CB Financial Services, Inc. (CBFV)

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations.

This discussion should be read in conjunction with the unaudited consolidated financial statements, notes and tables included in this report. For further information, refer to the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Forward-Looking Statements

This report contains certain “forward-looking statements” within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on the Company’s current expectations regarding its business strategies, intended results and future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions. Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors which could affect actual results include, but are not limited to, the following:

•General and local economic conditions;

•Changes in market interest rates, deposit flows, demand for loans, real estate values and competition;

•Competitive products and pricing;

•The ability of our customers to make scheduled loan payments;

•Loan delinquency rates and trends;

•Our ability to manage the risks involved in our business;

•Our ability to integrate the operations of businesses we acquire;

•Our ability to control costs and expenses;

•Inflation, market and monetary fluctuations;

•Changes in federal and state legislation and regulation applicable to our business;

•Actions by our competitors; and

•Other factors disclosed in the Company’s periodic reports as filed with the Securities and Exchange Commission.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.

General

CB Financial Services is a bank holding company established in 2006 and headquartered in Carmichaels, Pennsylvania. CB Financial’s business activity is conducted primarily through its wholly owned bank subsidiary, Community Bank.

The Bank is a Pennsylvania-chartered commercial bank headquartered in Carmichaels, Pennsylvania. The Bank operates from nine branches in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania and three offices in Marshall and Ohio Counties in West Virginia. The Bank also has a loan production office in Allegheny County, a corporate center in Washington County and an operations center in Greene County, all of which are in Pennsylvania. The Bank is a community-oriented institution offering residential and commercial real estate loans, commercial and industrial loans, and consumer loans as well as a variety of deposit products for individuals and businesses in its market area.

Subsequent Event

As reported on the Company's Current Report on Form 8-K filed with the SEC on May 11, 2026, the Company became aware of an internal incident involving the disclosure of certain non-public customer information using an unauthorized artificial intelligence-based software application. Due to the volume and confidential nature of the information at issue, the event was determined to be material; however, the Company does not expect a material impact on its consolidated financial condition or results of operations.

Overview

The following discussion and analysis is presented to assist in the understanding and evaluation of our consolidated financial condition and results of operations. 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 March 31, 2026, compared to the consolidated financial condition as of December 31, 2025 and the consolidated results of operations for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

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Table of Contents

Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provision for credit losses, noninterest income and noninterest expense. Noninterest income consists primarily of fees and service charges on deposit accounts, income from bank-owned life insurance and other income. Noninterest expense consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, contracted services, legal and professional fees, advertising, deposit and general insurance and other 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, competition among lenders, interest rate conditions, and funds availability. Our operations and lending are principally concentrated in the southwestern Pennsylvania and Ohio Valley market areas.

Explanation of Use of Non-GAAP Financial Measures

In addition to financial measures presented in accordance with U.S. GAAP, we present certain non-GAAP financial measures. We believe these non-GAAP financial measures provide useful information in understanding our underlying results of operations or financial position and our business and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry. Non-GAAP adjusted items impacting the Company's financial performance are identified to assist investors in providing a complete understanding of factors and trends affecting the Company’s business and in analyzing the Company’s operating results on the same basis as that applied by management. Although we believe that these non-GAAP financial measures enhance the understanding of our business and performance, they should not be considered an alternative to GAAP or considered to be more important than financial results determined in accordance with GAAP, nor are they necessarily comparable with similar non-GAAP measures which may be presented by other companies. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein.

The interest income on interest-earning assets, net interest rate spread and net interest margin are presented on a fully tax-equivalent (“FTE”) basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans using the federal statutory income tax rate of 21.0%. We believe the presentation of net interest income on a FTE basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

The following table reconciles net interest income, net interest spread and net interest margin on a FTE basis for the periods indicated:

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Table of Contents

Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by period-end common shares outstanding. We believe this non-GAAP measure serves as a useful tool to help evaluate the strength and discipline of the Company's capital management strategies and as an additional, conservative measure of the Company’s total value.

Consolidated Statements Of Financial Condition Analysis

Assets

Total assets increased $35.6 million, or 2.3%, to $1.58 billion at March 31, 2026 compared to $1.55 billion at December 31, 2025.

Cash and Securities

•Cash and due from banks increased $23.9 million, or 75.3%, to $55.5 million at March 31, 2026, compared to $31.7 million at December 31, 2025.

•Securities increased $15.6 million, or 5.6%, to $295.5 million at March 31, 2026, compared to $279.9 million at December 31, 2025. This was primarily due to $26.0 million of security purchases, partially offset by $8.8 million of repayments on amortizing securities and a $1.9 million increase in unrealized losses on the portfolio.

Loans, Allowance for Credit Losses (ACL) and Credit Quality

•Total loans decreased $4.4 million, or 0.4%, to $1.158 billion compared to $1.162 billion, and included decreases in consumer, commercial and industrial, commercial real estate and other loans of $6.2 million, $3.4 million, $2.2 million and $228,000, respectively, partially offset by increases in construction and residential real estate loans of $6.0 million and $1.5 million, respectively. The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to the discontinuation of this product offering as of June 30, 2023. This portfolio is expected to continue to decline as resources are allocated and production efforts are focused on more profitable commercial products. Excluding the $5.8 million decrease in indirect automobile loans, total loans increased $1.4 million, or 0.1%. Loan production totaled $30.5 million while $29.4 million of loans were paid off since December 31, 2025.

•The allowance for credit losses (ACL) was $10.3 million at March 31, 2026 and $10.1 million at December 31, 2025. As a result, the ACL to total loans was 0.89% at March 31, 2026 and 0.87% at December 31, 2025. During the three months ended March 31, 2026, the Company recorded a net provision for credit losses of $241,000 including a provision for credit losses on loans of $228,000 and a provision for credit losses on unfunded commitments of $13,000.

•Net charge-offs for the three months ended March 31, 2026 were $41,000, or 0.01% of average loans on an annualized basis. Net charge-offs for the three months ended March 31, 2025 were $54,000, or 0.02% of average loans on an annualized basis.

•Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $3.3 million at March 31, 2026 and $5.3 million at December 31, 2025. Nonperforming loans to total loans ratio was 0.29% at March 31, 2026 and 0.46% at December 31, 2025. The decrease in nonperforming loans was due to the full repayment of a $2.0 million commercial real estate loan which was placed on nonaccrual status in the fourth quarter of

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited consolidated financial statements, which appear in this Report. You should read the information in this section in conjunction with the business and financial information the Company provided in this Report.

Cautionary Statement Concerning Forward-Looking Statements

See the first page of this Report for information regarding forward-looking statements.

Selected Financial Data

The following tables set forth selected historical financial and other data of the Company at and for the years ended December 31, 2025, 2024 and 2023. The information at December 31, 2025 and 2024, and for the years ended December 31, 2025 and 2024 is derived in part from, and should be read together with, the Company's audited consolidated financial statements and notes included in this Report and should be read together therewith. The information at December 31, 2023 and for the year ended December 31, 2023 is derived in part from audited financial statements that are not included in this Report.

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(1)Represents dividends per share divided by net income per share.

(2)Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of average interest-bearing liabilities.

(3)Represents net interest income as a percentage of average interest-earning assets.

(4)Fully taxable-equivalent (FTE) yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21%. Refer to Explanation of Use of Non-GAAP Financial Measures in Item 7 of this Report for the calculation of the measure and reconciliation to the most comparable GAAP measure.

(5)Represents noninterest expense divided by the sum of net interest income and noninterest income.

(6)Capital ratios are for Community Bank only.

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Critical Accounting Policies and Use of Critical Accounting Estimates

Critical accounting policies are those that involve significant judgments, estimates and assumptions by management and that have, or could have, a material impact on the Company’s income or the carrying value of its assets.

Allowance for Credit Losses (ACL). The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. The ACL is reported separately as a contra-asset on the Consolidated Statement of Financial Condition. The expected credit loss for unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in other liabilities while the provision for credit losses related to unfunded commitments is reported in provision for credit losses - unfunded commitments in the Consolidated Statements of Income.

ACL on Loans Receivable

The ACL on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether loans within a pool continue to exhibit similar risk characteristics. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. The Company evaluates the pooling methodology at least annually. Loans are charged off against the ACL when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.

The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. Such segments include residential mortgage, commercial real estate mortgages, construction, commercial business, consumer and other. For most segments, the Company calculates estimated credit losses using a probability of default and loss given default methodology, the results of which are applied to the aggregated discounted cash flow of each individual loan within the segment. The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount.

The Company estimates the ACL on loans via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts. The Company evaluates a variety of factors including third party economic forecasts, industry trends and other available published economic information in arriving at its forecasts. After the reasonable and supportable forecast period, the Company reverts, on a straight-line basis, to average historical losses. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a restructuring will be executed with an individual borrower or the renewal option is included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Also included in the ACL on loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and nonaccrual loans, and the effect of external factors such as competition, legal and regulatory requirements, among others. Furthermore, the Company considers the inherent uncertainty in quantitative models that are built upon historical data.

Individually Evaluated Loans

On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less estimated costs to sell at the reporting date, and the amortized cost basis of the loan.

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Accrued Interest Receivable

The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans and available-for-sale securities. Accrued interest receivable on loans is reported as a component of accrued interest receivable and other assets on the Consolidated Statement of Financial Condition, totaled $4.4 million at December 31, 2025 and is excluded from the estimate of credit losses. Accrued interest receivable on available-for-sale securities, also a component of accrued interest receivable and other assets on the Consolidated Statement of Financial Condition, totaled $2.0 million, at December 31, 2025 and is excluded from the estimate of credit losses.

Fair Value Measurements. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the transaction date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A three-level fair value hierarchy prioritizes the inputs used to measure fair value:

Level 1 –     Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available.

Level 2 –     Fair value is based on significant inputs, other than Level 1 inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are not active for identical or similar assets, and other observable inputs.

Level 3 –     Fair value is based on significant unobservable inputs. Examples of valuation methodologies that would result in Level 3 classification include option pricing models, discounted cash flows, and other similar techniques.

This hierarchy requires the use of observable market data when available. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The Company attempts to maximize observable inputs and limit the use of unobservable inputs when developing fair value measurements, Fair value measurements for assets where there exists limited or no observable market data and that are based primarily upon the Company’s or other third-party’s estimates, are often calculated based on the characteristics of the asset, the economic and competitive environment and other such factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset. Additionally, there may be inherent weaknesses in any calculation technique where changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future valuations.

Goodwill. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Deemed to have an indefinite life and not subject to amortization, goodwill is instead tested for impairment at the reporting unit level at least annually or more frequently if triggering events occur or impairment indicators exist. The Company operates one segments – Community Banking. The Company has assigned 100% of the goodwill to the Community Banking segment.

Determining the fair value of a reporting unit under the goodwill impairment test is judgmental and often involves the use of significant estimates and assumptions. The Company applies a one-step quantitative test and records the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing a step one impairment test is unnecessary. An entity also has the option to bypass the qualitative assessment for any reporting unit and proceed directly to the first step of impairment testing.

Two basic approaches to determine the fair value of an entity are the income approach and market approach or a combination of the two. The income approach uses valuation techniques to convert future earnings or cash flows to present value to arrive at a value that is indicated by market expectations about future amounts. The market approach uses observable prices and other relevant information that is generated by market transactions involving identical or comparable assets or liabilities. The fair value measure is based on the value that those transactions indicate. These approaches involve significant estimates and assumptions.

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In the application of the income approach, fair value of a reporting unit is determined using a discounted cash flow analysis. The income approach relies on Level 3 inputs along with a market-derived cost of capital when measuring fair value. Fair value is determined by converting anticipated benefits into a present single value. Once the benefit or benefits are selected, an appropriate discount or capitalization rate is applied to each benefit. These rates are calculated using the appropriate measure for the size and type of company, using financial models and market data as required. A discount rate may be derived based on a modified capital asset pricing model, which is comprised of a risk-free rate of return, an equity risk premium, a size premium and a factor covering the systemic market risk and a company specific risk premium. The values for the factors applied are determined primarily using external sources of information. The discounted cash flow model also uses prospective financial information. Estimating future earnings and capital requirements involves judgment and the consideration of past and current performance and overall macroeconomic and regulatory environments.

Under the market approach, Level 1 and 2 inputs are used when measuring fair value. In the application of the market approach, the Guideline Public Company method of appraisal is based on the premise that pricing multiples of publicly traded companies can be used as a tool to be applied in valuing a closely held entity. A value multiple or ratio relates a stock’s market price to the reported accounting data such as revenue, earnings, and book value. These ratios provide an objective basis for measuring the market’s perception of a stock’s fair value. Value ratios generally reflect the trends in growth, performance and stability of the financial results of operations. In this way, the business and financial risks exhibited by an industry or group of companies can be viewed in relation to market values. Value ratios also reflect the market’s outlook for the economy as a whole. Guideline companies provide a reasonable basis for comparison to the relative investment characteristics of the company being valued. The Company analyzes the relationships between the guideline companies' asset size, profitability, asset quality and capital ratios and applies a control premium to the selected guideline company multiples. The control premium is management's estimate of how much a market participant would be willing to pay over the fair market value in consideration of synergies and other benefits that flow from control of the entity. The Guideline Public Company method using trading activity of publicly traded companies that are most similar to the Company may also be considered when the banking industry has a sufficient level of merger and acquisition activity.

The results of the income and market approaches may be weighted to determine the concluded fair value of the reporting unit. The weighting is judgmental and is based on the perceived level of appropriateness of the valuation methodology. Estimating the fair value involves the use of estimates and significant judgments that are based on a number of factors including actual operating results. If current conditions change from those expected, it is reasonably possible that the judgments and estimates described above could change in future periods and require management to further evaluate goodwill for impairment.

If the Company determines a triggering event occurs in the future, changes in the judgments, assumptions and inputs noted above could result in additional goodwill impairment.

Deferred Taxes. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company did not have a deferred tax asset valuation allowance as of December 31, 2025 and December 31, 2024.

Recent Accounting Pronouncements and Developments

New accounting pronouncements that were adopted in the current period or will be adopted in a future period are discussed in Note 1 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements, which is included in Part IV, Item 15 of this Report.

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Explanation of Use of Non-GAAP Financial Measures

In addition to traditional measures presented in accordance with generally accepted accounting principles (“GAAP”), we use, and this Report contains or references, certain Non-GAAP financial measures. We believe these Non-GAAP financial measures provide useful information in understanding our underlying results of operations or financial position and our business and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry. Although we believe that these Non-GAAP financial measures enhance the understanding of our business and performance, these Non-GAAP financial measures should not be considered an alternative to GAAP or considered to be more important than financial results determined in accordance with GAAP, nor are they necessarily comparable with Non-GAAP measures which may be presented by other companies. Where Non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein. Refer to the "Reconciliations of Non-GAAP Financial Measures to GAAP" within this Item 7 for further information.

Comparison of Financial Condition at December 31, 2025 and 2024

Assets. Total assets increased $66.1 million, or 4.5%, to $1.55 billion at December 31, 2025, compared to $1.48 billion at December 31, 2024.

Cash and Due From Banks. Cash and due from banks decreased $17.9 million, or 36.1%, to $31.7 million at December 31, 2025, compared to $49.6 million at December 31, 2024. The change is primarily related to net funding of loans and securities.

Securities. Securities increased $17.7 million, or 6.8%, to $279.9 million at December 31, 2025, compared to $262.2 million at December 31, 2024. During the year, the Bank implemented a balance sheet repositioning strategy of its portfolio of available-for-sale investment securities, in which $129.6 million in book value of lower-yielding investment securities with an average yield of 2.87% were sold for an $11.8 million loss ($9.3 million after-tax). Investment securities sold included $121.1 million of mortgage-backed securities/collateralized mortgage obligations issued by the U.S. government-sponsored agencies, $5.0 million of U.S. government agency securities and $3.5 million of municipal securities. The Bank then purchased $117.8 million of higher-yielding mortgage-backed securities/collateralized mortgage obligations issued by U.S government-sponsored agencies, municipal securities, subordinated debt investments and non-agency guaranteed securitizations with an expected tax-equivalent yield of approximately 5.43%. This strategy is expected to add nearly 19 basis points to net interest margin and approximately $0.40 to annual earnings per share.

Securities Portfolio. The following table sets forth the composition of our securities portfolio at the dates indicated.

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Securities Portfolio Maturities and Yields. The composition and maturities of the debt securities portfolio at December 31, 2025, are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. The weighted average yield for each security category is determined by the security's book yield and calculating the interest earned divided by the carrying value. For tax free obligations of states and political subdivision, the book yield is the tax free yield.

Loans. Total loans increased $69.6 million, or 6.4%, to $1.16 billion at December 31, 2025 compared to $1.09 billion at December 31, 2024. The change was driven by increases in commercial real estate loans and commercial and industrial loans of $66.7 million and $49.0 million, respectively, partially offset by decreases in consumer loans, residential mortgage loans, construction real estate loans and other loans of $27.6 million, $9.3 million, $8.8 million and $396,000, respectively. The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to the discontinuation of this product offering as of June 30, 2023. This portfolio is expected to continue to decline as resources are allocated and production efforts are focused on more profitable commercial products. Excluding the $29.6 million decrease in indirect automobile loans, total loans increased $99.3 million, or 9.6%. Average net loans for the year ended December 31, 2025 increased $34.7 million compared to the year ended December 31, 2024.

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Loan Portfolio Composition. The following table sets forth the composition of the Company’s loan portfolio by type of loan at the dates indicated.

The Company's loan portfolio is a mix of consumer and commercial credits. Overall credit exposure and portfolio compensation is managed via a credit concentration policy. The policy designates specific loan types, collateral types and loan structures to be formally tracked and assigned maximum exposure limits as a percentage of capital. Commercial lending by asset class, specific limits for Commercial Real Estate ("CRE") project types, loans secured by residential real estate, large dollar exposures and designated high risk loan categories represent examples of specifically tracked components of our concentration management process. There are no identified concentrations that exceed the assigned exposure limits. Our concentration management policy is approved by the Company's Board of Directors and is used to ensure a high-quality, well diversified portfolio that is consistent with our overall objective of maintaining an acceptable level of risk.

The Company's CRE portfolio totaled $552.2 million at December 31, 2025, an increase of $66.7 million, or 13.7%, compared to December 31, 2024. CRE loans are concentrated in the Pittsburgh metropolitan area.

The tables below provide further detail of the composition of the CRE portfolio as of December 31, 2025:

(1) Based on collateral value at the time of loan origination.

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(1) Based on collateral value at the time of loan origination.

Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2025. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. For construction-to-permanent loans in the construction category, the maturity date is the date the loan matures once it is in permanent repayment status. Consumer loans consist primarily of indirect automobile loans whereby a portion of the rate is prepaid to the dealer and accrued in a prepaid dealer reserve account. Therefore, the true yield for the consumer loan portfolio is significantly less than the note rate disclosed below.

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The following table sets forth at December 31, 2025, the dollar amount of all fixed-rate and adjustable-rate loans due after December 31, 2026.

Liabilities. Total liabilities increased $56.0 million, or 4.2%, to $1.39 billion at December 31, 2025 compared to $1.33 billion at December 31, 2024.

Deposits. Total deposits increased $56.3 million, or 4.4%, to $1.34 billion as of December 31, 2025 compared to $1.28 billion at December 31, 2024. Interest-bearing demand deposits, non interest-bearing demand deposits and time deposits increased $40.4 million, $23.8 million and $15.6 million, respectively, while money market deposits and savings deposits decreased $22.3 million and $1.2 million respectively. This favorable change in the deposit mix occurred as the Bank continues to focus on building core banking relationships while strategically reducing higher priced funding. Brokered time deposits totaled $98.5 million as of December 31, 2025, compared to $39.0 million at December 31, 2024, all of which mature within three months and were utilized to fund the purchase of floating rate CLO securities. FDIC insured deposits totaled approximately 59.5% of total deposits while an additional 15.7% of deposits were collateralized with investment securities.

The following table sets forth the distribution of our average deposit accounts, by account type, for the years indicated.

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The following table sets forth time deposits classified by interest rate as of the dates indicated.

The following table sets forth, by interest rate ranges and scheduled maturity, information concerning our time deposits at the date indicated.

As of December 31, 2025 and 2024, the aggregate estimated amount of outstanding deposits in amounts uninsured by the FDIC, or that were not secured by the Bank through the pledging of securities, FHLB letters of credit or other means, was approximately $309.6 million and $272.0 million, respectively. The estimates are based on the same methodologies and assumptions used for the Bank's regulatory reporting requirements. Of the amount at December 31, 2025, an estimated $44.9 million are uninsured time deposits and the following table sets forth their maturity.

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Borrowed Funds

•Short-term borrowings. There were no short-term borrowings at December 31, 2025 or December 31, 2024.

•Other borrowed funds. Other borrowed funds increased $40,000 to $34.76 million at December 31, 2025, compared to $34.72 million at December 31, 2024. Borrowings for December 31, 2025 consisted of $20.0 million of FHLB advances entered into in June 2025 for a term of 24 months at 4.08%. Borrowings at December 31, 2024 consisted of $20.0 million of FHLB advances entered into in June 2023 for a term of 24 months at 4.92%. The proceeds of the FHLB borrowings were utilized to match fund originations within the Bank’s commercial and industrial loan portfolio. Borrowings at both period ends also included $14.7 million related to the Company's unsecured subordinated debt obligation.

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

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

•Book value per share was $31.28 at December 31, 2025 compared to $28.71 at December 31, 2024, an increase of $2.57. Tangible book value per share (Non-GAAP) increased $2.53, or 9.4%, to $29.35 at December 31, 2025 compared to $26.82 at December 31, 2024. Refer to “Explanation of Use of Non-GAAP Financial Measures” at the end of this section.

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

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

•During the third quarter of 2025, the Company implemented a balance sheet repositioning strategy of its portfolio of available-for-sale investment securities in which $129.6 million in book value of lower-yielding investment securities with an average yield of 2.87% were sold for an $11.8 million loss. Investment securities sold included $121.1 million of mortgage-backed securities/collateralized mortgage obligations issued by the U.S. government-sponsored agencies, $5.0 million of U.S. government agency securities and $3.5 million of municipal securities. The Bank then purchased $117.8 million of higher-yielding mortgage-backed securities/collateralized mortgage obligations issued by U.S government-sponsored agencies, municipal securities, subordinated debt investments and non-agency guaranteed securitizations with an expected tax-equivalent yield of approximately 5.43%.

Net Interest Income. Net interest income increased $4.7 million, or 10.2%, to $50.8 million for the year ended December 31, 2025 compared to $46.1 million for the year ended December 31, 2024. Net interest margin (Non-GAAP) increased 38 bps to 3.58% for the year ended December 31, 2025 compared to 3.20% the year ended December 31, 2024. Net interest margin (GAAP) increased to 3.55% for the year ended December 31, 2025 compared to 3.19% for the year ended December 31, 2024.

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

•Interest income on loans increased $2.7 million, or 4.5%, to $62.1 million for the year ended December 31, 2025 compared to $59.4 million for the year ended December 31, 2024. Average loans increased $34.7 million and the loan yield increased 7 bps to 5.62% for the year ended December 31, 2025 compared to 5.55% for the year ended December 31, 2024.

•Interest income on investment securities increased $548,000, or 4.8%, to $12.1 million for the year ended December 31, 2025 compared to $11.5 million for the year ended December 31, 2024. Average investment securities increased $9.2 million and there was a 11 bps increase in average yield. These changes were primarily due to the securites repositioning strategy.

•Interest from other interest-earning assets, which primarily consists of interest-earning cash, decreased $3.4 million, or 66.0%, to $1.7 million for the year ended December 31, 2025 compared to $5.1 million for the year ended December 31, 2024. Average interest bearing deposits at other banks decreased $59.1 million, primarily related to changes in deposits and loans, and there was a 108 bps decrease in average yield due to recent decreases in Fed interest rates.

Interest expense decreased $4.9 million, or 16.3%, to $25.2 million for the year ended December 31, 2025 compared to $30.1 million for the year ended December 31, 2024. This decrease was largely due to a 43 basis point decrease in the cost of interest-bearing liabilities to 2.37% for the year ended December 31, 2025 compared to 2.80% for the year ended December 31, 2024, causing a $4.7 million decrease in interest expense.

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•Interest expense on deposits decreased $5.0 million, or 17.6%, to $23.4 million for the year ended December 31, 2025 compared to $28.4 million for the year ended December 31, 2024. The cost of interest-bearing deposits decreased 45 basis points to 2.29% for the year ended December 31, 2025 compared to 2.74% for the year ended December 31, 2024 causing a $4.6 million decrease in interest expense. Additionally, average interest-bearing deposits decreased $15.0 million, causing a $391,000 million decrease in interest expense. Declining market interest rates led to the repricing of interest-bearing demand and money market deposits and the deposit mix shifted from time deposits into noninterest-bearing and interest-bearing demand deposits as the Bank focused on building core banking relationships while strategically reducing higher priced time deposits.

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

Provision for Credit Losses. The provision for credit losses was $589,000 for the year ended December 31, 2025, compared to $570,000 for the year ended December 31, 2024. The provision for loan losses in 2025 was primarily due to growth in non-owner occupied commercial real estate and commercial and industrial loans. Net charge-offs for the year ended December 31, 2025 were $223,000 while net charge-offs for the year ended December 31, 2024 were $281,000 due to a decline in charge-offs for indirect auto loans, partially offset by current year increases in charge-offs for commercial and industrial and other consumer loans. Total recoveries remained constant year over year with an increase in recoveries on other consumer loans, mainly offset by a decline in recoveries on commercial and industrial loans.

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

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

•Net (loss) gain on investment securities was an $11.8 million loss for the year ended December 31, 2025, compared to a gain of $51,000 for the year ended December 31, 2024. The loss recognized during 2025 was primarily attributable to the securities repositioning strategy implemented during the third quarter of the year.

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

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•On December 1, 2023, the Company announced that the Bank and EU entered into an Asset Purchase Agreement with World pursuant to which EU sold substantially all of its assets to World for a purchase price of $30.5 million cash plus possible additional earn-out payments. The sale of assets was completed on December 8, 2023 at which time the Company recognized a $24.6 million pre-tax gain on the sale of EU assets. During 2024, the Company recognized an additional gain of $138,000 following the final settlement of all liabilities. In addition, other income for the year ended December 31, 2025 and 2024 includes a $750,000 and $708,000 earn-out payment related to the sale of EU, respectively.

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

Noninterest Expense. The breakdown of noninterest expense for the year ended December 31, 2025 compared to the year ended December 31, 2024 is as follows:

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

•Salaries and employee benefits increased $3.4 million to $22.2 million for the year ended December 31, 2025 compared to $18.8 million for the year ended December 31, 2024. The increase was primarily due to higher salaries, insurance and retirement benefits and tax expense related to the addition of revenue producing staff in the Bank's Commercial Banking and Treasury divisions, merit increases and higher incentive compensation costs.

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

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

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

•Data processing expense decreased $253,000 to $3.1 million for the year ended December 31, 2025 compared to $3.3 million for the year ended December 31, 2024. The decrease was primarily related to the utilization of certain vendor credits in 2025 and higher costs in 2024 related to the implementation of a new loan origination system and a financial dashboard program.

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

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

Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the years indicated. Tax-equivalent yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21%. All average balances are daily average balances. Nonaccrual loans are included in the computation of average balances only. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

(1)Net of the allowance for credit losses and includes nonaccrual loans with a zero yield

(2)Refer to Explanation of Use of Non-GAAP Financial Measures in this Report for the calculation of the measure and reconciliation to the most comparable GAAP measure.

(3)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. Net interest rate spread (GAAP) was 2.95% and 2.47% for the year ended December 31, 2025 and 2024, respectively.

(4)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(5)Net interest margin represents net interest income divided by average total interest-earning assets. Net interest margin (GAAP) was 3.55% and 3.19% for the year ended December 31, 2025 and 2024, respectively.

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Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.

Asset Quality

Nonperforming Assets and Delinquent Loans. The Company reviews its loans on a regular basis and generally places loans on nonaccrual status when either principal or interest is 90 days or more past due. In addition, the Company places loans on nonaccrual status when we do not expect to receive full payment of interest, principal or both. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income. Loans that are 90 days or more past due may still accrue interest if they are well secured and in the process of collection. Payments received on nonaccrual loans are applied against principal. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, and current and future payments are reasonably assured.

Management monitors all past due loans and nonperforming assets. Such loans are placed under close supervision, with consideration given to the need for additions to the allowance for credit losses and (if appropriate) partial or full charge-off.

Management believes the volume of nonperforming assets can be partially attributed to unique borrower circumstances as well as the economy in general. We have an experienced chief credit officer, collections and credit departments that monitor the loan portfolio and seek to prevent any deterioration of asset quality.

Real estate acquired through foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until such time as it is sold. When real estate owned is acquired, it is recorded at the lower of the unpaid principal balance of the related loan, or its fair market value, less estimated selling expenses. Any further write-down of real estate owned is charged against earnings.

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Nonaccrual Loans and Nonperforming Assets. The following table sets forth the amounts and categories of our nonperforming assets as of the dates indicated.

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

Nonperforming loans increased $3.5 million to $5.3 million at December 31, 2025 compared to $1.8 million at December 31, 2024. The increase in was due to the addition of two loan relationships to nonaccrual status during the year. The first relationship consists of three residential real estate loans totaling $2.1 million which are well-secured with first liens on multiple rental properties. The Bank has executed assignments of rents and leases, is in the process of foreclosure on the properties and currently does not expect to incur losses on the loans. The second is a $2.0 million commercial real estate loan fully secured by an owner-occupied distribution warehouse, which is currently under a sales agreement, and other assets of the borrower. The Bank is currently working with the borrower to achieve a successful resolution and expects to be repaid in full in 2026.

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

Classified Assets. Federal regulations provide that loans and other assets of lesser quality should be classified as “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the “distinct possibility” that the Company will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets is not warranted. The Company designates an asset as “special mention” if the asset has a potential weakness that warrants management’s close attention.

The Company uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first five categories are not considered criticized and are aggregated as one to four “pass” and five "pass-watch" rated. The criticized rating categories used by management generally follow bank regulatory definitions. The special mention category includes assets that are currently protected but are below average quality, resulting in an undue credit risk, but not to the point of justifying a substandard classification. Loans in the substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as loss are considered uncollectible and of such little value that continuance as an asset is not warranted.

As part of the periodic exams of the Bank by the FDIC and the Pennsylvania Department of Banking and Securities, the staff of such agencies reviews our classifications and determines whether such classifications are adequate. Such agencies have, in the past, and may in the future require us to classify certain assets which management has not otherwise classified or require a classification more severe than established by management. The following table shows the principal amount of special mention and classified loans at December 31, 2025 and 2024.

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The total amount of special mention and classified loans decreased $14.5 million, or 36.0%, to $25.8 million at December 31, 2025, compared to $40.4 million at December 31, 2024. The decrease of $13.3 million in the special mention category is primarily due to the upgrade of three credit relationships due to improved financial performance. The first relationship consisted loans to secure non-owner occupied commercial real estate and totaled $7.0 million; the second relationship consisted of commercial and industrial loans and totaled $5.9 million; and the third relationship consisted of loans to secure owner occupied commercial real estate and totaled $5.0 million. These improvements were partially offset by a downgrade of one credit relationship due to the non-receipt of updated financial information. This relationship consisted of loans to secure non-owner occupied commercial real estate which totaled $4.4 million.

Allowance for Credit Losses. The allowance for credit losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making evaluations. Additions are made to the allowance through periodic provisions charged to income and recovery of principal and interest on loans previously charged-off. Losses of principal are charged directly to the allowance when a loss occurs or when a determination is made that the specific loss is probable. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available. There can be no assurance that such losses will not exceed the estimated amounts or that we will not be required to make additions to the allowance for credit losses in the future. Future additions to our allowance for credit losses and changes in the related ratio of the allowance for credit losses to nonperforming loans are dependent upon the economy, changes in real estate values and interest rates, the view of the regulatory authorities toward adequate credit loss reserve levels, and inflation. Management will continue to periodically review the entire loan portfolio to determine the extent, if any, to which further additional credit loss provisions may be deemed necessary.

Analysis of the Allowance for Credit Losses. The following table summarizes changes in the allowance for credit losses by loan categories for each year indicated.

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The allowance for credit losses increased $311,000, or 3.2%, to $10.1 million at December 31, 2025, compared to $9.8 million at December 31, 2024. Allowance for credit losses to total loans decreased three basis points to 0.87% at December 31, 2025 compared to 0.90% at December 31, 2024. The increase in the allowance for credit losses was mainly due to $2.1 million of allowance necessary for loan growth attributed primarily to non-owner occupied commercial real estate and commercial and industrial loan originations. Additionally, an increase of $495,000 in the allowance was related changes in qualitative factors primarily related to loan growth. This was mainly offset by declines in the allowance of $1.4 million due to changes in loan concentrations, $608,000 due to improvement in loss rate factors and $269,000 in specific reserves for individually analyzed loans.

The ratio of allowance for credit losses to nonaccrual loans ratio decreased to 190.51% at December 31, 2025, compared to 548.07% at December 31, 2024. Nonaccrual loans increased $3.5 million to $5.3 million at December 31, 2025 compared to $1.8 million at December 31, 2024. The increase in nonaccrual loans was due to the addition of two loan relationships to nonaccrual status during the year. The first relationship consists of three residential real estate loans totaling $2.1 million which are well-secured with first liens on multiple rental properties. The Bank has executed assignments of rents and leases, is in the process of foreclosure on the properties and currently does not expect to incur losses on the loans. The second is a $2.0 million commercial real estate loan fully secured by an owner-occupied distribution warehouse, which is currently under a sales agreement, and other assets of the borrower. The Bank is currently working with the borrower to achieve a successful resolution and expects to be repaid in full in 2026.

Net charge-offs for the year ended December 31, 2025 were $223,000 primarily due to charge-offs of $164,000 for consumer revolving lines of credit, $137,000 for consumer indirect automobile loans and $127,000 for commercial and industrial. This was partially offset by recoveries of $136,000 for commercial and industrial loans, $106,000 for consumer indirect automobile loans and $94,000 for consumer revolving lines of credit. Net charge-offs for the year ended December 31, 2024 were $281,000 primarily due to charge-offs of $357,000 for consumer indirect, $127,000 for CRE non-owner occupied and $114,000 for consumer revolving lines of credit. This was partially offset by recoveries of $175,000 for commercial and industrial and $133,000 for consumer indirect loans. The following table presents the ratio of net charge-offs as a percent of average loans for the periods indicated.

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Allocation of Allowance for Credit Losses. The following table sets forth the allocation of allowance for credit losses by loan category at the dates indicated. The table reflects the allowance for credit losses as a percentage of total loans. The allocation of the allowance by category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category.

Reconciliations of Non-GAAP Financial Measures to GAAP

Reconciliations of Non-GAAP financial measures discussed in this Report to the most directly comparable GAAP financial measures are included in the following tables.

Interest income on interest-earning assets, net interest rate spread and net interest margin are presented on a fully tax-equivalent (“FTE”) basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and securities using the federal statutory income tax rate of 21 percent. We believe the presentation of net interest income on a FTE basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. The following table reconciles net interest income, net interest spread and net interest margin on a FTE basis for the periods indicated:

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Tangible book value per common share is a Non-GAAP measure and is calculated based on tangible common equity divided by period-end common shares outstanding. Tangible common equity to tangible assets is a Non-GAAP measure and is calculated based on tangible common equity divided by tangible assets. We believe these Non-GAAP measures serve as useful tools to help evaluate the strength and discipline of the Company's capital management strategies and as an additional, conservative measure of the Company’s total value.

Liquidity

Liquidity is the ability to meet current and future financial obligations of a short-term nature. The Bank’s primary sources of funds consist of deposit inflows, loan repayments, and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.

The Bank regularly adjusts its investments in liquid assets based upon its assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, and the objectives of its asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits with other banks and short- and intermediate-term securities. The Bank believes that it had sufficient liquidity at December 31, 2025, to satisfy its short- and long-term liquidity needs at that date.

The Bank’s most liquid assets are cash and due from banks, which totaled $31.7 million at December 31, 2025. Unpledged securities, which provide an additional source of liquidity, totaled $107.3 million. In addition, the Bank maintains a credit arrangement with the FHLB with a maximum borrowing limit of approximately $528.0 million and available borrowing capacity of $506.1 million as of December 31, 2025. At December 31, 2025, there were no standby letters of credit utilized to collateralize public deposits in excess of the level insured by the FDIC. This arrangement is subject to annual renewal, incurs no service charge, and is secured by a blanket security agreement on $747.7 million of residential and commercial mortgage loans and the Bank’s investment in FHLB stock. The Bank also maintains a Borrower-In-Custody of Collateral line of credit agreement with the FRB for $71.2 million that requires monthly certification of collateral, is subject to annual renewal, incurs no service charge and is secured by $86.6 million of commercial and consumer indirect auto loans. The Bank also maintains multiple line of credit arrangements with various unaffiliated banks totaling $50.0 million as of December 31, 2025.

At December 31, 2025, the Bank had funding commitments totaling $196.4 million, consisting primarily of commitments to originate loans, unused lines of credit and letters of credit.

At December 31, 2025, certificates of deposit due within one year of that date totaled $279.2 million, or 89.4% of total certificates of deposit. While liquidity levels at December 31, 2025 are currently sufficient, if these certificates of deposit do not remain with the Bank, the Bank may be required to seek other sources of funds. Depending on market conditions, the Bank may be required to pay higher rates on such deposits or other borrowings than it currently pays on these certificates of deposit. The Bank believes, however, based on past experience that a significant portion of its certificates of deposit will remain with it, either as certificates of deposit or as other deposit products. The Bank can attract and retain deposits by adjusting the interest rates offered.

The Bank’s primary investing activities are the origination of loans. For the year ended December 31, 2025, the Bank had net loan originations of $69.6 million.

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The Company is a separate legal entity from the Bank and must provide for its own liquidity to pay dividends to stockholders, to pay principal and interest on its subordinated debt and for other corporate purposes. At December 31, 2025, the Company (on an unconsolidated basis) had liquid assets of $8.3 million.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position daily and anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

Commitments. As a financial services provider, the Company routinely is a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit, commitments under unused lines of credit, and commitments under letters of credit. While these contractual obligations represent potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans the Company makes. In addition, the Company enters into commitments to sell mortgage loans.

Contractual Obligations. In the ordinary course of its operations, the Company enters into certain contractual obligations. Such obligations include operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities and agreements with respect to investments.

The following tables present certain of our contractual obligations at December 31, 2025.

Capital Resources

At December 31, 2025 and 2024, respectively, the Bank was considered "well capitalized" under the regulatory framework for prompt corrective action.

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The following table presents the Bank’s regulatory capital amounts and ratios, as well as the minimum amounts and ratios required to be well capitalized at the dates indicated.

Impact of Inflation and Changing Price

The consolidated financial statements and related notes of the Company have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations. Unlike industrial companies, the Company’s assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

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