Lake Shore Bancorp, Inc. /MD/ 10-Q

10-Q United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q (Mark One)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2026  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 001-42754 LAKE SHORE BANCORP, INC. (Exact name of registrant as specified in its charter) Maryland 39-3058424 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 31 East Fourth Street , Dunkirk , New York 14048 (Address of principal executive offices) (Zip code) ( 716 ) 366-4070 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Exchange Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock, par value $0.01 per share LSBK The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller reporting company  Emerging growth company  If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: There were 7,853,788 shares of the registrant’s common stock, $0.01 par value per share, outstanding at August 6, 2026. TABLE OF CONTENTS ITEM PART I PAGE 1 FINANCIAL STATEMENTS - Consolidated Statements of Financial Condition as of June 30, 2026 (Unaudited) and December 31, 2025 1 - Consolidated Statements of Income for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) 2 - Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) 3 - Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) 4 - Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2026 and 2025 (Unaudited) 5 - Notes to Unaudited Consolidated Financial Statements 6 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 31 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 45 4 CONTROLS AND PROCEDURES 45 PART II 1A RISK FACTORS 46 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 46 5 OTHER INFORMATION 6 EXHIBITS 47 SIGNATURES 47 PA RT I Financial Information It em 1. Financial Statements Lake Shore Bancorp, Inc. and Subsidiary Consolidated Statements of Financial Condition (Unaudited) June 30, December 31, 2026 2025 (Dollars in thousands, except per share data) (Unaudited) Assets Cash and due from banks $ 3,073 $ 3,035 Interest-earning deposits 69,164 61,245 Cash and Cash Equivalents 72,237 64,280 Securities available for sale, at fair value 53,567 56,138 Federal Home Loan Bank stock, at cost 666 673 Loans receivable, net of allowance for credit losses of $ 4,747 in 2026 and $ 4,884 in 2025 558,317 555,441 Premises and equipment, net 6,856 7,050 Accrued interest receivable 2,964 3,007 Bank-owned life insurance 32,015 31,525 Other assets 10,030 9,209 Total Assets $ 736,652 $ 727,323 Liabilities and Stockholders' Equity Liabilities Deposits: Interest-bearing $ 481,764 $ 477,174 Non-interest-bearing 96,476 96,103 Total Deposits 578,240 573,277 Advances from borrowers for taxes and insurance 3,159 3,046 Other liabilities and accrued interest payable 10,492 9,361 Total Liabilities 591,891 585,684 Commitments and Contingencies Stockholders' Equity Preferred stock, $ 0.01 par value per share, 10,000,000 shares authorized at June 30, 2026 and December 31, 2025; no shares issued or outstanding at June 30, 2026 or December 31, 2025 — — Common stock, $ 0.01 par value per share, 40,000,000 shares authorized at June 30, 2026 and December 31, 2025; 7,863,818 shares issued and outstanding at June 30, 2026, including 84,829 unvested shares, and 7,836,100 shares issued and outstanding at December 31, 2025, including 80,094 unvested shares 79 78 Additional paid-in capital 65,841 65,577 Unearned shares held by ESOP ( 4,613 ) ( 4,711 ) Retained earnings 91,169 88,398 Accumulated other comprehensive loss ( 7,715 ) ( 7,703 ) Total Stockholders' Equity 144,761 141,639 Total Liabilities and Stockholders' Equity $ 736,652 $ 727,323 See notes to unaudited consolidated financial statements. 1 Lake Shore Bancorp, Inc. and Subsidiary Consolidated Statements of Income (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (Dollars in thousands, except per share data) (Unaudited) Interest Income Loans, including fees $ 8,464 $ 8,469 $ 16,696 $ 16,222 Investment securities, taxable 150 151 305 315 Investment securities, tax-exempt 198 217 396 433 Interest-earning deposits 576 270 1,045 504 Total Interest Income 9,388 9,107 18,442 17,474 Interest Expense Deposits 2,472 2,948 4,844 5,790 Long-term debt — 28 — 78 Finance lease and other 23 9 46 19 Total Interest Expense 2,495 2,985 4,890 5,887 Net Interest Income 6,893 6,122 13,552 11,587 Provision for Credit Losses 119 — 5 48 Net Interest Income After Provision for Credit Losses 6,774 6,122 13,547 11,539 Non-Interest Income Service charges and fees 272 273 522 510 Debit card fees 197 201 378 388 Earnings on bank-owned life insurance 249 221 491 438 Gain on equity securities — 65 — 111 Recovery on previously impaired investment securities — 1 — 2 Earnings on annuity assets 16 23 32 46 Other 15 16 29 29 Total Non-Interest Income 749 800 1,452 1,524 Non-Interest Expense Salaries and employee benefits 3,090 2,854 6,396 5,768 Occupancy and equipment 642 615 1,361 1,291 Data processing 426 457 786 916 Professional services 266 251 528 565 Telephone and communications 77 79 152 171 FDIC insurance 73 74 152 146 Postage and supplies 55 57 124 137 Advertising 4 15 12 26 Other 240 223 485 483 Total Non-Interest Expense 4,873 4,625 9,996 9,503 Income before Income Taxes 2,650 2,297 5,003 3,560 Income Tax Expense 477 378 907 585 Net Income $ 2,173 $ 1,919 $ 4,096 $ 2,975 Basic and diluted earnings per common share $ 0.29 $ 0.25 $ 0.56 $ 0.39 Dividends declared per share $ 0.09 $ — $ 0.18 $ 0.13 Share and per share amounts related to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give the retroactive recognition to the exchange ratio applied in the Conversion ( 1.3549 ) (see Note 1) See notes to unaudited consolidated financial statements. 2 Lake Shore Bancorp, Inc. and Subsidiary Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended June 30, 2026 2025 (Unaudited) (Dollars in thousands) Net Income $ 2,173 $ 1,919 Other Comprehensive Income, net of tax benefit: Unrealized holding gains on securities available for sale, net of tax expense 677 214 Reclassification adjustments related to: Recovery on previously impaired investment securities included in net income, net of tax expense — ( 1 ) Total Other Comprehensive Income 677 213 Total Comprehensive Income $ 2,850 $ 2,132 Six Months Ended June 30, 2026 2025 (Unaudited) (Dollars in thousands) Net Income $ 4,096 $ 2,975 Other Comprehensive (Loss) Income, net of tax benefit (expense): Unrealized holding (losses) gains on securities available for sale, net of tax benefit (expense) ( 12 ) 228 Reclassification adjustments related to: Recovery on previously impaired investment securities included in net income, net of tax expense — ( 2 ) Total Other Comprehensive (Loss) Income ( 12 ) 226 Total Comprehensive Income $ 4,084 $ 3,201 See notes to unaudited consolidated financial statements. 3 Lake Shore Bancorp, Inc. and Subsidiary Consolidated Statements of Stockholders’ Equity Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) Unearned Accumulated Additional Shares Other Common Paid-In Held by Retained Comprehensive Stock Capital ESOP Earnings Loss Total (Dollars in thousands, except per share data) Balance - January 1, 2026 $ 78 $ 65,577 $ ( 4,711 ) $ 88,398 $ ( 7,703 ) $ 141,639 Net income — — — 1,923 — 1,923 Other comprehensive loss, net of tax benefit of $ 184 — — — — ( 689 ) ( 689 ) ESOP shares earned ( 5,143 shares) — 29 49 — — 78 Compensation plan shares earned ( 8,833 shares) 1 120 — — — 121 Cash dividends declared ($ 0.09 per share) — — — ( 662 ) — ( 662 ) Common stock repurchased on vesting for payroll taxes ( 2,102 shares) — ( 32 ) — — — ( 32 ) Balance - March 31, 2026 79 65,694 ( 4,662 ) 89,659 ( 8,392 ) 142,378 Net income — — — 2,173 — 2,173 Other comprehensive income, net of tax expense of $ 180 — — — — 677 677 ESOP shares earned ( 5,143 shares) — 33 49 — — 82 Compensation plan shares earned ( 9,936 shares) — 129 — — — 129 Cash dividends declared ($ 0.09 per share) — — — ( 663 ) — ( 663 ) Exercise of 2012 EIP stock options ( 3,598 shares) — 35 — — — 35 Common stock repurchased on vesting for payroll taxes ( 3,168 shares) — ( 50 ) — — — ( 50 ) Balance - June 30, 2026 $ 79 $ 65,841 $ ( 4,613 ) $ 91,169 $ ( 7,715 ) $ 144,761 Unearned Accumulated Additional Shares Other Common Paid-In Treasury Held by Retained Comprehensive Stock Capital Stock ESOP Earnings Loss Total (Dollars in thousands, except per share data) Balance - January 1, 2025 $ 68 $ 31,201 $ ( 13,304 ) $ ( 938 ) $ 82,805 $ ( 9,964 ) $ 89,868 Net income — — — — 1,057 — 1,057 Other comprehensive income, net of tax expense of $ 3 — — — — — 13 13 ESOP shares earned ( 2,688 shares) — 10 — 21 — — 31 Compensation plan shares granted ( 36,849 shares) — ( 256 ) 256 — — — — Compensation plan shares earned ( 10,586 shares) — 89 — — — — 89 Cash dividends declared ($ 0.13 per share) — — — — ( 361 ) — ( 361 ) Common stock repurchased to treasury on vesting for payroll taxes ( 2,914 shares) — — ( 35 ) — — — ( 35 ) Balance - March 31, 2025 68 31,044 ( 13,083 ) ( 917 ) 83,501 ( 9,951 ) 90,662 Net income — — — — 1,919 — 1,919 Other comprehensive income, net of tax expense of $ 57 — — — — — 213 213 ESOP shares earned ( 2,688 shares) — 9 — 21 — — 30 Compensation plan shares earned ( 7,900 shares) — 76 — — — — 76 Common stock repurchased on vesting for payroll taxes ( 1,490 shares) — — ( 16 ) — — — ( 16 ) Balance - June 30, 2025 $ 68 $ 31,129 $ ( 13,099 ) $ ( 896 ) $ 85,420 $ ( 9,738 ) $ 92,884 Share and per share amounts related to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give the retroactive recognition to the exchange ratio applied in the Conversion ( 1.3549 ) (see Note 1) See notes to unaudited consolidated financial statements. 4 Lake Shore Bancorp, Inc. and Subsidiary Con solidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2026 2025 (Unaudited) (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,096 $ 2,975 Adjustments to reconcile net income to net cash provided by operating activities: Net amortization of investment securities 30 36 Net amortization of deferred loan costs 215 163 Provision for credit losses 5 48 Recovery on previously impaired investment securities — ( 2 ) Unrealized gain on equity securities — ( 111 ) Loss on disposal of premises and equipment — 2 Depreciation and amortization of premises and equipment 282 312 Deferred income tax benefit ( 191 ) ( 105 ) Increase in cash surrender value of bank-owned life insurance ( 491 ) ( 438 ) ESOP shares committed to be released 160 62 Stock based compensation expense 250 164 Decrease (increase) in accrued interest receivable 43 ( 59 ) Increase in other assets ( 289 ) ( 850 ) Increase in other liabilities 1,051 359 Increase in annuity assets ( 32 ) ( 46 ) Net Cash Provided by Operating Activities 5,129 2,510 CASH FLOWS FROM INVESTING ACTIVITIES Activity in debt securities: Maturities, prepayments, and calls 2,526 1,537 Purchases of Federal Home Loan Bank of New York Stock ( 6 ) — Redemptions of Federal Home Loan Bank of New York Stock 13 394 Loan principal collections and originations, net ( 3,019 ) ( 7,971 ) Proceeds from surrender of bank-owned life insurance — 651 Investment in limited partnership ( 248 ) — Additions to premises and equipment ( 88 ) ( 536 ) Net Cash Used In Investing Activities ( 822 ) ( 5,925 ) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 4,963 54,521 Net increase (decrease) in advances from borrowers for taxes and insurance 113 ( 159 ) Repayment of long-term debt — ( 8,250 ) Repayment of finance lease obligation ( 54 ) ( 49 ) Proceeds from stock options exercised 35 — Shares of common stock repurchased on vesting for payroll taxes ( 82 ) ( 51 ) Cash dividends paid ( 1,325 ) ( 361 ) Net Cash Provided by Financing Activities 3,650 45,651 Net Increase in Cash and Cash Equivalents 7,957 42,236 CASH AND CASH EQUIVALENTS - BEGINNING 64,280 33,131 CASH AND CASH EQUIVALENTS - ENDING $ 72,237 $ 75,367 SUPPLEMENTARY CASH FLOWS INFORMATION Interest paid $ 4,933 $ 5,946 Income taxes paid (U.S. Federal) $ 1,110 $ 681 Income taxes paid (NY State) $ — $ — SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Unrealized (loss) gain on securities available for sale $ ( 15 ) $ 288 Foreclosed real estate acquired in settlement of loans $ 57 $ — See notes to unaudited consolidated financial statements. 5 Lake Shore Bancorp, Inc. and Subsidiary Notes to Unaudited Consolidated Financial Statements Note 1 – Basis of Presentation and Significant Accounting Policies and Estimates The interim unaudited consolidated financial statements include the accounts of Lake Shore Bancorp, Inc. (the “Company”, "Lake Shore Bancorp," “us”, “our”, or “we”), and Lake Shore Bank (the “Bank”), its wholly owned subsidiary. All intercompany accounts and transactions of the consolidated subsidiary have been eliminated in consolidation. On July 18, 2025, the Company underwent a Second Step Conversion, as more fully described below. The interim unaudited consolidated financial statements included herein as of June 30, 2026 and for the three and six months ended June 30, 2026 and 2025 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"), and therefore, do not include all information or footnotes necessary for a complete presentation of the consolidated statements of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated balance sheet at December 31, 2025 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements. The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information and to make the financial statements not misleading. These interim unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The consolidated statements of income for the three and six months ended June 30, 2026 are not necessarily indicative of the results for any subsequent period or the entire year ending December 31, 2026 . The Company's significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in Note 2 of the audited consolidated financial statements and notes thereto for the year ended December 31, 2025 and are contained in the Company's 2025 Annual Report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2025. To prepare these unaudited consolidated financial statements in conformity with GAAP, management of the Company made a number of estimates and assumptions relating to the reporting of assets and liabilities and the reporting of revenue and expenses. Actual results could differ from those estimates. The allowance for credit losses is a material estimate that is particularly susceptible to significant change in the near term. Organizational Structure Lake Shore Bancorp, Inc. is the parent holding company for Lake Shore Bank. Lake Shore Bancorp, Inc., a federal corporation ("Lake Shore Federal Bancorp") and the former parent mutual holding company, Lake Shore, MHC (the “MHC”) were formed on April 3, 2006 to serve as the savings and loan holding companies for Lake Shore Savings Bank, upon Lake Shore Savings Bank’s initial conversion and reorganization from a New York State chartered mutual savings and loan association to the federal mutual holding company form of organization. On July 18, 2025, Lake Shore Bancorp, Inc., a new corporation incorporated under the laws of the State of Maryland, became the bank holding company of Lake Shore Bank upon the completion of a "second-step" conversion (the "Conversion"). Pursuant to the Conversion, Lake Shore Savings Bank, a federally chartered savings bank, the wholly-owned subsidiary of Lake Shore Federal Bancorp, reorganized from the two-tier mutual holding company structure to the fully-public stock holding company structure. In addition, Lake Shore Savings Bank converted its charter from a federal savings bank to a New York commercial bank renamed Lake Shore Bank. The Conversion was consummated through the merger of Lake Shore, MHC with and into Lake Shore Federal Bancorp, followed by the merger of Lake Shore Federal Bancorp with and into Lake Shore Bancorp. In the subscription offering, Lake Shore Bancorp raised gross proceeds of $ 49.5 million by selling 4,950,460 shares of its common stock (approximately the midpoint of the offering range) at $ 10.00 per share to depositors of the Bank. The Company used $ 4.0 million of the proceeds to fund an addition to its 6 Employee Stock Ownership Plan ("ESOP") loan for the acquisition of an additional 396,036 shares at $ 10.00 per share. Expenses incurred related to the offering were $ 2.3 million and have been recorded against offering proceeds. As part of the Conversion transaction, outstanding shares of Lake Shore Federal Bancorp common stock owned by the public stockholders of Lake Shore Federal Bancorp (stockholders other than Lake Shore, MHC) as of July 18, 2025 were converted into shares of Lake Shore Bancorp's common stock based on an exchange ratio of 1.3549 shares of Lake Shore Bancorp's common stock for each share of Lake Shore Federal Bancorp common stock so that Lake Shore Federal Bancorp's existing public stockholders would own approximately the same percentage of Lake Shore Bancorp's common stock as they owned of Lake Shore Federal Bancorp's common stock immediately prior to the Conversion. A total of 7,825,501 shares of common stock were outstanding immediately following the completion of the stock offering. Share and per share amounts related to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give retroactive recognition to the exchange ratio applied in the Conversion ( 1.3549 ). Subsequent Events The Company has evaluated events and transactions occurring subsequent to the statement of financial condition date of June 30, 2026 for items that should potentially be recognized or disclosed in the unaudited consolidated financial statements. The evaluation was conducted through the date these unaudited consolidated financial statements were issued. As previously disclosed on a Current Report on Form 8-K , on July 22, 2026, the Board of Directors of the Company declared a cash dividend of $ 0.09 per share on its outstanding common stock. The dividend is expected to be paid on August 12, 2026 to stockholders of record as of August 3, 2026 . As previously disclosed on a Current Report on Form 8-K , on October 22, 2025, the Company adopted a plan to repurchase up to 5 % of its outstanding shares of common stock. On July 28, 2026, the Company commenced repurchases of shares under this plan. Note 2 – New Accounting Standards Recent Accounting Standards Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, " Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) ." The amendments in this ASU require a public business entity to disclose additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods, including employee compensation, depreciation, intangible asset amortization, and other costs and expenses. Additionally, a public business entity must disclose a qualitative description of the amounts remaining in relevant expense captions which are not separately disaggregated quantitatively under the amendments included within this ASU. This ASU is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption of this ASU is permitted and may be applied prospectively to financial statements issued for reporting periods after the effective date of the ASU or retrospectively to any period presented in the financial statements. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements. In November 2025, the FASB issued ASU 2025-08, “ Financial Instruments—Credit Losses (Topic 326): Purchased Loans .” The amendments in this ASU expand the application of the gross-up approach for recognizing credit losses to certain acquired loans, referred to as purchased seasoned loans, which are recorded at acquisition at their purchase price plus an allowance for expected credit losses. Under this approach, the initial allowance for credit losses does not result in a day-one provision for credit losses, and subsequent changes in the allowance are recognized through earnings. The amendments are intended to reduce complexity and improve comparability in the accounting for acquired loans by aligning the treatment of purchased seasoned loans with that of purchased credit-deteriorated assets. This ASU is effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual periods, 7 and is to be applied prospectively to loans acquired on or after the adoption date. Early adoption is permitted. The Company does not expect the adoption of ASU 2025-08 to have a material impact on its consolidated financial statements. Note 3 – Investment Securities The amortized cost and fair value of securities are as follows: June 30, 2026 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value (Dollars in thousands) SECURITIES Debt Securities Available for Sale U.S. government agencies $ 2,004 $ — $ ( 100 ) 1,904 Municipal bonds 40,013 — ( 6,793 ) 33,220 Mortgage-backed securities: Collateralized mortgage obligations-private label 7 — ( 1 ) 6 Collateralized mortgage obligations-government sponsored entities 7,468 — ( 888 ) 6,580 Government National Mortgage Association 45 — ( 3 ) 42 Federal National Mortgage Association 9,286 — ( 1,241 ) 8,045 Federal Home Loan Mortgage Corporation 4,508 1 ( 740 ) 3,769 Asset-backed securities-government sponsored entities 1 — — 1 Total Debt Securities Available for Sale $ 63,332 $ 1 $ ( 9,766 ) $ 53,567 December 31, 2025 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value (Dollars in thousands) SECURITIES Debt Securities Available for Sale U.S. government agencies $ 2,004 $ — $ ( 67 ) $ 1,937 Municipal bonds 40,665 — ( 6,825 ) 33,840 Mortgage-backed securities: Collateralized mortgage obligations-private label 8 — — 8 Collateralized mortgage obligations-government sponsored entities 8,649 — ( 885 ) 7,764 Government National Mortgage Association 47 — ( 2 ) 45 Federal National Mortgage Association 9,772 1 ( 1,236 ) 8,537 Federal Home Loan Mortgage Corporation 4,742 1 ( 737 ) 4,006 Asset-backed securities-government sponsored entities 1 — — 1 Total Debt Securities Available for Sale $ 65,888 $ 2 $ ( 9,752 ) $ 56,138 Debt Securities All of the Company's collateralized mortgage obligations are backed by one- to four-family residential mortgages. At June 30, 2026 and December 31, 2025, seventeen municipal bonds with an amortized cost o f $ 5.1 million and fair value of $ 4.1 million and sixteen municipal bonds with an amortized cost of $ 4.7 million and fair value of $ 3.6 million, respectively, were pledged as collateral for customer deposits in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. At June 30, 2026 and December 31, 2025 , no securities were pledged as collateral to the Federal Reserve Bank ("FRB"), to the Federal Home Loan Bank of New York ("FHLBNY"), or for any other purposes. 8 The following table sets forth the Company’s investment in available for sale debt securities with gross unrealized losses of less than twelve months and gross unrealized losses of twelve months or more and associated fair values for which an allowance for credit losses has not been recorded for the periods indicated: Less than 12 months 12 months or more Total Gross Gross Gross Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (Dollars in thousands) June 30, 2026 U.S. government agencies $ — $ — $ 1,904 $ ( 100 ) $ 1,904 $ ( 100 ) Municipal bonds 2,498 ( 23 ) 29,932 ( 6,770 ) 32,430 ( 6,793 ) Mortgage-backed securities — — 18,379 ( 2,873 ) 18,379 ( 2,873 ) $ 2,498 $ ( 23 ) $ 50,215 $ ( 9,743 ) $ 52,713 $ ( 9,766 ) December 31, 2025 U.S. government agencies $ — $ — $ 1,937 $ ( 67 ) $ 1,937 $ ( 67 ) Municipal bonds — — 32,794 ( 6,825 ) 32,794 ( 6,825 ) Mortgage-backed securities — — 20,285 ( 2,860 ) 20,285 ( 2,860 ) $ — $ — $ 55,016 $ ( 9,752 ) $ 55,016 $ ( 9,752 ) As of June 30, 2026 , the Company's investment portfolio included 11 debt securities in the "unrealized losses less than twelve months" category and 152 debt securities in the "unrealized losses twelve months or more" category. As of December 31, 2025 , the Company's investment portfolio included no debt securities in the "unrealized losses less than twelve months" category and 164 debt securities in the "unrealized losses twelve months or more" category. As of June 30, 2026 , the Company had 163 debt securities with a fair value of $ 52.7 million in an unrealized loss position. As of December 31, 2025 , the Company had 164 debt securities with a fair value of $ 55.0 million in an unrealized loss position. The Company reviews securities in an unrealized loss position to evaluate credit risk. The Company considers payment history, risk ratings from external parties, financial statements for municipal and corporate securities, public statements from issuers and other available credible published sources in evaluating credit risk. In this review, the Company did not identify any credit risk, and therefore, no allowance for credit losses on securities available for sale was recorded as of June 30, 2026 or December 31, 2025. The unrealized losses are attributed to noncredit-related factors including changes in interest rates and other market conditions. The Company does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The contractual terms of the investments do not permit the issuers to settle the securities at a price less than the cost basis of the investments. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Accrued interest of $ 239,000 as of June 30, 2026 and $ 248,000 as of December 31, 2025 on available-for-sale debt securities is included in accrued interest receivable on the consolidated statements of financial condition and is excluded from the estimate of credit losses. During the three and six months ended June 30, 2026 and 2025 , the Company did no t sell any debt securities. 9 Scheduled contractual maturities of debt securities are as follows: Amortized Fair Cost Value (Dollars in thousands) June 30, 2026: Less than one year $ 1,067 $ 1,046 After one year through five years 3,545 3,342 After five years through ten years 13,498 12,052 After ten years 23,907 18,684 Mortgage-backed securities 21,314 18,442 Asset-backed securities 1 1 Total Debt Securities $ 63,332 $ 53,567 The Company's mortgage-backed securities and asset-backed securities have stated maturities that may differ from actual maturities due to the borrowers' ability to prepay obligations. Cash flows from such investments are dependent upon the performance of the underlying assets and are generally influenced by interest rates. In the table above, mortgage-backed securities and asset-backed securities are shown in the aggregate. Equity Securities At January 1, 2025, the Company held 22,368 shares of Federal Home Loan Mortgage Corporation ("FHLMC") common stock, included within securities, at fair value, on the consolidated statement of financial condition. During the year ended December 31, 2025, the Company sold these shares for proceeds of $ 223,000 . Accordingly, the Company did not hold any equity securities at June 30, 2026. During the three and six months ended June 30, 2025 , the Company recognized an unrealized gain of $ 65,000 and $ 111,000 , respectively, on the equity securities, which was recorded in non-interest income in the consolidated statement of income. There were no purchases or sales of equity securities during the three and six months ended June 30, 2026 and 2025 . Note 4 - Loans and Allowance for Credit Losses Loans consisted of the following segments as of June 30, 2026 and December 31, 2025: June 30, December 31, 2026 2025 (Dollars in thousands) Real Estate Loans: Residential, one- to four-family (1) $ 143,615 $ 150,095 Home Equity 46,666 46,970 Commercial (2) 332,314 327,352 Total real estate loans 522,595 524,417 Other Loans: Commercial 22,787 17,430 Consumer (3) 14,875 15,466 Total gross loans 560,257 557,313 Net deferred loan costs 2,807 3,012 Allowance for credit losses on loans ( 4,747 ) ( 4,884 ) Loans receivable, net $ 558,317 $ 555,441 (1) There were no one- to four-family construction loans at June 30, 2026 or December 31, 2025. (2) Includes commercial construction loans of $ 21.1 million and $ 18.8 million at June 30, 2026 and December 31, 2025, respectively. (3) Includes overdraft protection of $ 32,000 and $ 24,000 at June 30, 2026 and December 31, 2025, respectively. 10 Real estate loans of approximately $ 122.7 million and $ 116.8 million in unpaid principal balance were pledged as collateral for FHLBNY advances as of June 30, 2026 and December 31, 2025, respectively. Total loans are stated at the principal amounts outstanding, net of unamortized loan fees and costs, with interest income accrued based upon the outstanding principal balance and the terms of the loans. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. Loans are reported by the portfolio segments identified above and are analyzed by management on this basis. All loan policies identified below apply to all segments of the loan portfolio. Accrued interest on loans of $ 2.7 million at both June 30, 2026 and December 31, 2025 is included in accrued interest receivable on the consolidated statements of financial condition and is excluded from the estimate of credit losses. Allowance for Credit Losses for Loans The loan portfolio is segmented into the following loan types by risk level: Real Estate Loans:  Residential, One- to Four-Family – are loans secured by first lien collateral on residential real estate primarily held in the Western New York region. These loans can be affected by economic conditions and the value of underlying properties. Western New York’s housing market has consistently demonstrated stability in home prices despite changing economic conditions. Furthermore, the Company has conservative underwriting standards and its residential lending policies and procedures verify that its one- to four-family residential mortgage loans generally conform to secondary market guidelines.  Home Equity - are loans or lines of credit secured by first or second liens on owner-occupied residential real estate primarily held in the Western New York region. These loans can also be affected by economic conditions and the values of underlying properties. Home equity loans may have increased risk of loss if the Company does not hold the first mortgage resulting in the Company being in a secondary position in the event of collateral liquidation. The Company does not originate interest only home equity loans.  Commercial Real Estate – are loans used to finance the purchase of real property, which generally consists of developed real estate that is held as first lien collateral for the loan. These loans are secured by real estate properties that are primarily held in the Western New York region. Commercial real estate lending involves additional risks compared with one- to four-family residential lending, because payments on loans secured by commercial real estate properties are often dependent on the successful operation or management of the properties, and/or the collateral value of the commercial real estate securing the loan, and repayment of such loans may be subject to adverse conditions in the real estate market or economic conditions to a greater extent than one- to four-family residential mortgage loans. Also, commercial real estate loans typically involve relatively large loan balances concentrated with single borrowers or groups of related borrowers. Other Loans:  Commercial – includes business installment loans, lines of credit, and other commercial loans. Most of our commercial loans are for terms generally not in excess of five years . Whenever possible, we collateralize these loans with a lien on business assets and equipment and require the personal guarantees from principals of the borrower. Commercial loans generally involve a higher degree of credit risk, as commercial loans can involve relatively large loan balances to a single borrower or groups of related borrowers, with the repayment of such loans typically dependent on the successful operation of the commercial business and the income stream of the borrower. Such risks can be significantly affected by economic conditions. Although commercial loans may be collateralized by equipment or other business assets, the liquidation of collateral in the event of a borrower default may be an insufficient source of repayment because the equipment or other business assets may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial loan depends primarily on the credit worthiness of the borrowers (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment. 11  Consumer – consist of loans secured by collateral such as an automobile or a deposit account, unsecured loans, and lines of credit. Consumer loans tend to have a higher credit risk due to the loans being either unsecured or secured by rapidly depreciable assets. Furthermore, consumer loan payments are dependent on the borrower’s continuing financial stability and therefore are more likely to be adversely affected by job loss, divorce, illness, or personal bankruptcy. Included in the Real Estate Loans for one-to four-family and commercial real estate are loans to finance the construction of either one- to four-family owner occupied homes or commercial real estate. At the end of the construction period, the loan automatically converts to either a one- to four-family residential mortgage or a commercial real estate mortgage, as applicable. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion compared to the actual cost of construction. The Company limits its risk during construction as disbursements are not made until the required work for each advance has been completed and an updated lien search is performed. The completion of the construction progress is verified by a Company loan officer or inspections performed by an independent appraisal firm or other third party. Construction loans also expose us to the risk of construction delays which may impair the borrower’s ability to repay the loan. The following tables detail the changes in the allowance for credit losses by loan segment as well as the distribution of the allowance for credit losses and gross loans receivable by loan segment and allowance evaluation method at or for the three and six months ended June 30, 2026 and 2025. Real Estate Loans Other Loans One- to Four-Family (1) Home Equity Commercial Real Estate (2) Commercial Consumer Total (Dollars in thousands) June 30, 2026 Allowance for Credit Loss on Loans Balance – April 1, 2026 $ 787 $ 95 $ 3,743 $ 167 $ 7 $ 4,799 Charge-offs — — — — ( 3 ) ( 3 ) Recoveries — — — — 2 2 (Credit) provision ( 44 ) 10 ( 35 ) 18 — ( 51 ) Balance – June 30, 2026 $ 743 $ 105 $ 3,708 $ 185 $ 6 $ 4,747 Balance - January 1, 2026 $ 721 $ 100 $ 3,916 $ 140 $ 7 $ 4,884 Charge-offs — — — — ( 12 ) ( 12 ) Recoveries — — — — 3 3 Provision (credit) 22 5 ( 208 ) 45 8 ( 128 ) Balance – June 30, 2026 $ 743 $ 105 $ 3,708 $ 185 $ 6 $ 4,747 Ending balance: individually evaluated $ 14 $ — $ — $ — $ — $ 14 Ending balance: collectively evaluated $ 729 $ 105 $ 3,708 $ 185 $ 6 $ 4,733 Gross Loans Receivable (3) : Ending balance $ 143,615 $ 46,666 $ 332,314 $ 22,787 $ 14,875 $ 560,257 Ending balance: individually evaluated $ 1,265 $ 53 $ 82 $ — $ — $ 1,400 Ending balance: collectively evaluated $ 142,350 $ 46,613 $ 332,232 $ 22,787 $ 14,875 $ 558,857 (1) There were no one-to four-family construction loans at June 30, 2026. (2) Includes commercial construction loans of $ 21.1 million at June 30, 2026. (3) Gross Loans Receivable does not include allowance for credit losses of $( 4,747 ) or net deferred loan costs of $ 2,807 . 12 Real Estate Loans Other Loans One- to Four-Family (1) Home Equity Commercial Real Estate (2) Commercial Consumer Total (Dollars in thousands) June 30, 2025 Allowance for Credit Loss on Loans Balance – April 1, 2025 $ 714 $ 117 $ 4,197 $ 131 $ 11 $ 5,170 Charge-offs — — — — ( 6 ) ( 6 ) Recoveries — — — — — — Provision (credit) 20 ( 11 ) ( 30 ) 16 5 — Balance – June 30, 2025 $ 734 $ 106 $ 4,167 $ 147 $ 10 $ 5,164 Balance - January 1, 2025 $ 390 $ 137 $ 4,171 $ 421 $ 14 $ 5,133 Charge-offs — — — — ( 13 ) ( 13 ) Recoveries 4 — — — 1 5 Provision (credit) 340 ( 31 ) ( 4 ) ( 274 ) 8 39 Balance – June 30, 2025 $ 734 $ 106 $ 4,167 $ 147 $ 10 $ 5,164 Ending balance: individually evaluated $ — $ — $ — $ — $ 2 $ 2 Ending balance: collectively evaluated $ 734 $ 106 $ 4,167 $ 147 $ 8 $ 5,162 Gross Loans Receivable (3) : Ending balance $ 154,938 $ 46,840 $ 324,321 $ 16,412 $ 11,919 $ 554,430 Ending balance: individually evaluated $ 1,531 $ 109 $ 94 $ — $ 2 $ 1,736 Ending balance: collectively evaluated $ 153,407 $ 46,731 $ 324,227 $ 16,412 $ 11,917 $ 552,694 (1) There were no one-to four-family construction loans at June 30, 2025. (2) Includes commercial construction loans of $ 17.0 million at June 30, 2025. (3) Gross Loans Receivable does not include allowance for credit losses of $( 5,164 ) or net deferred loan costs of $ 3,123 . The following table summarizes the distribution of the allowance for credit losses and loans receivable by loan segment and allowance evaluation method as of December 31, 2025: Real Estate Loans Other Loans One- to Four-Family (1) Home Equity Commercial Real Estate (2) Commercial Consumer Total (Dollars in thousands) December 31, 2025 Allowance for Credit Losses on Loans Balance – December 31, 2025 $ 721 $ 100 $ 3,916 $ 140 $ 7 $ 4,884 Ending balance: individually evaluated $ 6 $ — $ — $ — $ — $ 6 Ending balance: collectively evaluated $ 715 $ 100 $ 3,916 $ 140 $ 7 $ 4,878 Gross Loans Receivable (3) : Ending Balance $ 150,095 $ 46,970 $ 327,352 $ 17,430 $ 15,466 $ 557,313 Ending balance: individually evaluated $ 1,493 $ 62 $ 89 $ — $ — $ 1,644 Ending balance: collectively evaluated $ 148,602 $ 46,908 $ 327,263 $ 17,430 $ 15,466 $ 555,669 (1) There were no one- to four-family construction loans at December 31, 2025. (2) Includes commercial construction loans of $ 18.8 million at December 31, 2025. (3) Gross Loans Receivable does not include allowance for credit losses of $( 4,884 ) or deferred loan costs of $ 3,012 . 13 Allowance for Credit Losses on Unfunded Loan Commitments The Company’s allowance for credit losses on unfunded loan commitments is recognized as a liability and included within other liabilities on the unaudited consolidated statements of financial condition, with adjustments to the reserve recognized in the provision for credit losses on the unaudited consolidated statements of income. The Company’s activity in the allowance for credit losses on unfunded loan commitments for the three and six months ended June 30, 2026 and the three and six months ended June 30, 2025 was as follows: For the six months ended June 30, 2026 (Dollars in thousands) Balance at December 31, 2025 $ 361 Provision for credit losses ( 36 ) Balance at March 31, 2026 325 Provision for credit losses 169 Balance at June 30, 2026 $ 494 For the six months ended June 30, 2025 (Dollars in thousands) Balance at December 31, 2024 $ 314 Provision for credit losses 9 Balance at March 31, 2025 323 Provision for credit losses — Balance at June 30, 2025 $ 323 Non-accrual Loans and Delinquency Status The following table presents the amortized cost basis of loans on non-accrual status and loans on non-accrual status with no allowance for credit losses recorded. The Company did not have any loans past due 90 days or more and still accruing at June 30, 2026 and December 31, 2025. Total Non-accrual Non-accrual with no Allowance for Credit Losses June 30, December 31, June 30, December 31, 2026 2025 2026 2025 (Dollars in thousands) Real Estate Loans: Residential, one- to four-family (1) $ 1,291 $ 1,525 $ 1,093 $ 1,388 Home Equity 57 66 57 66 Commercial Real Estate (2) 82 89 82 89 Other Loans: Commercial — — — — Consumer — — — — Total loans $ 1,430 $ 1,680 $ 1,232 $ 1,543 (1) There were no non-accrual one- to four-family construction loans at June 30, 2026 or December 31, 2025. (2) There were no non-accrual commercial construction loans at June 30, 2026 or December 31, 2025. There was no interest income recognized on non-accrual loans during the three and six months ended June 30, 2026 and the three and six months ended June 30, 2025. The accrual of interest on loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due. A loan does not have to be 90 days delinquent in order to be classified as non-accrual. When interest accrual is discontinued, all unpaid accrued interest is reversed. If ultimate collection of principal is in doubt, all cash receipts on non-accrual loans are applied to reduce the principal balance. 14 The following tables provide an analysis of past due loans as of the dates indicated: 30-59 Days 60-89 Days 90 Days or More Total Past Current Total Gross Loans Past Due Past Due Past Due Due Due Receivable (Dollars in thousands) June 30, 2026: Real Estate Loans: Residential, one- to four-family (1) $ 1,020 $ 123 $ 481 $ 1,624 $ 141,991 $ 143,615 Home equity 298 20 13 331 46,335 46,666 Commercial (2) — — 82 82 332,232 332,314 Other Loans: Commercial — — — — 22,787 22,787 Consumer 60 — — 60 14,815 14,875 Total $ 1,378 $ 143 $ 576 $ 2,097 $ 558,160 $ 560,257 30-59 Days 60-89 Days 90 Days or More Total Past Current Total Gross Loans Past Due Past Due Past Due Due Due Receivable (Dollars in thousands) December 31, 2025: Real Estate Loans: Residential, one- to four-family (1) $ 788 $ 27 $ 674 $ 1,489 $ 148,606 $ 150,095 Home equity 447 137 — 584 46,386 46,970 Commercial (2) — — 89 89 327,263 327,352 Other Loans: Commercial — — — — 17,430 17,430 Consumer 5 — — 5 15,461 15,466 Total $ 1,240 $ 164 $ 763 $ 2,167 $ 555,146 $ 557,313 (1) There were no past due one- to four-family construction loans at June 30, 2026 or December 31, 2025. (2) There were no past due commercial construction loans at June 30, 2026 or December 31, 2025. Collateral-Dependent Loans Collateral-dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. For collateral-dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is measured on an individual loan basis based on the difference between the fair value of the loan’s collateral, which is adjusted for liquidation costs, and the amortized cost. If 15 the fair value of the collateral exceeds the amortized cost, no allowance for credit losses is required. Refer to Note 8 - Fair Value of Financial Instruments for additional information. The following table presents an analysis of the amortized cost of collateral-dependent loans of the Company as of June 30, 2026 and December 31, 2025 by collateral type and loan segment: Residential Business Commercial Total Real Estate Assets Land Real Estate Other Loans June 30, 2026: (Dollars in thousands) Real Estate Loans: Residential, one- to four-family $ 1,291 $ — $ — $ — $ — $ 1,291 Home Equity 57 — — — — 57 Commercial — — — 82 — 82 Total $ 1,348 $ — $ — $ 82 $ — $ 1,430 December 31, 2025: Real Estate Loans: Residential, one- to four-family $ 1,525 $ — $ — $ — $ — $ 1,525 Home Equity 66 — — — — 66 Commercial — — — 89 — 89 Total $ 1,591 $ — $ — $ 89 $ — $ 1,680 There was an allowance for credit losses of $ 14,000 and $ 6,000 recorded on the above noted collateral-dependent loans secured by residential real estate as of June 30, 2026 and December 31, 2025, respectively. Credit Quality Indicators The Company’s policies provide for the classification of loans as follows: • Pass/Performing; • Special Mention – does not currently expose the Company to a sufficient degree of risk but does possess credit deficiencies or potential weaknesses deserving the Company’s close attention; • Substandard – has one or more well-defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. A substandard asset would be one inadequately protected by the current net worth and paying capacity of the obligor or pledged collateral, if applicable; • Doubtful – has all the weaknesses inherent in substandard loans with the additional characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss; and • Loss – loan is considered uncollectible and continuance without the establishment of a specific valuation reserve is not warranted. Each commercial loan is individually assigned a loan classification. The Company’s consumer loans, including residential one- to four-family loans and home equity loans, are classified by using the delinquency status as the basis for classifying these loans. Generally, all consumer loans more than 90 days past due are classified and placed into non-accrual status. Such loans that are considered by management to be well-secured and in the process of collection will remain in accrual status. Asset quality indicators for all loans and the Company’s risk rating process are reviewed on a monthly basis. Risk ratings are updated as circumstances that could affect the repayment of individual loans are brought to management’s attention through an established monitoring process. Written action plans are maintained and reviewed on a quarterly basis for all classified commercial loans. In addition to the Company’s internal process, an outsourced independent credit review 16 function is in place for commercial and certain consumer loans to further assess assigned risk classifications and monitor compliance with internal lending policies and procedures. The following table presents gross loans by credit quality indicator by origination year at June 30, 2026 as well as gross charge-offs by year of origination for the six months ended June 30, 2026: 2026 2025 2024 2023 2022 Prior Revolving Loans Total June 30, 2026: (Dollars in thousands) Residential, one-to four-family (1) : Pass $ 1,241 $ 3,875 $ 4,742 $ 9,909 $ 28,886 $ 93,012 $ — $ 141,665 Substandard — — — 190 118 1,642 — 1,950 Doubtful — — — — — — — — Total $ 1,241 3,875 $ 4,742 $ 10,099 $ 29,004 $ 94,654 $ — $ 143,615 Current period gross charge-offs $ — — $ — $ — $ — $ — $ — $ — Home Equity (2) : Pass $ 161 $ 600 $ 25 $ 1,791 $ 1,487 $ 344 $ 41,726 46,134 Substandard — — — — — — 532 532 Doubtful — — — — — — — — Total $ 161 $ 600 $ 25 $ 1,791 $ 1,487 $ 344 $ 42,258 $ 46,666 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial Real Estate (3) : Pass $ 26,971 $ 35,085 $ 37,073 $ 19,082 $ 74,880 $ 129,939 $ 293 $ 323,323 Special mention — — — 397 — 849 — 1,246 Substandard — — — — — 7,745 — 7,745 Doubtful — — — — — — — — Total $ 26,971 $ 35,085 $ 37,073 $ 19,479 $ 74,880 $ 138,533 $ 293 $ 332,314 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial Loans: Pass $ 883 $ 3,947 $ 1,031 $ 618 $ 1,288 $ 1,303 $ 11,046 $ 20,116 Special mention — — — — — 10 — 10 Substandard — — — — — 1,705 956 2,661 Doubtful — — — — — — — — Total $ 883 $ 3,947 $ 1,031 $ 618 $ 1,288 $ 3,018 $ 12,002 $ 22,787 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Consumer Loans: Pass $ 1,175 $ 13,173 $ 81 $ 26 $ 35 $ 166 $ 219 $ 14,875 Substandard — — — — — — — — Doubtful — — — — — — — — Total $ 1,175 $ 13,173 $ 81 $ 26 $ 35 $ 166 $ 219 $ 14,875 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 12 $ 12 (1) There were no one- to four-family construction loans at June 30, 2026. (2) Home equity loans presented with an origination year represent home equity lines-of-credit which have been converted to term loans. (3) Includes commercial construction loans at June 30, 2026. 17 The following table presents gross loans by credit quality indicator by origination year at December 31, 2025 as well as gross charge-offs by year of origination for the year ended December 31, 2025: 2025 2024 2023 2022 2021 Prior Revolving Loans Total December 31, 2025: (Dollars in thousands) Residential, one-to four-family (1) : Pass $ 4,434 $ 5,068 $ 10,308 $ 30,091 $ 24,701 $ 73,327 $ — $ 147,929 Substandard — — 190 315 399 1,262 — 2,166 Doubtful — — — — — — — — Total $ 4,434 5,068 $ 10,498 $ 30,406 $ 25,100 $ 74,589 $ — $ 150,095 Current period gross charge-offs $ — — $ — $ — $ — $ — $ — $ — Home Equity (2) : Pass $ 627 $ 28 $ 2,007 $ 1,721 $ 58 $ 352 $ 41,698 46,491 Substandard — — — — — — 479 479 Doubtful — — — — — — — — Total $ 627 $ 28 $ 2,007 $ 1,721 $ 58 $ 352 $ 42,177 $ 46,970 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial Real Estate (3) : Pass $ 34,815 $ 36,156 $ 19,119 $ 76,565 $ 37,655 $ 113,836 $ 2 $ 318,148 Special mention — — 402 — — 865 — 1,267 Substandard — — — — — 7,937 — 7,937 Doubtful — — — — — — — — Total $ 34,815 $ 36,156 $ 19,521 $ 76,565 $ 37,655 $ 122,638 $ 2 $ 327,352 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial Loans: Pass $ 4,296 $ 1,171 $ 730 $ 1,538 $ 77 $ 1,546 $ 5,184 $ 14,542 Special mention — — — — 63 — — 63 Substandard — — — — — 1,869 956 2,825 Doubtful — — — — — — — — Total $ 4,296 $ 1,171 $ 730 $ 1,538 $ 140 $ 3,415 $ 6,140 $ 17,430 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Consumer Loans: Pass $ 14,857 $ 131 $ 45 $ 50 $ — $ 169 $ 213 $ 15,465 Substandard — — — — — — 1 1 Doubtful — — — — — — — — Total $ 14,857 $ 131 $ 45 $ 50 $ — $ 169 $ 214 $ 15,466 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 30 $ 30 (1) There were no one- to four-family construction loans at December 31, 2025. (2) Home equity loans presented with an origination year represent home equity lines-of-credit which have been converted to term loans. (3) Includes commercial construction loans at December 31, 2025. Modifications with Borrowers Experiencing Financial Difficulty : Occasionally, the Company modifies loans to borrowers in financial distress by providing modifications to loans that it would not normally grant. Such modifications could include principal forgiveness, term extension, a significant payment delay, an interest rate reduction or the addition of a co-borrower or guarantor. When principal forgiveness is provided, the amount of the forgiveness is charged-off against the allowance for credit losses. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification. In some cases, the Company provides multiple types of modifications on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification may be granted, such as principal forgiveness. 18 There were no loans modified to borrowers experiencing financial difficulty during the three and six months ended June 30, 2026 or 2025. There were no modified loans that were past due or on non-accrual as of June 30, 2026 or December 31, 2025. There were no loans to borrowers experiencing financial difficulty during the six months ended June 30, 2026 and 2025 that had a payment default and were modified in the twelve months prior. Foreclosed real estate consists of property acquired in settlement of loans which is carried at its fair value less estimated selling costs. Write-downs from amortized cost to fair value less estimated selling costs are recorded at the date of acquisition or repossession and are charged to the allowance for credit losses. There was $ 57,000 of foreclosed real estate at June 30, 2026, and no foreclosed real estate at December 31, 2025 . The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction was $ 512,000 at June 30, 2026 and $ 491,000 at December 31, 2025 . Note 5 - Deposits Deposits consist of the following at the dates indicated: June 30, 2026 December 31, 2025 Weighted Weighted Average Average Amount Rate Amount Rate (Dollars in thousands) Demand deposits: Non-interest bearing $ 96,476 — % $ 96,103 — % Interest bearing 64,386 0.09 % 62,346 0.09 % Money market accounts 155,223 1.87 % 159,212 1.91 % Savings accounts 49,984 0.06 % 51,788 0.07 % Time deposits 212,171 3.27 % 203,828 3.44 % Total deposits $ 578,240 1.72 % $ 573,277 1.77 % Note 6 – Earnings per Share Earnings per share was calculated for the three and six months ended June 30, 2026 and 2025, in accordance with ASC 260 - Earnings Per Share , which provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Basic earnings per share is based upon the weighted average number of common shares outstanding, exclusive of unearned shares held by the Employee Stock Ownership Plan of Lake Shore Bancorp, Inc. (the “ESOP”). Unvested shares of restricted stock which have voting rights and are eligible to receive dividends are included in the calculation of the weighted average number of common shares outstanding. Diluted earnings per share is based upon the weighted average number of common shares outstanding and common share equivalents that would arise from the exercise of dilutive securities. Stock options are regarded as potential common stock and are 19 considered in the diluted earnings per share calculations to the extent they would be dilutive and computed using the treasury stock method. The calculated basic and diluted earnings per share are as follows. Share and per share amounts related to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give the retroactive recognition to the exchange ratio applied in the Conversion ( 1.3549 ): Three Months Ended June 30, 2026 2025 Numerator – net income $ 2,173,000 $ 1,919,000 Denominator: Basic weighted average shares outstanding 7,377,633 7,678,457 Increase in weighted average shares outstanding due to: Stock options (1) 16,684 3,788 Diluted weighted average shares outstanding (1) 7,394,317 7,682,245 Earnings per share: Basic $ 0.29 $ 0.25 Diluted $ 0.29 $ 0.25 Six Months Ended June 30, 2026 2025 Numerator – net income $ 4,096,000 $ 2,975,000 Denominator: 7,363,418 7,664,392 Increase in weighted average shares outstanding due to: Stock options (1) 15,884 4,848 Diluted weighted average shares outstanding (1) 7,379,302 7,669,240 Earnings per share: Basic $ 0.56 $ 0.39 Diluted $ 0.56 $ 0.39 (1) Weighted average stock options to purchase 43,175 shares under the Company's 2025 Equity Incentive Plan ("2025 EIP") at $ 14.85 were outstanding during the three and six months ended June 30, 2026 and were not included in the calculation of diluted earnings per share because to do so would have been anti-dilutive. All stock options outstanding during the three and six months ended June 30, 2025 were included in the calculation of diluted earnings per share as no ne had anti-dilutive effects. Note 7 – Commitments to Extend Credit and Other Obligations The Company enters into various commitments and contingent obligations in the ordinary course of business. These commitments primarily consist of obligations to extend credit to customers through loan commitments, lines of credit, and letters of credit which involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. In addition, the Company may enter into other contractual commitments, including capital commitments related to investment activities. Such commitments are subject to the terms of the underlying agreements and may not result in the future use of all committed amounts. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. The commitments for lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer. 20 The Company’s exposure to credit losses is represented by the contractual amount of these commitments. There was a $ 495,000 and $ 361,000 allowance for credit losses associated with these commitments at June 30, 2026 and December 31, 2025, respectively. During the six months ended June 30, 2026 , the Company committed to invest up to $ 2.0 million in Castle Creek Launchpad Fund II (SBIC) LP, a limited partnership investment fund, and funded an initial capital contribution of $ 248,000 . The funded investment does not have a readily determinable fair value, is carried at cost less impairment, and is included in other assets in the consolidated statements of financial condition. No impairment or observable price adjustments were recognized during the three and six months ended June 30, 2026. As of June 30, 2026, the Company's remaining unfunded capital commitment was approximately $ 1.8 million. Future capital contributions are subject to capital calls by the fund's general partner in accordance with the terms of the limited partnership agreement. The unfunded commitment is not reflected as a liability in the Company's consolidated statements of financial condition and is included in commitments and contingencies. The following commitments to extend credit and other obligations were outstanding as of the dates specified: Commitment Amount June 30, December 31, 2026 2025 (Dollars in thousands) Commitments to grant loans $ 23,924 $ 17,644 Unfunded commitments to fund loans and lines of credit 103,939 92,748 Commercial and Standby letters of credit 93 720 Commitment to fund limited partnership investment 1,752 — Note 8 – Stock-based Compensation As of June 30, 2026 , the Company had four active stock-based compensation plans, which are described below. The compensation cost related to these plans was $ 211,000 and $ 106,000 for the three months ended June 30, 2026 and 2025 , respectively, and $ 410,000 and $ 226,000 for the six months ended June 30, 2026 and 2025, respectively, and is included within salary and benefits expense in the non-interest expense section of the consolidated statements of income. Share and per share amounts related to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give the retroactive recognition to the exchange ratio applied in the Conversion ( 1.3549 ). 2006 Stock Option Plan The Company’s 2006 Stock Option Plan (the “Stock Option Plan”), which was approved by the Company’s stockholders, permitted the grant of options to its employees and non-employee directors for up to 403,167 shares of common stock. The Stock Option Plan expired on October 24, 2016 , and grants of options can no longer be awarded. Both incentive stock options and non-qualified stock options have been granted under the Stock Option Plan. The exercise price of each stock option equals the market price of the Company’s common stock on the date of grant and an option’s maximum term is ten years . The stock options generally vest over a five year period. 21 A summary of the status of the Stock Option Plan during the six months ended June 30, 2026 and 2025 is presented below: 2026 2025 Options Weighted Average Exercise Price Remaining Contractual Life Options Weighted Average Exercise Price Remaining Contractual Life Outstanding at beginning of year 37,696 $ 10.61 37,696 $ 10.61 Outstanding at end of period 37,696 10.61 0.3 years 37,696 10.61 1.3 years Options exercisable at end of period 37,696 $ 10.61 0.3 years 37,696 $ 10.61 1.3 years : At June 30, 2026 , stock options granted under this plan had an intrinsic value of $ 271,000 and there were no remaining options available for grant under the Stock Option Plan. At June 30, 2026, all compensation cost and expense related to the Stock Option Plan had been recognized in prior periods. 2012 Equity Incentive Plan The Company’s 2012 Equity Incentive Plan (the “2012 EIP”), which was approved by the Company’s stockholders on May 23, 2012, authorized the issuance of up to 243,882 shares of common stock pursuant to grants of restricted stock awards and up to 27,098 shares of common stock pursuant to grants of incentive stock options and non-qualified stock options, subject to permitted adjustments for certain corporate transactions. Employees and non-employee directors of the Company were eligible to receive awards under the 2012 EIP, except that non-employees may not be granted incentive stock options. The 2012 EIP expired on April 24, 2024 , and grants of awards can no longer be made. A summary of the status of unvested restricted stock awards under the 2012 EIP for the six months ended June 30, 2026 and 2025 is as follows: For the Six Months Ended June 30, 2026 Weighted Average Grant Price (per Share) For the Six Months Ended June 30, 2025 Weighted Average Grant Price (per Share) Unvested shares outstanding at beginning of year 32,538 $ 7.91 77,231 $ 8.19 Vested ( 10,656 ) 7.89 ( 44,416 ) 8.39 Unvested shares outstanding at end of period 21,882 $ 7.92 32,815 $ 7.92 As of June 30, 2026, there were 219,761 shares of restricted stock vested or distributed to eligible participants under the 2012 EIP and the plan expired on April 24, 2024. Accordingly, there were no remaining shares available for grant. Compensation expense related to restricted stock awards under the EIP amounted to $ 22,000 a nd $ 35,000 for the three months ended June 30, 2026 and 2025 , respectively. Compensation expense related to unvested restricted stock awards under the EIP amounted to $ 43,000 and $ 114,000 for the six months ended June 30, 2026 and 2025, respectively. At June 30, 2026, $ 156,000 of unrecognized compensation cost related to unvested restricted stock awards is expected to be recognized over a period of 22 months. A summary of the status of stock options under the 2012 EIP for the six months ended June 30, 2026 and 2025 is presented below: 2026 2025 Options Exercise Price Intrinsic Value Remaining Contractual Life Options Exercise Price Intrinsic Value Remaining Contractual Life Outstanding at beginning of year 17,749 $ 8.68 $ 106,000 17,749 $ 8.68 $ 28,000 Exercised ( 3,598 ) 9.83 $ 20,000 — — Outstanding at end of period 14,151 $ 8.38 $ 133,000 6.5 years 17,749 $ 8.68 $ 53,000 6.6 years Options exercisable at end of period 6,585 $ 8.95 $ 58,000 4.9 years 7,662 $ 9.72 $ 15,000 3.8 years 22 Compensation expense related to unvested stock options under the 2012 EIP amounted to $ 2,000 , for the three months ended June 30, 2026 and $ 1,000 for the three months ended June 30, 2025 . Compensation expense related to unvested stock options under the 2012 EIP amounted to $ 3,000 and $ 2,000 f or the six months ended June 30, 2026 and 2025, respectively. At June 30, 2026, $ 16,000 of unrecognized compensation cost related to unvested stock options is expected to be recognized over a period of 2.8 yea rs. During April 2024, the Company granted all remaining options available under the 2012 EIP. The 2012 EIP expired on April 24, 2024 and no additional options were available for grant nor issued after this date. 2025 Equity Incentive Plan On February 4, 2025, the stockholders of Lake Shore Bancorp, Inc. approved the Company's 2025 Equity Incentive Plan which authorized the issuance of up to 406,470 shares of common stock pursuant to grants of restricted stock, restricted stock units, non-qualified stock options, and incentive stock options. Employees of the Company and Lake Shore Bank and non-employee members of the Company's Board of Directors are eligible to receive grants of stock-based awards under the 2025 EIP. The Compensation Committee of the Board of Directors granted restricted stock awards under the 2025 EIP during the six months ended June 30, 2026 as follows: Grant Date Number of Restricted Stock Awards Vesting Fair Value per Share of Award on Grant Date Awardees March 18, 2026 4,349 100 % on March 18, 2027 $ 14.57 Non-employee directors March 18, 2026 25,041 25 % per year for four years with first vesting on March 18, 2027 $ 14.57 Employees A summary of the status of unvested restricted stock awards under the 2025 EIP for the six months ended June 30, 2026 is as follows: At June 30, 2026 Weighted Average Grant Price (per Share) Unvested shares outstanding at beginning of year 47,556 $ 12.36 Granted 29,390 14.57 Vested ( 13,999 ) 11.64 Unvested shares outstanding at end of period 62,947 $ 13.55 As of June 30, 2026, there were 13,999 shares of restricted stock vested or distributed to eligible participants under the 2025 EIP. Compensation expense related to unvested restricted stock awards under the 2025 EIP amounted to $ 100,000 for the three months ended June 30, 2026 and $ 40,000 for the three months ended June 30, 2025. Compensation expense related to unvested restricted stock awards under the 2025 EIP amounted to $ 191,000 for the six months ended June 30, 2026 and $ 49,000 for the six months ended June 30, 2025. At June 30, 2026, $ 716,000 of unrecognized compensation cost related to unvested restricted stock awards is expected to be recognized over a period of 31.4 months. A summary of the status of stock options under the 2025 EIP for the six months ended June 30, 2026 is presented below: 2026 Options Exercise Price Intrinsic Value Remaining Contractual Life Outstanding at beginning of year 43,175 $ 14.85 Outstanding at end of period 43,175 $ 14.85 $ 128,000 9.4 years Options exercisable at end of period — $ — $ — — 23 Compensation expense related to unvested stock options under the 2025 EIP amounted to $ 5,000 for the three months ended June 30, 2026 and $ 13,000 for the six months ended June 30, 2026 . At June 30, 2026, $ 95,000 of unrecognized cost related to unvested stock options is expected to be recognized over a period of 4.4 years. As of June 30, 2026, there were 286,349 shares available for grant under the 2025 EIP. Employee Stock Ownership Plan (“ESOP”) The Company established the ESOP for the benefit of eligible employees of the Company and Bank. All Company and Bank employees meeting certain age and service requirements are eligible to participate in the ESOP. Participants’ benefits become fully vested after five years of service once the employee is eligible to participate in the ESOP. The Company utilized $ 2.6 million of the proceeds of its 2006 stock offering to extend a loan to the ESOP and the ESOP used such proceeds to purchase 322,534 shares of stock on the open market at an average price of $ 7.90 per share, plus commission expenses. As a result of the purchase of shares by the ESOP, total stockholders’ equity of the Company was reduced by $ 2.6 million. As part of the Conversion, the remaining balance of $ 1.2 million of the original 2006 ESOP loan was paid off and refinanced with a new loan to the ESOP. The Company utilized $ 4.0 million of the proceeds from the 2025 stock offering to extend a loan to the ESOP and the ESOP purchased 396,036 shares of stock in the new Company at an average cost of $ 10.00 . As a result of the purchase of shares by the ESOP, total stockholders' equity of the Company was reduced by $ 4.0 million. As of June 30, 2026, the balance of the l oan to the ESOP was $ 5.0 million and the fair value of unallocated shares was $ 8.8 million. As of June 30, 2026, there were 107,361 allocated shares and 493,724 unallocated shares compared to 111,292 allocated shares and 493,724 unallocated shares at December 31, 2025. The ESOP compensation expense was $ 82,000 for the three months ended June 30, 2026 and $ 30,000 for the three months ended June 30, 2025 based on 5,143 shares and 2,688 shares earned in each of those quarters, respectively. The ESOP compensation expense was $ 160,000 for the six months ended June 30, 2026 and $ 61,000 for the six months ended June 30, 2025 based on 10,286 shares and 5,376 shares, respectively, earned in each of those six month periods. Note 9 - Fair Value of Financial Instruments Management uses its best judgment in estimating the fair value of the Company’s financial instruments. However, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of June 30, 2026 and December 31, 2025 and have not been re-evaluated or updated for purposes of these unaudited consolidated financial statements subsequent to those respective dates. The estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported here. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities measurements (Level 1) and the lowest priority to unobservable input measurements (Level 3). The three levels of the fair value hierarchy are as follows: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. Level 3: Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the inputs and assumptions that market participants would use in pricing the assets or liabilities. 24 An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company’s consolidated statements of financial condition contain investment securities that are recorded at fair value on a recurring basis. For financial instruments measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2026 and December 31, 2025 were as follows: Fair Value Measurements at June 30, 2026 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs Fair Value (Level 1) (Level 2) (Level 3) (Dollars in thousands) Measured at fair value on a recurring basis: Securities: Debt Securities Available for Sale U.S. government agencies $ 1,904 $ — $ 1,904 $ — Municipal bonds 33,220 — 33,220 — Mortgage-backed securities: Collateralized mortgage obligations-private label 6 — 6 — Collateralized mortgage obligations-government sponsored entities 6,580 — 6,580 — Government National Mortgage Association 42 — 42 — Federal National Mortgage Association 8,045 — 8,045 — Federal Home Loan Mortgage Corporation 3,769 — 3,769 — Asset-backed securities- government sponsored entities: 1 — 1 — Total Debt Securities Available for Sale $ 53,567 $ — $ 53,567 $ — Fair Value Measurements at December 31, 2025 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs Fair Value (Level 1) (Level 2) (Level 3) (Dollars in thousands) Measured at fair value on a recurring basis: Securities: Debt Securities Available for Sale U.S. government agencies $ 1,937 $ — $ 1,937 $ — Municipal bonds 33,840 — 33,840 — Mortgage-backed securities: Collateralized mortgage obligations-private label 8 — 8 — Collateralized mortgage obligations-government sponsored entities 7,764 — 7,764 — Government National Mortgage Association 45 — 45 — Federal National Mortgage Association 8,537 — 8,537 — Federal Home Loan Mortgage Corporation 4,006 — 4,006 — Asset-backed securities- government sponsored entities: 1 — 1 — Total Debt Securities Available for Sale $ 56,138 $ — $ 56,138 $ — 25 Level 2 inputs for assets or liabilities measured at fair value on a recurring basis might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment projections, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. The following is a description of valuation methodologies used for financial assets recorded at fair value on a recurring basis: • Investment securities - the fair values are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1) or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted prices. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution date, market consensus prepayment projections, credit information, and the security’ terms and conditions, among other observations. Level 2 securities which are fixed income instruments that are not quoted on an exchange, but are traded in active markets, are valued using prices obtained from our custodian, who use third party data service providers. In addition to disclosure of the fair value of assets on a recurring basis, GAAP requires disclosures for assets and liabilities measured at fair value on a non-recurring basis. The following is a description of the valuation methods used for assets that may be measured at fair value on a non-recurring basis. Collateral-Dependent Loans. Loans for which repayment is substantially expected to be provided through the operations or sale of collateral are considered collateral dependent. They are held at the lower of cost or fair value, and are considered to be measured at fair value when recorded below cost. Collateral-dependent loans are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, based on either a recent appraisal performed by a third-party independent appraiser or discounted cash flows based on current market conditions. Accordingly, collateral dependent loans are classified within Level 3 of the fair value hierarchy. The Company recorded an allowance for credit losses of $ 14,000 related to two collateral-dependent loans as of June 30, 2026 , and recorded an allowance for credit losses of $ 6,000 related to one collateral-dependent loan as of December 31, 2025. Foreclosed Real Estate and Repossessed Assets. Foreclosed real estate and repossessed assets are held at the lower of cost or fair value and are considered to be measured at fair value when recorded below cost. The fair value of foreclosed real estate is calculated using independent appraisals, less estimated selling costs. Certain repossessed assets may require assumptions about factors that are not observable in an active market when determining fair value. Accordingly, foreclosed real estate and repossessed assets are classified within Level 3 of the fair value hierarchy. There was $ 57,000 of foreclosed real estate at June 30, 2026, related to one residential, one- to four-family property, which was included as a component of other assets on the consolidated statements of financial condition, and no foreclosed real estate at December 31, 2025 . The Company did no t have repossessed assets at June 30, 2026 and December 31, 2025. Mortgage Servicing Rights . Mortgage servicing rights do not trade in an active market with readily observable market data. As a result, the Company estimates the fair value of loan servicing rights by using a discounted cash flow model to calculate the present value of estimated future net servicing income. The key assumptions used in the model include the estimated life of loans sold with servicing retained and the estimated cost to service the loans. Loan servicing rights are classified as Level 3 measurements due to the use of unobservable inputs, as well as management judgment and estimation. Mortgage servicing rights amounted to $ 156,000 and $ 163,000 at June 30, 2026 and December 31, 2025, respectively, and were included as a component of other assets on the consolidated statements of financial condition. 26 For assets subject to measurement at fair value on a non-recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2026 and December 31, 2025 were as follows: Fair Value Measurements Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs Fair Value (Level 1) (Level 2) (Level 3) (Dollars in thousands) Measured at fair value on a non-recurring basis: At June 30, 2026 Mortgage servicing rights $ 156 $ — $ — $ 156 Collateral-dependent loans 185 — — 185 Foreclosed real estate 57 — — 57 At December 31, 2025 Mortgage servicing rights $ 163 $ — $ — $ 163 Collateral-dependent loan 131 131 The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis and for which the Company has utilized Level 3 inputs to determine fair value: Quantitative Information about Level 3 Fair Value Measurements (Dollars in thousands) Fair Value Estimate Valuation Technique Unobservable Input Range Weighted Average At June 30, 2026 Mortgage servicing rights $ 156 Discounted Cash Flow Model (1) Servicing Fees 0.25 % 0.25 % Servicing Costs 0.11 % 0.11 % Estimated Life of Loans 3.58 - 7.24 years 5.41 years Collateral-dependent loans 185 Appraisal of collateral (2) Direct Disposal Costs (3) 8.00 % 8.00 % Foreclosed Real Estate 57 Appraisal of collateral (2) Direct Disposal Costs (3) 8.00 % 8.00 % At December 31, 2025 Mortgage servicing rights $ 163 Discounted Cash Flow Model (1) Servicing Fees 0.25 % 0.25 % Servicing Costs 0.10 % 0.10 % Estimated Life of Loans 4.04 - 7.68 years 5.86 years Collateral-dependent loan 131 Appraisal of collateral (2) Direct Disposal Costs (3) 8.00 % 8.00 % (1) The fair value is based on a discounted cash flow model. The model's key assumptions are the estimated life of loans sold with servicing retained and the estimated cost to service the loans. (2) Fair value is generally determined through independent third-party appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable. (3) The fair value basis of collateral-dependent loans and foreclosed real estate may be adjusted to reflect estimates of disposal costs including, but not necessarily limited to, real estate brokerage commissions, legal fees, and delinquent property taxes. 27 The carrying amount and estimated fair value, based on the exit price notion, of the Company’s financial instruments, whether carried at cost or fair value, are as follows: Fair Value Measurements at June 30, 2026 Carrying Estimated Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs Amount Fair Value (Level 1) (Level 2) (Level 3) (Dollars in thousands) Financial assets: Cash and cash equivalents $ 72,237 $ 72,237 $ 72,237 $ — $ — Securities 53,567 53,567 — 53,567 — Federal Home Loan Bank stock 666 666 — 666 — Loans receivable, net 558,317 553,451 — — 553,451 Accrued interest receivable 2,964 2,964 — 2,964 — Bank-owned life insurance 32,015 32,015 — 32,015 — Mortgage servicing rights 156 156 — — 156 Financial liabilities: Deposits 578,240 577,285 — 577,285 — Accrued interest payable 15 15 — 15 — Fair Value Measurements at December 31, 2025 Carrying Estimated Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs Amount Fair Value (Level 1) (Level 2) (Level 3) (Dollars in thousands) Financial assets: Cash and cash equivalents $ 64,280 $ 64,280 $ 64,280 $ — $ — Securities 56,138 56,138 — 56,138 — Federal Home Loan Bank stock 673 673 — 673 — Loans receivable, net 555,441 547,492 — — 547,492 Accrued interest receivable 3,007 3,007 — 3,007 — Bank-owned life insurance 31,525 31,525 — 31,525 — Mortgage servicing rights 163 163 — — 163 Financial liabilities: Deposits 573,277 572,772 — 572,772 — Accrued interest payable 58 58 — 58 — Note 10 – Treasury Stock and Repurchases to Authorized and Unissued Share and per share information disclosed herein which relate to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give the retroactive recognition to the exchange ratio ( 1.3549 ) applied in the Conversion. The Company’s previous stock repurchase program adopted on August 13, 2021 was terminated effective July 18, 2025 in connection with the Conversion, and 1,459,691 shares of common stock held in treasury at a cost of $ 13.1 million were retired. During the six months ended June 30, 2026 , the Company issued 29,390 shares of common stock to fund awards that were granted under the 2025 Equity Incentive Plan. During the six months ended June 30, 2026 , the Company repurchased 5,270 shares upon vesting of shares under the 2012 EIP and 2025 EIP for the purpose of remitting payroll taxes on behalf of awardees who were employees, at an average cost of $ 15.68 per share. Following the second step conversion, shares repurchased for the purpose of remitting payroll taxes are repurchased into common stock authorized and unissued in accordance with the Company's incorporation in the State of Maryland. 28 During the three and six months ended June 30, 2025 , the Company did no t repurchase any shares of common stock under the previous stock repurchase program. As of June 30, 2025 , there were 41,495 shares remaining to be repurchased under the existing stock repurchase program. During the six months ended June 30, 2025 , the Company transferred 36,849 shares of common stock out of treasury stock under the 2025 Equity Incentive Plan, at an average cost of $ 6.93 per share, to fund awards that had been granted under the plan. During the six months ended June 30, 2025 , the Company repurchased 4,405 shares upon vesting of shares under the 2012 Equity Incentive Plan for the purpose of remitting payroll taxes on behalf of awardees who were employees, at an average cost of $ 11.51 per share. On October 22, 2025, the Company adopted a plan to repurchase up to 5 % of its outstanding shares of common stock. Share repurchases under the plan may occur following the one-year anniversary of the Conversion, or on July 20, 2026. All share repurchases made after the Conversion will be repurchased into common stock authorized and unissued. On July 28, 2026, the Company commenced repurchases of shares under this plan. Note 11 – Other Comprehensive Income (Loss) In addition to presenting the consolidated statements of other comprehensive income herein, the following table shows the tax effects allocated to the Company’s single component of other comprehensive income for the periods presented: For the Three Months June 30, 2026 For the Three Months June 30, 2025 Pre-Tax Amount Tax Expense Net of Tax Amount Pre-Tax Amount Tax Expense Net of Tax Amount (Dollars in thousands) Net unrealized gains on securities available for sale: Net unrealized gains arising during the period $ 857 $ ( 180 ) $ 677 $ 271 $ ( 57 ) $ 214 Less: reclassification adjustment related to: Recovery on previously impaired investment securities included in net income — — — ( 1 ) — ( 1 ) Total Other Comprehensive Income $ 857 $ ( 180 ) $ 677 $ 270 $ ( 57 ) $ 213 For the Six Months June 30, 2026 For the Six Months June 30, 2025 Pre-Tax Amount Tax Benefit Net of Tax Amount Pre-Tax Amount Tax Expense Net of Tax Amount (Dollars in thousands) Net unrealized (losses) gains on securities available for sale: Net unrealized (losses) gains arising during the period $ ( 15 ) $ 3 $ ( 12 ) $ 288 $ ( 60 ) $ 228 Less: reclassification adjustment related to: Recovery on previously impaired investment securities included in net income — — — ( 2 ) — $ ( 2 ) Total Other Comprehensive (Loss) Income $ ( 15 ) $ 3 $ ( 12 ) $ 286 $ ( 60 ) $ 226 29 The following table presents the amounts reclassified out of the single component of the Company’s accumulated other comprehensive loss for the indicated periods: Amounts Reclassified from Accumulated Details about Accumulated Other Other Comprehensive Income Affected Line Item Comprehensive Income (Loss) For the Three Months Ended June 30, on the Consolidated Components 2026 2025 Statements of Income (Dollars in thousands) Net unrealized losses on securities available for sale: Recovery on previously impaired investment securities — ( 1 ) Recovery on previously impaired investment securities Provision for income tax expense — — Income tax expense Total reclassification for the period $ — $ ( 1 ) Increase to Net Income Amounts Reclassified from Accumulated Details about Accumulated Other Other Comprehensive Loss Affected Line Item Comprehensive Loss For the Six Months Ended June 30, on the Consolidated Components 2026 2025 Statements of Income (Dollars in thousands) Net unrealized losses on securities available for sale: Recovery on previously impaired investment securities — ( 2 ) Recovery on previously impaired investment securities Provision for income tax expense — — Income tax expense Total reclassification for the period $ — $ ( 2 ) Increase to Net Income 30 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward-Looking Statements Safe-Harbor This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are based on current expectations, estimates and projections about the Company’s and the Bank’s industry, and management’s beliefs and assumptions. Words such as anticipates, expects, intends, plans, believes, estimates and variations of such words and expressions are intended to identify forward-looking statements. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to forecast. Therefore, actual results may differ materially from those expressed or forecast in such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ from those anticipated in any forward-looking statements include, but are not limited to, those described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, Part II, Item 1A of this Quarterly Report on Form 10-Q and the following: • the strength of the United States economy in general and of the local economies in which we conduct operations; • the effect of change in monetary and fiscal policy, including changes in interest rate policies of the Board of Governors of the Federal Reserve System; • inflation, and market and monetary fluctuations; • climate change; • tariffs; • deterioration in the credit quality of our loan portfolio and/or the value of the collateral securing repayment of loans; • unanticipated changes in our liquidity position; • reduction in the value of our investment securities; • the cost and ability to attract and retain key employees; • regulatory or legal developments, tax policy changes; • our ability to implement and execute our business plan and strategy and expand our operations; • the ability of our customers to make loan payments; • the effect of competition on rates of deposit and loan growth and net interest margin; • our ability to continue to control costs and expenses; • any future FDIC insurance premium increases, or special assessment may adversely affect our earnings; • risks from data loss or other security breaches, including a breach of our operational or security systems, policies, or procedures, including cyber-attacks on us or on our third-party vendors or service providers; • the failure of financial institutions may adversely affect our business, and the market price of our common stock; • risks relating to pandemics and other public health issues; • risks relating to geopolitical conflicts; • changes in accounting principles, policies, or guidelines; • our success in managing the risks involved in our business; and • other economic, competitive, geopolitical, governmental, regulatory and technological factors affecting our operations, pricing, products and services. Any and all of our forward-looking statements in this Quarterly Report on Form 10-Q and in any other public statements we make may differ from actual outcomes. They can be affected by inaccurate assumptions we might make or known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Except as required by law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. 31 Overview The following discussion and analysis is presented to assist in the understanding and evaluation of our consolidated financial condition, results of operations and other relevant statistical data. It is intended to complement the unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and should be read in conjunction therewith. The detailed discussion focuses on our consolidated financial condition as of June 30, 2026 compared to the consolidated financial condition as of December 31, 2025 and the consolidated results of operations for the three and six months ended June 30, 2026 and 2025. Our results of operations depend primarily on our net interest income, which is the difference between the interest income we earn on loans and investments and the interest expense we pay on deposits, borrowings, and other interest-bearing liabilities. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates we earn or pay on these balances. Our operations are also affected by non-interest income, such as service charges and fees, debit card fees, earnings on bank owned life insurance, and other non-interest income activities as well as non-interest expenses which include salaries and employee benefits, occupancy and equipment costs, data processing, professional services, advertising, FDIC insurance, and other general and administrative expenses. Financial institutions like us, in general, are significantly affected by economic conditions, competition, and the monetary and fiscal policies of the federal government. Lending activities are influenced by the demand for and supply of housing and commercial real estate, competition among lenders, interest rate conditions, and funds availability. Our operations and lending are principally concentrated in the Western New York area, and our operations and earnings are influenced by local economic conditions. Deposit balances and cost of funds are influenced by prevailing market rates on competing investments, customer preferences, and levels of personal income and savings in our primary market area. Operations are also significantly impacted by government policies and actions of regulatory authorities. Future changes in applicable law, regulations, or government policies may materially impact the Company. Completion of Second-Step Conversion On January 27, 2025, Lake Shore, MHC, the former parent mutual holding company of Lake Shore Federal Bancorp, adopted a Plan of Conversion and Reorganization pursuant to which Lake Shore, MHC, would undertake a "second-step" conversion (the “Conversion”) and Lake Shore Savings Bank, a federally chartered savings bank, the wholly-owned subsidiary of Lake Shore Federal Bancorp, would reorganize from the two-tier mutual holding company structure to the fully-public stock holding company structure. In addition, Lake Shore Savings Bank would convert its charter from a federal savings bank to a New York commercial bank renamed Lake Shore Bank. Effective July 18, 2025, Lake Shore Bancorp, a new corporation incorporated under the laws of the State of Maryland, became the bank holding company of Lake Shore Bank, a New York commercial bank and its only wholly-owned subsidiary in connection with the completion of Conversion. The Conversion was consummated through the merger of Lake Shore, MHC with and into Lake Shore Federal Bancorp, followed by the merger of Lake Shore Federal Bancorp with and into Lake Shore Bancorp, which occurred on July 18, 2025. In the subscription offering, Lake Shore Bancorp raised gross proceeds of $49.5 million by selling 4,950,460 shares of its common stock (approximately the midpoint of the offering range) at $10.00 per share to depositors of the Bank. The Company used $4.0 million of the proceeds to fund an addition to its Employee Stock Ownership Plan ("ESOP") loan for the acquisition of an additional 396,036 shares at $10.00 per share. Expenses incurred related to the offering were approximately $2.3 million and have been recorded against offering proceeds. As part of the Conversion transaction, each outstanding share of Lake Shore Federal Bancorp common stock owned by the public stockholders of Lake Shore Federal Bancorp (stockholders other than Lake Shore, MHC) as of July 18, 2025 were converted into shares of Lake Shore Bancorp's common stock based on an exchange ratio of 1.3549 shares of Lake Shore Bancorp's common stock for each share of Lake Shore Federal Bancorp common stock so that Lake Shore Federal Bancorp's existing public stockholders would own approximately the same percentage of Lake Shore Bancorp's common 32 stock as they owned of Lake Shore Federal Bancorp's common stock immediately prior to the Conversion. A total of 7,825,501 shares of common stock were outstanding immediately following the completion of the stock offering. Share and per share amounts related to periods prior to the date of Conversion (July 18, 2025) have been adjusted to give the retroactive recognition to the exchange ratio applied in the Conversion (1.3549). Recent Events As previously disclosed on a Current Report on Form 8-K , the Board of Directors of the Company declared a cash dividend of $0.09 per share on its outstanding common stock. The dividend is expected to be paid on August 12, 2026 to stockholders of record as of August 3, 2026. As previously disclosed on a Current Report on Form 8-K , on October 22, 2025, the Company adopted a plan to repurchase up to 5% of its outstanding shares of common stock. On July 28, 2026, the Company commenced repurchases of shares under this plan. Management Strategy There have been no material changes in the Company’s management strategy from what was disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Critical Accounting Estimates The Company's consolidated financial statements are prepared in accordance with GAAP. As a result, the Company is required to make certain estimates, judgments, and assumptions that it believes are reasonable based upon the information available at that time. Critical accounting estimates includes the areas where the Company has made what it considers to be particularly difficult, subjective, or complex judgments concerning estimates, and where these estimates can significantly affect the Company's financial results under different assumptions and conditions. These estimates, judgments, and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could be different from these estimates. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them as needed. Significant accounting policies followed by the Company are presented in Note 2 - Summary of Significant Accounting Policies, to the Audited Consolidated Financial Statements included within Part II. Item 8. of its Annual Report on Form 10-K for the year ended December 31, 2025, and in Note 1: Basis of Presentation and Significant Accounting Policies and Estimates in Part I. Item 1. of this Form 10-Q. Allowance for Credit Losses Management considers the allowance for credit losses to be a critical accounting estimate, given the uncertainty in estimating lifetime credit losses attributable to its portfolios of assets exhibiting credit risk, particularly in its loan portfolio, and the material effect that such judgments can have on our results of operations. Determining the amount requires significant judgment on the part of management, is multi-faceted, and can be imprecise. The level of the allowance for credit losses on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and expectations of the future based on reasonable and supportable forecasts. The allowance is established through a provision for credit losses in the Consolidated Statements of Income, and evaluation of the adequacy of the allowance for credit losses is performed by management on a quarterly basis. While management uses available information to anticipate credit losses, future additions to the allowance may be necessary based on changes in economic conditions or the composition of its portfolios. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for credit losses. As of June 30, 2026 and December 31, 2025, the allowance for credit losses on loans totaled $4.7 million and $4.9 million, respectively. Due to the 33 nature and composition of the Bank's lending activities, a significant portion of the allowance for credit losses on loans is allocated to the commercial real estate portfolio. As of June 30, 2026 and December 31, 2025, the allowance for credit losses on loans allocated to the total commercial real estate portfolio was $3.7 million, or 78.1%, and $3.9 million, or 80.2%, respectively. The Company's methodology for maintaining its allowance for credit losses is based on historical loan-level performance experience and data, peer data, current economic information, and reasonable and supportable forecasts. Accordingly, the estimation of the allowance for credit losses is impacted by the economic forecasts utilized, which require the use of significant judgment. Deterioration of forecasted economic conditions may lead to further required increases to the allowance for credit losses. Conversely, improvements to forecasted economic conditions may warrant further reductions to the allowance for credit losses. In estimating the allowance for credit losses, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate. The allowance for credit losses is sensitive to various forecasted macroeconomic drivers, including the Federal Open Market Committee's ("FOMC") median forecasted U.S. civilian unemployment rate and the year-over-year change in U.S. Gross Domestic Product ("GDP"). While it is difficult to estimate how potential changes to various factors may impact the allowance for credit losses because such changes to factors may not occur at the same rate or in the same direction, management compared the modeled allowance for credit losses on loans to a hypothetical model using a downside economic forecast. Using an immediate "shock" or increase of 20 basis points in the FOMC's projected rate of U.S. civilian unemployment, and a decrease of 100 basis points in the FOMC's projected rate of U.S. GDP growth, this would increase the model's total calculated allowance for credit losses on loans by $391,000, or 8.3%, representing a seven basis points increase in the coverage ratio of the allowance for credit losses as a percentage of loans at amortized cost, assuming all other quantitative and qualitative factors are kept at current levels, as of June 30, 2026. This example is only one of the numerous possible economic scenarios that could be utilized in assessing the sensitivity of the allowance for credit losses and does not represent management’s assumptions or judgment of factors as of June 30, 2026. Unexpected changes in economic growth could adversely affect our results of operations, including causing increases in delinquencies and default rates on loans, which would adversely impact our charge-offs, allowance for credit losses, and provision for credit losses. Deterioration in real estate values, employment data and household incomes may also result in higher credit losses for us. Also, in the ordinary course of business, we may be subject to a concentration of credit risk to a particular industry, counterparty, borrower or issuer. A deterioration in the financial condition or prospects of a particular industry or a failure or downgrade of, or default by, any particular entity or group of entities could negatively impact our business, perhaps materially, and the systems by which we set limits and monitor the level of our credit exposure to individual entities and industries, may not function as we have anticipated. Analysis of Net Interest Income Net interest income represents the difference between the interest we earn on our interest-earning assets, such as commercial and residential mortgage loans and investment securities, and the expense we pay on interest-bearing liabilities, such as deposits and borrowings. Net interest income depends on both the volume of our interest-earning assets and interest-bearing liabilities and the interest rates we earn or pay on them. Average Balances, Interest and Average Yields. The following tables set forth certain information relating to our average balance sheets for each principal category, and the amount of interest income or expense associated with that category, as well as corresponding average yields earned and rates paid for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods presented. Average balances are derived from daily balances over the periods indicated. The average balances for loans are net of allowance for credit losses but include non-accrual loans. The loan yields include net amortization of certain deferred fees and costs that are considered adjustments to yields. The net amortization of deferred loan fees and costs were $122,000 and $100,000 for the three months ended June 30, 2026 and 2025, respectively. The net amortization 34 of deferred loan fees and costs were $215,000 and $163,000 for the six months ended June 30, 2026 and 2025, respectively. Interest income on securities does not include a tax equivalent adjustment for tax exempt securities. For the Three Months Ended For the Three Months Ended June 30, 2026 June 30, 2025 Average Interest Income/ Yield/ Average Interest Income/ Yield/ Balance Expense Rate (2) Balance Expense Rate (2) (Unaudited) (Dollars in thousands) Interest-earning assets: Interest-earning deposits $ 64,801 $ 576 3.56 % $ 27,162 $ 270 3.98 % Securities (1) 54,910 348 2.54 % 56,222 368 2.62 % Loans, including fees 559,192 8,464 6.05 % 553,550 8,469 6.12 % Total interest-earning assets 678,903 $ 9,388 5.53 % 636,934 $ 9,107 5.72 % Other assets 53,753 52,724 Total assets $ 732,656 $ 689,658 Interest-bearing liabilities: Demand & NOW accounts $ 63,572 $ 14 0.09 % $ 64,337 $ 15 0.09 % Money market accounts 153,861 731 1.90 % 153,547 955 2.49 % Savings accounts (3) 50,642 8 0.06 % 58,286 9 0.06 % Time deposits 210,894 1,719 3.26 % 217,101 1,969 3.63 % Total interest-bearing deposits 478,969 2,472 2.06 % 493,271 2,948 2.39 % Borrowed funds & other interest-bearing liabilities 3,105 23 2.96 % 3,869 37 3.83 % Total interest-bearing liabilities 482,074 $ 2,495 2.07 % 497,140 $ 2,985 2.40 % Other non-interest bearing liabilities 106,759 100,826 Stockholders' equity 143,823 91,692 Total liabilities & stockholders' equity $ 732,656 $ 689,658 Net interest income $ 6,893 $ 6,122 Interest rate spread 3.46 % 3.32 % Net interest margin 4.06 % 3.84 % (1) The tax equivalent adjustment for bank qualified tax exempt municipal securities, using a federal statutory rate of 21%, results in rates of 2.92% and 3.03% for the three months ended June 30, 2026 and 2025, respectively. Yields above are not presented on a tax equivalent basis. (2) Annualized. (3) Included within savings accounts as of June 30, 2025 is $43.7 million of funds collected and held on deposit in a segregated account in connection with the Company's stock offering. The average rate paid on these funds was 5 basis points and the collection of these funds resulted in a $3.8 million increase in the average balance of savings accounts during the three months ended June 30, 2025. 35 For the Six Months Ended For the Six Months Ended June 30, 2026 June 30, 2025 Average Interest Income/ Yield/ Average Interest Income/ Yield/ Balance Expense Rate (2) Balance Expense Rate (2) (Unaudited) (Dollars in thousands) Interest-earning assets: Interest-earning deposits $ 59,461 $ 1,045 3.51 % $ 25,372 $ 504 3.97 % Securities (1) 55,975 701 2.50 % 57,008 748 2.62 % Loans, including fees 555,178 16,696 6.01 % 549,578 16,222 5.90 % Total interest-earning assets 670,614 $ 18,442 5.50 % 631,958 $ 17,474 5.53 % Other assets 53,542 52,193 Total assets $ 724,156 $ 684,151 Interest-bearing liabilities Demand & NOW accounts $ 62,982 $ 29 0.09 % $ 63,565 $ 30 0.09 % Money market accounts 155,037 1,466 1.89 % 153,116 1,822 2.38 % Savings accounts (3) 50,951 16 0.06 % 55,927 18 0.06 % Time deposits 204,604 3,333 3.26 % 212,975 3,920 3.68 % Total interest-bearing deposits 473,574 4,844 2.05 % 485,583 5,790 2.38 % Borrowed funds & other interest-bearing liabilities 2,725 46 3.38 % 5,046 97 3.84 % Total interest-bearing liabilities 476,299 $ 4,890 2.05 % 490,629 $ 5,887 2.40 % Other non-interest bearing liabilities 104,401 102,202 Stockholders' equity 143,456 91,320 Total liabilities & stockholders' equity $ 724,156 $ 684,151 Net interest income $ 13,552 $ 11,587 Interest rate spread 3.45 % 3.13 % Net interest margin 4.04 % 3.67 % (1) The tax equivalent adjustment for bank qualified tax exempt municipal securities, using a federal statutory rate of 21%, results in rates of 2.88% and 3.03% for the six months ended June 30, 2026 and 2025, respectively. Yields above are not presented on a tax equivalent basis. (2) Annualized. (3) Included within savings accounts as of June 30, 2025 is $43.7 million of funds collected and held on deposit in a segregated account in connection with the Company's stock offering. The average rate paid on these funds was 5 basis points and the collection of these funds resulted in a $1.9 million increase in the average balance of savings accounts during the six months ended June 30, 2025. Rate Volume Analysis . The following tables analyze the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. The tables show the amount of the change in interest income or expense caused by either changes in outstanding balances (volume) or changes in interest rates. The effect of a change in volume for the major components of interest-earning assets and interest-bearing liabilities is measured by applying the average rate during the later period to the volume change between the two periods. The effect of changes 36 in rate for the major components of interest-earning assets and interest-bearing liabilities is measured by applying the change in rate between the two periods to the average volume during the first period. Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025 Rate Volume Net Change (Dollars in thousands) Interest-earning assets: Interest-earning deposits $ (29 ) $ 335 $ 306 Securities (12 ) (8 ) (20 ) Loans, including fees (90 ) 85 (5 ) Total interest-earning assets (131 ) 412 281 Interest-bearing liabilities: Demand & NOW accounts (1 ) — (1 ) Money market accounts (225 ) 1 (224 ) Savings accounts — (1 ) (1 ) Time deposits (199 ) (51 ) (250 ) Total deposits (425 ) (51 ) (476 ) Other interest-bearing liabilities: Borrowed funds & other interest-bearing liabilities (8 ) (6 ) (14 ) Total interest-bearing liabilities (433 ) (57 ) (490 ) Total change in net interest income $ 302 $ 469 $ 771 Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 Rate Volume Net Change (Dollars in thousands) Interest-earning assets: Interest-earning deposits $ (58 ) $ 599 $ 541 Securities (34 ) (13 ) (47 ) Loans, including fees 306 168 474 Total interest-earning assets 214 754 968 Interest-bearing liabilities: Demand & NOW accounts (1 ) — (1 ) Money market accounts (374 ) 18 (356 ) Savings accounts — (2 ) (2 ) Time deposits (451 ) (136 ) (587 ) Total deposits (826 ) (120 ) (946 ) Other interest-bearing liabilities: Borrowed funds & other interest-bearing liabilities (12 ) (39 ) (51 ) Total interest-bearing liabilities (838 ) (159 ) (997 ) Total change in net interest income $ 1,052 $ 913 $ 1,965 As shown in the above tables, the increase in net interest income for the three months ended June 30, 2026 when compared to the three months ended June 30, 2025 was primarily impacted by a decrease in average rate paid on interest-bearing liabilities, an increase in the average balance of interest-earning assets, and a decrease in the average balance of interest-bearing liabilities. This increase was partially offset by a decrease in the average yield of interest-earning assets when compared to the prior year period. The average interest rate paid on interest-bearing liabilities decreased 33 basis points from 2.40% during the three months ended June 30, 2025 to 2.07% during the three months ended June 30, 2026. The decrease in the average interest rate paid on interest-bearing liabilities during the three months ended June 30, 2026 was primarily due to a 33 basis points decrease in the average interest rate paid on interest-bearing deposit accounts. The decrease in the average interest rate paid on deposit accounts was primarily due to the decrease in market interest rates, time deposit 37 repricing, and a marginal shift in deposit composition. The increase in the average balance of interest-earning assets was primarily due to a $37.6 million, or 138.6%, increase in average interest-earning deposits when compared to the prior year period. The average yield of interest-earning assets decreased by 19 basis points to 5.53% for the three months ended June 30, 2026 as compared to 5.72% for the same period in the prior year primarily as a result of a 42 basis point decrease in the average yield earned on interest-earning deposits and a seven basis points decrease in the average yield of the loan portfolio. The average balance of interest-bearing liabilities decreased $15.1 million, from $497.1 million during the three months ended June 30, 2025 to $482.1 million during the three months ended June 30, 2026 as a result of a decrease in the average balance of deposits of $14.3 million. Net interest margin increased to 4.06% for the three months ended June 30, 2026 as compared to 3.84% for the same period of the prior year. As shown in the above tables, the increase in net interest income for the six months ended June 30, 2026 was primarily impacted by a decrease in the average interest rate paid on interest-bearing liabilities, an increase in the average balance of interest-earning assets, and a decrease in the average balance of interest-bearing liabilities. The average interest rate paid on interest-bearing liabilities decreased 35 basis points from 2.40% during the six months ended June 30, 2025 to 2.05% during the six months ended June 30, 2026. The decrease in the average interest rate paid on interest-bearing liabilities during the six months ended June 30, 2026 was primarily due to a 33 basis points decrease in the average interest rate paid on interest-bearing deposit accounts. The decrease in the average interest rate paid on deposit accounts was primarily due to the decrease in market interest rates, time deposit repricing, and a marginal shift in deposit composition. The increase in the average balance of interest-earning assets was primarily due to a $34.1 million, or 134.4%, increase in average interest-earning deposits when compared to the prior year period. The average yield of interest-earning assets decreased by three basis points to 5.50% for the six months ended June 30, 2026 as compared to 5.53% for the same period in the prior year primarily as a result of a 46 basis point decrease in the average yield on interest-earning deposits, partially offset by an 11 basis points increase in the average yield of the loan portfolio. The average balance of interest-bearing liabilities decreased $14.3 million, from $490.6 million during the six months ended June 30, 2025 to $476.3 million during the six months ended June 30, 2026 as a result of decreases in the average balance of interest-bearing deposits of $12.0 million and the average balance of borrowed funds and other interest-bearing liabilities of $2.3 million. Net interest margin increased to 4.04% for the six months ended June 30, 2026 as compared to 3.67% for the same period of the prior year. Comparison of Financial Condition at June 30, 2026 and December 31, 2025 Total assets at June 30, 2026 were $736.7 million, an increase of $9.3 million, or 1.3%, as compared to $727.3 million at December 31, 2025 primarily due to increases in cash and cash equivalents and loans receivable, net. Cash and cash equivalents increased by $8.0 million, or 12.4%, from $64.3 million at December 31, 2025 to $72.2 million at June 30, 2026. The increase in cash and cash equivalents was primarily due to an increase in deposits of $5.0 million, or 0.9% and a decrease in securities of $2.6 million, or 4.6%, partially offset by an increase in loans receivable of $2.9 million, or 0.5%. Securities, at fair value, decreased by $2.6 million, or 4.6%, from $56.1 million at December 31, 2025 to $53.6 million at June 30, 2026, primarily due to securities paydowns of $2.5 million, as well as a $15,000 decrease in the market value of the securities. 38 Net loans receivable increased during the six months ended June 30, 2026, as shown in the table below: At June 30, At December 31, Change 2026 2025 $ % (Dollars in thousands) Real Estate Loans: Residential, one- to four-family (1) $ 143,615 $ 150,095 $ (6,480 ) (4.3 ) % Home equity 46,666 46,970 (304 ) (0.6 ) % Commercial (2) 332,314 327,352 4,962 1.5 % Total real estate loans 522,595 524,417 (1,822 ) (0.3 ) % Other Loans: Commercial 22,787 17,430 5,357 30.7 % Consumer (3) 14,875 15,466 (591 ) (3.8 ) % Total gross loans 560,257 557,313 2,944 0.5 % Net deferred loan costs 2,807 3,012 (205 ) (6.8 ) % Allowance for credit losses on loans (4,747 ) (4,884 ) 137 (2.8 ) % Loans receivable, net $ 558,317 $ 555,441 $ 2,876 0.5 % (1) There were no one- to four-family construction loans at June 30, 2026 or December 31, 2025. (2) Includes commercial construction loans of $21.1 million and $18.8 million at June 30, 2026 and December 31, 2025, respectively. (3) Includes overdraft protection of $32,000 and $24,000 at June 30, 2026 and December 31, 2025, respectively. The loans receivable, net balance increased $2.9 million, or 0.5%, from $555.4 million at December 31, 2025 to $558.3 million at June 30, 2026. The increase was primarily due to increases in commercial loans and commercial real estate loans, partially offset by decreases in residential, one- to four-family real estate loans and consumer loans. During the six months ended June 30, 2026, we remained strategically focused on originating shorter duration, adjustable-rate loans to diversify our asset mix and to manage interest rate risk. Asset Quality . The following tables set forth activity in our allowance for credit losses on loans and other ratios at or for the dates indicated: For the Six Months Ended June 30, 2026 2025 (Dollars in thousands) Balance at beginning of year $ 4,884 $ 5,133 Provision for credit losses (128 ) 39 Charge-offs: Other loans: Consumer (12 ) (13 ) Total charge-offs (12 ) (13 ) Recoveries: Real estate loans: Residential, one- to four-family — 4 Other loans: Consumer 3 1 Total recoveries 3 5 Net (charge-offs) recoveries (9 ) (8 ) Balance at end of period $ 4,747 $ 5,164 At or for the Six Months Ended June 30, 2026 2025 Average loans outstanding, including fees $ 555,178 $ 549,578 Allowance for credit losses as a percent of loans at amortized cost 0.84 % 0.93 % Allowance for credit losses as a percent of non-performing loans at amortized cost 331.85 % 290.53 % 39 When compared to December 31, 2025, the current modeled allowance for credit losses related to the loan portfolio decreased by approximately $137,000, or 2.80%, comprised of a decrease of $207,000 due to a decrease in reserve rate for the blended portfolio, partially offset by an increase of $70,000 as the result of an increase in loan balance. Such allowance for credit losses was calculated utilizing a discounted cash flow model as further described in Part I Item 1 - Note 1 - Basis of Presentation and Significant Accounting Policies and Estimates. For the Six Months Ended June 30, 2026 2025 Ratio of net charge-offs to average loans outstanding by loan type, annualized: Real estate loans: Residential, one- to four-family — % — % Home equity — % — % Commercial — % — % Other loans: Commercial — % — % Consumer (0.06 ) % (0.14 ) % Ratio of net charge-offs to average loans outstanding — % — % For the six months ended June 30, 2026, consumer loan net charge-offs to average consumer loans outstanding, annualized, improved to (0.06)% from (0.14)% for the prior year period. This improvement was primarily driven by an increase in average consumer loans outstanding of $6.9 million for the six months ended June 30, 2026 when compared to the six months ended June 30, 2025. At June 30, At December 31, 2026 2025 (Dollars in thousands) Loans accounted for on a non-accrual basis: Real estate loans: Residential, one- to four-family (1) $ 1,291 $ 1,525 Home equity 57 66 Commercial (2) 82 89 Other loans: Commercial — — Consumer — — Total non-accrual loans 1,430 1,680 Total non-performing loans 1,430 1,680 Foreclosed real estate 57 — Total non-performing assets $ 1,487 $ 1,680 Ratios: Non-performing loans as a percent of total loans at amortized cost 0.25 % 0.30 % Non-performing assets as a percent of total assets 0.20 % 0.23 % (1) Includes one- to four- family construction loans. (2) Includes Commercial construction loans. Total non-performing assets decreased by $193,000, or 11.5%, to $1.5 million at June 30, 2026 from $1.7 million at December 31, 2025, due to a decrease in non-accrual loans of $250,000, partially offset by an increase in foreclosed real estate of $57,000. The Company had no loans past due 90 days or more but still accruing at June 30, 2026 or December 31, 2025. Other assets increased $821,000, or 8.9%, to $10.0 million at June 30, 2026 from $9.2 million at December 31, 2025 as a result of normal operations. 40 The table below shows changes in deposit balances by type of deposit account between June 30, 2026 and December 31, 2025: At June 30, At December 31, Change 2026 2025 $ % (Dollars in thousands) Core deposits Demand deposits and NOW accounts: Non-interest bearing $ 96,476 $ 96,103 $ 373 0.4 % Interest bearing 64,386 62,346 2,040 3.3 % Time deposits less than or equal to $250,000 180,479 174,211 6,268 3.6 % Money market 155,223 159,212 (3,989 ) (2.5 ) % Savings 49,984 51,788 (1,804 ) (3.5 ) % Total core deposits 546,548 543,660 2,888 0.5 % Non-core deposits Time deposits greater than $250,000 31,692 29,617 2,075 7.0 % Total non-core deposits 31,692 29,617 2,075 7.0 % Total deposits $ 578,240 $ 573,277 $ 4,963 0.9 % The increase in total deposits was primarily due to a 3.6% increase in time deposits less than or equal to $250,000, a 7.0% increase in time deposits greater than $250,000 and a 3.3% increase in interest-bearing demand deposits, as a result of increased customer demand for these types of products as the result of the competitive interest rate environment. The increases were partially offset by a 2.5% decrease in money market accounts and a 3.5% decrease in savings accounts. Our strategic focus remains centered on organic growth of deposits among our retail and commercial customers to maintain low reliance on wholesale funding and to strengthen customer relationships. At June 30, 2026 and December 31, 2025, our percentage of uninsured deposits to total deposits was 10.9% and 11.3%, respectively. Total stockholders’ equity increased $3.1 million, or 2.2%, to $144.8 million at June 30, 2026 from $141.6 million at December 31, 2025. The increase in stockholders’ equity was primarily attributed to $4.1 million in net income earned during the six months ended June 30, 2026, partially offset by dividends declared and paid of $1.3 million during the same time period. Comparison of Results of Operations for the Three Months Ended June 30, 2026 and 2025 General. Net income increased to $2.2 million during the three months ended June 30, 2026, or $0.29 per diluted share, an increase of $254,000, or 13.2%, compared to net income of $1.9 million, or $0.25 per diluted share, for the three months ended June 30, 2025. Our financial performance for the three months ended June 30, 2026 was positively impacted primarily by higher net interest income. Net Interest Income. Net interest income for the second quarter of 2026 increased by $771,000, or 12.6%, to $6.9 million as compared to $6.1 million for the second quarter of 2025. Net interest margin and interest rate spread were 4.06% and 3.46%, respectively, for the three months ended June 30, 2026 as compared to 3.84% and 3.32%, respectively, for the three months ended June 30, 2025. Interest Income. Interest income for the three months ended June 30, 2026 was $9.4 million, an increase of $281,000, or 3.1%, compared to $9.1 million for the three months ended June 30, 2025. The increase in interest income from the prior year quarter was primarily due to $42.0 million, or 6.6%, increase in the average balance of interest-earning assets, partially offset by a 19 basis point decrease in the average yield on interest-earning assets. During the second quarter of 2026 as compared to the same period in 2025, there was a $306,000, or 113.3%, increase in interest income on interest-earning deposits due to a $37.6 million increase in the average balance of interest-earnings deposits. This increase was partially offset by a 42 basis point decrease in the average yield on interest-earnings deposits. 41 Interest Expense. Interest expense for the three months ended June 30, 2026 was $2.5 million, a decrease of $490,000, or 16.4%, from $3.0 million for the three months ended June 30, 2025. The decrease in interest expense when compared to the prior year quarter was primarily due to a 33 basis points decrease in average interest rate paid on interest-bearing liabilities and a $15.1 million, or 3.0%, decrease in the average balance of interest-bearing liabilities. During the second quarter of 2026 as compared to the same period in 2025, interest expense on deposits decreased by $476,000, or 16.1%, due to a 33 basis points decrease in the average interest rate paid on deposit accounts and a $14.3 million, or 2.9%, decrease in the average balance of interest-bearing deposits. The decrease in the average interest rate paid on deposit accounts was primarily due to the decrease in market interest rates, time deposit repricing, and a marginal shift in deposit composition. Average interest-bearing deposit balances decreased 2.9% during the second quarter of 2026 when compared to the second quarter of 2025 due to a decrease in all deposit categories except money market accounts. Provision for Credit Losses. The Company recorded a $119,000 provision for credit losses for the three months ended June 30, 2026, as compared to no provision for the three months ended June 30, 2025. Of the amount recorded for the second quarter of 2026, $169,000 related to a provision recorded to the allowance for credit losses for unfunded commitments, and $50,000 related to a credit recorded to the allowance for credit losses on the loan portfolio. The allowance for credit losses on loans and unfunded commitments and the corresponding provision for credit losses of $119,000 recognized during the second quarter of 2026 was primarily the result of an increase in outstanding unfunded commitments between the periods. The decrease in the allowance for credit losses on the loan portfolio was primarily related to a decrease in the calculated reserve rates, including the expected quantitative losses inclusive of forecasted economic trends, and the qualitative factor loss rates related to economic factors. The decrease primarily related to the commercial real estate and residential mortgage loan pools, partially offset by an increase in the calculation of expected losses for the commercial loan pool. Non-Interest Income. Non-interest income was $749,000 for the three months ended June 30, 2026, a decrease of $51,000, or 6.4%, as compared to $800,000 for the three months ended June 30, 2025. The decrease was primarily due to a $65,000 decrease in gain on equity securities that were held in the prior year period, partially offset by a $28,000 increase in earnings on bank-owned life insurance. Non-Interest Expense. Non-interest expense was $4.9 million for the three months ended June 30, 2026, an increase of $248,000, or 5.4%, as compared to $4.6 million for the three months ended June 30, 2025. The increase from the prior year quarter was primarily related to an increase in the cost of health insurance, taxes, and other non-salary benefits of $236,000, or 8.3%, and an increase in occupancy and equipment of $27,000, or 4.4%, partially offset by a decrease in data processing of $31,000, or 6.8%. Income Tax Expense. Income tax expense was $477,000 for the three months ended June 30, 2026, an increase of $99,000, or 26.2%, as compared to $378,000 for the three months ended June 30, 2025. The increase in income tax expense from the prior year quarter was due to an increase in pre-tax income during the current quarter as well as an increase in the effective tax rate, which was due to an increase in taxable income earned during the second quarter of 2026. The effective tax rate was 18.0% for three months ended June 30, 2026 as compared to 16.5% for the three months ended June 30, 2025. Comparison of Results of Operations for the Six Months Ended June 30, 2026 and 2025 General. Net income was $4.1 million for the six months ended June 30, 2026, or $0.56 per diluted share, an increase of $1.1 million, or 37.7%, compared to net income of $3.0 million, or $0.39 per diluted share, for the six months ended June 30, 2025. Net income for the six months ended June 30, 2026 was positively impacted by a $2.0 million, or 17.0% increase in net interest income, when compared to the first half of 2025. Net Interest Income. Net interest income for the six months ended June 30, 2026 increased by $2.0 million, or 17.0%, to $13.6 million as compared to $11.6 million for the first half of 2025. Net interest margin and interest rate spread were 4.04% and 3.45%, respectively, for the six months ended June 30, 2026 as compared to 3.67% and 3.13%, respectively, for the six months ended June 30, 2025. 42 Interest Income. Interest income increased by $968,000, or 5.5%, to $18.4 million for the six months ended June 30, 2026 when compared to $17.5 million for the six months ended June 30, 2025. This increase was primarily due to an increase in the average balance of interest-earning assets of $38.7 million, or 6.1%, when compared to the previous period. Interest earned on interest-earning deposits increased by $541,000, or 107.3%, primarily due to a $34.1 million, or 134.4%, increase in the average balance of interest-earning deposits. Interest earned on loans increased by $474,000, or 2.9%, due to an increase in the average balance of loans of $5.6 million, or 1.0%, along with an 11 basis points increase in the average yield earned on loans due to loans originating and rates resetting at higher interest rates. Interest Expense. Interest expense decreased $997,000, or 16.9%, to $4.9 million for the six months ended June 30, 2026, compared to $5.9 million for the six months ended June 30, 2025. The decrease in interest expense was primarily due to a 35 basis points decrease in average interest rate paid on interest-bearing liabilities and a decrease in the average balance of interest-bearing liabilities of $14.3 million, or 2.9%. During the first half of 2026, there was a $946,000 decrease in interest expense on interest-bearing deposit accounts when compared to the first half of 2025 due to a 33 basis points decrease in the average interest rate paid on interest-bearing deposit accounts along with a decrease in average balance of interest-bearing deposits of $12.0 million, or 2.5%. The decrease in the average interest rate paid on deposit accounts was primarily due to the decrease in market interest rates, time deposit repricing, and a marginal shift in deposit composition. Provision for Credit Losses. The Company recorded a net provision for credit losses of $5,000 on loans and unfunded commitments during the six months ended June 30, 2026, as compared to a $48,000 provision for credit losses during the six months ended June 30, 2025. For the first half of 2026, $133,000 related to a provision recorded to the allowance for credit losses for unfunded commitments, and $128,000 related to a credit recorded to the allowance for credit losses on the loan portfolio. The increase in the allowance for credit losses on unfunded commitments and the corresponding provision for credit losses recognized during the first half of 2026 was primarily the result of an increase in outstanding unfunded commitments between the periods. The decrease in the allowance for credit losses on the loan portfolio was primarily related to a decrease in the calculated reserve rates, including the expected quantitative losses inclusive of forecasted economic trends, and the qualitative factor loss rates related to economic factors. The decrease primarily related to the commercial real estate and residential mortgage loan pools, partially offset by an increase in the calculation of expected losses for the commercial loan pool. Non-Interest Income. Non-interest income decreased by $72,000, or 4.7%, to $1.5 million for the six months ended June 30, 2026, when compared to the six months ended June 30, 2025. The decrease was primarily due to a $111,000 decrease in gain on equity securities that were held in the prior year period and a $14,000 decrease in earnings on annuity assets, partially offset by a $53,000 increase in earnings on bank-owned life insurance and a $12,000 increase in service charges and fees. Non-Interest Expense. Non-interest expense was $10.0 million for the six months ended June 30, 2026, an increase of $493,000, or 5.2%, as compared to $9.5 million for the six months ended June 30, 2025. The increase related primarily to an increase in the cost of health insurance, taxes, and other non-salary benefits of $628,000, or 10.9%, partially offset by a decrease in data processing costs of $130,000, or 14.2% and professional services of $37,000, or 6.5%, as a result of management's efforts to optimize operating expenses. Income Taxes Expense. Income tax expense was $907,000 for the six months ended June 30, 2026, an increase of $322,000, or 55.0%, as compared to $585,000 for the six months ended June 30, 2025. The effective tax rate was 18.1% for the first half of 2026 and 16.4% for the first half of 2025. The increase in income tax expense from the first half of 2025 was primarily related to the increase in pre-tax income earned during the first half of 2026. The increase in the effective tax rate during the first half of 2026 was primarily due to an increase in taxable income earned during the first half of 2026. Liquidity and Capital Resources Liquidity describes our ability to meet the financial obligations that arise during the ordinary course of business. Liquidity is primarily needed to fund loan commitments, to pay the deposit withdrawal requirements of our customers, as well as to fund current and planned expenditures. Our primary sources of funds consist of deposits, scheduled amortization and 43 prepayments of loans and securities, maturities and sales of investments and loans, excess cash, interest earning deposits at other financial institutions, and funds provided from operations. We have written agreements with the FHLBNY, which allow us to borrow the maximum lending values designated by the type of collateral pledged. As of June 30, 2026, the unpaid principal balance of the fixed-rate residential, one-to four-family loans pledged to FHLBNY as collateral, was $122.7 million and the total collateral market value assigned by FHLBNY was $91.9 million. In support of arrangements entered into by certain municipal and other public sector counterparties, we have issued a letter of credit (“MULOC”) through FHLBNY to secure municipal deposits. As of June 30, 2026 we had a $1.5 million outstanding letter of credit related to municipal deposits, and as of December 31, 2025, we had no outstanding letters of credit related to municipal deposits. Such MULOCs are applied as a reduction to our total borrowing capacity with FHLBNY. As of June 30, 2026 and December 31, 2025, respectively, we had available borrowing capacity of $90.4 million and $88.0 million under the agreement with FHLBNY. At June 30, 2026 and December 31, 2025, there were no outstanding advances under this agreement. We have a written agreement with the Federal Reserve Bank discount window for overnight borrowings which is collateralized by a pledge of our securities, and allows us to borrow up to the value of the securities pledged. At June 30, 2026, and December 31, 2025, there were no securities pledged to the Federal Reserve Bank and we had no balances outstanding. Additionally, as of June 30, 2026, the Bank has uncollateralized intraday credit with the Federal Reserve Bank that allows for certain transactions to not be rejected for which there are insufficient funds in our Federal Reserve Master Account during normal hours of operation. Lastly, we have also established an unsecured line of credit with a correspondent bank for $20.0 million. There were no borrowings on this line as of June 30, 2026 and December 31, 2025. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, calls of investment securities, and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions, and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds. Our primary investing activities include the origination and purchase of loans and the purchase of investment securities. For the six months ended June 30, 2026, we originated loans of approximately $41.5 million as compared to approximately $37.9 million of loans originated during the six months ended June 30, 2025. Loan originations and purchases exceeded principal payments and other deductions during the six months ended June 30, 2026 by $3.0 million. There were no purchases or sales of investment securities during the six months ended June 30, 2026 and 2025. We have loan commitments to borrowers and borrowers have unused overdraft lines of protection, unused home equity lines of credit and unused commercial lines of credit that may require funding at a future date. Additionally, we have a commitment to provide a capital contribution to Castle Creek Launchpad Fund II (SBIC) LP, a limited partnership investment fund. We believe we have sufficient funds to fulfill these commitments, including sources of funds available through the use of FHLBNY advances or other liquidity sources. Total deposits were $578.2 million at June 30, 2026, as compared to $573.3 million at December 31, 2025. Approximately $196.8 million of time deposit accounts are scheduled to mature within one year as of June 30, 2026. Based on our deposit retention experience, current pricing strategy, and competitive pricing policies, we anticipate that a significant portion of these time deposits will remain with us following their maturity. We are committed to maintaining a strong liquidity position; therefore, we monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. The marginal cost of new funding, however, whether from deposits or borrowings from the FHLBNY, will be carefully considered as we monitor our liquidity needs. Therefore, in order to maintain sufficient liquidity and manage our cost of funds, we may consider wholesale funding options, including additional borrowings from the FHLBNY, in the future. 44 We do not anticipate any material capital expenditures in 2026. We do not have any balloon or other payments due on any long-term obligations, other than the borrowing agreements noted above. At June 30, 2026, the Bank exceeded all of its regulatory capital requirements. Regulatory Capital The federal banking agencies have developed a “Community Bank Leverage Ratio” (“CBLR”) (bank’s tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A “qualifying community bank” may elect to utilize the Community Bank Leverage Ratio in lieu of the general applicable risk-based capital requirements under Basel III. If the community bank exceeds this ratio it will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Basel III. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies set the minimum capital for the Community Bank Leverage Ratio at 9.0%. The Bank elected to be subject to this new definition when it became effective on January 1, 2020, and has continued to use the Community Bank Leverage Ratio since that time. Effective July 1, 2026, the federal banking agencies set the minimum capital for the Community Bank Leverage Ratio at 8.00%. As of June 30, 2026 and December 31, 2025, the Bank’s Community Bank Leverage Ratio was 17.43% and 16.65%, respectively. In order to be considered “well-capitalized” by the FDIC, a non-CBLR commercial bank must maintain a Tier 1 Leverage capital ratio of 5% and a Total Risk-Based capital ratio of 10%. At June 30, 2026 and December 31, 2025, the Bank’s Tier 1 Leverage capital ratio was 17.43% and 16.65%, respectively, and its Total Risk-Based capital ratio was 24.04% and 23.51%, respectively. Accordingly, the Bank was considered to be well-capitalized under applicable regulatory capital requirements. Off-Balance Sheet Arrangements In February 2026, we committed to invest up to $2.0 million in Castle Creek Launchpad Fund II (SBIC) LP, a limited partnership investment fund. During the six months ended June 30, 2026, we funded an initial capital contribution of $248,000. As of June 30, 2026, the remaining unfunded commitment was $1.8 million. Future funding is subject to capital calls by the fund's general partner in accordance with the terms of the partnership agreement. Because no additional capital has been called, the unfunded commitment is not reflected as a liability in the consolidated statement of financial condition. We do not believe this commitment will have a material adverse effect on our liquidity, capital resources, or results of operations. Other than the limited partnership investment commitment and our loan commitments, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Refer to Note 7 in the Notes to our unaudited consolidated financial statements for a summary of loan commitments outstanding as of June 30, 2026. It em 3. Quantitative and Qualitative Disclosures About Market Risk Disclosure is not required as the Company is a smaller reporting company. Item 4. Con trols and Procedures. Disclosure Controls and Procedures The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective. 45 Changes in Internal Control over Financial Reporting There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting. PA RT II Item 1A. Risk Factors. Refer to Part I, Item 1A, Risk Factors, of our Form 10-K for the year ended December 31, 2025 and Forward-Looking Statements from Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-Q for a discussion of certain risks affecting us. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. There have been no material changes to the risk factors since the filing of the Annual Report on Form 10-K for the year ended December 31, 2025. Item 2. Unregistered S ales of Equity Securities and Use of Proceeds The following table reports information regarding repurchases by Lake Shore Bancorp of its common stock in each month of the quarter ended June 30, 2026. COMPANY PURCHASES OF EQUITY SECURITIES Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (2) April 1 through April 30, 2026 3,168 $ 15.85 — — May 1 through May 31, 2026 — — — — June 1 through June 30, 2026 — — — — Total 3,168 $ 15.85 — — (1) Shares purchased represent shares that were elected to be withheld from the vesting of restricted stock awards to cover income tax withholdings for the individuals upon vesting. (2) On October 22, 2025, our Board of Directors adopted a plan to repurchase up to 5% of our outstanding shares of common stock. On July 28, 2026, the Company commenced repurchases of shares under this plan. The plan allows for a maximum number of 393,191 shares to be repurchased. 46 Item 5. Other Information During the second quarter of 2026, none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC regulations. Item 6. Exh ibits 31.1 Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * 31.2 Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 * 32.1 Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * 32.2 Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * 101.INS Inline XBRL Instance Document * 101.SCH Inline XBRL Taxonomy Extension Schema Document * 101.CAL Inline XBRL Taxonomy Calculation Linkbase Document * 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document * 101.LAB Inline XBRL Taxonomy Label Linkbase Document * 101.PRE Inline XBRL Taxonomy Presentation Linkbase Document * 104 Cover Page Interactive Date File (formatted as inline XBRL and contained in Exhibit 101)* ________________ * Filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LAKE SHORE BANCORP, INC. (Registrant) August 11, 2026 By: /s/ Kim C. Liddell Kim C. Liddell President and Chief Executive Officer (Principal Executive Officer) August 11, 2026 By: /s/ Taylor M. Gilden Taylor M. Gilden Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 47