FRANKLIN FINANCIAL SERVICES CORP /PA/

Previous wording

For the Three and Nine Months Ended September 30, 2025 and 2024

Current wording

For the Three Months Ended March 31, 2026 and 2025

Previous wording

A summary of operating results for Franklin Financial Services Corporation for the three and nine months ended September 30, 2025 are as follows:

Current wording

A summary of operating results for Franklin Financial Services Corporation for the three months ended March 31, 2026 are as follows:

Previous wording

Wealth Management: Fees were $2.3 million, an increase of 8.0% from $2.1 million in the third quarter of 2024. Assets under management were $1.4 billion on September 30, 2025.

Current wording

Wealth Management: $2.3 million in fees for the first quarter of 2026, an increase of 4.1% from $2.2 million in the first quarter of 2025. Assets under management were $1.417 billion on March 31, 2026.

Previous wording

Asset Growth: $2.297 billion in assets on September 30, 2025 compared to $2.198 billion at year-end 2024, an increase of 4.5%.

Current wording

Asset Growth: $2.298 billion in total assets on March 31,2026, an increase of 2.6% from $2.239 billion at year-end 2025.

Previous wording

Deposit Growth: Total deposits of $1.903 billion on September 30, 2025, an increase of 4.8% from December 31, 2024.

Current wording

Deposit Growth: Total deposits of $1.890 billion, an increase of 2.9% from $1.836 billion on December 31, 2025.

Previous wording

Performance Metrics: Return on Average Assets (ROA) 0.93%, Return on Average Equity (ROE) 13.39%, and Net Interest Margin (NIM) of 3.32% on an annualized basis for the third quarter of 2025, compared to a ROA of 0.80%, ROE of 11.86%, and NIM of 2.97% for the third quarter of 2024.

Current wording

Quarterly Performance Metrics: Return on Average Assets (ROA) of 1.20%, Return on Average Equity (ROE) of 15.13%, and Net Interest Margin (NIM) of 3.53%, on an annualized basis for the first quarter of 2026, compared to an ROA of 0.72%, ROE of 10.80% and NIM of 3.05% for the first quarter of 2025.

Previous wording

On October 16, 2025, the Board of Directors declared a $0.33 per share regular quarterly cash dividend for the fourth quarter of 2025 to be paid on November 26, toshareholdersof record at the close of business on November 7, 2025. This dividend represents a 3.1% increase over the 2024 fourth quarter dividend.

Current wording

On April 9, 2026, the Board of Directors declared $0.34 per share regular quarterly cash dividend for the second quarter of 2026 to be paid on May 27, 2026, toshareholdersof record at the close of business on May 1, 2026. This dividend represents a 3.0% increase over the second quarter 2025 dividend.

Previous wording

GAAP versus non-GAAP Presentations – The Corporation supplements its traditional GAAP measurements with certain non-GAAP measurements to evaluate its performance and to eliminate the effect of intangible assets. By eliminating intangible assets (Goodwill), the Corporation believes it presents a measurement that is comparable to companies that have no intangible assets or to companies that have eliminated intangible assets in similar calculations. However, not all companies may use the same calculation method for each measurement. The non-GAAP measurements are not intended to be used as a substitute for the related GAAP measurements. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. In the event of such a disclosure or release, the Securities and Exchange Commission’s Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. The following table shows the calculation of the non-GAAP measurements as of, or for the nine months ended September 30, 2025 and 2024 and the year ended December 31, 2024.

Current wording

GAAP versus non-GAAP Presentations – The Corporation supplements its traditional GAAP measurements with certain non-GAAP measurements to evaluate its performance and to eliminate the effect of intangible assets. By eliminating intangible assets (Goodwill), the Corporation believes it presents a measurement that is comparable to companies that have no intangible assets or to companies that have eliminated intangible assets in similar calculations. However, not all companies may use the same calculation method for each measurement. The non-GAAP measurements are not intended to be used as a substitute for the related GAAP measurements. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. In the event of such a disclosure or release, the Securities and Exchange Commission’s Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. The following table shows the calculation of the non-GAAP measurements as of, or for the three months ended March 31, 2026 and 2025 and the year ended December 31, 2025.

Previous wording

Tax equivalent net interest income increased $3.5 million to $18.4 million in the third quarter of 2025 compared to $14.9 million for the same period in 2024. Tax equivalent net interest income increased $1.6 million from balance sheet volume changes and $1.9 million from interest rate changes.

Current wording

Tax equivalent net interest income increased $2.9 million to $18.8 million in the first quarter of 2026 compared to $15.9 million for the same period in 2025. Tax equivalent net interest income increased $1.9 million from balance sheet volume changes and $1.0 million from interest rate changes.

Previous wording

The provision for unfunded commitments was a reversal of $93 thousand compared to a reversal of $41 thousand for the same period in 2024. The ACL for unfunded commitments was $1.9 million and $2.0 million on September 30, 2025, and December 31, 2024, respectfully. For more information refer to the Loan Quality and Allowance for Credit Losses discussion in the Financial Condition section.

Current wording

The provision for unfunded commitments was $19 thousand compared to $29 thousand for the same period in 2025. The ACL for unfunded commitments was $1.9 million on March 31, 2026 and December 31, 2025, respectfully. For more information refer to the Loan Quality and Allowance for Credit Losses discussion in the Financial Condition section.

Previous wording

For the third quarter of 2025, noninterest income, before securities transactions, increased $261 thousand compared to the same period in 2024. Wealth Management fees increased, primarily because of growth in assets under management and other income increased from swap referral fees and a state sales tax refund. These increases were partially offset by decreases in loan service charges and gains on the sale of loans.

Current wording

For the first quarter of 2026, noninterest income, before securities transactions, increased $791 thousand compared to the same period in 2025. Wealth Management fees increased, primarily because of growth in assets under management, the gain on sale of loans increased due to a one-time sale of mortgages and other income increased from gains from bank owned life insurance claims.

Previous wording

For the third quarter of 2025, total income tax was $1.3 million, comprised of $1.2 million in Federal income tax and $55 thousand in state income taxes. Income tax for the third quarter increased by $419 thousand compared to the third quarter of 2024, due to higher pre-tax income in 2025. The effective tax rate for the third quarter of 2025 was 19.6% compared to 17.3% for the same period in 2024. The federal statutory tax rate is 21% for 2025 and 2024.

Current wording

For the first quarter of 2026, total income tax was $1.7 million, comprised of $1.4 million in Federal income tax and $229 thousand in state income taxes. Income tax for the first quarter increased by $780 thousand compared to the first quarter of 2025, due to higher pre-tax income in 2026. The effective tax rate for the first quarter of 2026 was 20.1% compared to 18.5% for the same period in 2025. The federal statutory tax rate is 21% for 2026 and 2025.

Previous wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA makes permanent certain provisions from the Tax Cuts and Jobs Act and modifies other tax provisions. These provisions have various effective dates. We are currently evaluating the impact of the new legislation but do not expect it to have a material impact on the Corporation’s financial statements.

Current wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA makes permanent certain provisions from the Tax Cuts and Jobs Act and modifies other tax provisions. These provisions have various effective dates. We continue to evaluate the impact of the new legislation but do not expect it to have a material impact on the Corporation’s financial statements.

Previous wording

Cash and cash equivalents totaled $188.1 million on September 30, 2025, a decrease of $15.5 million from the prior year-end balance of $203.6 million. Short-term interest-earning deposits are held primarily at the Federal Reserve ($155.7 million). As of September 30, 2025, the Corporation had posted cash collateral of $6.5 million to a counterparty in a derivative transaction.

Current wording

Cash and cash equivalents totaled $210.8 million on March 31, 2026, an increase of $83.1 million from the prior year-end balance of $127.7 million. Short-term interest-earning deposits are held primarily at the Federal Reserve ($183.1 million).

Previous wording

Available for Sale (AFS) Securities: At September 30, 2025, the AFS securities portfolio had an amortized cost of $499.7 million, a decrease of $54.3 million from the prior year-end, and a fair value of $469.3 million, a decrease of $39.3 million from the prior year-end. During the first nine months of 2025, the portfolio returned $54.2 million of principal and there were no new purchases. The Bank did not sell any investments in the first nine months of 2025. The AFS portfolio had a net unrealized loss of $30.4 million at September 30, 2025 compared to a net unrealized loss of $45.4 million at the prior year-end. The AFS portfolio averaged $488.9 million with a tax equivalized yield of 4.01% for the nine months ended September 30, 2025. This compares to an average of $461.9 million and a tax-equivalized yield of 3.70% for the same period in 2024.

Current wording

Available for Sale (AFS) Securities: At March 31, 2026, the AFS securities portfolio had an amortized cost of $465.3 million, a decrease of $16.1 million from the prior year-end, and a fair value of $436.5 million, a decrease of $18.1 million from the prior year-end. During the first three months of 2026, the portfolio returned $17.2 million of principal and $1.2 million was purchased. The Bank did not sell any investments in the first three months of 2026. The AFS portfolio had a net unrealized loss of $28.8 million at March 31, 2026 compared to a net unrealized loss of $26.8 million at the prior year-end. The AFS portfolio averaged $449.3 million with a tax equivalized yield of 3.57% for the three months ended March 31, 2026. This compares to an average of $504.0 million and a tax-equivalized yield of 4.15% for the same period in 2025.

Previous wording

Restricted Stock at Cost: The Bank held $8.9 million of restricted stock at September 30, 2025 and $8.8 million at December 31, 2024. Except for $30 thousand, this investment represents stock in Federal Home Loan Bank of Pittsburgh (the FHLB). The Bank is required to hold this stock to be a member of FHLB and it is carried at cost of $100 per share. The level of FHLB stock held is determined by FHLB and is comprised of a minimum membership amount plus a variable activity amount. FHLB stock is evaluated for impairment primarily based on an assessment of the ultimate recoverability of its cost. As a government sponsored entity, FHLB has the ability to raise funding through the U.S. Treasury that can be used to support its operations. There is no public market for FHLB stock and the benefits of FHLB membership (e.g., liquidity and low-cost funding) add value to the stock beyond purely financial measures. Management intends to remain a member of the FHLB and believes that it will be able to fully recover the cost basis of this investment.

Current wording

Restricted Stock at Cost: The Bank held $8.9 million of restricted stock at March 31, 2026 and at December 31, 2025. Except for $30 thousand, this investment represents stock in Federal Home Loan Bank of Pittsburgh (the FHLB). The Bank is required to hold this stock to be a member of FHLB and it is carried at cost of $100 per share. The level of FHLB stock held is determined by FHLB and is comprised of a minimum membership amount plus a variable activity amount. FHLB stock is evaluated for impairment primarily based on an assessment of the ultimate recoverability of its cost. As a government sponsored entity, FHLB has the ability to raise funding through the U.S. Treasury that can be used to support its operations. There is no public market for FHLB stock and the benefits of FHLB membership (e.g., liquidity and low-cost funding) add value to the stock beyond purely financial measures. Management intends to remain a member of the FHLB and believes that it will be able to fully recover the cost basis of this investment.

Previous wording

Total residential real estate loans increased by $44.8 million over year-end 2024, primarily in consumer first lien loans. For the first nine months of 2025, the Bank originated $95.3 million in mortgages, including $28.6 million for sale through the secondary market compared to $90.1 million of total originations for the same period in 2024. The Bank does not originate or hold any loans that would be considered sub-prime or Alt-A and does not generally originate mortgages outside of its primary market area.

Current wording

Total residential real estate loans increased by $13.4 million over the prior year-end, primarily in consumer first lien loans. For the first three months of 2026, the Bank originated $25.6 million in mortgages, including $11.1 million for sale through the secondary market compared to $23.0 million of total originations for the same period in 2025. The Bank does not originate or hold any loans that would be considered sub-prime or Alt-A and does not generally originate mortgages outside of its primary market area.

Previous wording

Residential real estate construction: This category contains loans for the vertical construction of 1-4 family residential properties. The largest component of this category ($27.3 million) represents loans for individuals to construct personal residences, while loans to residential real estate developers totaled $24.4 million at September 30, 2025. The Bank’s exposure to residential construction loans is concentrated primarily in south central Pennsylvania. Real estate construction loans, including residential real estate and land development loans, occasionally provide an interest reserve in order to assist the developer during the development stage when minimal cash flow is generated. All real estate construction loans are underwritten in the same manner, regardless of the use of an interest reserve.

Current wording

Residential real estate construction: This category contains loans for the vertical construction of 1-4 family residential properties. The largest component of this category ($32.4 million) represents loans for individuals to construct personal residences, while loans to residential real estate developers totaled $24.4 million at March 31, 2026. The Bank’s exposure to residential construction loans is concentrated primarily in south central Pennsylvania. All real estate construction loans are underwritten in the same manner, regardless of the use of an interest reserve.

Previous wording

Commercial real estate (CRE): This category includes commercial, industrial, farm and agricultural loans and land development loans, where real estate serves as the primary collateral for the loans. Total commercial real estate loans increased to $904.6 million at September 30, 2025 from $803.4 million at the end of 2024. Included in commercial real estate are approximately $532 million of nonowner occupied loans, non-construction loans located primarily in the Bank’s market area of south-central Pennsylvania. The Bank’s CRE concentration ratio is 357.6% of risk-based capital at September 30, 2025 compared to 332.9% at December 31, 2024.

Current wording

Commercial real estate (CRE): This category includes commercial, industrial, farm and agricultural loans and land development loans, where real estate serves as the primary collateral for the loans. Total commercial real estate loans increased to $909.1 million at March 31, 2026 from $903.6 million at the end of the prior year. Included in commercial real estate are approximately $725 million of nonowner occupied loans located primarily in the Bank’s market area of south-central Pennsylvania. The Bank’s CRE concentration ratio is 344.7% of risk-based capital at March 31, 2026 compared to 349.9% at December 31, 2025.

Previous wording

Also included in CRE are real estate construction loans totaling $207.1 million. At September 30, 2025, the Bank had $103.3 million in real estate construction loans funded with an interest reserve and capitalized $2.7 million of interest in the first nine months of 2025 from these reserves on active projects for commercial construction. Real estate construction loans are monitored on a regular basis by either an independent first-party inspector or the assigned loan officer depending on loan amount or complexity of the project. This monitoring process includes at a minimum, the submission of invoices and AIA documents (depending on the complexity of the project) detailing costs incurred by the borrower, on-site inspections, and a signature by the assigned loan officer for disbursement of funds.

Current wording

Included in CRE are real estate construction loans totaling $208.2 million. At March 31, 2026, the Bank had $84.0 million in real estate construction loans funded with an interest reserve and capitalized $734 thousand of interest in the first three months of 2026 from these reserves on active projects for commercial construction. Real estate construction loans are monitored on a regular basis by either an independent first-party inspector or the assigned loan officer depending on loan amount or complexity of the project. This monitoring process includes at a minimum, the submission of invoices and AIA documents (depending on the complexity of the project) detailing costs incurred by the borrower, on-site inspections, and a signature by the assigned loan officer for disbursement of funds.

Previous wording

Commercial: This category includes commercial, industrial, farm, agricultural, and municipal loans. Commercial loans decreased $312 thousand to $230.3 million at September 30, 2025, compared to $230.6 million at the end of 2024. On September 30, 2025, the Bank had $100.6 million in tax-free loans compared to $105.0 million at December 31, 2024.

Current wording

Commercial: This category includes commercial, industrial, farm, agricultural, and municipal loans. Commercial loans decreased $11.5 million to $214.0 million at March 31, 2026, compared to $225.5 million at the end of the prior year. On March 31, 2026, the Bank had $97.9 million in tax-free loans compared to $102.0 million at December 31, 2025.

Previous wording

Participations: The Bank may supplement its own commercial loan production by purchasing loan participations. These participations are primarily located in south-central Pennsylvania. On September 30, 2025, the outstanding commercial participations were $109.7 million, or 9.0%, of commercial purpose loans and 7.0% of total gross loans compared to $107.2 million at December 31, 2024, or 9.6%, of commercial purpose loans and 7.7% of total gross loans. The Bank’s total exposure (including outstanding balances and unfunded commitments) to purchased participations is $140.8 million, compared to $133.1 million at December 31, 2024. The commercial loan participations are comprised of $26.8 million of commercial loans and $82.9 million of CRE loans, reported in the respective loan class.

Current wording

Participations: The Bank may supplement its own commercial loan production by purchasing loan participations. These participations are primarily located in south-central Pennsylvania. On March 31, 2026, the outstanding commercial participations were $97.2 million, or 8.0%, of commercial purpose loans and 6.2% of total gross loans compared to $100.8 million at December 31, 2025, or 8.2%, of commercial purpose loans and 6.5% of total gross loans. The Bank’s total exposure (including outstanding balances and unfunded commitments) to purchased participations is $125.7 million, compared to $129.3 million at December 31, 2025. The commercial loan participations are comprised of $26.5 million of commercial loans and $70.7 million of CRE loans, reported in the respective loan class.

Previous wording

Consumer loans: This category had a balance of $9.5 million at September 30, 2025, compared to $8.9 million at prior year-end and is comprised primarily of installment loans and personal lines of credit.

Current wording

Consumer loans: This category had a balance of $10.7 million at March 31, 2026, compared to $9.7 million at prior year-end and is comprised primarily of installment loans and personal lines of credit.

Previous wording

Watch list loans (loans rated 6, 7, or 8) exhibit financial weaknesses that increase the potential risk of default or loss to the Bank. However, inclusion on the watch list, does not by itself, mean a loss is certain. The watch list totaled $53.5 million on September 30, 2025 compared to $21.5 million at December 31, 2024. The increase from year-end 2024 was primarily in commercial real estate loans rated 6 or 7, including an increase of 10.4 million in nonaccrual loans. The watch list includes both performing and nonperforming loans. Included in the watchlist total are $10.7 million of nonaccrual loans as of September 30, 2025 and $266 thousand as of December 31, 2024. The credit composition of the watch list, by primary collateral is shown in Note 6 of the accompanying financial statements.

Current wording

Watch list loans (loans rated 6, 7, or 8) exhibit financial weaknesses that increase the potential risk of default or loss to the Bank. However, inclusion on the watch list, does not by itself, mean a loss is certain. The watch list totaled $52.7 million on March 31, 2026 compared to $58.8 million at December 31, 2025. The watch list includes both performing and nonperforming loans. Included in the watchlist total are $8.5 million of nonaccrual loans as of March 31, 2026 and December 31, 2025. The credit composition of the watch list, by primary collateral is shown in Note 6 of the accompanying financial statements.

Previous wording

The Bank’s Loan Management Committee reviews these loans and risk ratings on a quarterly basis in order to proactively identify and manage problem loans. In addition, a committee meets monthly to discuss possible workout strategies for all credits rated 7-Substandard or worse. Management also tracks other commercial loan risk measurements including high loan to value loans, concentrations, participations and policy exceptions and reports these to the Board Enterprise Risk Management Committee of the Board of Directors. The Bank also uses an external loan review consultant to assist with internal loan review with a goal of reviewing up to 80% of commercial loans each year. The FDIC defines certain supervisory loan-to-value lending limits. The Bank’s internal loan–to-value limits are all equal to or have a lower loan-to-value limit than the supervisory limits. However, in certain instances, the Bank may make a loan that exceeds the supervisory loan-to-value limit. On September 30, 2025, the Bank had loans of $12.1 million (5.7% of risk-based capital) that exceeded the supervisory limit, compared to 7.1% at year-end 2024.

Current wording

The Bank’s Loan Management Committee reviews these loans and risk ratings on a quarterly basis in order to proactively identify and manage problem loans. In addition, a committee meets monthly to discuss possible workout strategies for all credits rated 7-Substandard or worse. Management also tracks other commercial loan risk measurements including high loan to value loans, concentrations, participations and policy exceptions and reports these to the Board Enterprise Risk Management Committee of the Board of Directors. The Bank also uses an external loan review consultant to assist with internal loan review with a goal of reviewing up to 80% of commercial loans each year. The FDIC defines certain supervisory loan-to-value lending limits. The Bank’s internal loan–to-value limits are all equal to or have a lower loan-to-value limit than the supervisory limits. However, in certain instances, the Bank may make a loan that exceeds the supervisory loan-to-value limit. On March 31, 2026, the Bank had loans of $15.6 million (7.0% of risk-based capital) that exceeded the supervisory limit, compared to 7.4% at year-end 2025.

Previous wording

Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

Current wording

Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. As of March 31, 2026 and December 31, 2025, there were no modifications made to borrowers experiencing financial difficulty.

Previous wording

As of September 30, 2025, the Bank had outstanding loans to a related party of a Bank Director who is considered an “insider” under Regulation O. The loans were originated in the ordinary course of business and were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with non-affiliated persons.

Current wording

As of March 31, 2026, the Bank had outstanding loans to a related party of a Bank Director who is considered an “insider” under Regulation O. The Bank Director serves on the Board of Directors of the related party. The loans were originated in the ordinary course of business and were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with non-affiliated persons.

Previous wording

The loans are currently classified as OAEM (rated 6) on the Bank’s internal credit risk rating system, indicating potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans. As of September 30, 2025, the outstanding balance of the loans was $4.7 million, and were not past due or on nonaccrual status.

Current wording

The loans are currently classified as Substandard (rated 7) on the Bank’s internal credit risk rating system, indicating potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans. As of March 31, 2026, the outstanding balance of the loans was $4.2 million, and were not past due or on nonaccrual status.

Previous wording

The ACL for pooled loans is the sum of the quantitative and qualitative loss estimates. At September 30, 2025, the pooled loan reserve was $19.5 million and approximately 70% of the pooled reserve was from the qualitative component. On September 30, 2025 the Bank had a specific reserve of $894 thousand on one commercial real estate construction loan compared to no specific reserve as of December 31, 2024.

Current wording

The ACL for pooled loans is the sum of the quantitative and qualitative loss estimates. At March 31, 2026, the pooled loan reserve was $19.9 million and approximately 69% of the pooled reserve was from the qualitative component. On March 31, 2026 the Bank had a specific reserve of $1.0 million on one commercial real estate construction loan and a specific reserve of $557 thousand for three commercial loans to a single borrower compared to $1.2 million specific reserves as of December 31, 2025.

Previous wording

The ACL for unfunded commitments is recorded in other liabilities on the consolidated balance sheet. The ACL represents management’s estimate of expected losses from unfunded commitments and is determined by estimating future usage of the commitments, based on historical usage. The estimated loss is calculated in a manner similar to that used for the ACL for loans, previously described. The ACL is increased or decreased through the provision for credit losses. The ACL for unfunded commitments was $1.9 million and $2.0 million on September 30, 2025 and December 31, 2024, respectively.

Current wording

The ACL for unfunded commitments is recorded in other liabilities on the consolidated balance sheet. The ACL represents management’s estimate of expected losses from unfunded commitments and is determined by estimating future usage of the commitments, based on historical usage. The estimated loss is calculated in a manner similar to that used for the ACL for loans, previously described. The ACL is increased or decreased through the provision for credit losses. The ACL for unfunded commitments was $1.9 million and $1.9 million on March 31, 2026 and December 31, 2025, respectively.

Previous wording

Total deposits increased $87.2 million during the first nine months of 2025 to $1.903 billion. Noninterest checking increased $21.6 million to $311.9 million (16.4% of total deposits), primarily in municipal and small business accounts. Interest-bearing checking increased by $7.0 million, primarily in municipal deposits, while the Bank’s Money Management product increased $90.3 million across all sectors. Time deposits decreased $29.8 million, reflecting the maturity of a one-year time deposit account for $29.4 million in September 2025. At maturity, this deposit moved to a money management account and was withdrawn from the Bank early in the fourth quarter of 2025.

Current wording

Total deposits increased $53.9 million during the first three months of 2026 to $1.890 billion. Noninterest checking increased $21.4 million to $331.7 million (17.6% of total deposits), primarily in municipal and small business accounts. Interest-bearing checking decreased by $12.6 million, primarily in retail deposits, while the Bank’s money management product increased $30.4 million across all sectors. Time deposits increased $14.2 million.

Previous wording

As of September 30, 2025, the Bank had deposits of $311.5 million placed in the IntraFi Network reciprocal deposit program ($126.6 million in interest-bearing checking and $184.9 million in money management) and $22.2 million in reciprocal time deposits in the CDARS program included in time deposits. These programs allow the Bank to offer full FDIC coverage to large depositors, but with the convenience to the customer of only having to deal with one bank. The Bank solicits these deposits from within its market and it believes they present no greater risk than any other local deposit. Only reciprocal deposits that exceed 20% of liabilities are considered brokered deposits. At September 30, 2025, the Bank’s reciprocal deposits were 15.7% of the Bank’s total liabilities compared to 16.2% at year-end 2024.

Current wording

As of March 31, 2026, the Bank had deposits of $309.5 million placed in a reciprocal deposit program ($125.9 million in interest-bearing checking and $183.7 million in money management) and $39.9 million in a reciprocal time deposit program included in time deposits. These programs allow the Bank to offer full FDIC coverage to large depositors, but with the convenience to the customer of only having to deal with one bank. The Bank solicits these deposits from within its market and it believes they present no greater risk than any other local deposit. Only reciprocal deposits that exceed 20% of liabilities are considered brokered deposits for regulatory reporting purposes. At March 31, 2026, the Bank’s reciprocal deposits were 16.6% of the Bank’s total liabilities compared to 17.0% at the previous year-end.

Previous wording

The Bank estimates that approximately 88% of its deposits are FDIC insured or collateralized as of September 30, 2025, compared to 85% at December 31, 2024.

Current wording

The Bank estimates that approximately 89% of its deposits are FDIC insured or collateralized as of March 31, 2026, compared to 87% at December 31, 2025.

Previous wording

On September 30, 2025, the Corporation redeemed $9.0 million of its $15.0 million fixed to floating subordinate notes due September 1, 2030 utilizing excess cash on hand. After the redemption, the Corporation had $11.0 million of unsecured subordinated debt notes remaining outstanding of which $6.0 million mature on September 1, 2030 and $5.0 million mature on September 1, 2035. The notes are recorded on the consolidated balance sheet net of remaining debt issuance costs totaling $159 thousand which is being amortized on a pro-rata basis, based on the maturity date of the notes, on an effective interest method. The subordinated notes totaling $6.0 million have a variable interest rate of 90-day Average Secured Overnight Financing Rate (SOFR) plus 4.93% and will reset quarterly. The subordinated notes totaling $5.0 million have a fixed interest rate of 5.25% through June 29, 2030, then convert to a variable rate of 90-day SOFR plus 4.92% for the applicable interest periods through maturity. The Corporation may, at its option, redeem the notes at par, in whole or in part, at any time 5-years prior to the maturity. The notes are structured to qualify as Tier 2 Capital for the Corporation and there are no debt covenants on the notes.

Current wording

At March 31, 2026, the Corporation had $11.0 million of unsecured subordinated debt notes remaining outstanding of which $6.0 million mature on September 1, 2030 and $5.0 million mature on September 1, 2035. The notes are recorded on the consolidated balance sheet net of remaining debt issuance costs totaling $150 thousand which is being amortized on a pro-rata basis, based on the maturity date of the notes, on an effective interest method. The subordinated notes totaling $6.0 million have a variable interest rate of 90-day Average Secured Overnight Financing Rate (SOFR) plus 4.93% and resets quarterly. The subordinated notes totaling $5.0 million have a fixed interest rate of 5.25% through June 29, 2030, then convert to a variable rate of 90-day SOFR plus 4.92% for the applicable interest periods through maturity. The Corporation may, at its option, redeem the notes at par, in whole or in part, at any time 5-years prior to the maturity. The notes are structured to qualify as Tier 2 Capital for the Corporation and there are no debt covenants on the notes.

Previous wording

Total shareholders’ equity increased $21.6 million to $166.3 million as of September 30, 2025 from December 31, 2024. Retained earnings increased $10.8 million in 2025, with net income of $15.2 million partially offset by cash dividends of $4.4 million. Accumulated other comprehensive income/(loss) (AOCI) improved $9.7 million since year-end 2024. The Corporation’s Dividend Reinvestment Plan (DRIP) added $213 thousand in new capital from optional cash contributions and $768 thousand from the reinvestment of quarterly dividends. The Corporation’s dividend payout ratio was 28.76% for the first nine months of 2025 compared to 39.74% for the same period in 2024.

Current wording

Total shareholders’ equity increased $3.5 million to $178.7 million as of March 31, 2026 from December 31, 2025. Retained earnings increased $5.2 million in 2026, with net income of $6.6 million partially offset by cash dividends of $1.5 million. Accumulated other comprehensive loss (AOCL) increased $1.7 million since year-end 2025. The Corporation’s Dividend Reinvestment Plan (DRIP) added $17 thousand in new capital from optional cash contributions and $247 thousand from the reinvestment of quarterly dividends. The Corporation’s dividend payout ratio was 22.30% for the first three months of 2026 compared to 36.16% for the same period in 2025.

Previous wording

As part of its quarterly dividend decision, the Corporation considers, among other factors, current and future income projections, dividend yield, payout ratio, current and future capital ratios, reserves and allocations. For the third quarter of 2025, the Corporation paid a $0.33 per share dividend, compared to $0.33 paid in the second quarter of 2025. On October 16, 2025, the Board of Directors declared a $0.33 per share regular quarterly dividend for the fourth quarter of 2025, which will be paid on November 26, 2024. This represents a 3.1% increase over the fourth quarter 2024 dividend.

Current wording

As part of its quarterly dividend decision, the Corporation considers, among other factors, current and future income projections, dividend yield, payout ratio, current and future capital ratios, reserves and allocations. For the first quarter of 2026, the Corporation paid a $0.33 per share dividend, compared to $0.33 paid in the fourth quarter of 2025. On April 9, 2026, the Board of Directors declared a $0.34 per share regular quarterly dividend for the second quarter of 2026, which will be paid on May 27, 2026. This represents a 3.0% increase over the second quarter 2025 dividend.

Previous wording

In January 2025, the Board of Directors authorized a repurchase plan for the repurchase of up to 150,000 shares of the Corporation’s $1.00 par value common stock at market prices in open market or privately negotiated transactions over a one-year period. During the first nine months of 2025, 12,800 shares were purchased to fund the quarterly dividend reinvestment plan.

Current wording

In December 2025, the Board of Directors authorized a repurchase plan for the repurchase of up to 150,000 shares of the Corporation’s $1.00 par value common stock at market prices in open market or privately negotiated transactions over a one-year period. During the first three months of 2026, 5,000 shares were purchased to fund the quarterly dividend reinvestment plan.

Previous wording

Capital adequacy for the Bank is currently defined by regulatory agencies through the use of several minimum required ratios. The capital ratios to be considered “well capitalized” are shown in the table below. In addition, a capital conservation buffer of 2.5% is applicable to all of the capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement. The Bank’s capital conservation buffer at September 30, 2025 was 4.88% compared to the regulatory buffer of 2.5%. Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions and is in addition to the minimum required capital requirements. As of September 30, 2025, the Bank was “well capitalized.”

Current wording

Capital adequacy for the Bank is currently defined by regulatory agencies through the use of several minimum required ratios. The capital ratios to be considered “well capitalized” are shown in the table below. In addition, a capital conservation buffer of 2.5% is applicable to all of the capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement. The Bank’s capital conservation buffer at March 31, 2026 was 5.64% compared to the regulatory buffer of 2.5%. Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions and is in addition to the minimum required capital requirements. As of March 31, 2026, the Bank was “well capitalized.”

Previous wording

The Corporation’s primary market area includes Franklin, Fulton, Cumberland, Huntingdon, and Dauphin County, PA, and Washington County, MD. This area is diverse in demographic and economic composition. County populations range from a low of approximately 15,000 in Fulton County to over 289,000 in Dauphin County. The market area has a diverse economic base and local industries include warehousing, truck and rail shipping centers, light and heavy manufacturers, health care, higher education institutions, farming and agriculture, and a varied service sector. The market area provides easy access to the major metropolitan markets on the east coast via trucking and rail transportation. Because of this, warehousing and distribution companies continue to find the area attractive. The local economy is not overly dependent on any one industry or business and Management believes that the Bank’s primary market area continues to be well suited for growth.

Current wording

The Corporation’s primary market area includes Franklin, Fulton, Cumberland, Huntingdon, and Dauphin Counties, PA, and Washington County, MD. This area is diverse in demographic and economic composition. County populations range from a low of approximately 15,000 in Fulton County to over 289,000 in Dauphin County. The market area has a diverse economic base and local industries include warehousing, truck and rail shipping centers, light and heavy manufacturers, health care, higher education institutions, farming and agriculture, and a varied service sector. The market area provides easy access to the major metropolitan markets on the east coast via trucking and rail transportation. Because of this, warehousing and distribution companies continue to find the area attractive. The local economy is not overly dependent on any one industry or business and Management believes that the Bank’s primary market area continues to be well suited for growth.

Previous wording

Historically, the Corporation has satisfied its liquidity needs from earnings, repayment of loans and amortizing investment securities, maturing investment securities, loan sales, deposit growth and its ability to access existing lines of credit. All investment securities are classified as available for sale; therefore, marketable securities that are unencumbered ($71.7 million fair value) are an additional source of readily available liquidity, either by selling the security or, more preferably, to provide collateral for additional borrowing. The Bank also has access to other wholesale funding via the brokered CD market.

Current wording

Historically, the Corporation has satisfied its liquidity needs from earnings, repayment of loans and amortizing investment securities, maturing investment securities, loan sales, deposit growth and its ability to access existing lines of credit. All investment securities are classified as available for sale; therefore, marketable securities that are unencumbered ($87.3 million fair value) are an additional source of readily available liquidity, either by selling the security or, more preferably, to provide collateral for additional borrowing. The Bank also has access to other wholesale funding via the brokered CD market.