YORK WATER CO

Balance Sheets (Unaudited)

Balance Sheets (Unaudited)

Statements of Income (Unaudited)

Statements of Common Stockholders’ Equity (Unaudited)

For the Periods Ended June 30, 2025 and 2024

Statements of Cash Flows (Unaudited)

Notes to Interim Financial Statements

1. Basis of Presentation

The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of results for such periods. Because the financial statements cover an interim period, they do not include all disclosures and notes normally provided in annual financial statements, and therefore, should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Operating results for thethree and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31,2025.

2. Accounts Receivable and Unbilled Revenue

Accounts receivable are summarized in the following table:

Differences in timing of revenue recognition, billings, and cash collections result in receivables. Generally, billing occurs subsequent to revenue recognition, resulting in unbilled revenue on the balance sheet. The Company does not receive advances or deposits from customers before revenue is recognized so no contract liabilities are reported. Accounts receivable are recorded when the right to consideration becomes unconditional and are presented separately on the balance sheet. The changes in accounts receivable – customers and in unbilled revenue were primarily due to the normal timing difference between performance and the customer’s payments.

3. Common Stock and Earnings Per Share

Net income of $5,052 and $4,993 for the three months ended June 30, 2025 and 2024, respectively, and $8,690 and $9,320 for the six months ended June 30, 2025 and 2024, respectively, is used to calculate both basic and diluted earnings per share. Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding plus potentially dilutive shares. The dilutive effect of employee stock-based compensation is included in the computation of diluted earnings per share and is calculated using the treasury stock method and expected proceeds upon exercise or issuance of the stock-based compensation.

The following table summarizes the shares used in computing basic and diluted earnings per share:

On March 11, 2013, the Board of Directors, or the Board, authorized a share repurchase program granting the Company authority to repurchase up to 1,200,000 shares of the Company’s common stock from time to time. The stock repurchase program has no specific end date and the Company may repurchase shares in the open market or through privately negotiated transactions. The Company may suspend or discontinue the repurchase program at any time. No shares were repurchased during the three or six months ended June 30, 2025 and 2024. As of June 30, 2025,618,004 shares remain authorized for repurchase.

4. Debt

For the six months ended June 30, 2025, the Company did not enter into any new long-term debt arrangements or modify its outstanding long-term debt, which is summarized in the table below.

5. Interest Rate Swap Agreement

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by using derivative instruments is interest rate risk. The Company utilizes an interest rate swap agreement to effectively convert the Company’s $12,000 variable-rate debt issue to a fixed rate. Interest rate swaps are contracts in which a series of interest rate cash flows are exchanged over a prescribed period. The notional amount on which the interest payments are based ($12,000) is not exchanged. The interest rate swap provides that the Company pays the counterparty a fixed interest rate of 3.16% on the notional amount of $12,000. In exchange, the counterparty pays the Company a variable interest rate based on 59% of thedaily simple Secured Overnight Financing Rate plus a spread adjustment of 11.448 basis points on the notional amount. The intent is for the variable rate received from the swap counterparty to approximate the variable rate the Company pays to bondholders on its variable rate debt issue, resulting in a fixed rate being paid to the swap counterparty and reducing the Company’s interest rate risk. The Company’s net payment rate on the swap averaged 0.54% and (0.04)% for the three months ended June 30, 2025 and 2024, respectively, and 0.53% and (0.04)% for the six months ended June 30, 2025 and 2024, respectively.

The interest rate swap agreement is classified as a financial derivative used for non-trading activities. The accounting standards regarding accounting for derivatives and hedging activities require companies to recognize all derivative instruments as either assets or liabilities at fair value on the balance sheet. In accordance with the standards, the interest rate swap is recorded on the balance sheet in other deferred credits at fair value (see Note 6).

The Company uses regulatory accounting treatment rather than hedge accounting to defer the unrealized gains and losses on its interest rate swap. These unrealized gains and losses are recorded as a regulatory asset or regulatory liability. Based on current ratemaking treatment, the Company expects the unrealized gains and losses to be recognized in rates as a component of interest expense as the swap settlements occur. Swap settlements are recorded in the income statement with the hedged item as interest expense. Swap settlements resulted in the reclassification from regulatory assets to interest expense of $16 and $(1) for the three months ended June 30, 2025 and 2024, respectively, and $32 and $(2) for the six months ended June 30, 2025 and 2024, respectively. The overall swap result was a (gain) loss of $55 and $(62) for the three months ended June 30, 2025 and 2024, respectively, and $169 and $(237) for the six months ended June 30, 2025 and 2024, respectively. The Company expects to reclassify $101 before tax from regulatory assets to interest expense as a result of swap settlements over the next 12 months.

The interest rate swap agreement contains provisions that require the Company to maintain a credit rating of at least BBB- with Standard & Poor’s. If the Company’s rating were to fall below this rating, it would be in violation of these provisions, and the counterparty to the derivative could request immediate payment if the derivative was in a liability position. On July 30, 2025, Standard & Poor’s affirmed the Company’s credit rating at A-, with a stable outlook and adequate liquidity. The Company’s interest rate swap was in a liability position as of June 30, 2025. If a violation due to credit rating, or some other default provision, were triggered on June 30, 2025, the Company would have been required to pay the counterparty approximately $535.

The interest rate swap will expire on October 1, 2029. Other than the interest rate swap, the Company has no other derivative instruments.

6. Fair Value of Financial Instruments

The accounting standards regarding fair value measurements establish a fair value hierarchy which indicates the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing the asset or liability.

The Company has recorded its interest rate swap liability at fair value in accordance with the standards. The liability is recorded under the caption “Other deferred credits” on the balance sheet. The table below illustrates the fair value of the interest rate swap as of the end of the reporting period.

Fair values are measured as the present value of all expected future cash flows based on the swap yield curve as of the date of the valuation. These inputs to this calculation are deemed to be Level 2 inputs. The balance sheet carrying value reflects the Company’s credit quality as of June 30, 2025. The rate used in discounting all prospective cash flows anticipated to be made under this swap reflects a representation of the yield to maturity for 30-year debt on utilities rated A- as of June 30, 2025. The use of the Company’s credit quality resulted in a reduction in the swap liability of $10 as of June 30, 2024. The fair value of the swap reflecting the Company’s credit quality as of December 31, 2024 is shown in the table below.

The carrying amount of current assets and liabilities that are considered financial instruments approximates fair value as of the dates presented. The Company’s total long-term debt, with a carrying value of $220,909 at June 30, 2025, and $208,178 at December 31, 2024, had an estimated fair value of approximately $197,000 and $189,000, respectively. The estimated fair value of debt was calculated using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration and risk profile. These inputs to this calculation are deemed to be Level 2 inputs. The Company recognized its credit rating in determining the yield curve and did not factor in third-party credit enhancements including the letter of credit on the 2008 Pennsylvania Economic Development Financing Authority Series A issue.

Customers’ advances for construction and note receivable had carrying values at June 30, 2025 of $21,812 and $255, respectively. At December 31, 2024, customers’ advances for construction and note receivable had carrying values of $20,546 and $255, respectively. The relative fair values of these amounts cannot be accurately estimated since the timing of future payment streams is dependent upon several factors, including new customer connections, customer consumption levels and future rate increases.

7. Commitments

The Company was granted approval by the Pennsylvania Public Utility Commission, or PPUC, to modify its tariff to include the cost of the annual replacement of up to 400 lead customer-owned service lines over nine years from the date of the agreement. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over afour-year period. The cost for the customer-owned lead service line replacements was approximately $2,018 and $1,961 through June 30, 2025 and December 31, 2024, respectively, and is included as a regulatory asset. Based on its experience, the Company estimates that lead customer-owned service lines replacements will cost $2,100. This estimate is subject to adjustment as more facts become available.

8. Revenue

The following table shows the Company’s revenues disaggregated by service and customer type.

Utility Service

The Company provides utility service as a distinct and single performance obligation to each of its water and wastewater customers. The transaction price is detailed in the tariff pursuant to an order by the PPUC and made publicly available. There is no variable consideration and no free service, special rates, or subnormal charges to any customer. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied over time through the continuous provision of utility service through a stand-ready obligation to perform and the transfer of water or the collection of wastewater through a series of distinct transactions that are identical in nature and have the same pattern of transfer to the customer. The Company uses an output method to recognize the utility service revenue over time. The stand-ready obligation is recognized through the passage of time in the form of a fixed charge and the transfer of water or the collection of wastewater is recognized at a per unit rate based on the actual or estimated flow through the meter. Each customer is invoiced every month and the invoice is due within twenty days. The utility service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period. A contract asset for unbilled revenue is recognized for the passage of time and the actual or estimated usage from the latest meter reading to the end of the accounting period. The methodology is standardized and consistently applied to reduce bias and the need for judgment.

Billing and Revenue Collection Service

The Company provides billing and revenue collection service as distinct performance obligations totwo municipalities within the service territory of the Company. The municipalities provide service to their residents and the Company acts as the billing and revenue collection agent for the municipalities. The transaction price is a fixed amount per bill prepared as established in the contract. There is no variable consideration. Due to the fact that both the billing performance obligation and the revenue collection performance obligation are materially complete by the end of the reporting period, the Company does not allocate the transaction price between the two performance obligations. The performance obligations are satisfied at a point in time when the bills are sent as the municipalities receive all the benefits and bear all of the risk of non-collection at that time. Each municipality is invoiced when the bills are complete and the invoice is due within thirty days. The billing and revenue collection service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period.

Collection Service

The Company provides collection service as a distinct and single performance obligation to several municipalities within the service territory of the Company. The municipalities provide wastewater service to their residents. If those residents are delinquent in paying for their wastewater service, the municipalities request that the Company post for and shut off the supply of water to the premises of those residents. When the resident is no longer delinquent, the Company will restore water service to the premises. The transaction price for each posting, each shut off, and each restoration is a fixed amount as established in the contract. There is no variable consideration. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied at a point in time when the posting, shut off, or restoration is completed as the municipalities receive all the benefits in the form of payment or no longer providing wastewater service. Each municipality is invoiced periodically for the posting, shut offs, and restorations that have been completed since the last billing and the invoice is due within thirty days. The collection service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period. A contract asset for unbilled revenue is recognized for postings, shut offs, and restorations that have been completed from the last billing to the end of the accounting period.

Service Line Protection Plan

The Company provides service line protection as a distinct and single performance obligation to current water customers that choose to participate. The transaction price is detailed in the plan’s terms and conditions and made publicly available. There is no variable consideration. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied over time through the continuous provision of service line protection through a stand-ready obligation to perform. The Company uses an output method to recognize the service line protection revenue over time. The stand-ready obligation is recognized through the passage of time. A customer has a choice to prepay for an entire year or to pay in advance each month. The service line protection plan has no returns or extended warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no material performance obligations remain unsatisfied as of the end of the reporting period.

9. Rate Matters

From time to time, the Company files applications for rate increases with the PPUC and is granted rate relief as a result of such requests. The most recent rate request was filed by the Company on May 30, 2025 and seeks an annual increase in water rates of $20,312, which would represent a 28.9% increase, and an annual increase in wastewater rates of $3,858, which would represent a 44.5% increase. The request is currently under review by the PPUC and other interested parties. Any rate increase approved by the PPUC will be effective no later than March 1, 2026. There can be no assurance that the PPUC will grant the Company’s rate increase in the amount requested, if at all.

The PPUC permits water utilities to collect a distribution system improvement charge, or DSIC. The DSIC allows the Company to add a charge to customers’ bills for qualified replacement costs of certain infrastructure without submitting a rate filing. This surcharge mechanism typically adjusts periodically based on additional qualified capital expenditures completed or anticipated in a future period. The DSIC is capped at 5% of base rates and is reset tozero when new base rates that reflect the costs of those additions become effective or when a utility’s earnings exceed a regulatory benchmark. The Company’s earnings are currently below the regulatory benchmark, thus allowing the Company to collect DSIC. The DSIC provided revenues of $531 and $34 for the three months ended June 30, 2025 and 2024, respectively, and $917 and $34 for the six months ended June 30, 2025 and 2024, respectively.

10. Pensions

Components of Net Periodic Pension Cost

Pension service cost is recorded in operating expenses. All other components of net periodic pension cost are recorded as other pension costs in other income (expenses).

Employer Contributions

The Company previously disclosed in its financial statements for the year ended December 31, 2024 that it didnot expect to contribute to its pension plans in 2025. For thesix months ended June 30, 2025, no contributions have been made. The Company doesnot expect to contribute any amounts in the final two quarters of 2025.

11. Stock-Based Compensation

The Company has a Long-Term Incentive Plan, or LTIP. The LTIP was approved by the Company’s shareholders to provide the incentive of long-term stock-based awards to officers, directors, and key employees. The LTIP provides for the granting of nonqualified stock options, incentive stock options, stock appreciation rights, performance restricted stock grants and units, restricted stock grants and units, and unrestricted stock grants. The maximum number of shares of common stock subject to awards that may be granted to any participant in any one calendar year is 10,000. Shares of common stock issued under the LTIP may be treasury shares or authorized but unissued shares. The LTIP will be administered by the Compensation and Human Capital Committee of the Board, or the full Board, provided that the full Board will administer the LTIP as it relates to awards to non-employee directors of the Company. The LTIP was originally effective on July 1, 2016 (“2016 LTIP”), and was amended, restated, and renamed the 2025 LTIP effective on May 6, 2025 (“2025 LTIP”). The Company filed a registration statement with the Securities and Exchange Commission on May 6, 2025 covering the offering of stock under the 2025 LTIP. The registration statement added 150,000 shares to the unissued shares from the 2016 LTIP, which may be issued under the 2025 LTIP overten years.

On November 25, 2024, the Board awarded stock to an officer effective January 1, 2025. This stock award vested immediately.

On May 5, 2025, the Board awarded stock to non-employee directors effective May 5, 2025. This stock award vested immediately. On May 5, 2025, the Compensation and Human Capital Committee awarded restricted stock to officers and key employees effective May 5, 2025. The stock award vests ratably over three years beginning May 5, 2025.

The restricted stock awards provide the grantee with the rights of a shareholder, including the right to receive dividends, subject to vesting restrictions, and to vote such shares, but not the right to sell or otherwise transfer the shares during the restriction period. As a result, the awards are included in common shares outstanding on the balance sheet. Restricted stock awards result in compensation expense valued at the fair market value of the stock on the date of the grant and are amortized ratably over the requisite service period.

The following tables summarize the stock grant amounts and activity for the six months ended June 30, 2025.

For the three months ended June 30, 2025 and 2024, the statement of income includes $98 and $97 of stock-based compensation, respectively, and related recognized tax benefits of $26 and $27, respectively. For the six months ended June 30, 2025 and 2024, the statement of income includes $170 and $140 of stock-based compensation, respectively, and related recognized tax benefits of $46 and $39, respectively. Total stock-based compensation related to nonvested awards not yet recognized is $349 at June 30, 2025 which will be recognized over the remaining three year vesting period.

12. Income Taxes

Under the Internal Revenue Service tangible property regulations, or TPR, the Company is permitted to deduct the costs of certain asset improvements that were previously being capitalized and depreciated for tax purposes as an expense on its income tax return. This ongoing deduction results in a reduction in the effective income tax rate, a net reduction in income tax expense, and a reduction in the amount of income taxes currently payable. It also results in increases to deferred tax liabilities and regulatory assets representing the appropriate book and tax basis difference on capital additions.

The Company’s effective tax rate was(7.8)% and 9.4% for the three months ended June 30, 2025 and 2024, respectively, and 1.2% and 10.8% for thesix months ended June 30, 2025 and 2024, respectively. The effective tax rate will vary depending on income before income taxes and the level of eligible asset improvements expensed for tax purposes under TPR each period.

On July 4, 2025, the One Big Beautiful Bill Act, or OBBBA, was signed into law. The Company is currently reviewing the provisions of the OBBBA but does not expect the impact to be material as most of the provisions applicable to the Company from the Tax Cuts and Jobs Act of 2017 were not changed in the OBBBA and new provisions do not apply to the Company.