What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-09 · 187 added, 141 removed, 644 unchanged (34% of the section changed)

28 unchanged sentences

Similarly, the use of different estimates or assumptions could produce different provisions for credit losses which would likely result in changes to the Company's net income.

In the three months ended March 31, 2025 the ACL-Loans increased by $243,000, the ACL-Off-Balance Commitments decreased by $5,000 and the ACL-HTM Securities increased by $1,000.

In the six months ended June 30, 2025 the ACL-Loans decreased by $42,000, the ACL-Off-Balance Commitments increased by $132,000 and the ACL-HTM Securities increased by $2,000.

Further discussion of the ACL may be found in Note 2, "Investment Securities", Note 3, "Loans", and Note 4, "Allowance for Credit Losses", to the consolidated financial statements contained in Item 1 of the Form 10-Q.

7 unchanged sentences

A finding that the Company's methodology for valuation of its investment securities is materially incorrect could result in changes to the carrying value of securities on its balance sheet and corresponding changes in shareholders equity position.

As of March 31, 2025 the fair value of AFS securities increased by $6.1 million and the fair value of HTM securities decreased by $2.2 million from that of December 31, 2024.

As of June 30, 2025 the fair value of AFS securities increased by $3.6 million and the fair value of HTM securities decreased by $2.5 million from that of December 31, 2024.

The increase in the fair value of AFS securities is attributable to a combination of rate-driven market price adjustments for the underlying securities and new purchases.

22 unchanged sentences

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.

Global markets have calmed somewhat after experiencing heightened volatility amidst an escalation of trade disputes, and the continuing impacts of ongoing conflicts between Russia and Ukraine, and Israel and Hamas, as well as other conflicts globally.

All have the potential to reignite leading to economic uncertainty and geopolitical instability.

Domestically, a budget package which featured spending reforms and renewal of 2017 tax cuts, that had been scheduled to sunset, has been met favorably by markets, further lessening volatility.

The future economic outlook continues to be clouded pending the outcome of threatened tariffs amidst trade negotiations.

The FOMC has cited the potential for tariff induced rekindling of inflation in keeping interest rates unchanged year-to-date.

Any or all of the foregoing could ultimately have negative downstream effects on the Company's operating results, the extent of which is indeterminable at this time.

Use of Non-GAAP Financial Measures

15 unchanged sentences

A Federal Income Tax rate of 21.0% was used in 2025 and 2024.

For the three months ended March 31,

For the six months ended June 30, For the quarter ended June 30,

Dollars in thousands

2025 2024 2025 2024

Net interest income as presented $ 36,208 $ 29,955 $ 18,409 $ 15,075

5 unchanged sentences

The following table provides a reconciliation between the GAAP and non-GAAP efficiency ratio:

For the three months ended March 31,

For the six months ended June 30, For the quarter ended June 30,

Dollars in thousands

2025 2024 2025 2024

Non-interest expense, as presented $ 25,043 $ 23,011 $ 12,199 $ 11,250

10 unchanged sentences

The following table provides a reconciliation of average tangible common equity to the Company's consolidated financial statements, which have been prepared in accordance with GAAP:

For the three months ended March 31,

For the six months ended June 30, For the quarter ended June 30,

Dollars in thousands

2025 2024 2025 2024

Average shareholders' equity as presented $ 260,248 $ 244,202 $ 262,663 $ 244,321

3 unchanged sentences

The following table provides a reconciliation to Net Income:

For the three months ended March 31,

For the six months ended June 30, For the quarter ended June 30,

Dollars in thousands 2025 2024 2025 2024

Net Income, as presented $ 15,140 $ 12,192 $ 8,063 $ 6,171

credit loss (reduction) expense 392 (513)

credit loss expense (reduction) 878 (1) 486 512

income taxes expense 3,278 2,550 1,790 1,299

1 unchanged sentence

Executive Summary

Net income for the three months ended March 31, 2025 was $7.1 million, up $1.1 million or 17.5% from the same period in 2024.

Earnings per common share on a fully diluted basis were $0.63 for the three months ended March 31, 2025, up $0.09 or 17.0% from the $0.54 posted for the same period in 2024.

Net income for the six months ended June 30, 2025 was $15.1 million, up $2.9 million or 24.2% from the same period in 2024.

Earnings per common share on a fully diluted basis were $1.35 for the six months ended June 30, 2025, up $0.26 or 23.6% from the $1.10 posted for the same period in 2024.

Dividends totaling $0.73 per share have been declared year-to-date, representing a payout to our shareholders of 53.4% of basic earnings per share for the period.

Net interest income on a tax-equivalent basis was up $3.0 million or 19.0% in the three months ended March 31, 2025 compared to the same period in 2024.

The tax equivalent net interest margin for the three months ended March 31, 2025, was 2.48%, up from 2.22% for the same period in 2024.

The period-to-period change in net interest income and net interest margin is primarily attributable to an increase in the tax equivalent yield on earning assets coupled with decrease in the cost of total liabilities.

Non-interest income for the three months ended March 31, 2025 was $4.0 million, up $362,000 or 9.9%, from the three months ended March 31, 2024.

For the quarter ended June 30, 2025, net income was $8.1 million, up $1.9 million or 30.7% from the same period in 2024.

Earnings per common share on a fully diluted basis were $0.72 for the quarter ended June 30, 2025, up $0.17 or 30.0% from the $0.55 posted for the same period in 2024.

Net interest income on a tax-equivalent basis was up $6.3 million or 20.1% in the six months ended June 30, 2025 compared to the same period in 2024.

The tax equivalent net interest margin for the six months ended June 30, 2025, was 2.50%, up from 2.21% for the same period in 2024.

The period-to-period change in net interest income and net interest margin is attributable to favorable changes on both sides of the balance sheet as an increase in tax equivalent yield on earning assets was coupled with decrease in the cost of total liabilities.

For the quarter ended June 30, 2025, net interest income on a tax-equivalent

basis increased $3.3 million or 21.2% compared to the same period in 2024, with the net interest margin at 2.52% compared to 2.21% for the same period in 2024.

Non-interest income for the six months ended June 30, 2025 was $8.1 million, up $334,000 or 4.3%, from the six months ended June 30, 2024.

As compared to the prior year, service charges on deposit accounts were up $29,000, or 2.8%, and debit card revenue decreased $63,000, or 2.5%.

Revenue at First National Wealth Management increased $196,000 or 8.0% over the same period and mortgage banking revenue increased $97,000 or 30.4%.

Non-interest expense for the three months ended March 31, 2025 was $12.8 million, up $1.1 million or 9.2% from the three months ended March 31, 2024.

Non-interest expense for the six months ended June 30, 2025 was $25.0 million, up $2.0 million or 8.8% from the six months ended June 30, 2024.

FDIC insurance premiums increased $269,000 from the same period in 2024, salaries and employee benefits increased 12.7% and other operating expense increased 1.8% over the same period.

Asset quality continues to be strong and stable.

Non-performing assets stood at 0.19% of total assets as of March 31, 2025, up slightly from 0.14% of total assets as of December 31, 2024 and up from 0.09% of total assets as of March 31, 2024.

Total past-due loans remain low and were 0.33% of total loans as of March 31, 2025, down from 0.40% and up from 0.09% of total loans as of December 31, 2024 and March 31, 2024, respectively.

The provision for credit losses on loans for the first three months of 2025 was $396,000, up from the $99,000 provisioned in the same period in 2024.

Net charge-offs for the three months ended March 31, 2025 were $153,000 or 0.026% of average loans on an annualized basis, compared to net recoveries of $78,000 or 0.015% as of the three months ended March 31, 2024.

The ACL for loans increased $243,000 between December 31, 2024 and March 31, 2025, and now stands at 1.05% of loans outstanding as of March 31, 2025, as compared to 1.06% at December 31, 2024 and 1.11% at March 31, 2024.

The Company's balance sheet continued to expand in the first three months of 2025 as total assets increased $30.4 million or 1.0% year-to-date.

The loan portfolio increased $42.2 million or 1.8% in the three months ended March 31, 2025 and $209.4 million or 9.6% from a year ago.

Loan growth in the first three months of 2025 was centered in the commercial and residential portfolios.

Commercial loans increased by $30.9 million during the period, led by increases in owner-occupied commercial real estate of $11.9 million, non-owner occupied commercial real estate of $9.6 million, commercial & industrial loans of $14.0 million and multifamily of $22.3 million.

Residential term and home equity loans each increased by $8.5 million in the first three months of 2025.

Non-performing assets stood at 0.19% of total assets as of June 30, 2025, unchanged from December 31, 2024 and up modestly from 0.09% of total assets as of June 30, 2024.

Total past-due loans remain low and were 0.23% of total loans as of June 30, 2025, down from 0.40% and up from 0.15% of total loans as of December 31, 2024 and June 30, 2024, respectively.

The provision for credit losses on loans for the first six months of 2025 was $744,000, up from the $638,000 provisioned in the same period in 2024.

Net charge-offs for the six months ended June 30, 2025 were $786,000 or 0.067% of average loans on an annualized basis, compared to net recoveries of $25,000 or 0.002% as of the six months ended June 30, 2024.

The ACL for loans decreased $42,000 between December 31, 2024 and June 30, 2025, and now stands at 1.04% of loans outstanding as of June 30, 2025, as compared to 1.06% at December 31, 2024 and 1.10% at June 30, 2024.

The Company's balance sheet continued to expand in the first six months of 2025 as total assets increased $42.5 million or 1.3% year-to-date.

The loan portfolio increased $53.1 million or 2.3% in the six months ended June 30, 2025 and $146.3 million or 6.5% from a year ago.

Loan growth in the first six months of 2025 was centered in the commercial and residential portfolios.

Commercial loans increased by $31.4 million during the period, led by increases in owner-occupied commercial real estate of $12.7 million, non-owner occupied commercial real estate of $20.7 million, commercial & industrial loans of $15.6 million and multifamily of $28.2 million, and partially offset by a decrease of $46.6 million in the construction segment.

Residential term increased by $13.5 million and home equity loans increased by $11.2 million in the first six months of 2025.

The investment portfolio increased $2.3 million year-to-date and decreased $4.3 million from a year ago based upon cash flow of amortizing securities, limited reinvestment or new purchases, and changes in the carrying value of AFS securities.

1 unchanged sentence

Low-cost deposits (Demand, NOW, Savings) followed typical seasonal patterns and decreased $95.5 million in the period, money market balances increased $11.6 million, and local CDs decreased $3.6 million, year-to-date.

To balance this activity and to support earning asset growth, wholesale CDs have increased $60.2 year-to-date and borrowings have increased by $39.2 million.

To balance this activity and to support earning asset growth, wholesale CDs have increased $67.7 million year-to-date and borrowings have increased by $49.9 million.

Remaining well capitalized is a top priority for The Company.

The Company's total risk-based capital ratio was 13.12% as of March 31, 2025, solidly above the well-capitalized threshold of 10.0% set by the FDIC, the FRBB, and the OCC.

Among the Company's operating ratios, the return on average assets was 0.91% and return on average tangible common equity of 12.64% for the three months ended March 31, 2025 compared to 0.82% and 11.36%, respectively, for the same period in 2024.

Our non-GAAP efficiency ratio continues to be an important component in the Company's overall performance and stood at 56.93% for the three months ended March 31, 2025 compared to 61.15% for the same period in 2024, the change being attributable primarily to higher levels of net interest income.

The Company's total risk-based capital ratio was 13.31% as of June 30, 2025, solidly above the well-capitalized threshold of 10.0% set by the FDIC, the FRBB, and the OCC.

Among the Company's operating ratios, the return on average assets was 0.96% and return on average tangible common equity of 13.31% for the six months ended June 30, 2025 compared to 0.82% and 11.49%, respectively, for the same period in 2024.

Our non-GAAP efficiency ratio continues to be an important component in the Company's overall performance and stood at 54.63% for the six months ended June 30, 2025 compared to 58.70% for the same period in 2024, the change being attributable primarily to higher levels of net interest income.

Net Interest Income

Total interest income of $38.7 million for the three months ended March 31, 2025 was an increase of $3.7 million or 10.6% compared to total interest income of $35.0 million for the same period of 2024.

All of the increase is attributable to the loan portfolio which benefited from both greater volume and higher average yields as compared to the prior year.

Total interest expense of $20.9 million for the three months ended March 31, 2025, was an increase of $802,000 or 4.0% compared to total interest expense for the three months ended March 31, 2024.

Total interest income of $78.5 million for the six months ended June 30, 2025 was an increase of $7.0 million or 9.8% compared to total interest income of $71.5 million for the same period of 2024.

Nearly all of the increase is attributable to the loan portfolio which benefited from both greater volume and higher average yields as compared to the prior year.

Total interest expense of $42.3 million for the six months ended June 30, 2025, was an increase of $735,000 or 1.8% compared to total interest expense for the six months ended June 30, 2024.

The increase was concentrated within borrowed funds expense which was up $734,000 based mostly in higher utilization of FHLB funding as compared to the prior year.

As a result, net interest income of $17.8 million for the three months ended March 31, 2025 was an increase of $2.9 million or 19.6% compared to net interest income of $14.9 million for the same period ended March 31, 2024.

The Company's net interest margin on a tax-equivalent basis for the three months ended March 31, 2025 was 2.48%, up from 2.22% for the first three months of 2024.

Tax-exempt interest income amounted to $2.7 million for the three months ended March 31, 2025 compared to $2.5 million for the three months ended March 31, 2024.

The following table presents the amount of interest earned or paid, as well as the average yield or rate on an annualized basis, for each major category of assets or liabilities for the three months ended March 31, 2025 and 2024.

As a result, net interest income of $36.2 million for the six months ended June 30, 2025 was an increase of $6.3 million or 20.9% compared to net interest income of $30.0 million for the same period ended June 30, 2024.

The Company's net interest margin on a tax-equivalent basis for the six months ended June 30, 2025 was 2.50%, up from 2.21% for the first six months of 2024.

Tax-exempt interest income amounted to $5.3 million for the six months ended June 30, 2025 compared to $5.1 million for the six months ended June 30, 2024.

Tax-exempt income is calculated on a tax-equivalent basis, using a 21.0% Federal Income Tax rate.

For the three months ended

March 31, 2025 March 31, 2024

For the six months ended

June 30, 2025 June 30, 2024

Dollars in thousands

13 unchanged sentences

Net interest margin 2.50 % 2.21 %

The following table presents changes in interest income and expense attributable to changes in interest rates and volume for interest-earning assets and liabilities for the three months ended March 31, 2025 compared to 2024.

For the quarters ended

June 30, 2025 June 30, 2024

Dollars in thousands

interest Average

Yield/Rate Amount of

interest Average

Interest on earning assets

Interest-bearing deposits $ 51 4.89 % $ 56 5.59 %

Investments 5,280 3.24 % 5,192 3.19 %

Loans 35,192 5.91 % 31,996 5.81 %

Total interest-earning assets 40,523 5.34 % 37,244 5.22 %

Interest expense

Deposits 19,725 3.25 % 19,816 3.47 %

Other borrowings 1,691 3.57 % 1,667 3.61 %

Total interest expense 21,416 3.28 % 21,483 3.48 %

Net interest income $ 19,107 $ 15,761

Interest rate spread 2.06 % 1.74 %

Net interest margin 2.52 % 2.21 %

The following table presents changes in interest income and expense attributable to changes in interest rates and volume for interest-earning assets and liabilities for the six months and quarters ended June 30, 2025 compared to 2024.

Tax-exempt income is calculated on a tax-equivalent basis, using a 21% Federal Income Tax rate.

For the three months ended March 31, 2025 compared to 2024

For the six months ended June 30, 2025 compared to 2024

Dollars in thousands

12 unchanged sentences

1 Represents the change attributable to a combination of change in rate and change in volume.

For the quarter ended June 30, 2025 compared to 2024

Dollars in thousands

Volume Rate Rate/Volume 1

Interest on earning assets

Interest-bearing deposits $ 2 $ (7) $ — $ (5)

Investment securities (5) 93 — 88

Loans held for sale — — — —

Loans 2,523 624 49 3,196

Change in interest income 2,520 710 49 3,279

Interest expense

Deposits 1,156 (1,178) (69) (91)

Other borrowings 35 (11) — 24

Change in interest expense 1,191 (1,189) (69) (67)

Change in net interest income $ 1,329 $ 1,899 $ 118 $ 3,346

Average Daily Balance Sheets

The following table shows the Company's average daily balance sheets for the three months ended March 31, 2025 and 2024:

For the three months ended

The following table shows the Company's average daily balance sheets for the six months and quarters ended June 30, 2025 and 2024:

For the six months ended For the quarters ended

Dollars in thousands

March 31, 2025 March 31, 2024

June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024

Cash and cash equivalents $ 24,811 $ 24,002 $ 26,042 $ 24,485

Interest-bearing deposits in other banks 4,181 4,867 4,186 4,030

Securities available for sale (includes tax exempt securities of $36,342 and $36,483 at March 31, 2025 and 2024, respectively)

Securities available for sale (includes tax exempt securities of $36,342 and $36,483 at June 30, 2025 and 2024, respectively)

277,300 272,772 277,824 269,647

Securities to be held to maturity, net of ACL (included tax exempt securities of $250,855 and $253,342 at March 31, 2025 and 2024, respectively)

Securities to be held to maturity, net of ACL (included tax exempt securities of $250,865 and $252,892 at June 30, 2025 and 2024, respectively)

368,660 380,487 368,199 378,076

33 unchanged sentences

Non-Interest Income

Non-interest income of $4.0 million for the three months ended March 31, 2025 is an increase of $362,000 compared to the same period in 2024.

Non-interest income of $8.1 million for the six months ended June 30, 2025 is an increase of $334,000 compared to the same period in 2024.

Service charges on deposit accounts were up $29,000, or 2.8%, debit card revenue was down $63,000, or 2.5%, and revenue at First National Wealth Management increased $196,000 or 8.0%.

Over the same period, Mortgage banking revenue was up $97,000, or 30.4%.

Non-interest income of $4.1 million for the quarter ended June 30, 2025 is a decrease of $28,000 compared to the same period in 2024.

Non-Interest Expense

Non-interest expense of $12.8 million for the three months ended March 31, 2025 is an increase of 9.2% or $1.1 million compared to non-interest expense of $11.8 million for the same period in 2024.

Salaries and employee benefits increased $793,000, or 13.1%, attributable to a combination of salary adjustments, incentive compensation accruals, increased benefit costs, and several one-time expenses resulting from retirements.

Non-interest expense of $25.0 million for the six months ended June 30, 2025 is an increase of 8.8% or $2.0 million compared to non-interest expense of $23.0 million for the same period in 2024.

Salaries and employee benefits increased $1.5 million, or 12.7%, attributable to a combination of salary adjustments, incentive compensation accruals, increased benefit costs, and several one-time expenses resulting from retirements.

Furniture and equipment expense was up $134,000 or 4.8% on higher software costs, and other operating expense increased $101,000 or 1.8%.

FDIC insurance premiums increased by $269,000 due to balance sheet expansion.

Income taxes on operating earnings were $1.5 million for the three months ended March 31, 2025, up $237,000 from the same period in 2024.

The carrying value of the Company's investment portfolio increased by $5.3 million between December 31, 2024 and March 31, 2025 from $651.6 million to $656.8 million.

The change in value of the portfolio is attributable to a combination of incoming cash flow from amortizing investments, limited re-investment or new purchases, and the effects of interest rate movement on the fair value of AFS holdings.

As of March 31, 2025, mortgage-backed securities had a carrying value of $278.5 million and a fair value of $268.1 million.

Non-interest expense of $12.2 million for the quarter ended June 30, 2025 is an increase of 8.4% compared to non-interest expense of $11.3 million for the same period in 2024 due to the reasons mentioned.

Income taxes on operating earnings were $3.3 million for the six months ended June 30, 2025, up $728,000 from the same period in 2024.

The carrying value of the Company's investment portfolio increased by $2.3 million between December 31, 2024 and June 30, 2025 from $651.6 million to $653.9 million.

The positive change in value of the portfolio is attributable to the effects of interest rate movement on the fair value of AFS holdings, partially countered by limited re-investment of incoming cash flow from amortizing investments and limited new purchases.

As of June 30, 2025, mortgage-backed securities had a carrying value of $274.9 million and a fair value of $264.8 million.

Of this total, securities with a fair value of $74.8 million or 28.7% of the mortgage-backed portfolio were issued by GNMA and securities with a fair value of $185.7 million or 71.3% of the mortgage-backed portfolio were issued by FHLMC and FNMA.

15 unchanged sentences

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 AFS to HTM was $45,000 at March 31, 2025.

This compares to $47,000 and $54,000, net of taxes, at December 31, 2024 and March 31, 2024, respectively.

The remaining unamortized balance of the net unrealized losses for the securities transferred from AFS to HTM was $60,000 at June 30, 2025.

This compares to $47,000 and $51,000, net of taxes, at December 31, 2024 and June 30, 2024, respectively.

These securities were transferred as a part of the Company's overall investment and balance sheet strategies.

The following table sets forth the Company's investment securities at their carrying amounts as of March 31, 2025 and 2024 and December 31, 2024.

The following table sets forth the Company's investment securities at their carrying amounts as of June 30, 2025 and 2024 and December 31, 2024.

Dollars in thousands

March 31, 2025 December 31, 2024 March 31, 2024

June 30, 2025 December 31, 2024 June 30, 2024

Securities available for sale

19 unchanged sentences

In conjunction with adoption, holdings of AFS Securities and HTM securities were evaluated to determine the need to establish an ACL, if any.

The total ACL for HTM securities was $197,000 as of March 31, 2025, $196,000 as of December 31, 2024 and $182,000 March 31, 2024.

The total ACL for HTM securities was $198,000 as of June 30, 2025, $196,000 as of December 31, 2024 and $149,000 June 30, 2024.

Further details are included in Note 2 of the accompanying financial statements.

The following table sets forth yields and contractual maturities of the Company's investment securities as of March 31, 2025.

The following table sets forth yields and contractual maturities of the Company's investment securities as of June 30, 2025.

Yields on tax-exempt securities have been computed on a tax-equivalent basis using a tax rate of 21%.

35 unchanged sentences

AFS Debt Securities in an Unrealized Loss Position

The securities portfolio contains certain AFS securities where the amortized cost of which exceeds fair value, which at March 31, 2025 amounted to $49.4 million, or 14.98% of the amortized cost of the total securities portfolio.

The securities portfolio contains certain AFS securities where the amortized cost of which exceeds fair value, which at June 30, 2025 amounted to $47.6 million, or 14.64% of the amortized cost of the total securities portfolio.

At December 31, 2024, this amount was $54.2 million, or 16.48% of the amortized cost of total securities portfolio.

6 unchanged sentences

Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain internal assumptions and judgments regarding the future performance of the underlying collateral.

As of March 31, 2025, the Company had AFS debt securities in an unrealized loss position with a fair value of $247.7 million and unrealized losses of $49.4 million, as identified in the table below.

AFS Securities in a continuous unrealized loss position for more than twelve months amounted to a fair value of $232.6 million as of March 31, 2025, compared with $234.1 million at December 31, 2024.

As of June 30, 2025, the Company had AFS debt securities in an unrealized loss position with a fair value of $240.9 million and unrealized losses of $47.6 million, as identified in the table below.

AFS Securities in a continuous unrealized loss position for more than twelve months amounted to a fair value of $228.9 million as of June 30, 2025, compared with $234.1 million at December 31, 2024.

The Company has concluded that these securities are fully collectible and that no charge against the allowance is required.

This conclusion was based on the issuer's continued satisfaction of the securities obligations in accordance with their contractual terms and the expectation that the issuer will continue to do so, Management's intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in fair value which may be at maturity, the expectation that the Company will receive 100% of future contractual cash flows, as well as the evaluation of the fundamentals of the issuer's financial condition and other objective evidence.

The following table summarizes AFS debt securities in an unrealized loss position for which an ACL has not been recorded at March 31, 2025:

The following table summarizes AFS debt securities in an unrealized loss position for which an ACL has not been recorded at June 30, 2025:

Less than 12 months 12 months or more Total

12 unchanged sentences

Government-sponsored agencies & enterprises.

As of March 31, 2025, there were $5.6 million of unrealized losses on these securities compared to $6.2 million at December 31, 2024.

As of June 30, 2025, there were $5.5 million of unrealized losses on these securities compared to $6.2 million at December 31, 2024.

All of these securities were credit rated "AAA" or "AA+" by the major credit rating agencies.

5 unchanged sentences

Government-sponsored enterprises.

As of March 31, 2025, there were $36.4 million of unrealized losses on these securities compared with $41.0 million at December 31, 2024.

As of June 30, 2025, there were $34.7 million of unrealized losses on these securities compared with $41.0 million at December 31, 2024.

All of these securities were credit rated "AAA" or "AA+" by the major credit rating agencies.

2 unchanged sentences

Government-sponsored enterprises have minimal credit risk, as these agencies and enterprises play a vital role in the nation's financial markets.

Management believes that the unrealized losses at March 31, 2025 were attributable to changes in current market yields and spreads since the date the underlying securities were purchased, and that 100% of the amounts contractually due will be realized.

Management believes that the unrealized losses at June 30, 2025 were attributable to changes in current market yields and spreads since the date the underlying securities were purchased, and that 100% of the amounts contractually due will be realized.

The Company also has the ability and intent to hold these securities until a recovery of their amortized cost, which may be at maturity.

AFS Obligations of state and political subdivisions.

As of March 31, 2025, there were $7.4 million of unrealized losses on these securities compared to $6.9 million at December 31, 2024.

As of June 30, 2025, there were $7.4 million of unrealized losses on these securities compared to $6.9 million at December 31, 2024.

Municipal securities are supported by the general taxing authority of the municipality or a dedicated revenue stream, and, in the case of school districts, are generally supported by state aid.

At March 31, 2025, all municipal bond issuers were current on contractually obligated interest and principal payments.

The Company attributes the unrealized losses at March 31, 2025 to changes in prevailing market yields and pricing spreads since the date the underlying securities were purchased, combined with general market conditions.

At June 30, 2025, all municipal bond issuers were current on contractually obligated interest and principal payments.

The Company attributes the unrealized losses at June 30, 2025 to changes in prevailing market yields and pricing spreads since the date the underlying securities were purchased, combined with general market conditions.

The Company has the ability and intent to hold these securities until a recovery of their amortized cost, which may be at maturity, and believes that 100% of the amounts contractually due will be realized.

AFS Asset-backed securities.

As of March 31, 2025, there were $6,000 of unrealized losses on these securities compared with none at December 31, 2024.

As of June 30, 2025, there were $16,000 of unrealized losses on these securities compared with none at December 31, 2024.

These securities consist of U.S.

4 unchanged sentences

The Bank uses the FHLBB for a portion of its wholesale funding needs.

As of March 31, 2025, the Bank's investment in FHLBB stock totaled $6.5 million.

This compares to $6.2 million as of December 31, 2024 and $4.9 million as of March 31, 2024.

As of June 30, 2025, the Bank's investment in FHLBB stock totaled $6.7 million.

This compares to $6.2 million as of December 31, 2024 and $6.1 million as of June 30, 2024.

FHLBB stock is a non-marketable equity security and therefore is reported at cost, subject to adjustments for any observable market transactions on the same or similar instruments of the investee.

No impairment losses have been recorded through March 31, 2025.

No impairment losses have been recorded through June 30, 2025.

The Bank is also a member of the FRBB.

1 unchanged sentence

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 $1.0 million at March 31, 2025 and 2024, and December 31, 2024.

The Bank's investment in FRBB stock totaled $1.0 million at June 30, 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.

No impairment losses have been recorded through June 30, 2025.

The Bank will continue to monitor its investment in these restricted equity securities.

1 unchanged sentence

Loans held for sale are carried at the lower of cost or market value.

There were no loans held for sale as of March 31, 2025 and 2024 and December 31, 2024.

There were no loans held for sale as of June 30, 2025 and 2024 and December 31, 2024.

The Company provides loans to customers within our market area, the State of Maine, with very limited exposures outside of Maine.

Loans are originated primarily via our network of branch offices, along with an online channel for residential mortgage loans.

The loan portfolio increased during the first three months of 2025, with total loans at $2.38 billion at March 31, 2025, up $42.2 million or 1.8% from total loans of $2.34 billion at December 31, 2024.

Commercial loans increased $30.9 million or 2.2% between December 31, 2024 and March 31, 2025, municipal loans decreased $6.7 million or 10.9%, and both residential term loans and home equity lines of credit increased $8.5 million.

The loan portfolio increased during the first six months of 2025, with total loans at $2.39 billion at June 30, 2025, up $53.1 million or 2.3% from total loans of $2.34 billion at December 31, 2024.

Commercial loans increased $31.4 million or 2.3% between December 31, 2024 and June 30, 2025, municipal loans increased $1.1 million or 1.8%, residential term loans increased $13.5 million, and home equity lines of credit increased $11.2 million.

The loan portfolio is segmented into eleven classes.

5 unchanged sentences

Further descriptions of each class, and the risk factors associated with each, are included in Note 4 of the accompanying financial statements.

The following table summarizes the loan portfolio, by class, at March 31, 2025 and 2024 and December 31, 2024.

The following table summarizes the loan portfolio, by class, at June 30, 2025 and 2024 and December 31, 2024.

Dollars in thousands

March 31, 2025 December 31, 2024 March 31, 2024

June 30, 2025 December 31, 2024 June 30, 2024

Real estate owner occupied $ 371,332 15.5 % $ 358,588 15.3 % $ 341,043 15.1 %

10 unchanged sentences

Total loans $ 2,394,007 100.0 % $ 2,340,940 100.0 % $ 2,247,670 100.0 %

The following table sets forth certain information regarding the contractual maturities of the Bank's loan portfolio as of March 31, 2025.

The following table sets forth certain information regarding the contractual maturities of the Bank's loan portfolio as of June 30, 2025.

Dollars in thousands

12 unchanged sentences

Total loans $ 139,596 $ 518,423 $ 170,667 $ 1,565,321 $ 2,394,007

The following table provides a listing of loans by class, between variable and fixed rates as of March 31, 2025.

The following table provides a listing of loans by class, between variable and fixed rates as of June 30, 2025.

Fixed-Rate Adjustable-Rate Total

14 unchanged sentences

Loan Concentrations

As of March 31, 2025 and 2024, the Bank had two concentration of loans in two particular industries that exceeded 10% of its total loan portfolio:

(1) loans to hotels (except Casino hotels) and motels, totaling $253.4 million, or 10.63% and $231.5 million, or 10.65% of total loans, respectively;

and (2) loans to lessors of residential buildings and dwellings, totaling $266.7 million, or 11.19% and $229.5 million, or 10.56% of total loans, respectively.

As of June 30, 2025, the Bank had one concentration of loans in one particular industry that exceeded 10% of its total loan portfolio:

(1) loans to lessors of residential buildings and dwellings, totaling $272.0 million, or 11.36% of total loans.

This compares to two concentrations of loans in one particular industry that exceeded 10% of its total loan portfolio:

(1) loans to hotels (except Casino hotels) and motels, totaling $246.0 million, or 10.95% of total loans, and (2) loans to lessors of residential buildings and dwellings, $243.3 million, or 10.83% of total loans, as of June 30, 2024.

Credit Risk Management and Allowance for Credit Losses on Loans

22 unchanged sentences

A specific reserve is allocated to an individual loan when the amount of a probable loss is estimable on the basis of its collateral value, the present value of anticipated future cash flows, or its net realizable value.

At March 31, 2025, IAL with specific reserves totaled $1.3 million and the amount of such reserves was $1.0 million.

At June 30, 2025, IAL with specific reserves totaled $729,000 and the amount of such reserves was $326,000.

This compares to IAL with specific reserves of $1.7 million at December 31, 2024 and the amount of such reserves was $1.0 million.

The total ACL on loans at March 31, 2025 is considered by Management to be appropriate to address the potential for credit losses inherent in the loan portfolio at that date.

The total ACL on loans at June 30, 2025 is considered by Management to be appropriate to address the potential for credit losses inherent in the loan portfolio at that date.

However, determination of the appropriate allowance level is based upon a number of assumptions made about future events, which management believes are reasonable, but which may or may not prove valid.

Thus, there can be no assurance charge-offs in future periods will not exceed the ACL or that additional increases in the ACL will not be necessary.

The following table summarizes the allocation of allowance by loan class as of March 31, 2025 and 2024 and December 31, 2024.

The following table summarizes the allocation of allowance by loan class as of June 30, 2025 and 2024 and December 31, 2024.

The percentages are the portion of each loan class to total loans.

Dollars in thousands

March 31, 2025 December 31, 2024 March 31, 2024

June 30, 2025 December 31, 2024 June 30, 2024

Real estate owner occupied $ 5,195 15.5 % $ 5,045 15.3 % $ 5,253 15.1 %

10 unchanged sentences

Total $ 24,829 100.0 % $ 24,871 100.0 % $ 24,693 100.0 %

A breakdown of the ACL on loans as of March 31, 2025, by loan class and allowance element, is presented in the following table:

A breakdown of the ACL on loans as of June 30, 2025, by loan class and allowance element, is presented in the following table:

Dollars in thousands

13 unchanged sentences

Based upon Management's evaluation, provisions are made to maintain the allowance as a best estimate of expected losses within the portfolio.

The provision for credit losses to maintain the allowance was $396,000 for the first three months of 2025 and $99,000 the first three months of 2024.

Net charge-offs were $153,000 in the first three months of 2025, compared to net recoveries of $78,000 in the first three months of 2024.

The ACL as a percentage of outstanding loans was 1.05% as of March 31, 2025, down slightly from 1.06% as of December 31, 2024, and down from 1.11% as of March 31, 2024.

The following table summarizes the activities in the ACL for the three months ended March 31, 2025 and 2024 and for the year ended December 31, 2024:

The provision for credit losses to maintain the allowance was $744,000 for the first six months of 2025 and $638,000 the first six months of 2024.

Net charge-offs were $786,000 in the first six months of 2025, compared to net recoveries of $25,000 in the first six months of 2024.

The ACL as a percentage of outstanding loans was 1.04% as of June 30, 2025, down slightly from 1.06% as of December 31, 2024, and down from 1.10% as of June 30, 2024.

The following table summarizes the activities in the ACL for the six months ended June 30, 2025 and 2024 and for the year ended December 31, 2024:

Dollars in thousands

March 31, 2025 December 31, 2024 March 31, 2024

June 30, 2025 December 31, 2024 June 30, 2024

Balance at the beginning of period $ 24,871 $ 24,030 $ 24,030

32 unchanged sentences

Utilization assumptions are based upon an independent analysis of the Bank's historical data.

The ACL for unfunded commitments is reported on the Company's consolidated balance sheets within other liabilities and totaled $709,000 as of March 31, 2025.

The ACL for unfunded commitments is reported on the Company's consolidated balance sheets within other liabilities and totaled $846,000 as of June 30, 2025.

Nonperforming Loans

7 unchanged sentences

On an ongoing basis, appraisals or valuations may be done periodically on collateral dependent nonperforming loans and an additional specific reserve or write down will be made, if appropriate, based on the new collateral value.

Once a loan is placed on nonaccrual, it remains in nonaccrual status until the loan is current as to payment of both principal and interest and the borrower demonstrates the ability to pay and remain current.

All payments made on nonaccrual loans are applied to the principal balance of the loan.

Nonperforming loans, expressed as a percentage of total loans, totaled 0.25% at March 31, 2025 compared to 0.18% at December 31, 2024 and 0.12% at March 31, 2024.

The following table shows the distribution of nonperforming loans by class as of March 31, 2025 and 2024 and December 31, 2024:

Once a loan is placed on non-accrual, it remains in non-accrual status until the loan is current as to payment of both principal and interest and the borrower demonstrates the ability to pay and remain current.

All payments made on non-accrual loans are applied to the principal balance of the loan.

Nonperforming loans, expressed as a percentage of total loans, totaled 0.25% at June 30, 2025 compared to 0.18% at December 31, 2024 and 0.11% at June 30, 2024.

The following table shows the distribution of nonperforming loans by class as of June 30, 2025 and 2024 and December 31, 2024:

Dollars in thousands

March 31, 2025 December 31, 2024 March 31, 2024

June 30, 2025 December 31, 2024 June 30, 2024

Real estate owner occupied $ 522 553 $ 383

13 unchanged sentences

These are loans for which we expect to collect all amounts due, including past-due interest.

As of March 31, 2025, loans 90 or more days past due and still accruing interest totaled $695,000, compared to $1.0 million at December 31, 2024 and $50,000 at March 31, 2024.

As of June 30, 2025, loans 90 or more days past due and still accruing interest totaled $457,000, compared to $1.0 million at December 31, 2024 and $87,000 at June 30, 2024.

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

2 unchanged sentences

Past Due Loans

The Bank's overall loan delinquency ratio was 0.33% at March 31, 2025 compared to 0.40% at December 31, 2024 and 0.09% at March 31, 2024.

Loans 90 or more days delinquent and accruing decreased from $1.0 million at December 31, 2024 to $695,000 as of March 31, 2025.

The following table sets forth loan delinquencies as of March 31, 2025 and 2024 and December 31, 2024:

The Bank's overall loan delinquency ratio was 0.23% at June 30, 2025 compared to 0.40% at December 31, 2024 and 0.15% at June 30, 2024.

Loans 90 or more days delinquent and accruing decreased from $1.0 million at December 31, 2024 to $457,000 as of June 30, 2025.

The following table sets forth loan delinquencies as of June 30, 2025 and 2024 and December 31, 2024:

Dollars in thousands

March 31, 2025 December 31, 2024 March 31, 2024

June 30, 2025 December 31, 2024 June 30, 2024

Real estate owner occupied $ 395 $ 549 $ 950

18 unchanged sentences

Based on historical experience, the credit quality of some of these loans may improve due to improvements in the economy as well as changes in collateral values or the financial condition of the borrowers, while the credit quality of other loans may deteriorate, resulting in some amount of loss.

At March 31, 2025, there were two potential problem loans reported with a balance of $18,000 or 0.001% of total loans.

At June 30, 2025, there were two potential problem loans reported with a balance of $106,000 or 0.004% of total loans.

This compares to one potential problem loan with a balance of $84,000 or 0.004% of total loans at December 31, 2024.

As of March 31, 2025, there were four residential loans in the process of foreclosure totaling $1.2 million.

As of June 30, 2025, there were two residential loans in the process of foreclosure totaling $859,000.

The Bank's residential foreclosure process begins when a loan becomes 75 days past due at which time a Demand/Breach Letter is sent to the borrower.

3 unchanged sentences

A foreclosure auction date is then set 30 days from the POR expiration date if the default is not cured.

As of March 31, 2025, there were no commercial loans in the process of foreclosure.

As of June 30, 2025, there were no commercial loans in the process of foreclosure.

The Bank's commercial foreclosure process begins when a loan becomes 60 days past due, at which time a default letter is issued.

7 unchanged sentences

There were no issues requiring management attention in the most recent review.

Servicing for others includes loans sold to FHLMC, FNMA, and the FHLBB through its MPF program.

Servicing for others includes loans sold to

FHLMC, FNMA, and the FHLBB through its MPF program.

The Bank follows the published guidelines of each investor.

6 unchanged sentences

Real estate acquired through foreclosure is carried at the lower of fair value less estimated cost to sell or the cost of the asset and is not included as part of the ACL totals.

At March 31, 2025 and 2024, there were no OREO properties and no allowance for losses.

This compares to December 31, 2024, when there was one OREO property with a balance of $173,000, net of an allowance for OREO losses of $35,000.

The table below presents the composition of OREO at March 31, 2025 and 2024, and December 31, 2024:

At June 30, 2025 there were no OREO properties and no allowance for losses.

This compares to December 31, 2024, when there was one OREO property with a balance of $173,000, net of an allowance for OREO losses of $35,000, and June 30, 2024, when there was one OREO property with a balance of 208,000, with no allowance for losses.

The table below presents the composition of OREO at June 30, 2025 and 2024, and December 31, 2024:

Dollars in thousands

March 31, 2025 December 31, 2024 March 31, 2024

June 30, 2025 December 31, 2024 June 30, 2024

Carrying Value

8 unchanged sentences

Consumer — — —

Term — 173 208

Construction — — —

3 unchanged sentences

Liquidity is the ability of a financial institution to meet maturing liability obligations, depositor withdrawal requests, and customer loan demand.

The Bank's lead source of liquidity is deposits, including brokered deposits, which funded 85.0% of total average assets in the first three months of 2025, down slightly from 86.5% a year ago.

The Bank's lead source of liquidity is deposits, including brokered deposits, which funded 85.0% of total average assets in the first six months of 2025, down slightly from 85.7% a year ago.

Other sources of funding include discretionary use of purchased liabilities (e.g., FHLBB term or overnight advances, and other borrowings), cash flows from the securities portfolio and loan repayments.

15 unchanged sentences

Government or Agency bond collateral, available capacity at FHLBB, and available authorized brokered deposit issuance capacity.

As of March 31, 2025, the Bank had primary sources of contingent liquidity of $881.0 million or 27.9% of its total assets.

As of June 30, 2025, the Bank had primary sources of contingent liquidity of $872.0 million or 27.5% of its total assets.

It is Management's opinion that this is an appropriate level.

5 unchanged sentences

As the sole shareholder of the Bank, the Company is entitled to such dividends when and as declared by the Bank's Board of Directors from legally available funds.

For the three-months periods ended March 31, 2025 and 2024 the Bank declared dividends to the Company of $4.0 million and $3.9 million, respectively.

For the six-month periods ended June 30, 2025 and 2024 the Bank declared dividends to the Company of $8.2 million and $7.9 million, respectively.

The Bank's regulator, the OCC, may limit the amount of dividends declared and paid in a calendar year based upon certain factors.

Further discussion may be found in Shareholder's Equity below.

During the first three months of 2025, total deposits decreased by $13.9 million or 0.5% from December 31, 2024 levels.

The Bank generally experiences a modest decline in deposit balances in the first quarter of each year due to seasonal effects.

In the first three months of 2025 low-cost deposits (demand, NOW, and savings accounts) decreased by $91.0 million or 7.4% .

During the first six months of 2025, total deposits decreased by $19.9 million or 0.7% from December 31, 2024 levels.

The Bank generally experiences a modest decline in deposit balances in the first six months of each year due to seasonal effects.

In the first six months of 2025 low-cost deposits (demand, NOW, and savings accounts) decreased by $95.5 million or 7.7% .

Money market deposits increased $11.6 million or 3.1%, and certificates of deposit increased $64.0 million or 5.7% as depositors shifted balances to higher cost product types and brokered certificates of deposit were issued to support earning asset growth.

The decrease in low-cost deposits for the period was consistent with Management's estimates based upon historical seasonal deposit behaviors.

Between March 31, 2024 and March 31, 2025, total deposits increased by $162.3 million or 6.4%.

Between June 30, 2024 and June 30, 2025, total deposits increased by $127.3 million or 4.9%.

Low-cost deposits decreased by $10.9 million or 1.0%, money market accounts increased $71.1 million or 22.4%, and certificates of deposit increased $67.1 million or 6.0%.

Estimated uninsured deposits totaled $476.8 million or 17.6% of total deposits as of March 31, 2025, and $506.2 million or 18.6% of total deposits as of December 31, 2024.

Estimated uninsured deposits totaled $479.3 million or 17.7% of total deposits as of June 30, 2025, and $506.2 million or 18.6% of total deposits as of December 31, 2024.

The company has pledged assets as collateral covering certain deposits;

these amounts were $351.9 million and $349.8 million as of March 31, 2025 and December 31, 2024, respectively.

these amounts were $347.7 million and $349.8 million as of June 30, 2025 and December 31, 2024, respectively.

Borrowed Funds

1 unchanged sentence

This funding may also be used to balance seasonal deposit flows or to carry out interest rate risk management strategies, and may be used to replace or supplement other sources of funding, including core deposits and certificates of deposit.

During the three months ended March 31, 2025, borrowed funds increased $39.2 million.

This change consisted of a $59.9 million increase in short-term FHLBB advances, a $4.3 million increase in customer repurchase agreement balances, and a $25.0 million decrease in long-term advances from the FHLBB.

Between March 31, 2024 and March 31, 2025, borrowed funds increased by $30.7 million.

During the six months ended June 30, 2025, total borrowed funds increased $49.9 million.

This change consisted of a $36.1 million increase in short-term FHLBB advances and a $13.8 million increase in customer repurchase agreement balances;

long-term borrowings from FHLBB were unchanged.

Between June 30, 2024 and June 30, 2025, total borrowed funds decreased by $34.5 million centered in redemption of a $25.0 million advance from FRBB under the Bank Term Financing Program.

Capital Resources

Shareholders' equity as of March 31, 2025 was $259.7 million, compared to $252.5 million as of December 31, 2024 and $242.6 million as of March 31, 2024.

The Company's earnings in the first three months of 2025, net of dividends declared, added $3.0 million to shareholders' equity.

The net unrealized loss on AFS securities, net of tax, presented in accordance with FASB ASC Topic 320 "Investments – Debt and Equity Securities" stands at $38.7 million as of March 31, 2025 and was $42.7 million as of December 31, 2024.

Shareholders' equity as of June 30, 2025 was $265.5 million, compared to $252.5 million as of December 31, 2024 and $244.7 million as of June 30, 2024.

The Company's earnings in the first six months of 2025, net of dividends declared, added $7.0 million to shareholders' equity.

The net unrealized loss on AFS securities, net of tax, presented in accordance with FASB ASC Topic 320 "Investments – Debt and Equity Securities" stands at $37.2 million as of June 30, 2025 and was $42.7 million as of December 31, 2024.

Additional information about the net unrealized loss on AFS securities was provided in Note 2 of the Consolidated Financial Statements and in the AFS Debit Securities section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

A cash dividend of $0.36 per share was declared in the first quarter of 2025.

The dividend payout ratio, which is calculated by dividing dividends declared per share by basic earnings per share, was 56.34% for the first three months of 2025 compared to 63.64% for the same period in 2024.

A cash dividend of $0.37 per share was declared in the second quarter of 2025.

The dividend payout ratio, which is calculated by dividing dividends declared per share by basic earnings per share, was 53.40% for the first six months of 2025 compared to 64.31% for the same period in 2024.

In determining future dividend payout levels, the Board of Directors carefully analyzes capital requirements and earnings retention, as set forth in the Company's Dividend Policy.

6 unchanged sentences

In order to avoid limitations on capital distributions, including dividend payments, the Company must hold a capital conservation buffer of 2.5% above the adequately capitalized risk-based capital ratios.

The Company met each of the well-capitalized ratio guidelines at March 31, 2025.

The following tables indicate the capital ratios for the Bank and the Company at March 31, 2025 and December 31, 2024:

As of March 31, 2025 Leverage Common Equity Tier 1 Tier 1 Total Risk-Based

The Company met each of the well-capitalized ratio guidelines at June 30, 2025.

The following tables indicate the capital ratios for the Bank and the Company at June 30, 2025 and December 31, 2024:

As of June 30, 2025 Leverage Common Equity Tier 1 Tier 1 Total Risk-Based

Bank 8.47 % 12.10 % 12.10 % 13.26 %

19 unchanged sentences

Derivative instruments that Management periodically uses as part of its interest rate risk management strategy may include interest rate swap agreements, interest rate floor agreements, and interest rate cap agreements.

At March 31, 2025, the Bank had one outstanding off-balance sheet, derivative instrument, designated as a cash flow hedge and four off-balance sheet, derivative instruments, designated as fair value hedges.

At June 30, 2025, the Bank had one outstanding off-balance sheet, derivative instrument, designated as a cash flow hedge and three off-balance sheet, derivative instruments, designated as fair value hedges.

These derivative instruments were interest rate swap agreements, with notional principal amounts totaling $75.0 million and $110.0 million, respectively, and an unrealized loss of $365,000, net of taxes.

2 unchanged sentences

The credit risk in derivative instruments is mitigated by entering into transactions with highly-rated counterparties that Management believes to be creditworthy and by limiting the amount of exposure to each counter-party.

At March 31, 2025, the Bank's derivative instrument counterparties had a composite credit rating of “A-” based upon the ratings of several major credit rating agencies.

At June 30, 2025, the Bank's derivative instrument counterparties had a composite credit rating of “A-” based upon the ratings of several major credit rating agencies.

The interest rate swap agreements were entered into by the Bank to limit its exposure to rising interest rates.

4 unchanged sentences

Credit risk is mitigated by prudent underwriting of the loan customer and financial institution counterparties.

As of March 31, 2025, the Bank had 12 loan swap agreements in place with a total notional value of $116.3 million.

As of June 30, 2025, the Bank had 12 loan swap agreements in place with a total notional value of $115.4 million.

Contractual Obligations

The following table sets forth the contractual obligations of the Company as of March 31, 2025:

The following table sets forth the contractual obligations of the Company as of June 30, 2025:

Dollars in thousands

6 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis