — — 2,000 2,000 Net unrealized loss on hedging derivative instruments, net of tax — — — ( 75,000 ) ( 75,000 ) Comprehensive income — — 7,077,000 3,896,000 10,973,000 Cash dividends declared ($ 0.36 per share) — — ( 4,031,000 ) — ( 4,031,000 ) Equity compensation expense — 298,000 — — 298,000 Payment to repurchase common stock ( 10,784 ) — ( 277,000 ) — ( 277,000 ) Issuance of restricted stock 43,297 — — — — Proceeds from sale of common stock 8,840 225,000 — — 225,000 Balance at March 31, 2025 11,196,881 $ 72,467,000 $ 225,592,000 $ ( 38,378,000 ) $ 259,681,000 See Report of Independent Registered Public Accounting Firm. The accompanying notes are an integral part of these consolidated financial statements. 5 Consolidated Statements of Cash Flows (Unaudited) The First Bancorp, Inc. and Subsi diary For the three months ended March 31, 2025 2024 Cash flows from operating activities Net income $ 7,077,000 $ 6,021,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 553,000 544,000 Change in deferred taxes 310,000 319,000 Credit loss expense (reduction) 392,000 ( 513,000 ) Loans originated for resale ( 3,041,000 ) ( 363,000 ) Proceeds from sales and transfers of loans 3,099,000 373,000 Net gain on sales of loans ( 58,000 ) ( 10,000 ) Net amortization of premiums on investments 127,000 135,000 Net gain on sale of other real estate owned ( 33,000 ) — Equity compensation expense 298,000 231,000 Net increase in other assets and accrued interest ( 3,631,000 ) ( 5,982,000 ) Net decrease in other liabilities ( 3,214,000 ) ( 2,385,000 ) Net (gain) loss on disposal of premises and equipment ( 15,000 ) 9,000 Amortization of investment in limited partnership 309,000 117,000 Net acquisition amortization 7,000 7,000 Net cash provided (used) by operating activities 2,180,000 ( 1,497,000 ) Cash flows from investing activities Decrease in interest-bearing deposits in other banks 19,162,000 577,000 Proceeds from maturities, payments and calls of securities available for sale 8,471,000 5,359,000 Proceeds from maturities, payments, calls and sales of securities to be held to maturity 1,129,000 6,011,000 Proceeds from sales of other real estate owned 206,000 — Purchases of securities available for sale ( 9,652,000 ) ( 1,968,000 ) Change in restricted equity securities ( 306,000 ) ( 2,548,000 ) Net increase in loans ( 42,363,000 ) ( 44,214,000 ) Capital expenditures ( 1,352,000 ) ( 326,000 ) Proceeds from disposal of premises and equipment 22,000 — Net cash used by investing activities ( 24,683,000 ) ( 37,109,000 ) Cash flows from financing activities Net decrease in demand, savings, and money market accounts ( 68,621,000 ) ( 45,854,000 ) Net increase (decrease) in certificates of deposit 54,705,000 ( 4,820,000 ) Net increase in short-term borrowings 64,166,000 15,127,000 Advances on long-term borrowings — 70,000,000 Repayment on long-term borrowings ( 25,000,000 ) — Payment to repurchase common stock ( 277,000 ) ( 211,000 ) Proceeds from sale of common stock 225,000 204,000 Dividends paid ( 3,899,000 ) ( 3,907,000 ) Net cash provided by financing activities 21,299,000 30,539,000 Net decrease in cash and cash equivalents ( 1,204,000 ) ( 8,067,000 ) Cash and cash equivalents at beginning of period 27,636,000 31,942,000 Cash and cash equivalents at end of period $ 26,432,000 $ 23,875,000 6 For the three months ended March 31, 2025 2024 Interest paid $ 20,843,000 $ 19,521,000 Non-cash transactions Change in net unrealized loss on available for sale securities, net of tax $ ( 3,969,000 ) $ 3,241,000 See Report of Independent Registered Public Accounting Firm. The accompanying notes are an integral part of these consolidated financial statements. 7 Notes to Consolidated Financial Statements The First Bancorp, Inc. and Subsidiary Note 1 – Basis of Presentation The Company is a financial holding company that owns all of the common stock of the Bank. The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of Management, all adjustments (consisting of normally recurring accruals) considered necessary for a fair presentation have been included. All significant intercompany transactions and balances are eliminated in consolidation. The income reported for the 2025 period is not necessarily indicative of the results that may be expected for the year ending December 31, 2025. For further information, refer to the consolidated financial statements and notes included in the Company's annual report on Form 10-K for the year ended December 31, 2024. The abbreviations and definitions identified below may be used throughout this Form 10-Q, including Item 1 - Financial Statements and Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. The following is provided to aid the reader and provide a reference page when reviewing these sections of the Form 10-Q. Abbreviation Description Abbreviation Description ACL Allowance for credit losses GAAP Accounting principles generally accepted in the U.S. AFS Available-for-sale GDP Gross domestic product ALCO Asset/Liability Committee GNMA Government National Mortgage Association AOCI Accumulated other comprehensive income (loss) HTM Held-to-maturity ASC Accounting Standards Codification IAL Individually Analyzed Loans ASU Accounting Standards Update IRS Internal Revenue Service C&I Commercial and Industrial MPF Mortgage Partnership Finance Program CDs Certificates of deposit OAEM Other assets especially mentioned CECL Current Expected Credit Loss OCC Office of the Comptroller of the Currency CET1 Common Equity Tier 1 OCI Other comprehensive income (loss) CLLD Construction, land, and land development OIS Overnight Indexed Swap EPS Earnings per share OREO Other real estate owned FASB Financial Accounting Standards Board POR Period of Redemption FDIC Federal Deposit Insurance Corporation PSA Public Securities Association FHLB Federal Home Loan Bank SEC Securities and Exchange Commission FHLBB Federal Home Loan Bank of Boston SOFR Secured Overnight Financing Rate FHLMC Federal Home Loan Mortgage Corporation The 2020 Plan The 2020 Equity Incentive Plan FNMA Federal National Mortgage Association The Bank First National Bank FOMC Federal Open Market Committee The Company The First Bancorp, Inc. FRB Federal Reserve Board U.S. United States of America FRBB Federal Reserve Bank of Boston USD U.S. Dollar Risks and Uncertainties Global markets have experienced heightened volatility amidst an escalation of trade disputes, the outcome of which is yet to be determined. The ongoing conflicts between Russia and Ukraine, and Israel and Hamas, as well as other conflicts globally, have the potential to further increase economic uncertainty and geopolitical instability. Finally, the 2024 U.S. election resulted in single party control of the executive and legislative branches of the federal government, with pledges to reign in government spending and reform numerous policies including immigration, and business regulation. Any or all could ultimately have negative downstream effects on the Company's operating results, the extent of which is indeterminable at this time. Subsequent Events Events occurring subsequent to March 31, 2025, have been evaluated as to their potential impact to the financial statements. 8 Note 2 – Investment Securities The following table summarizes the amortized cost and estimated fair value of investment securities at March 31, 2025: Amortized Cost Unrealized Gains Unrealized Losses Fair Value (Estimated) Securities available for sale U.S. Treasury & Agency securities $ 24,543,000 $ — $ ( 5,593,000 ) $ 18,950,000 Mortgage-backed securities 262,912,000 381,000 ( 36,416,000 ) 226,877,000 State and political subdivisions 40,130,000 — ( 7,368,000 ) 32,762,000 Asset-backed securities 2,168,000 13,000 ( 6,000 ) 2,175,000 $ 329,753,000 $ 394,000 $ ( 49,383,000 ) $ 280,764,000 Securities to be held to maturity U.S. Treasury & Agency securities $ 38,100,000 $ — $ ( 8,904,000 ) $ 29,196,000 Mortgage-backed securities 51,600,000 52,000 ( 10,402,000 ) 41,250,000 State and political subdivisions 251,818,000 38,000 ( 34,924,000 ) 216,932,000 Corporate securities 27,250,000 — ( 1,840,000 ) 25,410,000 $ 368,768,000 $ 90,000 $ ( 56,070,000 ) $ 312,788,000 Less allowance for credit losses ( 197,000 ) — — — Net securities to be held to maturity $ 368,571,000 $ 90,000 $ ( 56,070,000 ) $ 312,788,000 Restricted equity securities Federal Home Loan Bank Stock $ 6,472,000 $ — $ — $ 6,472,000 Federal Reserve Bank Stock 1,037,000 — — 1,037,000 $ 7,509,000 $ — $ — $ 7,509,000 The following table summarizes the amortized cost and estimated fair value of investment securities at December 31, 2024: Amortized Cost Unrealized Gains Unrealized Losses Fair Value (Estimated) Securities available for sale U.S. Treasury & Agency securities $ 26,042,000 $ — $ ( 6,246,000 ) $ 19,796,000 Mortgage-backed securities 260,267,000 141,000 ( 41,026,000 ) 219,382,000 State and political subdivisions 40,148,000 — ( 6,896,000 ) 33,252,000 Asset-backed securities 2,236,000 14,000 — 2,250,000 $ 328,693,000 $ 155,000 $ ( 54,168,000 ) $ 274,680,000 Securities to be held to maturity U.S. Treasury & Agency securities $ 38,100,000 $ — $ ( 9,938,000 ) $ 28,162,000 Mortgage-backed securities 52,370,000 15,000 ( 11,360,000 ) 41,025,000 State and political subdivisions 252,180,000 83,000 ( 31,739,000 ) 220,524,000 Corporate securities 27,250,000 — ( 1,968,000 ) 25,282,000 $ 369,900,000 $ 98,000 $ ( 55,005,000 ) $ 314,993,000 Less allowance for credit losses ( 196,000 ) — — — Net securities to be held to maturity $ 369,704,000 $ 98,000 $ ( 55,005,000 ) $ 314,993,000 Restricted equity securities Federal Home Loan Bank Stock $ 6,166,000 $ — $ — $ 6,166,000 Federal Reserve Bank Stock 1,037,000 — — 1,037,000 $ 7,203,000 $ — $ — $ 7,203,000 9 The following table summarizes the amortized cost and estimated fair value of investment securities at March 31, 2024: Amortized Cost Unrealized Gains Unrealized Losses Fair Value (Estimated) Securities available for sale U.S. Treasury & Agency securities $ 26,036,000 $ — $ ( 6,343,000 ) $ 19,693,000 Mortgage-backed securities 259,538,000 99,000 ( 41,635,000 ) 218,002,000 State and political subdivisions 40,288,000 — ( 6,338,000 ) 33,950,000 Asset-backed securities 2,786,000 20,000 — 2,806,000 $ 328,648,000 $ 119,000 $ ( 54,316,000 ) $ 274,451,000 Securities to be held to maturity U.S. Treasury & Agency securities $ 38,100,000 $ — $ ( 9,851,000 ) $ 28,249,000 Mortgage-backed securities 55,483,000 15,000 ( 11,258,000 ) 44,240,000 State and political subdivisions 254,302,000 175,000 ( 27,879,000 ) 226,598,000 Corporate securities 31,750,000 — ( 3,021,000 ) 28,729,000 $ 379,635,000 $ 190,000 $ ( 52,009,000 ) $ 327,816,000 Less allowance for credit losses ( 182,000 ) — — — Net securities to be held to maturity $ 379,453,000 $ 190,000 $ ( 52,009,000 ) $ 327,816,000 Restricted equity securities Federal Home Loan Bank Stock $ 4,896,000 $ — $ — $ 4,896,000 Federal Reserve Bank Stock 1,037,000 — — 1,037,000 $ 5,933,000 $ — $ — $ 5,933,000 Allowance for Credit Losses: AFS securities, as shown in the above tables, consist of securities issued by U.S. Government Agencies, U.S. Government Sponsored Entities, State or Local Municipal Governments, or are backed by collateral that is guaranteed by the U.S. Government. We monitor the credit quality of these investments through credit ratings issued by major rating providers and through substantial price changes not consistent with general market movements. Each of the AFS securities is deemed to be investment grade, and no ACL has been established for AFS securities. Similarly, the agency and mortgage-backed securities in the HTM portfolio have been determined to all be investment grade with no ACL required. Municipal securities within HTM include two private activity bonds issued by well-known customers of the Bank with total balances of $ 18,841,000 as of March 31, 2025. Corporate securities in HTM consist of 13 individual companies in the banking industry. Management reviewed the collectability of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, and other performance factors. Aggregate credit risk of the private activity bonds and corporate securities is considered very low and an immaterial ACL has been established. As of March 31, 2025 and 2024, and December 31, 2024, the total ACL for HTM securities was $ 197,000 , $ 182,000 and $ 196,000 , respectively. Changes in the ACL are recorded as credit loss expense, or reversal. Losses would be charged against the allowance when management believes collection of the full contractual amount due on a security is unlikely. Contractual Maturities: The following table summarizes the contractual maturities of investment securities at March 31, 2025: Securities available for sale Securities to be held to maturity Amortized Cost Fair Value (Estimated) Amortized Cost Fair Value (Estimated) Due in 1 year or less $ 1,514,000 $ 1,499,000 $ 2,704,000 $ 2,714,000 Due in 1 to 5 years 261,000 260,000 24,370,000 23,098,000 Due in 5 to 10 years 29,329,000 25,758,000 104,094,000 96,115,000 Due after 10 years 298,649,000 253,247,000 237,600,000 190,861,000 $ 329,753,000 $ 280,764,000 $ 368,768,000 $ 312,788,000 10 The following table summarizes the contractual maturities of investment securities at December 31, 2024: Securities available for sale Securities to be held to maturity Amortized Cost Fair Value (Estimated) Amortized Cost Fair Value (Estimated) Due in 1 year or less $ 2,997,000 $ 2,967,000 $ 2,683,000 $ 2,694,000 Due in 1 to 5 years 294,000 293,000 20,488,000 19,335,000 Due in 5 to 10 years 29,768,000 25,700,000 99,505,000 92,362,000 Due after 10 years 295,634,000 245,720,000 247,224,000 200,602,000 $ 328,693,000 $ 274,680,000 $ 369,900,000 $ 314,993,000 The following table summarizes the contractual maturities of investment securities at March 31, 2024: Securities available for sale Securities to be held to maturity Amortized Cost Fair Value (Estimated) Amortized Cost Fair Value (Estimated) Due in 1 year or less $ 1,496,000 $ 1,453,000 $ 1,673,000 $ 1,670,000 Due in 1 to 5 years 1,966,000 1,901,000 17,009,000 16,294,000 Due in 5 to 10 years 28,781,000 24,960,000 99,113,000 92,330,000 Due after 10 years 296,405,000 246,137,000 261,840,000 217,522,000 $ 328,648,000 $ 274,451,000 $ 379,635,000 $ 327,816,000 Pledged Securities: At March 31, 2025, securities with a carrying value of $ 351,890,000 were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law. This compares to securities with a carrying value of $ 349,833,000 as of December 31, 2024 and $ 314,208,000 at March 31, 2024, pledged for the same purposes. Realized Gains and Losses: Gains and losses on the sale of securities are computed by subtracting the amortized cost at the time of sale from the security's selling price, net of accrued interest to be received. There were no gains or losses on the sale of securities for the three months ended March 31, 2025 and 2024. Unrealized Gains and Losses on AFS Securities: As of March 31, 2025, there were 237 AFS securities with unrealized losses held in the Company's portfolio. The Company has the ability and intent to hold its securities which are in an unrealized loss position until a recovery of their amortized cost, which may be at maturity. The following table summarizes AFS debt securities in an unrealized loss position for which an ACL has not been recorded at March 31, 2025, aggregated by major security type and length of time in a continuous unrealized loss position: Less than 12 months 12 months or more Total Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses U.S. Treasury & Agency securities $ — $ — $ 18,950,000 $ ( 5,593,000 ) $ 18,950,000 $ ( 5,593,000 ) Mortgage-backed securities 8,974,000 ( 105,000 ) 185,973,000 ( 36,311,000 ) 194,947,000 ( 36,416,000 ) State and political subdivisions 4,862,000 ( 172,000 ) 27,720,000 ( 7,196,000 ) 32,582,000 ( 7,368,000 ) Asset-backed securities 1,173,000 ( 6,000 ) — — 1,173,000 ( 6,000 ) $ 15,009,000 $ ( 283,000 ) $ 232,643,000 $ ( 49,100,000 ) $ 247,652,000 $ ( 49,383,000 ) 11 As of December 31, 2024, there were 243 AFS securities with unrealized losses held in the Company's portfolio. The Company has the ability and intent to hold its securities which are in an unrealized loss position until a recovery of their amortized cost, which may be at maturity. The following table summarizes AFS debt securities in an unrealized loss position for which an ACL has not been recorded at December 31, 2024 aggregated by major security type and length of time in a continuous unrealized loss position: Less than 12 months 12 months or more Total Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses U.S. Treasury & Agency securities $ — $ — $ 19,796,000 $ ( 6,246,000 ) $ 19,796,000 $ ( 6,246,000 ) Mortgage-backed securities 18,544,000 ( 222,000 ) 186,155,000 ( 40,804,000 ) 204,699,000 ( 41,026,000 ) State and political subdivisions 4,968,000 ( 70,000 ) 28,104,000 ( 6,826,000 ) 33,072,000 ( 6,896,000 ) $ 23,512,000 $ ( 292,000 ) $ 234,055,000 $ ( 53,876,000 ) $ 257,567,000 $ ( 54,168,000 ) As of March 31, 2024, there were 236 AFS securities with unrealized losses held in the Company's portfolio. The Company has the ability and intent to hold its securities which are in an unrealized loss position until a recovery of their amortized cost, which may be at maturity. The following table summarizes AFS debt securities in an unrealized loss position for which an ACL has not been recorded at March 31, 2024 aggregated by major security type and length of time in a continuous unrealized loss position: Less than 12 months 12 months or more Total Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses U.S. Treasury & Agency securities $ — $ — $ 19,693,000 $ ( 6,343,000 ) $ 19,693,000 $ ( 6,343,000 ) Mortgage-backed securities 4,593,000 ( 16,000 ) 202,736,000 ( 41,619,000 ) 207,329,000 ( 41,635,000 ) State and political subdivisions 4,520,000 ( 30,000 ) 29,161,000 ( 6,308,000 ) 33,681,000 ( 6,338,000 ) $ 9,113,000 $ ( 46,000 ) $ 251,590,000 $ ( 54,270,000 ) $ 260,703,000 $ ( 54,316,000 ) Credit Quality Indicators: Agency-backed and government-sponsored enterprise securities have a long history with no credit losses, including during times of severe stress. The principal and interest payments on agency-guaranteed debt is backed by the U.S. Government. Government-sponsored enterprises similarly guarantee principal and interest payments and carry an implicit guarantee from the U.S. Department of the Treasury. Additionally, government-sponsored enterprise securities are exceptionally liquid, readily marketable, and provide a substantial amount of price transparency and price parity, indicating a perception of zero credit losses. HTM municipal debt holdings are comprised primarily of high credit quality (rated A- or higher) state and municipal obligations. High credit quality state and municipal obligations have a history of zero to near-zero credit loss. All of the Mortgage-backed securities owned were issued either by GNMA, FNMA or FHLMC. HTM municipal debt holdings also include two unrated private activity bonds issued by well known customers of the Bank. These securities are regularly monitored as part of an overall credit relationship with the issuers; both issuers were in good standing as of March 31, 2025. HTM corporate debt holdings consist of 13 individual companies in the banking industry. Management conducts periodic reviews of the collectability of these securities taking into consideration such factors as the financial condition of the issuers; each were in good standing as of March 31, 2025. 12 ACL for HTM Securities: The following table presents the activity in the ACL for HTM debt securities by major security type for the periods ended March 31, 2025 and 2024: For the three months ended March 31, 2025 For the three months ended March 31, 2024 State and Political Subdivisions Corporate Securities Total State and Political Subdivisions Corporate Securities Total Allowance for credit losses: Beginning balance $ 80,000 $ 116,000 $ 196,000 $ 212,000 $ 222,000 $ 434,000 Credit loss (reduction) expense 1,000 — 1,000 ( 143,000 ) ( 109,000 ) ( 252,000 ) Securities charged-off — — — — — — Recoveries — — — — — — Total ending allowance balance $ 81,000 $ 116,000 $ 197,000 $ 69,000 $ 113,000 $ 182,000 There was no ACL on U.S. Government-sponsored enterprise, agency securities, or mortgage-backed securities as of March 31, 2025 . A security is considered to be past due once it is 30 days contractually past due under the terms of the agreement. As of March 31, 2025, none of the Company’s HTM debt securities were past due or on non-accrual status. Re-Classified Securities: During the third quarter of 2014, the Company transferred securities with a total amortized cost of $ 89,780,000 with a corresponding fair value of $ 89,757,000 from available for sale to held to maturity. The net unrealized loss, net of taxes, on these securities at the date of the transfer was $ 15,000 . The net unrealized holding loss at the time of transfer continues to be reported in AOCI, net of tax and is amortized over the remaining lives of the securities as an adjustment of the yield. The amortization of the net unrealized loss reported in AOCI will offset the effect on interest income of the discount for the transferred securities. The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $ 45,000 , net of taxes, at March 31, 2025. This compares to $ 47,000 and $ 54,000 , net of taxes, at December 31, 2024 and March 31, 2024, respectively. These securities were transferred as a part of the Company's overall investment and balance sheet strategies. Restricted Equity Securities: The Bank is a member of the FHLBB, a cooperatively owned wholesale bank for housing and finance in the six New England States. As a requirement of membership in the FHLBB, the Bank must own a minimum required amount of FHLBB stock, calculated periodically based primarily on its level of borrowings from the FHLBB. The Bank uses the FHLBB for a portion of its wholesale funding needs. As of March 31, 2025 and 2024, and December 31, 2024, the Bank's investment in FHLBB stock totaled $ 6,472,000 , $ 4,896,000 and $ 6,166,000 , respectively. FHLBB stock is a non-marketable equity security and therefore is reported at cost, which equals par value. The Bank is also a member of the FRBB. As a requirement for membership in the FRBB, the Bank must own a minimum required amount of FRBB stock. The Bank uses FRBB for certain correspondent banking services and maintains borrowing capacity at its discount window. The Bank's investment in FRBB stock totaled $ 1,037,000 at March 31, 2025 and 2024, and December 31, 2024. The Company periodically evaluates its investment in FHLBB and FRBB stock for impairment based on, among other factors, the capital adequacy of the Banks and their overall financial condition. No impairment losses have been recorded through March 31, 2025. The Bank will continue to monitor its investment in these restricted equity securities. 13 Note 3 – Loans The Company periodically reviews and updates the segmentation of its loan portfolio. Updates performed in conjunction with adoption of ASC 326 in 2023 consisted of reporting what had been a single class, commercial real estate loans, as three classes - commercial real estate owner occupied, commercial real estate non-owner occupied, and commercial multi-family. In addition home equity installment loans which had previously been included in the residential term class were included in the home equity revolving and term class. In 2024, a new segment was established for Agriculture loans. Loan Portfolio by Class: The following table shows the composition of the Company's loan portfolio by class of financing receivable as of March 31, 2025 and 2024 and at December 31, 2024: March 31, 2025 December 31, 2024 March 31, 2024 Commercial Real estate owner occupied $ 370,465,000 15.5 % $ 358,588,000 15.3 % $ 327,496,000 15.1 % Real estate non-owner occupied 413,530,000 17.4 % 403,899,000 17.3 % 399,658,000 18.4 % Construction 76,402,000 3.2 % 99,717,000 4.3 % 85,817,000 3.9 % C&I 379,767,000 16.0 % 365,817,000 15.6 % 321,855,000 14.8 % Multifamily 131,036,000 5.5 % 108,732,000 4.6 % 101,344,000 4.7 % Agriculture 48,705,000 2.0 % 52,219,000 2.2 % 45,064,000 2.1 % Municipal 55,104,000 2.3 % 61,827,000 2.6 % 54,746,000 2.5 % Residential Term 719,348,000 30.2 % 710,807,000 30.4 % 678,093,000 31.1 % Construction 35,427,000 1.5 % 35,481,000 1.5 % 34,824,000 1.6 % Home Equity Revolving and term 131,522,000 5.5 % 123,063,000 5.3 % 105,814,000 4.9 % Consumer 21,844,000 0.9 % 20,790,000 0.9 % 19,035,000 0.9 % Total $ 2,383,150,000 100.0 % $ 2,340,940,000 100.0 % $ 2,173,746,000 100.0 % Loan balances include net deferred loan costs of $ 12,570,000 as of March 31, 2025, $ 12,457,000 as of December 31, 2024, and $ 11,745,000 as of March 31, 2024. Net deferred loan costs have increased from a year ago and year-to-date based upon loan origination unit volume over the periods, prepayments, and normal repayment activity. Loan balances in the Residential Term segment also include a valuation adjustment for fair value swaps hedged by certain loans in the portfolio. This adjustment added $ 1,120,000 , $ 758,000 , and $ 313,000 to the loan balances as of March 31, 2025, December 31, 2024, and March 31, 2024, respectively. Pledged Loans: Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 631,410,000 at March 31, 2025, were used to collateralize borrowings from the FHLBB. This compares to qualifying loans which totaled $ 626,851,000 at December 31, 2024, and $ 565,047,000 at March 31, 2024. In addition, commercial, residential construction and home equity loans totaling $ 411,257,000 at March 31, 2025, $ 392,562,000 at December 31, 2024, and $ 322,124,000 at March 31, 2024, were used to collateralize a standby line of credit at the FRBB. 14 Past Due Loans: For all loan classes, loans over 30 days past due are considered delinquent. Information on the past-due status of loans by class of financing receivable as of March 31, 2025, is presented in the following table: 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due All Past Due Current Total 90+ Days & Accruing Commercial Real estate owner occupied $ — $ — $ 195,000 $ 195,000 $ 370,270,000 $ 370,465,000 $ — Real estate non-owner occupied — — 61,000 61,000 413,469,000 413,530,000 — Construction 44,000 — — 44,000 76,358,000 76,402,000 — C&I 99,000 314,000 1,887,000 2,300,000 377,467,000 379,767,000 — Multifamily — — — — 131,036,000 131,036,000 — Agriculture 148,000 — 81,000 229,000 48,476,000 48,705,000 — Municipal — — — — 55,104,000 55,104,000 — Residential Term 1,136,000 342,000 1,650,000 3,128,000 716,220,000 719,348,000 — Construction 157,000 — — 157,000 35,270,000 35,427,000 — Home equity Revolving and term 642,000 127,000 82,000 851,000 130,671,000 131,522,000 — Consumer 245,000 66,000 696,000 1,007,000 20,837,000 21,844,000 695,000 Total $ 2,471,000 $ 849,000 $ 4,652,000 $ 7,972,000 $ 2,375,178,000 $ 2,383,150,000 $ 695,000 Information on the past-due status of loans by class of financing receivable as of December 31, 2024, is presented in the following table: 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due All Past Due Current Total 90+ Days & Accruing Commercial Real estate owner occupied $ — $ 257,000 $ 292,000 $ 549,000 $ 358,039,000 $ 358,588,000 $ — Real estate non-owner occupied — — — — 403,899,000 403,899,000 — Construction — — — — 99,717,000 99,717,000 — C&I 346,000 1,112,000 540,000 1,998,000 363,819,000 365,817,000 10,000 Multifamily — — — — 108,732,000 108,732,000 — Agriculture 115,000 — — 115,000 52,104,000 52,219,000 — Municipal — — — — 61,827,000 61,827,000 — Residential Term 137,000 2,614,000 935,000 3,686,000 707,121,000 710,807,000 778,000 Construction 390,000 — — 390,000 35,091,000 35,481,000 — Home equity Revolving and term 1,074,000 368,000 94,000 1,536,000 121,527,000 123,063,000 — Consumer 592,000 285,000 232,000 1,109,000 19,681,000 20,790,000 232,000 Total $ 2,654,000 $ 4,636,000 $ 2,093,000 $ 9,383,000 $ 2,331,557,000 $ 2,340,940,000 $ 1,020,000 15 Information on the past-due status of loans by class of financing receivable as of March 31, 2024, is presented in the following table: 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due All Past Due Current Total 90+ Days & Accruing Commercial Real estate owner occupied $ 283,000 $ 164,000 $ — $ 447,000 $ 327,049,000 $ 327,496,000 $ — Real estate non-owner occupied — — — — 399,658,000 399,658,000 — Construction — — — — 85,817,000 85,817,000 — C&I 58,000 14,000 15,000 87,000 321,768,000 321,855,000 — Multifamily — — — — 101,344,000 101,344,000 — Agriculture 119,000 — — 119,000 44,945,000 45,064,000 — Municipal — — — — 54,746,000 54,746,000 — Residential Term 36,000 47,000 746,000 829,000 677,264,000 678,093,000 48,000 Construction — — — — 34,824,000 34,824,000 — Home equity Revolving and term 363,000 — 33,000 396,000 105,418,000 105,814,000 — Consumer 158,000 10,000 2,000 170,000 18,865,000 19,035,000 2,000 Total $ 1,017,000 $ 235,000 $ 796,000 $ 2,048,000 $ 2,171,698,000 $ 2,173,746,000 $ 50,000 Non-Accrual Loans: For all classes, loans are placed on non-accrual status when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement or when principal and interest is 90 days or more past due unless the loan is both well secured and in the process of collection (in which case the loan may continue to accrue interest in spite of its past due status). A loan is "well secured" if it is secured (1) by collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt (including accrued interest) in full, or (2) by the guarantee of a financially responsible party. A loan is "in the process of collection" if collection of the loan is proceeding in due course either (1) through legal action, including judgment enforcement procedures, or, (2) in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future. Cash payments received on non-accrual loans are applied to reduce the loan's principal balance until the remaining principal balance is deemed collectible, after which interest is recognized when collected. As a general rule, a loan may be restored to accrual status when payments are current for a substantial period of time, generally six months, and repayment of the remaining contractual amounts is expected, or when it otherwise becomes well secured and in the process of collection. 16 The following table presents the amortized costs basis of loans on nonaccrual status as of March 31, 2025, December 31, 2024 and March 31, 2024: March 31, 2025 December 31, 2024 March 31, 2024 Nonaccrual with Allowance for Credit Loss Nonaccrual with no Allowance for Credit Loss Total Nonaccrual Nonaccrual with Allowance for Credit Loss Nonaccrual with no Allowance for Credit Loss Total Nonaccrual Nonaccrual with Allowance for Credit Loss Nonaccrual with no Allowance for Credit Loss Total Nonaccrual Commercial Real estate owner occupied $ — $ 545,000 $ 545,000 $ — $ 553,000 $ 553,000 $ — $ — $ — Real estate non-owner occupied — 61,000 61,000 — 61,000 61,000 — — — Construction — 17,000 17,000 — 18,000 18,000 — 20,000 20,000 C&I 1,348,000 595,000 1,943,000 1,359,000 336,000 1,695,000 346,000 48,000 394,000 Multifamily — 17,000 17,000 — — — — — — Agriculture — 111,000 111,000 — 31,000 31,000 — 33,000 33,000 Municipal — — — — — — — — — Residential Term — 2,944,000 2,944,000 — 1,599,000 1,599,000 — 1,959,000 1,959,000 Construction — — — — — — — — — Home equity Revolving and term — 415,000 415,000 — 291,000 291,000 — 304,000 304,000 Consumer — — — — — — — — — Total $ 1,348,000 $ 4,705,000 $ 6,053,000 $ 1,359,000 $ 2,889,000 $ 4,248,000 $ 346,000 $ 2,364,000 $ 2,710,000 Individually Analyzed Loans: IAL include loans with balances of $250,000 or more that have been placed into non-accrual or are loans identified by management as having characteristics that may impact ultimate collectibility and therefore merit individual analysis. These loans are measured at the present value of expected future cash flows discounted at the loan's effective interest rate or at the fair value of the collateral if the loan is collateral dependent. If the measure of an IAL loan is lower than the recorded investment in the loan and estimated selling costs, a specific reserve is established for the difference, or, in certain situations, if the measure of an IAL loan is lower than the recorded investment in the loan and estimated selling costs, the difference is written off. The following table presents the amortized cost basis of collateral-dependent loans as of March 31, 2025, December 31, 2024 and March 31, 2024, by collateral type: March 31, 2025 December 31, 2024 March 31, 2024 Collateral Type Collateral Type Collateral Type Commercial Real Estate Residential Real Estate Other Total Commercial Real Estate Residential Real Estate Other Total Residential Real Estate Total Commercial Real estate owner occupied $ 260,000 $ — $ — $ 260,000 $ 263,000 $ — $ — $ 263,000 $ — $ — Real estate non-owner occupied 67,000 — — 67,000 67,000 — — 67,000 — — Construction — — — — — — — — — — C&I — — 1,681,000 1,681,000 — — 1,438,000 1,438,000 — — Multifamily — — — — — — — — — — Agriculture — — — — — — — — — — Municipal — — — — — — — — — — Residential Term — 2,151,000 — 2,151,000 — 558,000 — 558,000 950,000 950,000 Construction — — — — — — — — — — Home equity Revolving and term — — — — — — — — — — Consumer — — — — — — — — — — Total $ 327,000 $ 2,151,000 $ 1,681,000 $ 4,159,000 $ 330,000 $ 558,000 $ 1,438,000 $ 2,326,000 $ 950,000 $ 950,000 17 Loan Modifications to Borrowers Experiencing Financial Difficulty: Loan modifications to borrowers experiencing financial difficulty may include interest rate reduction, term extension, payment deferral, principle forgiveness or a combination thereof. It is the intent to minimize future losses while providing borrowers with financial relief. The following table represents loan modifications made to borrowers experiencing financial difficulty by modification type and class of financing receivable, during the three months ended March 31, 2025: Amortized Cost Basis Payment Deferral Term Extension Interest Rate Reduction Principal Forgiveness Combination Payment Deferral and Term Extension % of Total Class of Financing Receivable Commercial Real estate owner occupied $ 158,000 $ — $ — $ — $ — 0.04 % Real estate non-owner occupied — — — — — — % Construction — — — — — — % C&I 78,000 364,000 — — — 0.02 % Multifamily 910,000 — — — — 0.69 % Agriculture 1,536,000 — — — — 3.15 % Municipal — — — — — — % Residential Term — — — — — — % Construction — — — — — — % Home Equity Revolving and term — — — — — — % Consumer — — — — — — % Total $ 2,682,000 $ 364,000 $ — $ — $ — The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty for the three months ended March 31, 2025: Payment Deferral Financial Effect Commercial Real estate owner occupied Temporary payment accommodation, payments deferred to end of loan. C&I Temporary payment accommodation, payments deferred to end of loan. Multifamily Temporary payment accommodation, payments deferred to end of loan. Agriculture Temporary payment accommodation, payments deferred to end of loan. Term Extension Financial Effect Commercial C&I Temporary payment accommodation, extended term 6 months. 18 The following table represents loan modifications made to borrowers experiencing financial difficulty by modification type and class of financing receivable, during the three months ended March 31, 2024: Amortized Cost Basis Payment Deferral Term Extension Interest Rate Reduction Principal Forgiveness Combination Payment Deferral and Term Extension % of Total Class of Financing Receivable Commercial Real estate owner occupied $ — $ — $ — $ — $ — — % Real estate non-owner occupied — — — — — — % Construction 69,000 — — — — 0.08 % C&I 61,000 — — — — 0.02 % Multifamily 1,932,000 — — — — 1.91 % Agriculture — — — — — — % Municipal — — — — — — % Residential Term 1,023,000 — — — — 0.15 % Construction — — — — — — % Home Equity Revolving and term — — — — 69,000 0.07 % Consumer — — — — — — % Total $ 3,085,000 $ — $ — $ — $ 69,000 The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty for the three months ended March 31, 2024: Payment Deferral Financial Effect Commercial Construction Temporary payment accommodation, payments deferred to end of loan. C&I Temporary payment accommodation, payments deferred to end of loan. Multifamily Temporary payment accommodation, payments deferred to end of loan. Residential Term Temporary payment accommodation, payments deferred to end of loan. Payment Deferral & Term Extension Financial Effect Home Equity Revolving and Term Temporary payment accommodations, extended term 60 days. 19 The Company monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts loans that were modified during the previous 12 months as of March 31, 2025 which defaulted upon the modified terms at some point during the 12 month period: Payment Status (Amortized Cost Basis) 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Commercial C&I $ — $ 170,000 $ — Residential Term 125,000 — — Total $ 125,000 $ 170,000 $ — The following table depicts the performance of loans that have been modified during the previous 12 months as of March 31, 2025: Payment Status (Amortized Cost Basis) Current 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Commercial Real estate owner occupied $ 792,000 $ — $ — $ — Construction — — — — C&I 619,000 — — — Multifamily 910,000 — — — Agriculture 1,536,000 — — — Residential Term — 125,000 — — Home Equity Revolving and term — — — — Consumer — — — — Total $ 3,857,000 $ 125,000 $ — $ — The following table depicts loans that were modified during the previous 12 months as of March 31, 2024 which defaulted upon the modified terms at some point during the 12 month period: Payment Status (Amortized Cost Basis) 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Commercial Real estate owner occupied $ 501,000 $ — $ 283,000 C&I 29,000 — 35,000 Residential Term — — 449,000 Consumer — — 13,000 Total $ 530,000 $ — $ 780,000 20 The following table depicts the performance of loans that had been modified during the the previous 12 months as of March 31, 2024: Payment Status (Amortized Cost Basis) Current 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Commercial Real estate owner occupied $ 786,000 $ — $ — $ — Construction 69,000 — — — C&I 96,000 — — — Multifamily 1,932,000 — — — Residential Term 1,023,000 — — — Home Equity Revolving and term 70,000 — — — Consumer 34,000 — — — Total $ 4,010,000 $ — $ — $ — Residential Mortgage Loans in Process of Foreclosure: As of March 31, 2025, there were four mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 1,208,000 . This compares to three mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 192,000 as of December 31, 2024, and four mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 510,000 as of March 31, 2024. Note 4. Allowance for Credit Losses The ACL is a valuation amount that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible. The ACL consists of three elements: (1) specific reserves for loans individually analyzed; (2) general reserves for each portfolio segment; and, (3) qualitative reserves. All outstanding loans are considered in evaluating the appropriateness of the allowance. Loans are segmented by common risk characteristics as delineated in the paragraph below. The Company provides for loan losses through the ACL which represents an estimated reserve for losses in the loan portfolio. To determine an appropriate level for general reserves, a discounted cash flow approach is applied to each portfolio segment implementing a probability of default and loss given default estimate based upon a number of factors including historical losses over an economic cycle, economic forecasts, loan prepayment speeds and curtailment rates. To determine an appropriate level for qualitative reserves, various factors are considered including underwriting policies, credit administration practices, experience, ability and depth of lending management, and economic factors not captured in the general reserve calculation. Loan Portfolio Composition & Risk Characteristics: The loan portfolio is segmented into eleven classes and credit risk is evaluated separately in each class. Major risk characteristics relevant to each portfolio segment are as follows: Commercial Real Estate Owner Occupied - commercial real estate owner occupied loans consist of mortgage loans to finance investments in real property such as retail space, offices, industrial buildings, hotels, educational facilities, and other specific or mixed use properties. Loans are typically written with amortizing payment structures. Collateral values are determined based on appraisals and evaluations in accordance with established policy and regulatory guidelines. Loans typically have a loan-to-value ratio of up to 80 % based upon current valuation information at the time the loan is made, and are primarily paid by the cash flow generated from the real property, typically the operating entity of owner occupant. Risk factors typically include competitive market forces, net operating incomes of the operating entity, and overall economic demand. Loans in the recreational and tourism sector can be affected by weather conditions, such as unseasonably low winter snowfalls. Commercial real estate lending also carries a higher degree of environmental risk than other types of lending. Commercial Real Estate Non-Owner Occupied - commercial real estate loans non-owner occupied share many of the purpose, loan structure and risk characteristics of owner-occupied commercial real estate. The primary differentiating factor from Owner Occupied is that repayment is generally reliant upon cash flow generated from tenants rather than an operating entity. Risk factors are also influenced by vacancy rates, cap rates, lease renewals, and underlying financial health of lessees. 21 Commercial Construction - commercial construction loans consist of loans to finance construction in a mix of owner- and non-owner occupied commercial real estate properties. Loans typically have construction periods of less than two years , and payment structures during the construction period are typically on an interest only basis, although principal payments may be established depending on the type of construction project being financed. During the construction phase, commercial construction loans are primarily paid by cash flow generated from the construction project or other operating cash flows from the borrower or guarantors, if applicable. Commercial construction loans will typically convert to permanent financing from the Company, or loan repayment may come from a third party source in the event that the Company will not be providing permanent term financing. Collateral valuation and loan-to-value guidelines follow those for commercial real estate loans. Commercial construction loans are impacted by factors similar to those for commercial real estate loans in addition to risks related to contractor financial capacity and ability to complete a project within acceptable time frames and within budget. Commercial and Industry - C&I loans consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and or capital investment. C&I loans may be secured or unsecured; when secured, collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, equipment, and/or other tangible and intangible assets. C&I loans are primarily paid by the operating cash flow of the borrower. A weakened economy, soft consumer spending, and the rising cost of labor or raw materials are examples of issues that can impact the credit quality in this segment. Commercial Multifamily - multifamily loans share structure and risk characteristics with non-owner occupied commercial real estate; underlying collateral is residential in nature rather than commercial, consisting of properties with five or more units. Municipal Loans - municipal loans are comprised of loans to municipalities in Maine for capitalized expenditures, construction projects, or tax anticipation notes. All municipal loans are considered either general obligations of the municipality collateralized by the taxing ability of the municipality for repayment of debt or have a pledge of specific revenues. The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment. Agriculture - agriculture loans consist mostly of amortizing term loans and revolving lines of credit made to borrowers in agriculture related industries. For the Company, this includes loans made to land based agricultural production and to participants in the fishing industry. Collateral values are determined based on appraisals and evaluations in accordance with established policy and regulatory guidelines. Loans are primarily paid by the cash flow generated from the agricultural property or operation of equipment. Risk factors typically include competitive market forces, overall economic demand for the product, and may be further influenced by weather conditions which impact growing and/or harvesting, or other factors such as changes in government regulation(s). Residential Real Estate Term - residential term loans consist of residential real estate loans made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors. Borrower qualifications include favorable credit history combined with supportive income requirements and loan-to-value ratios within established policy and regulatory guidelines. Collateral values are determined based on appraisals and evaluations in accordance with established policy and regulatory guidelines. Residential loans typically have a loan-to-value ratio of up to 80 % based on appraisal information at the time the loan is made. Collateral consists of mortgage liens on one-to four-family residential properties. Loans are offered with fixed or adjustable rates with amortization terms of up to thirty years . The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment. Residential Real Estate Construction - residential construction loans typically consist of loans for the purpose of constructing single family residences to be owned and occupied by the borrower. Borrower qualifications include favorable credit history combined with supportive income requirements and loan-to-value ratios within established policy and regulatory guidelines. Residential construction loans normally have construction terms of one year or less and payment during the construction term is typically on an interest only basis from sources including interest reserves, borrower liquidity, and/or income. Residential construction loans will typically convert to permanent financing from the Company or have another financing commitment in place from an acceptable mortgage lender. Collateral valuation and loan-to-value guidelines are consistent with those for residential term loans. Residential construction loans are impacted by factors similar to those for residential real estate term loans in addition to risks related to contractor financial capacity and ability to complete a project within acceptable time frames and within budget. Home Equity Revolving and Term - home equity revolving and term loans are made to qualified individuals and are secured by senior or junior mortgage liens on owner occupied one- to four-family homes, condominiums, or vacation homes. The home equity line of credit typically has a variable interest rate and is billed as interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the principal balance plus all accrued interest. Loan maturities are normally 300 months. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios usually not exceeding 80 % inclusive of priority liens. Collateral valuation guidelines follow those for residential real estate loans. The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment. 22 Consumer - consumer loans include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as autos, recreational vehicles, debt consolidation, personal expenses, or overdraft protection. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines. Consumer loans may be secured or unsecured. The overall health of the economy, including unemployment rates, has an impact on the credit quality of this segment. Construction, land, and land development : CLLD loans, both commercial and residential, represented 38.3 % of total Bank capital as of March 31, 2025 and remain below the regulatory guidance of 100.0 % of total Bank capital. Construction loans and non-owner-occupied commercial real estate loans represented 224.7 % of total Bank capital at March 31, 2025, below the regulatory guidance of 300.0 % of total Bank capital. Composition of the ACL: A breakdown of the ACL as of March 31, 2025, by class of financing receivable and allowance element, is presented in the following table: As of March 31, 2025 Specific Reserves on Loans Evaluated Individually General Reserves on Loans Based on Historical Loss Experience Reserves for Qualitative Factors Total Reserves Commercial Real estate owner occupied $ — $ 4,472,000 $ 717,000 $ 5,189,000 Real estate non-owner occupied — 4,252,000 618,000 4,870,000 Construction — 472,000 147,000 619,000 C&I 1,029,000 3,872,000 598,000 5,499,000 Multifamily — 1,290,000 165,000 1,455,000 Agriculture — 444,000 143,000 587,000 Municipal — 33,000 202,000 235,000 Residential Term — 4,823,000 437,000 5,260,000 Construction — 403,000 62,000 465,000 Home Equity Revolving and term — 662,000 89,000 751,000 Consumer — 176,000 8,000 184,000 $ 1,029,000 $ 20,899,000 $ 3,186,000 $ 25,114,000 23 A breakdown of the ACL as of December 31, 2024, by class of financing receivable and allowance element, is presented in the following table: As of December 31, 2024 Specific Reserves on Loans Evaluated Individually General Reserves on Loans Based on Historical Loss Experience Reserves for Qualitative Factors Total Reserves Commercial Real estate owner occupied $ — $ 4,355,000 $ 690,000 $ 5,045,000 Real estate non-owner occupied — 4,237,000 592,000 4,829,000 Construction — 786,000 158,000 944,000 C&I 1,047,000 3,744,000 573,000 5,364,000 Multifamily — 1,108,000 131,000 1,239,000 Agriculture — 449,000 156,000 605,000 Municipal — 35,000 227,000 262,000 Residential Term — 4,811,000 430,000 5,241,000 Construction — 414,000 60,000 474,000 Home Equity Revolving and term — 600,000 86,000 686,000 Consumer — 175,000 7,000 182,000 $ 1,047,000 $ 20,714,000 $ 3,110,000 $ 24,871,000 A breakdown of the ACL as of March 31, 2024, by class of financing receivable and allowance element, is presented in the following table: As of March 31, 2024 Specific Reserves on Loans Evaluated Individually General Reserves on Loans Based on Historical Loss Experience Reserves for Qualitative Factors Total Reserves Commercial Real estate owner occupied $ — $ 4,177,000 $ 1,003,000 $ 5,180,000 Real estate non-owner occupied — 3,730,000 535,000 4,265,000 Construction — 910,000 ( 90,000 ) 820,000 C&I 221,000 4,001,000 861,000 5,083,000 Multifamily — 1,348,000 159,000 1,507,000 Agriculture — 358,000 34,000 392,000 Municipal — 38,000 156,000 194,000 Residential Term 22,000 4,587,000 745,000 5,354,000 Construction — 648,000 ( 86,000 ) 562,000 Home Equity Revolving and term — 554,000 123,000 677,000 Consumer — 158,000 15,000 173,000 $ 243,000 $ 20,509,000 $ 3,455,000 $ 24,207,000 The ACL as a percent of total loans stood at 1.05 % as of March 31, 2025, 1.06 % at December 31, 2024 and 1.11 % as of March 31, 2024. Off-Balance Sheet Credit Exposures: In the ordinary course of business, the Company enters into commitments to extend credit, including construction lines of credit, revolving lines of credit, written commitments to provide financing, commercial letters of credit and standby letters of credit. Such financial instruments are recorded as loans when they are funded . 24 Allowance for Credit Losses on Off-Balance Sheet Credit Exposures: The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on off-balance sheet credit exposures is adjusted through credit loss expense and any adjustment is recognized in net income. To appropriately measure expected credit losses, management disaggregates the loan portfolio into similar risk characteristics, identical to those determined for the loan portfolio. An estimated funding rate is then applied to the qualifying unfunded loan commitments and letters of credit using the Company’s own historical experience to estimate the expected funded amount for each loan segment as of the reporting date. Once the expected funded amount for each loan segment is determined, the loss rate, which is the calculated expected loan loss as a percent of the amortized cost basis for each loan segment, is applied to calculate the ACL on off-balance sheet credit exposures as of the reporting date. The Company’s ACL on unfunded commitments is recognized as a liability, included within other liabilities on the consolidated balance sheet. The following table presents the activity in the ACL for off-balance sheet credit exposures for the three months ended March 31, 2025 and 2024: For the three months ended March 31, 2025 2024 Allowance for credit losses: Beginning balance $ 714,000 $ 1,255,000 Credit loss reduction ( 5,000 ) ( 360,000 ) Total ending allowance balance $ 709,000 $ 895,000 25 Credit Quality Indicators: To monitor the credit quality of its loan portfolio, management applies an internal risk rating system to categorize commercial loan segments. Approximately 60 % of commercial loan outstanding balances are subject to review and validation annually by an independent consulting firm. Additionally, commercial loan relationships with exposure greater than or equal to $ 750,000 are subject to review annually by the Company's internal credit review function. The risk rating system has eight levels, defined as follows: 1 Strong Credits rated "1" are characterized by borrowers fully responsible for the credit with excellent capacity to pay principal and interest. Loans rated "1" may be secured with acceptable forms of liquid collateral. 2 Above Average Credits rated "2" are characterized by borrowers that have better than average liquidity, capitalization, earnings, and/or cash flow with a consistent record of solid financial performance. 3 Satisfactory Credits rated "3" are characterized by borrowers with favorable liquidity, profitability, and financial condition with adequate cash flow to pay debt service. 4 Average Credits rated "4" are characterized by borrowers that present risk more than 1, 2 and 3 rated loans and merit an ordinary level of ongoing monitoring. Financial condition is on par or somewhat below industry averages while cash flow is generally adequate to meet debt service requirements. 5 Watch Credits rated "5" are characterized by borrowers that warrant greater monitoring due to financial condition or unresolved and identified risk factors. 6 Other Assets Especially Mentioned Loans in this category are currently protected but are potentially weak and constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of substandard. OAEM have potential weaknesses which may, if not checked or corrected, weaken the asset or inadequately protect the Company's credit position at some future date. 7 Substandard Loans in this category are inadequately protected by the paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company may sustain some loss if the deficiencies are not corrected. 8 Doubtful Loans classified "Doubtful" have the same weaknesses as those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Most residential real estate, home equity, and consumer loans are not assigned ratings; therefore they are categorized as performing and non-performing loans. Performing loans include loans that are current and loans that are past due less than 90 days. Loans that are past due more than 90 days are considered non-performing. 26 The following table summarizes the credit quality for the Company's portfolio by risk category of loans and by class by vintage as of March 31, 2025: Term Loans Amortized Cost Basis by Origination Year Dollars in thousands 2025 2024 2023 2022 2021 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of March 31, 2025 Commercial Real estate owner occupied Pass (risk rating 1-5) $ 25,528 $ 47,943 $ 63,697 $ 69,323 $ 34,093 $ 105,636 $ 11,439 $ 960 $ 358,619 Special Mention (risk rating 6) 335 — 3,026 5,334 — 1,602 134 — 10,431 Substandard (risk rating 7) — 50 254 — 257 854 — — 1,415 Doubtful (risk rating 8) — — — — — — — — — Total Real Estate Owner Occupied 25,863 47,993 66,977 74,657 34,350 108,092 11,573 960 370,465 Current period gross write-offs — — — — — — — — — Real estate non-owner occupied Pass (risk rating 1-5) 12,815 30,688 29,387 70,836 113,717 139,405 13,310 1,520 411,678 Special Mention (risk rating 6) — — 62 — 44 199 — — 305 Substandard (risk rating 7) 1,285 201 — — — 61 — — 1,547 Doubtful (risk rating 8) — — — — — — — — — Total Real Estate Non-Owner Occupied 14,100 30,889 29,449 70,836 113,761 139,665 13,310 1,520 413,530 Current period gross write-offs — — — — — — — — — Construction Pass (risk rating 1-5) 4,992 33,225 19,150 8,412 4,951 3,508 — — 74,238 Special Mention (risk rating 6) — — — 2,001 — — — — 2,001 Substandard (risk rating 7) — 95 — — 68 — — — 163 Doubtful (risk rating 8) — — — — — — — — — Total Construction 4,992 33,320 19,150 10,413 5,019 3,508 — — 76,402 Current period gross write-offs — — — — — — — — — C&I Pass (risk rating 1-5) 17,421 71,806 49,011 45,461 38,872 36,195 115,708 1,184 375,658 Special Mention (risk rating 6) — 25 10 301 471 73 840 — 1,720 Substandard (risk rating 7) 100 — 1,256 280 39 275 181 — 2,131 Doubtful (risk rating 8) — — — — — 258 — — 258 Total C&I 17,521 71,831 50,277 46,042 39,382 36,801 116,729 1,184 379,767 Current period gross write-offs — ( 46 ) — — — ( 100 ) — — ( 146 ) Multifamily Pass (risk rating 1-5) 4,181 14,711 11,913 49,518 19,005 25,969 769 — 126,066 Special Mention (risk rating 6) 112 — 1,600 — — — — — 1,712 Substandard (risk rating 7) — — — 1,020 1,328 910 — — 3,258 Doubtful (risk rating 8) — — — — — — — — — Total Multifamily 4,293 14,711 13,513 50,538 20,333 26,879 769 — 131,036 Current period gross write-offs — — — — — — — — — Agriculture Pass (risk rating 1-5) 2,798 10,784 2,712 5,139 3,777 19,080 1,168 231 45,689 Special Mention (risk rating 6) — — 460 — 52 135 600 — 1,247 Substandard (risk rating 7) 1,325 — 75 211 29 129 — — 1,769 Doubtful (risk rating 8) — — — — — — — — — Total Agriculture 4,123 10,784 3,247 5,350 3,858 19,344 1,768 231 48,705 Current period gross write-offs — — — — — — — — — 27 Term Loans Amortized Cost Basis by Origination Year Dollars in thousands 2025 2024 2023 2022 2021 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of March 31, 2025 Municipal Pass (risk rating 1-5) 1,937 9,186 18,563 3,984 3,881 17,553 — — 55,104 Special Mention (risk rating 6) — — — — — — — — — Substandard (risk rating 7) — — — — — — — — — Doubtful (risk rating 8) — — — — — — — — — Total Municipal 1,937 9,186 18,563 3,984 3,881 17,553 — — 55,104 Current period gross write-offs — — — — — — — — — Residential Term Performing 15,831 57,989 94,350 148,507 127,709 269,381 2,517 120 716,404 Non-performing — — — 420 703 1,821 — — 2,944 Total Term 15,831 57,989 94,350 148,927 128,412 271,202 2,517 120 719,348 Current period gross write-offs — — — — — ( 1 ) — — ( 1 ) Construction Performing 3,031 27,475 3,510 728 — 683 — — 35,427 Non-performing — — — — — — — — — Total Construction 3,031 27,475 3,510 728 — 683 — — 35,427 Current period gross write-offs — — — — — — — — — Home Equity Revolving and Term Performing 2,995 12,157 9,070 8,039 1,872 2,683 85,270 9,021 131,107 Non-performing — — — 88 — 93 63 171 415 Total Home Equity Revolving and Term 2,995 12,157 9,070 8,127 1,872 2,776 85,333 9,192 131,522 Current period gross write-offs — — — — — — — — — Consumer Performing 1,750 2,614 2,134 1,079 626 6,399 7,242 — 21,844 Non-performing — — — — — — — — — Total Consumer 1,750 2,614 2,134 1,079 626 6,399 7,242 — 21,844 Current period gross write-offs — ( 16 ) ( 11 ) ( 8 ) ( 2 ) ( 24 ) — — ( 61 ) Total loans $ 96,436 $ 318,949 $ 310,240 $ 420,681 $ 351,494 $ 632,902 $ 239,241 $ 13,207 $ 2,383,150 28 The following table summarizes the credit quality for the Company's portfolio by risk category of loans and by class by vintage as of December 31, 2024: Term Loans Amortized Cost Basis by Origination Year Dollars in thousands 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of December 31, 2024 Commercial Real estate owner occupied Pass (risk rating 1-5) $ 47,724 $ 62,376 $ 77,469 $ 39,635 $ 26,448 $ 81,529 $ 10,727 $ 1,126 $ 347,034 Special Mention (risk rating 6) 125 3,026 5,334 — 195 1,603 50 — 10,333 Substandard (risk rating 7) 41 261 — 257 160 502 — — 1,221 Doubtful (risk rating 8) — — — — — — — — — Total Real Estate Owner Occupied 47,890 65,663 82,803 39,892 26,803 83,634 10,777 1,126 358,588 Current period gross write-offs — — — — — — — — — Real estate non-owner occupied Pass (risk rating 1-5) 33,083 29,546 72,025 113,630 45,421 96,778 11,241 1,520 403,244 Special Mention (risk rating 6) — 62 — 44 — 199 — — 305 Substandard (risk rating 7) 289 — — — — 61 — — 350 Doubtful (risk rating 8) — — — — — — — — — Total Real Estate Non-Owner Occupied 33,372 29,608 72,025 113,674 45,421 97,038 11,241 1,520 403,899 Current period gross write-offs — — — — — — — — — Construction Pass (risk rating 1-5) 36,478 22,629 26,650 7,826 1,356 2,314 — — 97,253 Special Mention (risk rating 6) — — 2,007 44 — 199 — — 2,250 Substandard (risk rating 7) 145 — — 69 — — — — 214 Doubtful (risk rating 8) — — — — — — — — — Total Construction 36,623 22,629 28,657 7,939 1,356 2,513 — — 99,717 Current period gross write-offs — — — — — — — — — C&I Pass (risk rating 1-5) 69,543 50,204 45,986 39,217 14,958 25,284 114,567 778 360,537 Special Mention (risk rating 6) 25 15 561 478 723 — 900 — 2,702 Substandard (risk rating 7) 473 1,227 356 30 15 19 200 — 2,320 Doubtful (risk rating 8) — — — — — 258 — — 258 Total C&I 70,041 51,446 46,903 39,725 15,696 25,561 115,667 778 365,817 Current period gross write-offs — ( 128 ) ( 39 ) ( 72 ) ( 47 ) ( 165 ) — — ( 451 ) Multifamily Pass (risk rating 1-5) 14,048 13,102 33,558 17,335 14,483 12,152 781 — 105,459 Special Mention (risk rating 6) — — — — — — — — — Substandard (risk rating 7) — — 1,020 1,341 912 — — — 3,273 Doubtful (risk rating 8) — — — — — — — — — Total Multifamily 14,048 13,102 34,578 18,676 15,395 12,152 781 — 108,732 Current period gross write-offs — — — — — — — — — Agriculture Pass (risk rating 1-5) 11,694 2,749 5,790 3,835 14,651 6,023 4,546 215 49,503 Special Mention (risk rating 6) — 474 — 52 — 152 600 — 1,278 Substandard (risk rating 7) — 75 731 30 — 602 — — 1,438 Doubtful (risk rating 8) — — — — — — — — — Total Agriculture 11,694 3,298 6,521 3,917 14,651 6,777 5,146 215 52,219 Current period gross write-offs — — — — — — — — — 29 Term Loans Amortized Cost Basis by Origination Year Dollars in thousands 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of December 31, 2024 Municipal Pass (risk rating 1-5) 9,503 18,642 4,017 3,822 8,498 17,345 — — 61,827 Special Mention (risk rating 6) — — — — — — — — — Substandard (risk rating 7) — — — — — — — — — Doubtful (risk rating 8) — — — — — — — — — Total Municipal 9,503 18,642 4,017 3,822 8,498 17,345 — — 61,827 Current period gross write-offs — — — — — — — — — Residential Term Performing 56,378 94,816 148,877 130,413 84,028 192,466 2,109 121 709,208 Non-performing — — 297 257 380 665 — — 1,599 Total Term 56,378 94,816 149,174 130,670 84,408 193,131 2,109 121 710,807 Current period gross write-offs — — — — — ( 37 ) — — ( 37 ) Construction Performing 26,386 7,487 925 — 683 — — — 35,481 Non-performing — — — — — — — — — Total Construction 26,386 7,487 925 — 683 — — — 35,481 Current period gross write-offs — — — — — — — — — Home Equity Revolving and Term Performing 12,449 8,917 8,310 1,894 1,021 1,857 79,132 9,192 122,772 Non-performing — — — — — 96 15 180 291 Total Home Equity Revolving and Term 12,449 8,917 8,310 1,894 1,021 1,953 79,147 9,372 123,063 Current period gross write-offs — — — — — ( 7 ) — — ( 7 ) Consumer Performing 3,146 2,438 1,218 734 1,114 5,805 6,335 — 20,790 Non-performing — — — — — — — — — Total Consumer 3,146 2,438 1,218 734 1,114 5,805 6,335 — 20,790 Current period gross write-offs ( 13 ) ( 53 ) ( 72 ) ( 39 ) ( 20 ) ( 55 ) — — ( 252 ) Total loans $ 321,530 $ 318,046 $ 435,131 $ 360,943 $ 215,046 $ 445,909 $ 231,203 $ 13,132 $ 2,340,940 30 The following table summarizes the credit quality for the Company's portfolio by risk category of loans and by class by vintage as of March 31, 2024: Term Loans Amortized Cost Basis by Origination Year Dollars in thousands 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of March 31, 2024 Commercial Real estate owner occupied Pass (risk rating 1-5) $ 10,565 $ 66,273 $ 75,952 $ 40,501 $ 28,584 $ 85,709 $ 10,728 $ — $ 318,312 Special Mention (risk rating 6) — 1,903 — — — 6,428 50 — 8,381 Substandard (risk rating 7) — 283 — — — 520 — — 803 Doubtful (risk rating 8) — — — — — — — — — Total Real Estate Owner Occupied 10,565 68,459 75,952 40,501 28,584 92,657 10,778 — 327,496 Current period gross write-offs — — — — — — — — — Real estate non-owner occupied Pass (risk rating 1-5) 2,669 34,878 76,822 124,788 47,560 107,295 5,646 — 399,658 Special Mention (risk rating 6) — — — — — — — — — Substandard (risk rating 7) — — — — — — — — — Doubtful (risk rating 8) — — — — — — — — — Total Real Estate Non-Owner Occupied 2,669 34,878 76,822 124,788 47,560 107,295 5,646 — 399,658 Current period gross write-offs — — — — — — — — — Construction Pass (risk rating 1-5) 4,032 30,768 37,898 8,592 1,529 2,929 — — 85,748 Special Mention (risk rating 6) — — — 69 — — — — 69 Substandard (risk rating 7) — — — — — — — — — Doubtful (risk rating 8) — — — — — — — — — Total Construction 4,032 30,768 37,898 8,661 1,529 2,929 — — 85,817 Current period gross write-offs — — — — — — — — — C&I Pass (risk rating 1-5) 14,720 41,357 52,070 45,491 17,868 28,896 89,309 859 290,570 Special Mention (risk rating 6) — 23,905 146 296 390 3,166 2,805 — 30,708 Substandard (risk rating 7) — — 361 54 — 34 128 — 577 Doubtful (risk rating 8) — — — — — — — — — Total C&I 14,720 65,262 52,577 45,841 18,258 32,096 92,242 859 321,855 Current period gross write-offs — — — — — — — — — Multifamily Pass (risk rating 1-5) 4,517 12,360 34,562 17,855 14,913 13,319 530 — 98,056 Special Mention (risk rating 6) — — 1,020 — 912 — — — 1,932 Substandard (risk rating 7) — — — 1,356 — — — — 1,356 Doubtful (risk rating 8) — — — — — — — — — Total Multifamily 4,517 12,360 35,582 19,211 15,825 13,319 530 — 101,344 Current period gross write-offs — — — — — — — — — Agriculture Pass (risk rating 1-5) 4,330 3,738 7,534 4,325 15,357 7,974 670 234 44,162 Special Mention (risk rating 6) 21 — — — — — 600 — 621 Substandard (risk rating 7) — 87 — 33 — 161 — — 281 Doubtful (risk rating 8) — — — — — — — — — Total Agriculture 4,351 3,825 7,534 4,358 15,357 8,135 1,270 234 45,064 Current period gross write-offs — — — — — — — — — 31 Term Loans Amortized Cost Basis by Origination Year Dollars in thousands 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of March 31, 2024 Municipal Pass (risk rating 1-5) 2,420 21,146 4,714 4,335 9,770 12,361 — — 54,746 Special Mention (risk rating 6) — — — — — — — — — Substandard (risk rating 7) — — — — — — — — — Doubtful (risk rating 8) — — — — — — — — — Total Municipal 2,420 21,146 4,714 4,335 9,770 12,361 — — 54,746 Current period gross write-offs — — — — — — — — — Residential Term Performing 10,439 64,948 157,400 138,399 91,824 209,986 3,011 127 676,134 Non-performing — — 299 269 404 987 — — 1,959 Total Term 10,439 64,948 157,699 138,668 92,228 210,973 3,011 127 678,093 Current period gross write-offs — — — — — — — — — Construction Performing 1,329 29,910 2,246 — 1,339 — — — 34,824 Non-performing — — — — — — — — — Total Construction 1,329 29,910 2,246 — 1,339 — — — 34,824 Current period gross write-offs — — — — — — — — — Home Equity Revolving and Term Performing 3,594 10,114 9,134 2,007 1,175 2,166 66,901 10,419 105,510 Non-performing — — — — — 104 18 182 304 Total Home Equity Revolving and Term 3,594 10,114 9,134 2,007 1,175 2,270 66,919 10,601 105,814 Current period gross write-offs — — — — — — — — — Consumer Performing 775 3,347 1,806 1,055 1,625 4,724 5,703 — 19,035 Non-performing — — — — — — — — — Total Consumer 775 3,347 1,806 1,055 1,625 4,724 5,703 — 19,035 Current period gross write-offs — ( 11 ) ( 41 ) ( 21 ) ( 5 ) ( 18 ) — — ( 96 ) Total loans $ 59,411 $ 345,017 $ 461,964 $ 389,425 $ 233,250 $ 486,759 $ 186,099 $ 11,821 $ 2,173,746 32 Loss Recognition: Commercial loans are generally charged off when all or a portion of the principal amount is determined to be uncollectible. This determination is based on circumstances specific to a borrower including repayment ability, analysis of collateral, and other factors as applicable. Consumer loans greater than 120 days past due are generally charged off. Residential loans 90 days or more past due are placed on non-accrual status unless the loans are both well secured and in the process of collection. One- to four-family residential real estate loans and home equity loans are written down or charged-off no later than 180 days past due, or for residential real estate secured loans having a borrower in bankruptcy, within 60 days of receipt of notification of filing from the bankruptcy court, whichever is sooner. This is subject to completion of a current assessment of the value of the collateral with any outstanding loan balance in excess of the fair value of the property, less costs to sell, written down or charged-off. The following table presents ACL activity by class for the three months ended March 31, 2025: Dollars in thousands Commercial Municipal Residential Home Equity Consumer Total Real Estate Owner Occupied Real Estate Non-Owner Occupied Construction C&I Multifamily Agriculture Term Construction Revolving and term For the three months ended March 31, 2025 Beginning balance $ 5,045 $ 4,829 $ 944 $ 5,364 $ 1,239 $ 605 $ 262 $ 5,241 $ 474 $ 686 $ 182 $ 24,871 Charge offs — — — ( 146 ) — — — ( 1 ) — — ( 61 ) ( 208 ) Recoveries — — — 26 — — — 2 — 2 25 55 Credit loss (reduction) expense 144 41 ( 325 ) 255 216 ( 18 ) ( 27 ) 18 ( 9 ) 63 38 396 Ending balance $ 5,189 $ 4,870 $ 619 $ 5,499 $ 1,455 $ 587 $ 235 $ 5,260 $ 465 $ 751 $ 184 $ 25,114 The following table presents ACL activity by class for the year ended December 31, 2024: Dollars in thousands Commercial Municipal Residential Home Equity Consumer Total Real Estate Owner Occupied Real Estate Non-Owner Occupied Construction C&I Multifamily Agriculture Term Construction Revolving and term For the year ended December 31, 2024 Beginning balance $ 4,633 $ 4,285 $ 1,978 $ 5,001 $ 1,318 $ — $ 334 $ 4,991 $ 618 $ 626 $ 246 $ 24,030 Charge offs — — — ( 451 ) — — — ( 37 ) — ( 7 ) ( 252 ) ( 747 ) Recoveries 100 — — 25 — — — 32 — 24 103 284 Credit loss (reduction) expense 312 544 ( 1,034 ) 789 ( 79 ) 605 ( 72 ) 255 ( 144 ) 43 85 1,304 Ending balance $ 5,045 $ 4,829 $ 944 $ 5,364 $ 1,239 $ 605 $ 262 $ 5,241 $ 474 $ 686 $ 182 $ 24,871 The following table presents ACL activity by class for the three months ended March 31, 2024: Dollars in thousands Commercial Municipal Residential Home Equity Consumer Total Real Estate Owner Occupied Real Estate Non-Owner Occupied Construction C&I Multifamily Agriculture Term Construction Revolving and term For the three months ended March 31, 2024 Beginning balance $ 4,633 $ 4,285 $ 1,978 $ 5,001 $ 1,318 $ — $ 334 $ 4,991 $ 618 $ 626 $ 246 $ 24,030 Charge offs — — — — — — — — — — ( 96 ) ( 96 ) Recoveries 100 — — 23 — — — 25 — 3 23 174 Credit loss (reduction) expense 447 ( 20 ) ( 1,158 ) 59 189 392 ( 140 ) 338 ( 56 ) 48 — 99 Ending balance $ 5,180 $ 4,265 $ 820 $ 5,083 $ 1,507 $ 392 $ 194 $ 5,354 $ 562 $ 677 $ 173 $ 24,207 33 As of March 31, 2025, the significant model inputs and assumptions used within the discounted cash flow model for purposes of estimating the ACL on loans were: Macroeconomic loss drivers : The following loss drivers for each loan segment were used to calculate the expected probability of default over the forecast and reversion period: • Commercial Real Estate Owner Occupied: FOMC median forecasts of national unemployment and change in national real GDP • Commercial Real Estate Non-Owner Occupied: FOMC median forecasts of national unemployment and change in national real GDP • Commercial Construction: FOMC median forecasts of national unemployment and change in national real GDP • Commercial & Industrial: FOMC median forecasts of national unemployment and change in national real GDP • Commercial Multifamily: FOMC median forecast of national unemployment • Commercial Agriculture: FOMC median forecasts of national unemployment and change in national real GDP • Municipal: Probability of default is measured based upon an index supplied by a nationally recognized ratings agency • Residential Real Estate Term: FOMC median forecasts of national unemployment and change in national real GDP • Residential Real Estate Construction: FOMC median forecast of national unemployment and change in national real GDP • Home Equity Revolving & Term: FOMC median forecasts of national unemployment and change in national real GDP • Consumer: FOMC median forecasts of national unemployment and change in national real GDP Reasonable and supportable forecast period: The ACL on loans estimate used a reasonable and supportable forecast period of one year. Reversion period: The ACL on loans estimate used a reversion period of one year. Prepayment speeds: The estimate of prepayment speed for each loan segment was derived using internally sourced prepayment data. Qualitative factors: The ACL on loans estimate incorporated various qualitative factors into the calculation such as changes in lending policies, changes in the nature and volume and terms of loans, changes in the experience, depth and ability of lending management, and economic factors not captured in the quantitative model. Note 5 – Stock-Based Compensation At the 2020 Annual Meeting, shareholders approved the 2020 Equity Incentive Plan. The 2020 Plan reserves 400,000 shares of common stock for issuance in connection with stock options, restricted stock awards, and other equity based awards to attract and retain the best available personnel, provide additional incentive to officers, employees, and non-employee Directors, and promote the success of the Company. Such grants and awards will be structured in a manner that does not encourage the recipients to expose the Company to undue or inappropriate risk. Options issued under the 2020 Plan qualify for treatment as incentive stock options for purposes of Section 422 of the Internal Revenue Code. Other compensation under the 2020 Plan qualifies as performance-based for purposes of Section 162(m) of the Internal Revenue Code, and satisfies NASDAQ guidelines relating to equity compensation. As of March 31, 2025, 172,916 shares of restricted stock had been granted under the 2020 Plan, of which 96,624 shares remain restricted as of March 31, 2025 as detailed in the following table: Year Granted Vesting Term (In Years) Shares Remaining Term (In Years) 2023 3.0 26,609 0.8 2024 3.0 27,737 1.8 2024 2.0 1,869 0.8 2025 3.0 39,709 2.8 2025 1.0 700 0.8 96,624 1.9 The compensation cost related to these non-vested restricted stock grants is $ 2,608,000 and is recognized over the vesting terms of each grant. In the three months ended March 31, 2025, $ 298,000 of expense was recognized for these restricted shares, leaving $ 1,598,000 in unrecognized expense as of March 31, 2025. In the three months ended March 31, 2024, $ 231,000 of expense was recognized for restricted shares, leaving $ 1,486,000 in unrecognized expense as of March 31, 2024. 34 Note 6 – Common Stock Proceeds from sale of common stock totaled $ 225,000 and $ 204,000 for the three months ended March 31, 2025 and 2024, respectively. Note 7 – Earnings Per Share The following table sets forth the computation of basic and diluted EPS for the three months ended March 31, 2025 and 2024: Income (Numerator) Shares (Denominator) Per-Share Amount For the three months ended March 31, 2025 Net income as reported $ 7,077,000 Basic EPS: Income available to common shareholders 7,077,000 11,074,840 $ 0.64 Effect of dilutive securities: restricted stock 108,089 Diluted EPS: Income available to common shareholders plus assumed conversions $ 7,077,000 11,182,929 $ 0.63 For the three months ended March 31, 2024 Net income as reported $ 6,021,000 Basic EPS: Income available to common shareholders 6,021,000 11,033,857 $ 0.55 Effect of dilutive securities: restricted stock 85,964 Diluted EPS: Income available to common shareholders plus assumed conversions $ 6,021,000 11,119,821 $ 0.54 Note 8 – Employee Benefit Plans 401(k) Plan The Bank has a defined contribution plan available to substantially all employees who have completed three months of service. Employees may contribute up to IRS determined limits and the Bank may match employee contributions not to exceed 3.0 % of compensation depending on contribution level. The Plan is a safe harbor plan whereby the Bank also contributes a minimum 3.0 % of annual compensation to the plan for all eligible employees. The expense related to the 401(k) plan was $ 275,000 and $ 315,000 for the three months ended March 31, 2025 and 2024, respectively. Deferred Compensation and Supplemental Retirement Benefits The Bank also provides unfunded supplemental retirement benefits for certain officers, payable in installments over 20 years upon retirement or death. The agreements consist of individual contracts with differing characteristics that, when taken together, do not constitute a postretirement plan. There are no active officers eligible for these benefits. The costs for these benefits are recognized over the service periods of the participating officers in accordance with FASB ASC Topic 712 "Compensation – Nonretirement Postemployment Benefits". The expense of these supplemental retirement benefits was $ 36,000 and $ 37,000 for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, the associated accrued liability included in other liabilities in the balance sheet was $ 2,542,000 compared to $ 2,578,000 and $ 2,629,000 at December 31, 2024 and March 31, 2024, respectively. Postretirement Benefit Plans The Bank sponsors two postretirement benefit plans. One plan currently provides a subsidy for health insurance premiums to certain retired employees; these subsidies are based on years of service and range between $ 40 and $ 1,200 per month per person. The other plan provides life insurance coverage to certain retired employees and health insurance for retired directors. None of these plans are prefunded. The Company utilizes FASB ASC Topic 712 to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its balance sheet and to recognize changes in the funded status in the year in which the changes occur through comprehensive income (loss). 35 The following table sets forth the accumulated postretirement benefit obligation and funded status: At or for the three months ended March 31, 2025 2024 Change in benefit obligation Benefit obligation at beginning of year $ 843,000 $ 1,091,000 Interest cost — — Benefits paid ( 23,000 ) ( 21,000 ) Benefit obligation at end of period $ 820,000 $ 1,070,000 Funded status Benefit obligation at end of period $ ( 820,000 ) $ ( 1,070,000 ) Unamortized gain ( 363,000 ) ( 384,000 ) Accrued benefit cost at end of period $ ( 1,183,000 ) $ ( 1,454,000 ) There was no net periodic pension cost for the three months ended March 31, 2025 and 2024. Amounts not yet reflected in net periodic benefit cost and included in AOCI are as follows: March 31, 2025 December 31, 2024 March 31, 2024 Unamortized net actuarial gain $ 363,000 $ 363,000 $ 384,000 Deferred tax expense ( 76,000 ) ( 76,000 ) ( 81,000 ) Net unrecognized postretirement benefits included in AOCI $ 287,000 $ 287,000 $ 303,000 A weighted average discount rate of 5.30 % was used in determining the accumulated benefit obligation and the net periodic benefit cost. The assumed health care cost trend rate is 7.00 %. The measurement date for benefit obligations was as of year-end for prior years presented. The expected benefit payments for all of 2025 are $ 90,000 . Plan expense for 2025 is estimated to be $ 0 . A 1.00% change in trend assumptions would create an approximate change in the same direction of $ 100,000 in the accumulated benefit obligation, $ 7,000 in the interest cost, and $ 1,000 in the service cost. Note 9 - Other Comprehensive Income (Loss) The following table summarizes activity in the unrealized gain or loss on available for sale securities included in OCI for the three months ended March 31, 2025 and 2024. For the three months ended March 31, 2025 2024 Balance at beginning of period $ ( 42,671,000 ) $ ( 39,575,000 ) Unrealized gains (losses) arising during the period 5,024,000 ( 4,102,000 ) Related deferred taxes ( 1,055,000 ) 861,000 Net change 3,969,000 ( 3,241,000 ) Balance at end of period $ ( 38,702,000 ) $ ( 42,816,000 ) The reclassification of realized gains is included in the net securities gains line of the consolidated statements of income and comprehensive income and the tax effect is included in the income tax expense line of the same statement. 36 The following table summarizes activity in the unrealized loss on securities transferred from available for sale to held to maturity included in OCI for the three months ended March 31, 2025 and 2024. For the three months ended March 31, 2025 2024 Balance at beginning of period $ ( 47,000 ) $ ( 56,000 ) Amortization of net unrealized gains 3,000 3,000 Related deferred taxes ( 1,000 ) ( 1,000 ) Net change 2,000 2,000 Balance at end of period $ ( 45,000 ) $ ( 54,000 ) The following table presents the effect of the Company's derivative financial instruments included in OCI for the three months ended March 31, 2025 and 2024. For the three months ended March 31, 2025 2024 Balance at beginning of period $ 157,000 $ 300,000 Unrealized (losses) gains on cash flow hedging derivatives arising during the period ( 94,000 ) 551,000 Related deferred taxes 19,000 ( 116,000 ) Net change ( 75,000 ) 435,000 Balance at end of period $ 82,000 $ 735,000 There was no activity in the unrealized gain or loss on postretirement benefits included in OCI for the three months ended March 31, 2025 and 2024. Note 10 - Financial Derivative Instruments The Bank uses derivative financial instruments for risk management purposes and not for trading or speculative purposes. As part of its overall asset and liability management strategy, the Bank periodically uses derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. The Bank’s interest rate risk management strategy involves modifying the re-pricing characteristics of certain assets or liabilities so that changes in interest rates do not have a significant effect on net interest income. The Bank recognizes its derivative instruments in the consolidated balance sheets at fair value. On the date the derivative instrument is entered into, the Bank designates whether the derivative is part of a hedging relationship (i.e., cash flow or fair value hedge). The Bank formally documents relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. The Bank also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting the changes in cash flows or fair values of hedged items. Changes in fair value of derivative instruments that are highly effective and qualify as cash flow hedges are recorded in OCI. Any ineffective portion is recorded in earnings. The Bank discontinues hedge accounting when it is determined that the derivative is no longer highly effective in offsetting changes of the hedged risk on the hedged item, or management determines that the designation of the derivative as a hedging instrument is no longer appropriate. 37 The details of the Bank's swap agreements are as follows: March 31, 2025 December 31, 2024 March 31, 2024 Effective Date Maturity Date Variable Index Received Fixed Rate Paid Presentation on Consolidated Balance Sheets Notional Amount Fair Value Notional Amount Fair Value Notional Amount Fair Value Cash Flow Hedges 04/27/2022 04/27/2024 USD-SOFR-COMPOUND 2.619 % Other Assets — — — — 10,000,000 21,000 01/10/2023 01/01/2026 USD-SOFR-OIS COMPOUND 3.836 % Other Assets 75,000,000 104,000 75,000,000 198,000 75,000,000 910,000 $ 75,000,000 $ 104,000 $ 75,000,000 $ 198,000 $ 85,000,000 $ 931,000 Fair Value Hedges 03/08/2023 03/01/2026 USD-SOFR-OIS COMPOUND 4.712 % Other Liabilities $ 40,000,000 $ ( 256,000 ) $ 40,000,000 $ ( 270,000 ) $ 40,000,000 $ ( 126,000 ) 03/08/2023 03/01/2027 USD-SOFR-OIS COMPOUND 4.402 % Other Liabilities 30,000,000 ( 367,000 ) 30,000,000 ( 216,000 ) 30,000,000 ( 132,000 ) 03/08/2023 03/01/2028 USD-SOFR-OIS COMPOUND 4.189 % Other Liabilities 30,000,000 ( 431,000 ) 30,000,000 ( 137,000 ) 30,000,000 ( 127,000 ) 07/12/2023 08/01/2025 USD-SOFR-OIS COMPOUND 4.703 % Other (Liabilities) Assets 50,000,000 ( 66,000 ) 50,000,000 ( 135,000 ) 50,000,000 72,000 $ 150,000,000 $ ( 1,120,000 ) $ 150,000,000 $ ( 758,000 ) $ 150,000,000 $ ( 313,000 ) Total swap agreements $ 225,000,000 $ ( 1,016,000 ) $ 225,000,000 $ ( 560,000 ) $ 235,000,000 $ 618,000 The Company would reclassify unrealized gains or losses accounted for within AOCI into earnings if the interest rate swaps were to become ineffective or the swaps were to terminate for cash flow hedges, or would amortize the gain or loss over the remaining life of the hedged instrument for fair value hedges. Amounts paid or received under the swaps are reported in interest income or interest expense in the consolidated statements of income, and reflected in net income in the consolidated statements of cash flows. Customer loan derivatives The Bank will enter into interest rate swaps with qualified commercial customers. Through these arrangements, the Bank is able to provide a means for a loan customer to obtain a long-term fixed rate, while it simultaneously contracts with an approved, highly-rated, third-party financial institution as counterparty to swap the fixed rate for a variable rate. Such loan level arrangements are not designated as hedges for accounting purposes, and are recorded at fair value in the Company’s consolidated balance sheets. 38 At March 31, 2025 there were 12 customer loan swap arrangements in place. This compares to 10 customer loan swap arrangements in place at December 31, 2024 and seven customer loan swap arrangements in place at March 31, 2024. The details of the Bank's customer loan swap arrangements are detailed below: March 31, 2025 December 31, 2024 March 31, 2024 Presentation on Consolidated Balance Sheet Number of Positions Notional Amount Fair Value Number of Positions Notional Amount Fair Value Number of Positions Notional Amount Fair Value Pay Fixed, Receive Variable Other Assets 6 $ 34,398,000 $ 4,078,000 8 $ 43,415,000 $ 4,772,000 7 $ 40,593,000 $ 4,778,000 Pay Fixed, Receive Variable Other Liabilities 6 23,731,000 ( 426,000 ) 2 4,342,000 ( 87,000 ) — — — 12 58,129,000 3,652,000 10 47,757,000 4,685,000 7 40,593,000 4,778,000 Receive Fixed, Pay Variable Other Assets 6 23,731,000 426,000 2 4,342,000 87,000 — — — Receive Fixed, Pay Variable Other Liabilities 6 34,398,000 ( 4,078,000 ) 8 43,415,000 ( 4,772,000 ) 7 40,593,000 ( 4,778,000 ) 12 58,129,000 ( 3,652,000 ) 10 47,757,000 ( 4,685,000 ) 7 40,593,000 ( 4,778,000 ) Total 24 $ 116,258,000 $ — 20 $ 95,514,000 $ — 14 $ 81,186,000 $ — Derivative collateral The Bank has entered into a master netting arrangement with its counterparty and settles payments with the counterparty as necessary. The Bank's arrangement with its institutional counterparty requires it to post cash or other assets as collateral for its various loan swap contracts in a net liability position based on their fair values and the Bank's credit rating or receive cash collateral for contracts in a net asset position as requested. At March 31, 2025, there was no collateral posted on its swap contracts or required amount to be pledged. Note 11 – Mortgage Servicing Rights FASB ASC Topic 860 "Transfers and Servicing", requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. The Company's servicing assets and servicing liabilities are reported using the amortization method and carried at the lower of amortized cost or fair value by strata. In evaluating the carrying values of mortgage servicing rights, the Company obtains third party valuations based on loan level data including note rate, type, and term of the underlying loans. The model utilizes several assumptions, the most significant of which is loan prepayments, calculated using a three-months moving average of weekly prepayment data published by the PSA and modeled against the serviced loan portfolio, and the discount rate to discount future cash flows. As of March 31, 2025, the prepayment assumption using the PSA model was 136, which translates into an anticipated prepayment rate of 6.53 %. The discount rate is 9.63 %. Other assumptions include delinquency rates, foreclosure rates, servicing cost inflation, and annual unit loan cost. All assumptions are adjusted periodically to reflect current circumstances. Amortization of mortgage servicing rights, as well as write-offs due to prepayments of the related mortgage loans, are recorded as a charge against mortgage servicing fee income. For the three months ended March 31, 2025 and 2024, servicing rights capitalized totaled $ 13,000 and $ 4,000 , respectively. Servicing rights amortized for the three-month periods ended March 31, 2025 and 2024 were $ 71,000 and $ 84,000 , respectively. The fair value of servicing rights was $ 2,973,000 , $ 3,054,000 , and $ 3,423,000 at March 31, 2025, December 31, 2024 and March 31, 2024, respectively. The Bank serviced loans for others totaling $ 293,503,000 , $ 297,950,000 , and $ 315,414,000 at March 31, 2025, December 31, 2024, and March 31, 2024, respectively. Mortgage servicing rights are included in other assets and detailed in the following table: March 31, 2025 December 31, 2024 March 31, 2024 Mortgage servicing rights $ 8,754,000 $ 8,741,000 $ 8,705,000 Accumulated amortization ( 6,919,000 ) ( 6,847,000 ) ( 6,609,000 ) Carrying value $ 1,835,000 $ 1,894,000 $ 2,096,000 39 Note 12 – Income Taxes FASB ASC Topic 740 "Income Taxes" defines the criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company's financial statements. Topic 740 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements. The Company is currently open to audit under the statute of limitations by the IRS for the years ended December 31, 2021 through 2024. Note 13 - Certificates of Deposit The following table represents the breakdown of certificates of deposit at March 31, 2025 and 2024, and at December 31, 2024: March 31, 2025 December 31, 2024 March 31, 2024 Certificates of deposit < $100,000 $ 754,558,000 $ 702,632,000 $ 655,576,000 Certificates $100,000 to $250,000 241,536,000 225,106,000 244,148,000 Certificates $250,000 and over 173,422,000 187,073,000 165,703,000 $ 1,169,516,000 $ 1,114,811,000 $ 1,065,427,000 Note 14 – Reclassifications Certain items from the prior year were reclassified in the consolidated financial statements to conform with the current year presentation. These do not have a material impact on the consolidated balance sheet or statement of income and comprehensive income presentations. Note 15 – Fair Value Certain assets and liabilities are recorded at fair value to provide additional insight into the Company's quality of earnings. Some of these assets and liabilities are measured on a recurring basis while others are measured on a nonrecurring basis, with the determination based upon applicable existing accounting pronouncements. For example, securities available for sale are recorded at fair value on a recurring basis. Other assets, such as other real estate owned and IAL, are recorded at fair value on a nonrecurring basis using the lower of cost or market methodology to determine impairment of individual assets. The Company groups assets and liabilities, which are recorded at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. A financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement (with level 1 considered highest and level 3 considered lowest). A brief description of each level follows: Level 1 - Valuation is based upon quoted prices for identical instruments in active markets. Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 - Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates that market participants would use in pricing the asset or liability. Valuation includes use of discounted cash flow models and similar techniques. The fair value methods and assumptions for the Company's financial instruments and other assets measured at fair value are set forth below. Investment Securities The fair values of investment securities are estimated by independent providers using a market approach with observable inputs, including matrix pricing and recent transactions. In obtaining such valuation information from third parties, the Company has evaluated their valuation methodologies used to develop the fair values in order to determine whether the valuations are representative of an exit price in the Company's principal markets. The Company's principal markets for its securities portfolios are the secondary institutional markets, with an exit price that is predominantly reflective of bid level pricing in those markets. Fair values are calculated based on the value of one unit without regard to any premium or discount that may result from concentrations of ownership of a financial instrument, possible tax ramifications, or estimated transaction costs. If these considerations had been incorporated into the fair value estimates, the aggregate fair value could have been changed. The carrying values of restricted equity securities approximate fair values. As such, the Company classifies investment securities as Level 2. 40 Loans Fair values are estimated for portfolios of loans are based on an exit pricing notion. The fair values of performing loans are calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest risk inherent in the loan. The estimates of maturity are based on the Company's historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of current economic and lending conditions, and the effects of estimated prepayments. Assumptions regarding credit risk, cash flows, and discount rates are judgmentally determined using available market information and specific borrower information. Management has made estimates of fair value using discount rates that it believes to be reasonable. However, because there is no market for many of these financial instruments, Management has no basis to determine whether the fair value presented above would be indicative of the value negotiated in an actual sale. As such, the Company classifies loans as Level 3, except for certain IAL. Fair values of IAL are based on estimated cash flows and are discounted using a rate commensurate with the risk associated with the estimated cash flows, or if collateral dependent, discounted to the appraised value of the collateral as determined by reference to sale prices of similar properties, less costs to sell. As such, the Company classifies IAL for which a specific reserve results in a fair value measure as Level 2. All other IAL are classified as Level 3. Other Real Estate Owned Real estate acquired through foreclosure is initially recorded at fair value. The fair value of other real estate owned is based on property appraisals and an analysis of similar properties currently available. As such, the Company records other real estate owned as nonrecurring Level 2. Mortgage Servicing Rights Mortgage servicing rights represent the value associated with servicing residential mortgage loans. Servicing assets and servicing liabilities are reported using the amortization method and compared to fair value for impairment. In evaluating the fair values of mortgage servicing rights, the Company obtains third party valuations based on loan level data including note rate, type, and term of the underlying loans. As such, the Company classifies mortgage servicing rights as Level 2. Time Deposits The fair value of maturity deposits is based on the discounted value of contractual cash flows using a replacement cost of funds approach. The discount rate is estimated using the cost of funds borrowing rate in the market. As such, the Company classifies time deposits as Level 2. Borrowed Funds The fair value of borrowed funds is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently available for borrowings of similar remaining maturities. As such, the Company classifies borrowed funds as Level 2. Derivatives The fair value of interest rate swaps is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes and, accordingly, are classified as Level 2 inputs. The credit value adjustments associated with derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of March 31, 2025 and 2024, and December 31, 2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives due to collateral postings. Customer Loan Derivatives The valuation of the Company’s customer loan derivatives is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of master netting arrangements and any applicable credit enhancements, such as collateral postings. Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These values do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on Management's judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of 41 assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial instruments include the deferred tax asset, premises and equipment, and other real estate owned. In addition, tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates. Assets and Liabilities Recorded at Fair Value on a Recurring Basis The following tables present the balances of assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2025, December 31, 2024 and March 31, 2024. At March 31, 2025 Level 1 Level 2 Level 3 Total Securities available for sale U.S. Government-sponsored agencies $ — $ 18,950,000 $ — $ 18,950,000 Mortgage-backed securities — 226,877,000 — 226,877,000 State and political subdivisions — 32,762,000 — 32,762,000 Asset-backed securities — 2,175,000 — 2,175,000 Total securities available for sale — 280,764,000 — 280,764,000 Interest rate swap agreements — 104,000 — 104,000 Customer loan interest swap agreements — 4,504,000 — 4,504,000 Total interest rate swap agreements — 4,608,000 — 4,608,000 Total assets $ — $ 285,372,000 $ — $ 285,372,000 At March 31, 2025 Level 1 Level 2 Level 3 Total Interest rate swap agreements $ — $ 1,120,000 $ — $ 1,120,000 Customer loan interest swap agreements — 4,504,000 — 4,504,000 Total liabilities $ — $ 5,624,000 $ — $ 5,624,000 At December 31, 2024 Level 1 Level 2 Level 3 Total Securities available for sale U.S. Government-sponsored agencies $ — $ 19,796,000 $ — $ 19,796,000 Mortgage-backed securities — 219,382,000 — 219,382,000 State and political subdivisions — 33,252,000 — 33,252,000 Asset-backed securities — 2,250,000 — 2,250,000 Total securities available for sale — 274,680,000 — 274,680,000 Interest rate swap agreements — 198,000 — 198,000 Customer loan interest swap agreements — 4,859,000 — 4,859,000 Total interest rate swap agreements — 5,057,000 — 5,057,000 Total assets $ — $ 279,737,000 $ — $ 279,737,000 At December 31, 2024 Level 1 Level 2 Level 3 Total Interest rate swap agreements $ — $ 758,000 $ — $ 758,000 Customer loan interest swap agreements — 4,859,000 — 4,859,000 Total liabilities $ — $ 5,617,000 $ — $ 5,617,000 42 At March 31, 2024 Level 1 Level 2 Level 3 Total Securities available for sale U.S. Government-sponsored agencies $ — $ 19,693,000 $ — $ 19,693,000 Mortgage-backed securities — 218,002,000 — 218,002,000 State and political subdivisions — 33,950,000 — 33,950,000 Asset-backed securities — 2,806,000 — 2,806,000 Total securities available for sale — 274,451,000 — 274,451,000 Interest rate swap agreements — 1,003,000 — 1,003,000 Customer loan interest swap agreements — 4,778,000 — 4,778,000 Total interest swap agreements — 5,781,000 — 5,781,000 Total assets $ — $ 280,232,000 $ — $ 280,232,000 At March 31, 2024 Level 1 Level 2 Level 3 Total Interest rate swap agreements $ — $ 385,000 $ — $ 385,000 Customer loan interest swap agreements — 4,778,000 — 4,778,000 Total liabilities $ — $ 5,163,000 $ — $ 5,163,000 Assets Recorded at Fair Value on a Non-Recurring Basis The following tables include assets measured at fair value on a nonrecurring basis that have had a fair value adjustment since their initial recognition. Mortgage servicing rights are presented at fair value with no impairment reserve for each of the periods presented. There was no OREO or related allowance at March 31, 2025 and 2024 . OREO is presented net of an allowance of $ 35,000 at December 31, 2024. Only collateral-dependent IAL with a related specific ACL or a partial charge off are included in IAL for purposes of fair value disclosures. IAL below are presented net of specific allowances of $ 1,029,000 and $ 821,000 at March 31, 2025 and December 31, 2024, respectively. There were no collateral-dependent IAL with a related specific ACL or a partial charge off at March 31, 2024. At March 31, 2025 Level 1 Level 2 Level 3 Total Mortgage servicing rights $ — $ 2,973,000 $ — $ 2,973,000 Individually analyzed loans — 318,000 — 318,000 Total assets $ — $ 3,291,000 $ — $ 3,291,000 At December 31, 2024 Level 1 Level 2 Level 3 Total Mortgage servicing rights $ — $ 3,054,000 $ — $ 3,054,000 Other real estate owned — 173,000 — 173,000 Individually analyzed loans — 538,000 — 538,000 Total assets $ — $ 3,765,000 $ — $ 3,765,000 At March 31, 2024 Level 1 Level 2 Level 3 Total Mortgage servicing rights $ — $ 3,423,000 $ — $ 3,423,000 Total assets $ — $ 3,423,000 $ — $ 3,423,000 43 Fair Value of Financial Instruments FASB ASC Topic 825 "Financial Instruments" requires disclosures of fair value information about financial instruments, whether or not recognized in the balance sheet if the fair values can be reasonably determined. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques using observable inputs when available. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Topic 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. This summary excludes financial assets and liabilities for which carrying value approximates fair values and financial instruments that are recorded at fair value on a recurring basis. Financial instruments for which carrying values approximate fair value include cash equivalents, interest-bearing deposits in other banks, demand, NOW, savings, and money market deposits. The estimated fair value of demand, NOW, savings, and money market deposits is the amount payable on demand at the reporting date. Carrying value is used because the accounts have no stated maturity and the customer has the ability to withdraw funds immediately. The carrying amount and estimated fair values for financial instruments as of March 31, 2025 were as follows: Carrying value Estimated fair value Level 1 Level 2 Level 3 Financial assets Securities to be held to maturity (net of allowance for credit losses) $ 368,571,000 $ 312,788,000 $ — $ 312,788,000 $ — Loans (net of allowance for credit losses) Commercial Real estate 773,936,000 750,258,000 — — 750,258,000 Construction 75,783,000 73,464,000 — — 73,464,000 Other 551,967,000 548,918,000 — 318,000 548,600,000 Municipal 54,868,000 50,617,000 — — 50,617,000 Residential Term 714,088,000 655,427,000 — — 655,427,000 Construction 34,962,000 34,653,000 — — 34,653,000 Home equity line of credit 130,771,000 130,190,000 — — 130,190,000 Consumer 21,661,000 19,353,000 — — 19,353,000 Total loans 2,358,036,000 2,262,880,000 — 318,000 2,262,562,000 Mortgage servicing rights 1,835,000 2,973,000 — 2,973,000 — Financial liabilities Local certificates of deposit $ 380,408,000 $ 359,404,000 $ — $ 359,404,000 $ — National certificates of deposit 789,108,000 809,997,000 — 809,997,000 — Total certificates of deposit 1,169,516,000 1,169,401,000 — 1,169,401,000 — Repurchase agreements 55,539,000 55,435,000 — 55,435,000 — Federal Home Loan Bank advances 129,905,000 130,213,000 — 130,213,000 — Total borrowed funds 185,444,000 185,648,000 — 185,648,000 — 44 The carrying amounts and estimated fair values for financial instruments as of December 31, 2024 were as follows: Carrying value Estimated fair value Level 1 Level 2 Level 3 Financial assets Securities to be held to maturity (net of allowance for credit losses) $ 369,704,000 $ 314,993,000 $ — $ 314,993,000 $ — Loans (net of allowance for credit losses) Commercial Real estate 752,613,000 720,898,000 — — 720,898,000 Construction 98,773,000 94,611,000 — — 94,611,000 Other 519,560,000 513,417,000 — 538,000 512,879,000 Municipal 61,565,000 57,657,000 — — 57,657,000 Residential Term 705,566,000 643,402,000 — — 643,402,000 Construction 35,007,000 34,631,000 — — 34,631,000 Home equity line of credit 122,377,000 119,930,000 — — 119,930,000 Consumer 20,608,000 18,274,000 — — 18,274,000 Total loans 2,316,069,000 2,202,820,000 — 538,000 2,202,282,000 Mortgage servicing rights 1,894,000 3,054,000 — 3,054,000 — Financial liabilities Local certificates of deposit $ 385,897,000 $ 365,937,000 $ — $ 365,937,000 $ — National certificates of deposit 728,914,000 747,681,000 — 747,681,000 — Total certificates of deposit 1,114,811,000 1,113,618,000 — 1,113,618,000 — Repurchase agreements 51,278,000 51,181,000 — 51,181,000 — Federal Home Loan Bank advances 95,000,000 95,066,000 — 95,066,000 — Total borrowed funds 146,278,000 146,247,000 — 146,247,000 — 45 The carrying amount and estimated fair values for financial instruments as of March 31, 2024 were as follows: Carrying value Estimated fair value Level 1 Level 2 Level 3 Financial assets Securities to be held to maturity (net of allowance for credit losses) $ 379,453,000 $ 327,816,000 $ — $ 327,816,000 $ — Loans (net of allowance for credit losses) Commercial Real estate 717,709,000 679,690,000 — — 679,690,000 Construction 84,997,000 80,494,000 — — 80,494,000 Other 461,281,000 446,607,000 — — 446,607,000 Municipal 54,552,000 51,889,000 — — 51,889,000 Residential Term 672,739,000 602,025,000 — — 602,025,000 Construction 34,262,000 33,801,000 — — 33,801,000 Home equity line of credit 105,137,000 104,938,000 — — 104,938,000 Consumer 18,862,000 16,676,000 — — 16,676,000 Total loans 2,149,539,000 2,016,120,000 — — 2,016,120,000 Mortgage servicing rights 2,096,000 3,423,000 — 3,423,000 — Financial liabilities Local certificates of deposit $ 370,364,000 $ 351,799,000 $ — $ 351,799,000 $ — National certificates of deposit 695,063,000 704,387,000 — 704,387,000 — Total certificates of deposit 1,065,427,000 1,056,186,000 — 1,056,186,000 — Repurchase agreements 47,845,000 47,734,000 — 47,734,000 — Federal Home Loan Bank advances 106,934,000 81,863,000 — 81,863,000 — Total borrowed funds 154,779,000 129,597,000 — 129,597,000 — Note 16 – Impact of Recently Issued Accounting Standards In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires public business entities, such as the Company, to provide enhanced disclosures on the amount of income taxes paid disaggregated by type and jurisdiction. Adoption is required for annual periods beginning after December 15, 2024 and is not expected to have a material impact on the Company's consolidated financial statements. In November 2024 the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). Under ASU 2024-03, public business entities, such as the Company, are required to disclose in the notes to their financial statements disaggregated information about certain costs and expenses in both annual and interim filings. ASU 2024-03 is effective for calendar year-end public business entities beginning in calendar year 2027, and is not expected to have a material impact on the Company's consolidated financial statements. 46