FIDELITY D & D BANCORP INC

To the Shareholders and the Board of Directors of Fidelity D & D Bancorp, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Fidelity D & D Bancorp, Inc. and subsidiary (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for the years ended December 31, 2024 and 2023, and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical AuditMatter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses–* Collectively Evaluated Loans*

As described in Notes 1 and 5 to the financial statements, the Company has recorded an allowance for credit losses (“ACL”) in the amount of $19.7 million as of December 31, 2024, representing management’s estimate of credit losses over the remaining expected life of the Company’s loan portfolio as of that date.

The Company’s methodology to determine its ACL incorporates the use of third-party software to arrive at an expected life-of-loan loss amount that incorporates either discounted cash flow or weighted average remaining life methodologies for the Company’s various loan segments. Both of these approaches use both industry-based and Company specific loss history and Company specific prepayment rates that are adjusted based on various current and forecasted economic factors including, as relevant, home price indices, gross domestic product forecasts and national and local unemployment rates which incorporate reasonable and supportable forecasts. The results of these calculations are then qualitatively adjusted by management based on portfolio specific attributes including changes in lending policies and procedures, changes in other economic conditions, changes in the nature and volume of loans, changes in experience of lending personnel, changes in credit quality and loan review results, changes in underlying collateral values, the existence of credit concentrations, and other portfolio relevant information including legal and regulatory changes. We determined that performing procedures relating to these components of the Company’s methodology is a critical audit matter.

The principal considerations for our determination are (i) the application of significant judgment and estimation on the part of management, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence obtained, and (ii) significant audit effort was necessary in evaluating management’s methodology, significant assumptions and calculations.

How the Critical Audit Matter was addressed in the Audit

Following are some of the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the collective ACL, including controls over the:

Addressing the above matters involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures also included, among others, reviewing the Company’s model validation ensuring appropriate recalculation of the models used along with management’s review of model validation results, testing various assumptions used in the calculation, testing management’s process for determining the qualitative reserve component, evaluating the appropriateness of management’s methodology relating to the qualitative reserve component and testing the completeness and accuracy of data utilized by management.

/s/Wolf & Company, P.C.

Boston, Massachusetts

March 13, 2025

We have served as the Company's auditor since 2023.

To the Shareholders and the Board of Directors of Fidelity D & D Bancorp, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Fidelity D & D Bancorp, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2024, based on criteria established inInternal Control—* Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established inInternal Control*—* Integrated Framework* *(2013)*issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2024 and 2023 and our report dated March 13, 2025 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanyingManagement’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 13, 2025

We have served as the Company's auditor since 2023.

Fidelity D & D Bancorp, Inc. and Subsidiary

Consolidated Balance Sheets

Fidelity D & D Bancorp, Inc. and Subsidiary

Consolidated Statements of Income

Fidelity D & D Bancorp, Inc. and Subsidiary

Fidelity D & D Bancorp, Inc. and Subsidiary

Consolidated Statements of Changes in Shareholders' Equity

For the years ended December 31, 2024 and 2023

Fidelity D & D Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows

Fidelity D & D Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows (continued)

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of Fidelity D & D Bancorp, Inc. and its wholly-owned subsidiary, The Fidelity Deposit and Discount Bank (the Bank) (collectively, the Company). All significant inter-company balances and transactions have been eliminated in consolidation.

NATURE OF OPERATIONS

The Company provides a full range of banking, trust and financial services to individuals, small businesses and corporate customers. Its primary market areas are Lackawanna, Luzerne and Northampton Counties, Pennsylvania. The Company's primary deposit products are demand deposits and interest-bearing time, money market and savings accounts. It offers a full array of loan products to meet the needs of retail and commercial customers. The Company is subject to regulation by the Federal Deposit Insurance Corporation (FDIC) and the Pennsylvania Department of Banking.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses on loans, the valuation of investment securities, the determination and the amount of impairment in the securities portfolios, and the related realization of the deferred tax assets related to the allowance for credit losses on loans, credit losses on and valuations of investment securities.

In connection with the determination of the allowance for credit losses on loans, management generally obtains independent appraisals for individually evaluated loans, along with discounted cash flow and weighted average remaining maturity models adjusted for qualitative factors for collectively evaluated loans. While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans* maybe necessary based on changes in economic conditions and reasonable and supportable forecasts. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies mayrequire the Company to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may*change materially in the near-term. However, the amount of the change that is reasonably possible cannot be estimated.

The Company’s investment securities are comprised of a variety of financial instruments. The fair values of the securities are subject to various risks including changes in the interest rate environment and general economic conditions including illiquid conditions in the capital markets. Due to the increased level of these risks and their potential impact on the fair values of the securities, it is possible that the amounts reported in the accompanying financial statements could materially change in the near-term. If credit losses exist, a contra-asset is recorded on the consolidated balance sheet, limited by the amount that fair value is less than the amortized cost basis. Any impairment that hasnot been recorded through an allowance for credit losses is recognized in other comprehensive income, net of tax.

RECLASSIFICATION

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to current year presentation.

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SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK

The Company originates commercial, consumer, and mortgage loans to customers primarily located in Lackawanna, Luzerne and Northampton Counties of Pennsylvania. Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on the economic sector in which the Company operates. The loan portfolio doesnot have any significant concentrations fromone industry or customer.

HELD-TO-MATURITY SECURITIES

Debt securities, for which the Company has the positive intent and ability to hold to maturity, are reported at amortized cost. Premiums and discounts are amortized or accreted, as a component of interest income over the life of the related security (or earlier call date for premiums) as an adjustment to yield using the interest method. The Company had held-to-maturity securities with balances of $225.8 million and $224.2 million at* December 31, 2024* and2023, respectively.

TRADING SECURITIES

Debt securities held principally for resale in the near-term, or trading securities, are recorded at their fair values. Unrealized gains and losses are included in other income. The Company didnot have investment securities held for trading purposes during2024 or2023.

AVAILABLE-FOR-SALE SECURITIES

Available-for-sale (AFS) securities consist of debt securities classified as neither held-to-maturity nor trading and are reported at fair value. Premiums and discounts are amortized or accreted as a component of interest income over the life of the related security (or earlier call date for premiums) as an adjustment to yield using the interest method. Unrealized holding gains and losses on AFS securities are reported as a separate component of shareholders’ equity, net of deferred income taxes, until realized. The net unrealized holding gains and losses are a component of accumulated other comprehensive income. Gains and losses from sales of securities AFS are determined using the specific identification method.

FEDERAL HOME LOAN BANK STOCK

The Company is a member of the Federal Home Loan Bank system, and as such is required to maintain an investment in capital stock of the Federal Home Loan Bank of Pittsburgh (FHLB). The amount the Company is required to invest is dependent upon the relative size of outstanding borrowings the Company has with the FHLB. Based on redemption provisions of the FHLB, the stock hasno quoted market value and is carried at cost.

LOANS

Originated loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at face value, net of unamortized loan fees and costs and the allowance for credit losses. Interest on residential real estate loans is recorded based on principal pay downs on an actual days basis. Commercial loan interest is accrued on the principal balance on an actual days basis. Interest on consumer loans is determined using the simple interest method.

Acquired loans classified as Purchase Credit Impaired (PCI) loans prior to the effective date of Accounting Standard Update (ASU)2016-13, Financial Instruments–* Credit Losses (Topic326) Measurement of Credit Losses on Financial Instruments (CECL), which was adopted by the Company on January 1, 2023,*were classified as Purchase Credit Deteriorated (PCD) loans as of the effective date. For all loans designated as PCD loans as of the effective date, the Company was required to gross up the balance sheet amount of the financial asset by the amount of its allowance for expected credit losses as of the effective date. Subsequent changes in the allowances for credit losses on PCD loans will be recognized by charges or credits to earnings. The Company will continue to accrete the noncredit discount or premium to interest income based on the effective interest rate on the PCD loans determined after the gross-up for the CECL allowance at adoption.

CECL introduced the concept of PCD financial loans, which replaces PCI loans under previous U.S. GAAP. For PCD loans, the new accounting standard requires institutions to estimate and record an allowance for credit losses for these loans at the time of purchase. This allowance is then added to the purchase price to establish the initial amortized cost basis of the PCD loans, rather than being reported as a credit loss expense. In contrast, for purchased loans within the scope of CECL that arenot PCD loans, an institution is required to measure expected credit losses by a charge to the provision for credit losses (expense) in the period the non-PCD loans are acquired.

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In addition, the definition of PCD loans is broader than the definition of PCI loans in previous accounting standards. CECL defines "purchased financial assets with credit deterioration" as "acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment.”

Generally, loans are placed on non-accrual status when principal or interest is past due90 days or more. When a loan is placed on non-accrual status, all interest previously accrued butnot collected is charged against current earnings. Any payments received on non-accrual loans are applied,first to the outstanding loan amounts, then to the recovery of any charged-off loan amounts. Any excess is treated as a recovery of lost interest.

MORTGAGE BANKING OPERATIONS AND MORTGAGE SERVICING RIGHTS

The Company sellsone-to-four family residential mortgage loans on a servicing retained basis. On a loan sold where servicing was retained, the Company determines at the time of sale the value of the retained servicing rights, which represents the present value of the differential between the contractual servicing fee and adequate compensation, defined as the fee a sub-servicer would require to assume the role of servicer, after considering the estimated effects of prepayments. If material, a portion of the gain on the sale of the loan is recognized due to the value of the servicing rights, and a mortgage servicing asset is recorded.

Commitments to sellone-to-four family residential mortgage loans are made primarily during the period between the intent to proceed and the closing of the mortgage loan. The timing of making these sale commitments is dependent upon the timing of the borrower’s election to lock-in the mortgage interest rate and fees prior to loan closing. Most of these sales commitments are made on a best-efforts basis whereby the Company is only obligated to sell the mortgage if the mortgage loan is approved and closed by the Company. Commitments to fund mortgage loans (rate lock commitments) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. Fair values of these derivatives are estimated based on changes in mortgage interest rates from the date the interest rate on the loan is locked. The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in the fair values of these derivatives are included in gains or losses on sales of loans. The fair value of these derivative instruments wasnot significant at* December 31, 2024and2023*.

For sales of mortgage loans originated by the Company, a portion of the cost of originating the loan is allocated to the servicing retained right based on fair value. Servicing assets are reported in other assets and amortized in proportion to and over the period during which estimated servicing income will be received. Servicing loans for others consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors, and processing foreclosures. Loan servicing income is recorded when earned and represents servicing fees from investors and certain charges collected from borrowers, such as late payment fees. The Company has fiduciary responsibility for related escrow and custodial funds.

DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments are recognized as assets and liabilities on the consolidated balance sheets, measured at fair value and recorded in other assets and accrued interest payable and other liabilities.

Interest Rate Swap Agreements

For asset/liability management purposes, the Company uses interest rate swap agreements to manage risk to the Company associated with interest rate movements. Interest rate swaps are contracts in which a series of interest rate flows are exchanged over a prescribed period. The notional amount on which the interest payments are based isnot exchanged. These swap agreements are derivative instruments and generally convert a portion of the Company’s fixed rate investment securities to an adjustable rate (fair value hedge) and convert a portion of customers' variable rate loans to fixed rate (no hedge designation).

The gain or loss on a derivative designated and qualifying as a fair value hedging instrument, as well as the offsetting gain or loss on the hedged item attributable to the risk being hedged, is recognized currently in earnings in the same accounting period.

Interest rate derivative financial instruments receive hedge accounting treatment only if they are designated as a hedge and are expected to be, and are, effective in substantially reducing interest rate risk arising from the assets and liabilities identified as exposing the Company to risk. Such derivatives are recorded as assets or liabilities at fair value with changes in fair value recorded in other comprehensive income, net of tax. Derivative financial instruments that donot meet specified hedging criteria would be recorded at fair value with changes in fair value charged to earnings.

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Cash flows resulting from the derivative financial instruments that are accounted for as hedges are classified in the cash flow statement in the same category as the cash flows of the items being hedged.

LOANS HELD-FOR-SALE

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses are recognized through a valuation allowance by charges to income. Unrealized gains are recognized but only to the extent of previous write-downs.

AUTOMOBILE LEASING

Financing of automobiles, provided to customers under lease arrangements of varying terms obtained via an indirect arrangement primarily through a single dealer on a full recourse basis, are accounted for as direct finance leases. Interest on automobile direct finance leasing is determined using the interest method. Generally, the interest method is used to arrive at a level effective yield over the life of the lease. The lease residual and the lease receivable, net of unearned lease income, are recorded within loans and leases on the balance sheet.

ALLOWANCE FOR CREDIT LOSSES

Allowance for Credit Losses on Loans

Management continually evaluates the credit quality of the Company’s loan portfolio and performs a formal review of the adequacy of the allowance for credit losses (ACL) on a quarterly basis. The allowance reflects management’s best estimate of the amount of credit losses in the loan portfolio. When estimating the net amount expected to be collected, management considers the effects of past events, current conditions, and reasonable and supportable forecasts of the collectability of the Company’s financial assets. Those estimates* may*be susceptible to significant change. Credit losses are charged directly against the allowance when loans are deemed to be uncollectible. Recoveries from previously charged-off loans are added to the allowance when received.

The methodology to analyze the adequacy of the ACL is based onseven primary components:

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Assets are evaluated on a collective (or pool) basis or individually, as applicable consistent with ASC Topic326. In accordance with ASC Topic326, the Company will evaluate individual instruments for expected credit losses when those instruments donot share similar risk characteristics with instruments evaluated using a collective (pooled) basis. In contrast to legacy accounting standards, this criterion is broader than the “impairment” concept as management* mayevaluate assets individually even whenno* specific expectation of collectability is in place. Instruments willnot be included in both collective and individual analysis. Individual analysis will establish a specific reserve for instruments in scope.

For individually evaluated assets, an ACL is determined separately for each financial asset based on an appropriate method per ASC Subtopic326-20. As of the reporting date, the Company is using the collateral and cash flow methods.

ASC Topic326 defines a collateral-dependent asset as a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower, based on Management’s assessment, is experiencing financial difficulty. The ACL for a collateral-dependent loan is measured using the fair value of collateral, regardless of whether foreclosure is probable. The fair value of collateral must be adjusted for estimated costs to sell if repayment or satisfaction of the asset depends on the sale of the collateral. If repayment is dependent only on the operation of the collateral, andnot on the sale of the collateral, the fair value of the collateral wouldnot be adjusted for estimated costs to sell. If the fair value of the collateral, adjusted for costs to sell if applicable, is less than the amortized cost basis of the collateral-dependent asset, the difference is recorded as an ACL.

The Company’s policy is to charge-off unsecured consumer loans when they become90 days or more past due as to principal and interest. In the other portfolio segments, amounts are charged-off at the point in time when the Company deems the balance, or a portion thereof, to be uncollectible.

If the individually evaluated asset is determined tonot be collateral dependent, the ACL is measured based on the expected cash flows. This measurement is based on the amount and timing of cash flows; the effective interest rate (EIR) is used to discount the cash flows; and the basis for the determination of cash flows, including consideration of past events, current conditions, and reasonable and supportable forecasts about the future. These cash flows are discounted back by the EIR and compared to the amortized cost basis of the asset. If the present value of cash flows is less than the amortized cost, an ACL is recorded. When the present value of cash flows is equal to or greater than the amortized cost,no ACL is recorded.

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies.

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The risk characteristics of each of the identified portfolio segments are as follows:

Commercial and industrial loans (C&I): C&I loans are primarily based on the identified historic and/or the projected cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of the borrower, however, do fluctuate based on changes in the Company’s internal and external environment including management, human and capital resources, economic conditions, competition and regulation. Most C&I loans are secured by business assets being financed such as equipment, accounts receivable, and/or inventory and generally incorporate a secured or unsecured personal guarantee. Unsecured loans* maybe made on a short-term basis. Loans to municipal borrowers, which carry the full faith and credit of each respective local government unit consistent with the PA Local Government Unit Debt Act (LGUDA) as well as loans to municipal authorities are included in C&I loans. The ability of the borrower to collect amounts due from its customers and perform under the terms of its loan may*be affected by its customers’ economic and financial condition.

*Commercial real estate loans (CRE):Commercial real estate loans are made to finance the purchase of real estate, refinance existing obligations and/or to provide capital. These commercial real estate loans are generally secured byfirst lien security interests in the real estate as well as assignment of leases and rents. The real estate mayinclude apartments, hotels, retail stores or plazas and healthcare facilities whether they are owner or non-owner occupied. These loans are typically originated in amounts ofno more than80% of the appraised value of the property. The ability of the borrower to collect amounts due from its customers and perform under the terms of its loan may*be affected by its customers’ or lessees' customers’ economic and financial condition.

Consumer loans: The Company offers home equity installment loans and lines of credit. Risks associated with loans secured by residential properties are generally lower than commercial real estate loans and include general economic risks, such as the strength of the job market, employment stability and the strength of the housing market. Since most loans are secured by a primary or secondary residence or an automobile, the borrower’s continued employment is considered the greatest risk to repayment. The Company also offers a variety of loans to individuals for personal and household purposes. These loans are generally considered to have greater risk than mortgages on real estate because they* maybe unsecured, or if they are secured, the value of the collateral may*be difficult to assess and more likely to decrease in value than real estate.

**Residential mortgage loans:**Residential mortgages are secured by afirst lien position of the borrower’s residential real estate. These loans have varying loan rates depending on the financial condition of the borrower and the loan to value ratio. Since most loans are secured by a primary or secondary residence, the borrower’s continued employment is considered the greatest risk to repayment. Residential mortgages have terms up tothirty years with amortizations varying from10 to30 years. The majority of the loans are underwritten according to FNMA and/or FHLB standards.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

In accordance with ASC Topic326, the Company estimates expected credit losses for off-balance-sheet credit exposures over the contractual period during which the Company is exposed to credit risk. The estimate of expected credit losses takes into consideration the likelihood that funding will occur (i.e., funding rate) as well as the amount expected to be collected over the estimated remaining contractual term of the off-balance-sheet credit exposures (i.e., loss rate). The Company doesnot record an estimate of expected credit losses for off-balance-sheet exposures that are unconditionally cancellable. On a quarterly basis, management evaluates expected credit losses for off-balance-sheet credit exposures. The Company's allowance for credit losses on unfunded commitments is recognized as a liability on the consolidated balance sheets, with adjustments to the reserve recognized in the provision for credit losses on unfunded commitments on the consolidated statements of income.

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TRANSFER OF FINANCIAL ASSETS

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company doesnot maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. The Company accounts for certain participation interests in commercial loans receivable (loan participation agreements) sold as a sale of financial assets pursuant to ASC860, Transfers and Servicing. Loan participation agreements that meet the sale criteria under ASC860 are derecognized from the Consolidated Balance Sheets at the time of transfer. If the transfer of loans doesnot meet the sale criteria or participating interest criteria under ASC860, the transfer is accounted for as a secured borrowing and the loan isnot de-recognized and a participating liability is recorded in the Consolidated Balance Sheets.

LOAN FEES AND COSTS

Nonrefundable loan origination fees and certain direct loan origination costs are recognized as a component of interest income over the life of the related loans as an adjustment to yield. The unamortized balance of the deferred fees and costs are included as components of the loan balances to which they relate.

ACCRUED INTEREST RECEIVABLE

The Company electednot to measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on nonaccrual status, which is generally when the instrument is90 days past due, or earlier if the Company believes the collections of interest is doubtful. The Company has concluded that this policy results in the timely reversal of uncollectible interest.

Accrued interest receivable is presented separately on the consolidated balance sheets.

BANK PREMISES AND EQUIPMENT

Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the term of the lease or the estimated useful lives of the improved property. The Company leases several branches which are classified as operating leases. The Company also leasestwo stand-alone ATMs which are classified as operating leases and a building and equipment classified as finance leases. In most circumstances, management expects that in the normal course of business, leases will be renewed or replaced by other leases. Rent expense is recognized on the straight-line method over the term of the lease.

BANK OWNED LIFE INSURANCE

The Company maintains bank owned life insurance (BOLI) for a selected group of employees, namely its officers where the Company is the owner and sole beneficiary of the policies. The earnings from the BOLI are recognized as a component of other income in the consolidated statements of income. The BOLI is an asset that can be liquidated, if necessary, with tax consequences. However, the Company intends to hold these policies and, accordingly, the Company hasnot provided for deferred income taxes on the earnings from the increase in the cash surrender value.

EMPLOYEE BENEFITS

The Company holds separate supplemental executive retirement (SERP) agreements for certain officers and an amount is credited to each participant’s SERP account monthly while they are actively employed by the bank until retirement. A deferred tax asset is provided for the non-deductible SERP expense. The Company also entered into separate split dollar life insurance arrangements with four executives providing post-retirement benefits and accrues monthly expense for this benefit. Monthly expenses for the SERP and post-retirement split dollar life benefit are recorded as components of salaries and employee benefit expense on the consolidated statements of income.

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FORECLOSED ASSETS HELD-FOR-SALE

Foreclosed assets held-for-sale are carried at the lower of cost or fair value less cost to sell. Foreclosed assets held-for-sale is primarily other real estate owned, but also includes other repossessed assets. Losses from the acquisition of property in full and partial satisfaction of debt are treated as credit losses. Routine holding costs, gains and losses from sales, write-downs for subsequent declines in value and any rental income received are recognized net, as a component of other real estate owned expense in the consolidated statements of income. Gains or losses are recorded when the properties are sold.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets, including bank premises and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable. If impairment is indicated by that review, the asset is written down to its estimated fair value through a charge to non-interest expense.

GOODWILL AND INTANGIBLE ASSETS

Goodwill is recorded on the consolidated balance sheets as the excess of liabilities assumed over identifiable assets acquired on the acquisition date. Goodwill is recorded at its net carrying value. The goodwill isnot deductible for tax purposes.

Goodwill is reviewed for impairment annually as of* November 30and between annual tests when events and circumstances indicate that impairment mayhave occurred. Goodwill impairment exists when the carrying amount of a reporting unit exceeds its fair value. A qualitative test can be performed to determine whether it is more likely thannot* that the fair value of the Company is less than its carrying amount, including goodwill. In this qualitative assessment, the Company evaluates events and circumstances which include general banking industry conditions and trends, the overall financial performance of the Company, the performance of the Company’s common stock and key financial performance metrics of the Company. If the qualitative review indicates that it isnot more likely thannot that the carrying value exceeds its fair value,no further evaluation needs to be performed. If the results of the qualitative review indicate it is more likely thannot that the fair value is less than the carrying value, then the Company performs a quantitative impairment test. During2024, the Company determined it isnot more likely thannot that the fair value exceeds its carrying value thereforeno quantitative analysis was necessary.

Other acquired intangible assets that have finite lives, such as core deposit intangibles, are amortized over their estimated useful lives and subject to periodic impairment testing.

STOCK PLANS

The Company accounts for stock-based compensation plans under the recognition and measurement accounting principles, which requires the cost of share-based payment transactions be recognized in the financial statements. The stock-based compensation accounting guidance requires that compensation cost for stock awards be calculated and recognized over the employees’ service period, generally defined as the vesting period. Compensation cost is recognized on a straight-line basis over the requisite service period. When granting stock-settled stock appreciation rights (SSARs), the Company uses Black-Scholes-Merton valuation model to determine fair value on the date of grant.

TRUST AND FINANCIAL SERVICE FEES

Trust and financial service fees are recorded on the cash basis, which isnot materially different from the accrual basis.

ADVERTISING COSTS

Advertising costs are charged to expense as incurred.

LEGAL AND PROFESSIONAL EXPENSES

Generally, the Company recognizes legal and professional fees as incurred and are included as a component of professional services expense in the consolidated statements of income. Legal costs incurred that are associated with the collection of outstanding amounts due from delinquent borrowers are included as a component of loan collection expense in the consolidated statements of income. In the event of litigation proceedings brought about by an employee orthird party against the Company, expenses for damages will be accrued if the likelihood of the outcome against the Company is probable, the amount can be reasonably estimated and the amount would have a material impact on the financial results of the Company.

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REVENUE RECOGNITION

The Company recognizes revenue from contracts with customers when it satisfies its performance obligations. The Company’s performance obligations are generally satisfied as services are rendered and can either be satisfied at a point in time or over time. The majority of the Company’s revenues are generated through interest earned on securities and loans. In addition, the Company has other non-interest income streams such as fees associated with mortgage servicing rights which amortized to net mortgage servicing fees within other income, loan service charges, life insurance earnings, rental income and gains/losses on the sale of loans.

INCOME TAXES

Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

The benefit of a tax position is recognized on the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than-not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken arenot offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than50% likely of being realized upon settlement with the applicable taxing authority. For tax positionsnot meeting the more likely thannot threshold,no tax benefit is recorded. Under the more likely thannot threshold guidelines, the Company believesno significant uncertain tax positions exist, either individually or in the aggregate, that would give rise to the non-recognition of an existing tax benefit. The Company hadno material unrecognized tax benefits or accrued interest and penalties for the years ended* December 31, 2024* and2023, respectively.

COMPREHENSIVE INCOME (LOSS)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the shareholders’ equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income (loss).

CASH FLOWS

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and interest-bearing deposits with financial institutions.

The Company is required by the Federal Reserve Bank to maintain average reserve balances based on a percentage of deposits. There wereno reserve requirements on* December 31, 2024and2023*.

Deposits with anyone financial institution are insured up to $250,000. From time-to-time, the Company* may*maintain cash and cash equivalents with certain other financial institutions in excess of the insured amount.

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The following tables illustrate the changes in accumulated other comprehensive income by component and the details about the components of accumulated other comprehensive income as of and for the periods indicated:

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Agency– Government-sponsored enterprise (GSE) and Mortgage-backed securities (MBS) - GSE residential

Agency – GSE and MBS – GSE residential securities consist of short- to long-term notes issued by Federal Home Loan Mortgage Corporation (FHLMC), FNMA, FHLB and Government National Mortgage Association (GNMA). These securities have interest rates that are fixed, have varying short to long-term maturity dates and have contractual cash flows guaranteed by the U.S. government or agencies of the U.S. government.

Obligations of states and political subdivisions (municipal)

The municipal securities are general obligation and revenue bonds rated as investment grade by various credit rating agencies and have fixed rates of interest with mid- to long-term maturities. Fair values of these securities are highly driven by interest rates. Management performs ongoing credit quality reviews on these issues.

The Company didnot record any allowance for credit losses on its available-for-sale or held-to-maturity securities. The Company excludes accrued interest receivable from the amortized cost basis of investment securities disclosed throughout this footnote. As of* December 31, 2024and2023,* accrued interest receivable for investment securities totaled $3.4 million and $3.4 million, respectively, and is included in the accrued interest receivable line in the consolidated balance sheets. Amortized cost and fair value of investment securities as of the period indicated are as follows:

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The amortized cost and fair value of debt securities at* December 31, 2024* by contractual maturity are shown below:

There was $0.5 million increase to the carrying value of municipal AFS securities and a $0.5 million increase to the carrying value of mortgage-backed securities resulting from the interest rate swap that wasnot included in the maturity table above.

Actual maturities will differ from contractual maturities because issuers and borrowers* may*have the right to call or repay obligations with or without call or prepayment penalty. Agency – GSE and municipal securities are included based on their original stated maturity. MBS – GSE residential, which are based on weighted-average lives and subject to monthly principal pay-downs, are listed in total. Most of the securities have fixed rates or have predetermined scheduled rate changes and many have call features that allow the issuer to call the security at par before its stated maturity without penalty.

Some of the Company’s debt securities are pledged to secure trust funds, public deposits, short-term borrowings, FHLB advances, Federal Reserve Bank of Philadelphia Discount Window borrowings and certain other deposits as required by law. Securities pledged at* December 31, 2024* had a carrying amount of $398.8 million and were pledged to secure public deposits, trust client deposits, borrowings and derivative instruments.

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Gross realized gains and losses from sales, determined using specific identification, for the periods indicated were as follows:

The following table presents the fair value and gross unrealized losses of investments aggregated by investment type, the length of time and the number of securities that have been in a continuous unrealized loss position as of the period indicated:

There was a $1.0 million and $2.2 million increase to the carrying value of AFS securities resulting from the interest rate swap that increased the unrealized loss position at* December 31, 2024and2023,* respectively, that wasnot included in the table above.

The Company had 424 debt securities in an unrealized loss position at* December 31, 2024*, including 46 agency-GSE securities,142 MBS – GSE residential securities and 236 municipal securities. The severity of these unrealized losses based on their underlying cost basis was as follows at* December 31, 2024*:9.81% for agency - GSE,15.34% for total MBS-GSE residential; and 13.85% for municipals. Management hasno intent to sell any securities in an unrealized loss position as of* December 31, 2024*.

The Company reassessed classification of certain investments and effective* April 1, 2022,*the Company transferred agency and municipal investment securities with a book value of $245.5 million from available-for-sale to held-to-maturity. The securities were transferred at their fair value. The market value of the securities on the date of the transfer was $221.7 million, after netting unrealized losses totaling $18.9 million. The $18.9 million, net of deferred taxes, is being accreted into other comprehensive income over the life of the bonds. The allowance for credit losses on these securities was evaluated under the accounting policy for HTM debt securities.

Unrealized losses on available-for-sale securities havenot been recognized into income because management believes the cause of the unrealized losses is related to changes in interest rates and isnot directly related to credit quality. Quarterly, management conducts a formal review of investment securities to assess whether the fair value of a debt security is less than its amortized cost as of the balance sheet date. An allowance for credit losses hasnot been recognized on these securities in an unrealized loss position because: (1) the entity doesnot intend to sell the security; (2) more likely thannot the entity willnot be required to sell the security before recovery of its amortized cost basis; or (3) the present value of expected cash flows is sufficient to recover the entire amortized cost. The issuer(s) continues to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bond(s) approach maturity.

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The Company has U.S. agency bonds and municipal securities classified as held-to-maturity. Management estimatedno credit loss reserve will be necessary for agency bonds HTM given the strong credit history of GSE and other U.S. agency issued bonds and the involvement of the U.S. government. For municipal securities HTM, the Company utilized athird-party model to analyze whether a credit loss reserve is needed for these bonds. The amount of credit loss reserve calculated using this model was immaterial to the Company's financial statements, thereforeno reserve was recorded, but the Company will continue to evaluate these securities on a quarterly basis.

The classifications of loans and leases at* December 31, 2024and2023* are summarized as follows:

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Total unamortized net costs and premiums included in loan totals were as follows:

The Company excludes accrued interest receivable from the amortized cost basis of loans disclosed throughout this footnote. As of* December 31, 2024and2023,* accrued interest receivable for loans totaled $6.3 million and $5.7 million, respectively, and is included in theaccrued interest receivable line in the consolidated balance sheets and is excluded from the estimate of credit losses.

Direct finance leases include the lease receivable and the guaranteed lease residual. Unearned lease revenue represents the difference between the Company’s investment in the property and the gross investment in the lease. Unearned revenue is accrued over the life of the lease using the effective interest method.

The Company services real estate loans for investors in the secondary mortgage market which arenot included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgages serviced for others amounted to $495.4 million as of* December 31, 2024* and $477.7 million as of* December 31, 2023*. Mortgage servicing rights amounted to $1.3 million and $1.5 million as of* December 31, 2024and2023*, respectively.

During thesecond quarter of2024, the Company reviewed its commercial real estate loan portfolios to ensure the loans in those portfolios reflect proper purpose and collateral. Based on this analysis, loans with a net balance of $25.4 million were reclassified between commercial real estate owner-occupied and commercial real estate non-owner-occupied categories. This adjustment was applied to* December 31, 2023,for purposes of comparison. As of December 31, 2023,the non-owner-occupied portfolio increased, and the owner-occupied portfolio decreased by $26.1 million. This change hadno* significant impacts on the allowance for credit losses.

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Non-accrual loans

Non-accrual loans and loans past due over89 days still accruing, segregated by class, at* December 31, 2024and2023,* were as follows:

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The decision to place loans on non-accrual status is made on an individual basis after considering factors pertaining to each specific loan. C&I and CRE loans are placed on non-accrual status when management has determined that payment of all contractual principal and interest is in doubt or the loan is past due90 days or more as to principal and interest, unless well-secured and in the process of collection. Consumer loans secured by real estate and residential mortgage loans are placed on non-accrual status at90 days past due as to principal and interest and unsecured consumer loans are charged-off when the loan is90 days or more past due as to principal and interest. The Company considers all non-accrual loans to be individually evaluated loans.

Loan modifications to borrowers experiencing financial difficulty

Occasionally, the Company modifies loans to borrowers in financial distress by providing lower interest rates below the market rate, temporary interest-only payment periods, term extensions at interest rates lower than the current market rate for new debt with similar risk and/or converting revolving credit lines to term loans. The Company typically doesnot forgive principal when modifying loans.

In some cases, the Company provides multiple types of concessions onone loan. Typically,one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as lowering the interest rate,* may*be granted. For the loans included in the "combination" columns below, multiple types of modifications have been made on the same loan within the current reporting period.

The following table presents the amortized cost basis of loans at* December 31, 2024* and2023 that were both experiencing financial difficulty and modified during thetwelve months ended* December 31, 2024* and2023, by class and type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below:

The Company hasnot committed to lend additional amounts to the borrowers included in the previous tables.

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The following tabled represents the performance of such loans that have been modified in the last12 months as of* December 31, 2024and2023:*

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The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for thetwelve months ended* December 31, 2024and2023:*

The following table provides the amortized cost basis of financing receivables that had a payment default during thetwelve months ended* December 31, 2024and2023* and were modified in thetwelve months prior to that default to borrowers experiencing financial difficulty:

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The allowance for credit losses (ACL)* maybe increased, adjustments maybe made in the allocation of the ACL or partial charge-offs may*be taken to further write-down the carrying value of the loan.

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Past due loans

Loans are considered past due when the contractual principal and/or interest isnot received by the due date. For loans reported30-59 days past due, certain categories of loans are reported past due as and when the loan is in arrears fortwo payments or billing cycles. An aging analysis of past due loans, segregated by class of loans, as of the period indicated is as follows (dollars in thousands):

(1) Includes non-accrual loans.(2) Net of unearned lease revenue of $1.9 million.(3) Includes net deferred loan costs of $5.0 million and net unamortized fair value mark discount on acquired loans of $4.9 million.

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(1) Includes non-accrual loans.(2) Net of unearned lease revenue of $2.0 million.(3)Includes net deferred loan costs of $4.9 million and net unamortized fair value mark discount on acquired loans of $6.5 million.

Credit Quality Indicators

Management is responsible for conducting the Company’s credit risk evaluation process, which includes credit risk grading of individual commercial and industrial and commercial real estate loans. Commercial and industrial and commercial real estate loans are assigned credit risk grades based on the Company’s assessment of conditions that affect the borrower’s ability to meet its contractual obligations under the loan agreement. That process includes reviewing borrowers’ current financial information, historical payment experience, credit documentation, public information, and other information specific to each individual borrower. Upon review, the commercial loan credit risk grade is revised or reaffirmed. The credit risk grades* may*be changed at any time management feels an upgrade or downgrade is warranted. The Company utilizes an external independent loan review firm that reviews and validates the credit risk program on at least an annual basis. Results of these reviews are presented to management and the Board of Directors. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Commercial and industrial and commercial real estate

The Company utilizes a loan grading system and assigns a credit risk grade to its loans in the C&I and CRE portfolios. The grading system provides a means to measure portfolio quality and aids in the monitoring of the credit quality of the overall loan portfolio. The credit risk grades are arrived at using a risk rating matrix to assign a grade to each of the loans in the C&I and CRE portfolios.

These loans are assigned credit risk grades based on the Company’s assessment of conditions that affect the borrower’s ability to meet its contractual obligations under the loan agreement. That process includes reviewing borrowers’ current financial information, historical payment experience, credit documentation, public information and other information specific to each individual borrower. Upon review, the commercial loan credit risk grade is revised or reaffirmed. The credit risk grades* may*be changed at any time management feels an upgrade or downgrade is warranted.

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The following is a description of each risk rating category the Company uses to classify each of its C&I and CRE loans:

Pass

Loans in this category have an acceptable level of risk and are graded in a range ofone to five. Secured loans generally have good collateral coverage. Current financial statements reflect acceptable balance sheet ratios, sales and earnings trends. Management is competent, and a reasonable succession plan is evident. Payment experience on the loans has been good with minor orno delinquency experience. Loans with a grade ofone are of the highest quality in the range. Those gradedfive are of marginally acceptable quality.

Special Mention

Loans in this category are graded asix and* maybe protected but are potentially weak. They constitute a credit risk to the Company but havenot* yet reached the point of adverse classification. Some of the following conditions* mayexist: little orno* collateral coverage; lack of current financial information; delinquency problems; highly leveraged; available financial information reflects poor balance sheet ratios and profit and loss statements reflect uncertain trends; and document exceptions. Cash flow* may**not* be sufficient to support total debt service requirements.

Substandard

Loans in this category are graded aseven and have a well-defined weakness which* mayjeopardize the ultimate collectability of the debt. The collateral pledged maybe lacking in quality or quantity. Financial statements mayindicate insufficient cash flow to service the debt; and/or donot* reflect a sound net worth. The payment history indicates chronic delinquency problems. Management is weak. There is a distinct possibility that the Company* maysustain a loss. All loans on non-accrual are rated substandard. Other loans that are included in the substandard category can be accruing, as well as loans that are current or past due. Loans90* days or more past due, unless otherwise fully supported, are classified substandard. Also, borrowers that are bankrupt or have loans categorized as modifications experiencing financial difficulty can be graded substandard.

Doubtful

Loans in this category are graded aneight and have a better than50% possibility of the Company sustaining a loss, but the loss cannot be determined because of specific reasonable factors which* maystrengthen credit in the near-term. Many of the weaknesses present in a substandard loan exist. Liquidation of collateral, if any, is likely. Any loan graded lower than aneight* is considered to be uncollectible and charged-off.

Consumer and residential

The consumer and residential loan segments are regarded as homogeneous loan pools and as such arenot risk rated. For these portfolios, the Company utilizes payment activity and history in assessing performance. Non-performing loans are comprised of non-accrual loans and loans past due90 days or more and accruing. All loansnot classified as non-performing are considered performing.

The following table presents loans including $5.0 million and $4.9 million of deferred costs, and $4.9 million and $6.5 million of fair value mark discount, segregated by class and vintage, categorized into the appropriate credit quality indicator category as of* December 31, 2024and2023*, respectively:

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Commercial credit exposure

Credit risk profile by creditworthiness category

As of December 31, 2024**

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Consumer & Mortgage lending credit exposure

Credit risk profile based on payment activity

As of December 31, 2024**

(1)Net of unearned lease revenue of $1.9 million.

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Commercial credit exposure

Credit risk profile by creditworthiness category

As of December 31, 2023**

93

Consumer & Mortgage lending credit exposure

Credit risk profile based on payment activity

As of December 31, 2023**

(2)Net of unearned lease revenue of $2.0 million.

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Collateral dependent loans

Loans that donot share risk characteristics are evaluated on an individual basis. For loans that are individually evaluated and foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the financial asset is expected to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. The following table presents the individually evaluated, collateral dependent loans as of* December 31, 2024and2023:*

Allowance for credit losses

Management continually evaluates the credit quality of the Company’s loan portfolio and performs a formal review of the adequacy of the allowance for credit losses (ACL) on a quarterly basis. The allowance reflects management’s best estimate of the amount of credit losses in the loan portfolio.

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Information related to the change in the allowance for credit losses on loans and the Company’s recorded investment in loans by portfolio segment as of the period indicated is as follows:

Unfunded commitments

The Company's allowance for credit losses on unfunded commitments is recognized as a liability on the consolidated balance sheets, with adjustments to the reserve recognized in the provision for credit losses on unfunded commitments on the consolidated statements of income. The Company's activity in the allowance for credit losses on unfunded commitments for the period was as follows:

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Direct finance leases

The Company originates direct finance leases throughthree automobile dealerships. The carrying amount of the Company’s lease receivables, net of unearned income, was $4.5 million and $6.1 million as of* December 31, 2024and2023*, respectively. The residual value of the direct finance leases is fully guaranteed by the dealerships. Residual values amounted to $20.9 million and $25.1 million at* December 31, 2024and2023*, respectively, and are included in the carrying value of direct finance leases. As of* December 31, 2024,there was also $553 thousand in deferred lease expense included in the carrying value of direct finance leases that isnot* included in the table below.

The undiscounted cash flows to be received on an annual basis for the direct finance leases are as follows:

Components of bank premises and equipment are summarized as follows:

Depreciation expense, which includes amortization of leasehold improvements, was $2.4 million and $2.5 million for the years ended* December 31, 2024and2023,* respectively. The estimated useful life was 40 years for bank premises,3 to 7 years for furniture and fixtures and for leasehold improvements was the term of the lease.

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The scheduled maturities of certificates of deposit as of* December 31, 2024* were as follows:

Certificates of deposit of*$250,000* or more aggregated $108.8 million and $72.6 million at* December 31, 2024and2023*, respectively.

As of* December 31, 2024and2023*, $0.7 million and $0.5 million of overdraft deposits have been reclassified as loan balances.

As of* December 31, 2024*, available-for-sale investment securities with a combined fair value of $331.5 million and held-to-maturity investment securities with a combined carrying value of $225.8 million were available to be pledged as qualifying collateral to secure public deposits and trust funds. The Company required $321.4 million of the qualifying collateral to secure such deposits as of* December 31, 2024* and the balance of $235.9 million was available for other pledging needs.

The components of short-term borrowings are summarized as follows:

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The maximum and average amounts of short-term borrowings outstanding and related interest rates as of the periods indicated are as follows:

Overnight borrowings* may*include Fed funds purchased from correspondent banks, open repurchase agreements with the FHLB and borrowings at the Discount Window from the Federal Reserve Bank of Philadelphia (FRB).

FHLB borrowings are collateralized by a blanket lien on all commercial and residential real estate loans. At* December 31, 2024*, the Company had $733.2 million available to borrow from the FHLB, $20.0 million from correspondent banks and $157.3 million that it could borrow at the FRB.

The Company hadno FHLB advances as of* December 31, 2024and2023*.

As of* December 31, 2024and2023*, the Company had secured borrowings with a carrying value of $6.2 million and $7.4 million related to certain acquired sold loan participations that didnot qualify for sales treatment. The carrying value includes a $42 thousand and $47 thousand purchase accounting fair value adjustment as of* December 31, 2024and2023*.

The maturity and weighted-average interest rate of secured borrowings as of the periods indicated is as follows:

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The Company hasone active stock-based compensation plan (the stock compensation plan) from which it can grant stock-based compensation awards and applies the fair value method of accounting for stock-based compensation provided under current accounting guidance. The guidelines require the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. The Company’s stock compensation plan was shareholder-approved and permits the grant of share-based compensation awards to its employees and directors. The Company believes that the stock-based compensation plan will advance the development, growth and financial condition of the Company by providing incentives through participation in the appreciation in the value of the Company’s common stock. In return, the Company hopes to secure, retain and motivate the employees and directors who are responsible for the operation and the management of the affairs of the Company by aligning the interest of its employees and directors with the interest of its shareholders. In the stock compensation plan, employees and directors are eligible to be awarded stock-based compensation grants which can consist of stock options (qualified and non-qualified), stock appreciation rights (SARs) and restricted stock.

At the2022 annual shareholders' meeting, the Company's shareholders approved and the Company adopted the2022 Omnibus Stock Incentive Plan which replaced the2012 Omnibus Stock Incentive Plan and the2012 Director Stock Incentive Plan (collectively, the2012 stock incentive plans). The2012 stock incentive plans expired in2022. Unless terminated by the Company’s board of directors, the2022 Omnibus Stock Incentive Plan will expire on, andno stock-based awards shall be granted after the year2032.

In the2022 Omnibus Stock Incentive Plan, the Company has reserved 500,000 shares of itsno-par common stock for future issuance. The Company recognizes share-based compensation expense over the requisite service or vesting period. Since2019, the Company has approved a Long-Term Incentive Plan (LTIP) each year that awarded restricted stock and/or stock-settled stock appreciation rights (SSARs) to senior officers and managers based on the attainment of performance goals. The SSAR awards have aten-year term from the date of each grant.

During thefirst quarter of2024, the Company approved a LTIP and awarded restricted stock to senior officers and managers in* February 2024based on2023* performance.

During thefirst quarter of2023, the Company approved a LTIP and awarded restricted stock to senior officers and managers in* February 2023based on2022* performance. During thesecond quarter of2023, the Company awarded 1,000 shares of restricted stock toone new employee.

The following table summarizes the weighted-average fair value and vesting of restricted stock grants awarded during2024 and2023 under the2022 stock incentive plans:

(1) Vest after 1 year (2) Vest after 3 years – 33% each year (3) Vest fully after 3 years

The fair value of the shares granted in2024 and2023 was calculated using the grant date closing stock price.

A summary of the status of the Company’s non-vested restricted stock as of and changes during the period indicated are presented in the following table:

A summary of the status of the Company’s SSARs as of and changes during the period indicated are presented in the following table:

All the SSARs outstanding at* December 31, 2024*, are fully vested and exercisable.

Share-based compensation expense is included as a component of salaries and employee benefits in the consolidated statements of income. The following tables illustrate stock-based compensation expense recognized on non-vested equity awards during the years ended* December 31, 2024and2023and* the unrecognized stock-based compensation expense as of* December 31, 2024*:

The unrecognized stock-based compensation expense as of* December 31, 2024* will be recognized ratably over the periods ended* February 2025,** February 2025and February 2027for the2012* Director Stock Incentive Plan,2012 Omnibus Stock Incentive Plan and2022 Omnibus Stock Incentive Plan, respectively.

In addition to the2022 stock incentive plan, the Company established the2002 Employee Stock Purchase Plan (the ESPP) and reserved 165,000 shares of its un-issued capital stock for issuance under the plan. The ESPP was designed to promote broad-based employee ownership of the Company’s stock and to motivate employees to improve job performance and enhance the financial results of the Company. Under the ESPP, participation is voluntary whereby employees use automatic payroll withholdings to purchase the Company’s capital stock at a discounted price based on the fair market value of the capital stock as measured on either the commencement or termination dates, as defined. As of* December 31, 2024*,108,591 shares have been issued under the ESPP. The ESPP is considered a compensatory plan and is required to comply with the provisions of current accounting guidance. The Company recognizes compensation expense on its ESPP on the date the shares are purchased, and it is included as a component of salaries and employee benefits in the consolidated statements of income.

Pursuant to the accounting guidelines related to income taxes, the Company has evaluated its material tax positions as of* December 31, 2024and2023*. Under the “more-likely-than-not” threshold guidelines, the Company believesno significant uncertain tax positions exist, either individually or in the aggregate, that would give rise to the non-recognition of an existing tax benefit. In periods subsequent to* December 31, 2024,determinations of potentially adverse material tax positions will be evaluated to determine whether an uncertain tax position may*have previously existed or has been originated. In the event an adverse tax position is determined to exist, penalty and interest will be accrued, in accordance with the Internal Revenue Service (IRS) guidelines, and will be recorded as a component of other expenses in the Company’s consolidated statements of income.

As of* December 31, 2024*, there wereno unrecognized tax benefits that, if recognized, would significantly affect the Company’s effective tax rate. Also, there wereno penalties and interest recognized in the consolidated statements of income in2024 or2023 as a result of management’s evaluation of whether an uncertain tax position* mayexist nor does the Company foresee a change in its material tax positions that would give rise to the non-recognition of an existing tax benefit during the forthcomingtwelve* months. Tax returns filed with the IRS are subject to review by law under athree-year statute of limitations. The Company hasnot received notification from the IRS regarding adverse tax issues for the current year or from tax returns filed for tax years2023, 2022, or2021.

The following temporary differences gave rise to the net deferred tax asset, a component of other assets in the consolidated balance sheets, as of the periods indicated:

The components of the total provision/(benefit) for income taxes for the years indicated are as follows:

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The Company pays state income tax only to the state of New Jersey. The reconciliation between the expected statutory income tax and the actual provision for income taxes is as follows:

The Company has a defined contribution profit sharing401(k) plan covering substantially all of its employees. The plan is subject to the provisions of the Employee Retirement Income Security Act of1974 (ERISA). Contributions to the plan approximated $1.0 million and $1.0 million in2024 and2023, respectively.

The accounting guidelines establish a framework for measuring and disclosing information about fair value measurements. The guidelines of fair value reporting instituted a valuation hierarchy for disclosure of the inputs used to measure fair value. This hierarchy prioritizes the inputs intothree broad levels as follows:

Level*1*** -**inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level*2*** -**inputs are quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that arenot active; or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument;

Level*3*** -*inputs are unobservable and are based on the Company’s own assumptions to measure assets and liabilities at fair value. Level3 pricing for securities may*also include unobservable inputs based upon broker-traded transactions.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company uses fair value to measure certain assets and, if necessary, liabilities on a recurring basis when fair value is the primary measure for accounting. Thus, the Company uses fair value for AFS securities. Fair value is used on a non-recurring basis to measure certain assets when adjusting carrying values to market values, such as collateral dependent individually evaluated loans, other real estate owned (ORE) and other repossessed assets.

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The following table represents the carrying amount and estimated fair value of the Company’s financial instruments:

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The carrying value of short-term financial instruments, as listed below, approximates their fair value. These instruments generally have limited credit exposure,no stated or short-term maturities, carry interest rates that approximate market and generally are recorded at amounts that are payable on demand:

Securities: Fair values on investment securities are determined by prices provided by athird-party vendor, who is a provider of financial market data, analytics and related services to financial institutions.

Accruing loans and leases: The fair value of accruing loans is estimated by calculating the net present value of the future expected cash flows discounted at current offering rates for similar loans. Current offering rates consider, among other things, credit risk.

The carrying value that fair value is compared to is net of the allowance for credit losses and since there is significant judgment included in evaluating credit quality, loans are classified within Level3 of the fair value hierarchy.

Non-accrual loans: Loans which the Company has measured as non-accruing are generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independentthird-party appraisals of the properties. These loans are classified within Level3 of the fair value hierarchy. The fair value consists of loan balances less the valuation allowance.

Loans held-for-sale: The fair value of loans held-for-sale is estimated using rates currently offered for similar loans and is typically obtained from the Federal National Mortgage Association (FNMA) or the Federal Home Loan Bank of Pittsburgh (FHLB).

Interest rate swaps: Fair values on derivative instruments are determined by valuations provided by athird-party vendor, who is a provider of financial market data, analytics and related services to financial institutions.

**Certificates of deposit:**The fair value of certificates of deposit is based on discounted cash flows using rates which approximate market rates for deposits of similar maturities.

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Secured borrowings: The fair value for these obligations uses an income approach based on expected cash flows on a pooled basis.

The following tables illustrate the financial instruments measured at fair value on a recurring basis segregated by hierarchy fair value levels as of the periods indicated:

Debt securities in the AFS portfolio are measured at fair value using market quotations provided by athird-party vendor, who is a provider of financial market data, analytics and related services to financial institutions. Assets classified as Level2 use valuation techniques that are common to bond valuations. That is, in active markets whereby bonds of similar characteristics frequently trade, quotes for similar assets are obtained.

There wereno changes in Level3 financial instruments measured at fair value on a recurring basis as of and for the periods ending* December 31, 2024and2023*, respectively.

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From time-to-time, the Company* may*be required to record at fair value financial instruments on a non-recurring basis, such as individually evaluated loans, ORE and other repossessed assets. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting on write downs of individual assets. The following table illustrates the financial instruments measured at fair value on a non-recurring basis segregated by hierarchy fair value levels as of the periods indicated:

The following describes valuation methodologies used for financial instruments measured at fair value on a non-recurring basis. Individually evaluated loans that are collateral dependent are written down to fair value through the establishment of specific reserves, a component of the allowance for credit losses, and as such are carried at the lower of net recorded investment or the estimated fair value. Estimates of fair value of the collateral are determined based on a variety of information, including available valuations from certified appraisers for similar assets, present value of discounted cash flows and inputs that are estimated based on commonly used and generally accepted industry liquidation advance rates and estimates and assumptions developed by management.

Valuation techniques for individually evaluated, collateral dependent loans are typically determined through independent appraisals of the underlying collateral or* maybe determined through present value of discounted cash flows. Both techniques include various Level3* inputs which arenot identifiable. The valuation technique* maybe adjusted by management for estimated liquidation expenses and qualitative factors such as economic conditions. If real estate isnot* the primary source of repayment, present value of discounted cash flows and estimates using generally accepted industry liquidation advance rates and other factors* may*be utilized to determine fair value.

At* December 31, 2024* and* December 31, 2023*, the range of liquidation expenses and other valuation adjustments applied to individually evaluated, collateral dependent loans ranged from -13.81% to -31.19% and from -31.47% to -31.47%, respectively. The weighted average of liquidation expenses and other valuation adjustments applied to individually evaluated, collateral dependent loans amounted to -24.85% as of* December 31, 2024* and -31.47% as of* December 31, 2023*, respectively. Due to the multitude of assumptions, many of which are subjective in nature, and the varying inputs and techniques used to determine fair value, the Company recognizes that valuations could differ across a wide spectrum of techniques employed. Accordingly, fair value estimates for individually evaluated, collateral dependent loans are classified as Level3.

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For ORE, fair value is generally determined through independent appraisals of the underlying properties which generally include various Level3 inputs which arenot identifiable. Appraisals form the basis for determining the net realizable value from these properties. Net realizable value is the result of the appraised value less certain costs or discounts associated with liquidation which occurs in the normal course of business. Management’s assumptions* mayinclude consideration of the location and occupancy of the property, along with current economic conditions. Subsequently, as these properties are actively marketed, the estimated fair values maybe periodically adjusted through incremental subsequent write-downs. These write-downs usually reflect decreases in estimated values resulting from sales price observations as well as changing economic and market conditions. At December 31, 2023,the discounts applied to the appraised values of ORE ranged from -77.60% to -77.60%. As of December 31, 2023,the weighted average discount to the appraisal values of ORE amounted to -77.60%. At December 31, 2024,*the net realizable values of properties in ORE were higher than the carrying value.

At* December 31, 2024,there wasone* other repossessed asset totaling $1 thousand. At* December 31, 2023,*there wereno other repossessed assets. The Company refers to the National Automobile Dealers Association (NADA) guide to determine a vehicle’s fair value.

Financial Instruments with Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of the Company’s involvement in particular classes of financial instruments. Because of the nature of these instruments, the fair values of these off-balance sheet items arenot material.

The notional amount of the Company’s financial instruments with off-balance sheet risk was as follows:

Commitments to Extend Credit and Standby Letters of Credit

The Company’s exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are legally binding agreements to lend to customers. Commitments generally have fixed expiration dates or other termination clauses and* mayrequire payment of fees. Since commitments mayexpire without being drawn upon, the total commitment amounts donot* necessarily represent future liquidity requirements. The Company evaluates each customer’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by the Company on extension of credit, is based on management’s credit assessment of the customer.

Financial standby letters of credit are conditional commitments issued by the Company to guarantee performance of a customer to athird party. Those guarantees are issued primarily to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The Company’s performance under the guarantee is required upon presentation by the beneficiary of the financial standby letter of credit. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company wasnot required to recognize any liability in connection with the issuance of these financial standby letters of credit.

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The following table summarizes outstanding financial letters of credit, by maturity, as of* December 31, 2024*:

The Company hasnot incurred losses on its commitments in2024 and2023.

Basic earnings per share (EPS) is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed in the same manner as basic EPS but also reflects the potential dilution that could occur from the grant of stock-based compensation awards. The Company maintainsone active share-based compensation plan that* maygenerate additional potentially dilutive common shares. For granted and unexercised stock-settled stock appreciation rights (SSARs), dilution would occur if Company-issued SSARs were exercised and converted into common stock. As of the years ended December 31, 2024and2023*, there were 9,211 and 14,863 potentially dilutive shares related to issued and unexercised SSARs. The calculation didnot include 46,423 weighted average unexercised SSARs because their effect was antidilutive as of* December 31, 2024*. For restricted stock, dilution would occur from the Company’s previously granted but unvested shares. There were 30,954 and 25,128 potentially dilutive shares related to unvested restricted share grants as of the years ended* December 31, 2024and2023*, respectively.

In the computation of diluted EPS, the Company uses the treasury stock method to determine the dilutive effect of its granted but unexercised stock options and SSARs and unvested restricted stock. Under the treasury stock method, the assumed proceeds, as defined, received from shares issued in a hypothetical stock option exercise or restricted stock grant, are assumed to be used to purchase treasury stock. Proceeds include amounts received from the exercise of outstanding stock options and compensation cost for future service that the Company hasnot yet recognized in earnings. The Company doesnot consider awards from share-based grants in the computation of basic EPS.

The following table illustrates the data used in computing basic and diluted EPS for the years indicated:

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The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors. Since the Company (on a consolidated basis) is currently considered a small bank holding company, it isnot subject to regulatory capital requirements.

Under these guidelines, assets and certain off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets. The guidelines require all banks and bank holding companies to maintain a minimum ratio of total risk-based capital to total risk-weighted assets (Total Risk Adjusted Capital) of 8%, including Tier I common equity to total risk-weighted assets (Tier I Common Equity) of 4.5%, Tier I capital to total risk-weighted assets (Tier I Capital) of 6% and Tier I capital to average total assets (Leverage Ratio) of at least 4%. A capital conservation buffer, comprised of common equity Tier I capital, is also established above the regulatory minimum capital requirements of 2.50%. As of* December 31, 2024and2023*, the Bank exceeded all capital adequacy requirements to which it was subject.

The following table reflects the actual and required capital and the related capital ratios as of the periods indicated.No amounts were deducted from capital for interest-rate risk in either2024 or2023.

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• The minimums under Basel III increased to include the capital conservation buffer of 2.50%.

The Company’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations and Pennsylvania law limit the amount of dividends that* maybe paid from the Bank to the Company without prior approval of regulatory agencies. Accordingly, at December 31, 2024*, $161.2 million was available for dividend distribution from the Bank to the Company in2024.

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During the ordinary course of business, loans are made to executive officers, directors, greater than 5% shareholders and associates of such persons. These transactions are executed on substantially the same terms and at the rates prevailing at the time for comparable transactions with others. These loans donot involve more than the normal risk of collectability or present other unfavorable features. A summary of loan activity with officers, directors, associates of such persons and shareholders who own more than5% of the Company’s outstanding shares is as follows:

As of* December 31, 2024and2023*, deposits from executive officers and directors were $26.0 million and $27.7 million, respectively.

The Pittston branch property is subject to a lease with a company of which director, William J. Joyce, Sr., is a partner. With the exception of the Pittston branch,none of the lessors of the properties leased by the Company are affiliated with the Company and all of the properties are located in the Commonwealth of Pennsylvania.

The nature of the Company’s business generates litigation involving matters arising in the ordinary course of business. However, in the opinion of management of the Company after consulting with the Company’s legal counsel,no legal proceedings are pending, which, if determined adversely to the Company or the Bank, would have a material effect on the Company’s shareholders’ equity or results of operations. No legal proceedings are pending other than ordinary routine litigation incident to the business of the Company and the Bank. In addition, to management’s knowledge,no government authorities have initiated or contemplated any material legal actions against the Company or the Bank.

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In* March 2023,the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)2023-02, Investments - Equity Method and Joint Ventures (Topic323). The amendments in this update permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The amendments are effective for the Company for fiscal years beginning after December 31, 2023,including interim periods within those fiscal years. The adoption of this ASU didnot* have a material impact on the consolidated financial statements.

In* October 2023,the FASB issued ASU2023*-06, Disclosure Improvements. The amendments in this update are the result of the FASB's decision to incorporate into the Codification certain disclosures referred by the SEC that overlap with, but require incremental information to, generally accepted accounting principles (GAAP). The amendments in this update represent changes to clarify or improve disclosure and presentation requirements of a variety of topics in the Codification. For entities subject to the SEC's existing requirements, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The amendments in this update should be applied prospectively. The adoption isnot expected to have a material impact on the consolidated financial statements but could change certain disclosures in SEC filings.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic840*): Improvements to Income Tax Disclosures*. The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The amendments in this update also require that all entities disclose on an annual basis the amount of income taxes paid disaggregated by federal, state, and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than5 percent of total income taxes paid. The amendments will require the disclosure of pre-tax income disaggregated between domestic and foreign, as well as income tax expense disaggregated by federal, state, and foreign. The amendment also eliminates certain disclosures related to unrecognized tax benefits and certain temporary differences. This ASU is effective for fiscal years beginning after* December 15, 2024.The amendments should be applied on a prospective basis, but retrospective application is permitted. The Company doesnot* expect adoption of the standard to have a material impact on its consolidated financial statements.

In* November 2024,FASB issued ASU2024*-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220*-40): Disaggregation of Income Statement Expenses*, which requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. The amendments are effective for fiscal years beginning after* December 15, 2026,and for interim periods within fiscal years beginning after December 15, 2027.Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the new guidance to determine the impact it may*have on its consolidated financial statements and related disclosures but expects additional disclosures upon adoption.

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The following is the condensed financial information for Fidelity D & D Bancorp, Inc. on a parent company only basis as of and for the years indicated:

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Bank-Owned Life Insurance (BOLI)

The Company has purchased single premium BOLI policies on certain officers. The policies are recorded at their cash surrender values. Increases in cash surrender values are included in non-interest income in the consolidated statements of income. The policies’ cash surrender value totaled $58.1 million and $54.6 million, respectively, as of* December 31, 2024and2023* and is reflected as an asset on the consolidated balance sheets. For the years ended* December 31, 2024and2023*, the Company has recorded income of $1.5 million and $1.3 million, respectively, due to an increase in cash surrender values and an employee added to the policy during2024.

Officer Life Insurance

The Bank enters into separate split dollar life insurance arrangements (Split Dollar Agreements) with certain officers which provide each officer a specified death benefit should the officer die while in the Bank’s employ. The Bank owns the policies and all cash values thereunder. Upon death of the covered employee, the agreed-upon amount of death proceeds from the policies will be paid directly to the insured’s beneficiary. As of* December 31, 2024*, the policies had total death benefits of $58.1 million of which $9.6 million would have been paid to the officer’s beneficiaries and the remaining $48.5 million would have been paid to the Bank. In addition, four executive officers have the opportunity to retain a split dollar benefit equal totwo times their highest base salary after separation from service if the vesting requirements are met. In* June 2024,the Bank entered into an agreement withone* officer pursuant to which the Bank will share a portion of the net death proceeds of certain bank-owned life insurance (BOLI) policies with the participant’s beneficiary should they die while employed by the Bank. Net death proceeds are the total death proceeds from the BOLI policies less the greater of the cash surrender value or aggregate premiums paid. Under the Split Dollar Agreement, the participant's beneficiary will receive a death benefit equal to the lesser ofthree times the participant's base salary at the date of death or the net death proceeds from the BOLI policies. See exhibit10.17 for further information. As of* December 31, 2024and2023*, the Company had a balance in accrued expenses of $471 thousand and $352 thousand, respectively, for the split dollar benefit.

Supplemental Executive Retirement plan (SERP)

On* March 29, 2017,the Bank entered into separate supplemental executive retirement agreements (individually the “SERP Agreement”) with five officers, pursuant to which the Bank will credit an amount to a SERP account established on each participant’s behalf while they are actively employed by the Bank for each calendar month from March 1, 2017until retirement. On March 20, 2019,the Bank entered into a SERP Agreement withone officer, pursuant to which the Bank will credit an amount to a SERP account established for the participant’s behalf while they are actively employed by the Bank for each calendar month from March 1, 2019until normal retirement age. As a result of the acquisition of Landmark, the Company acquired a SERP agreement withone former employee. In June 2024,the bank entered into a supplemental executive retirement plan agreement (the “SERP Agreement”) withone* officer; pursuant to which the Bank will credit an amount to a SERP account established for the participant’s behalf while they are actively employed by the Bank for each calendar month from* June 1, 2024until normal retirement age of70.* See exhibit10.16 for further information. As of* December 31, 2024and2023*, the Company had a balance in accrued expenses of $4.9 million and $4.4 million in connection with these SERPs.