ORRSTOWN FINANCIAL SERVICES INC

Previous wording

The Company, headquartered in Harrisburg, Pennsylvania, is a one-bank holding company that has elected status as a financial holding company. The consolidated financial information presented herein reflects the Company and its wholly-owned subsidiary, the Bank. At September 30, 2025, the Company had total assets of $5.5 billion, total liabilities of $4.9 billion and total shareholders’ equity of $571.9 million as reported in the unaudited consolidated balance sheets.

Current wording

The Company, headquartered in Harrisburg, Pennsylvania, is a one-bank holding company that has elected status as a financial holding company. The consolidated financial information presented herein reflects the Company and its wholly-owned subsidiary, the Bank. At March 31, 2026, the Company had total assets of $5.6 billion, total liabilities of $5.0 billion and total shareholders’ equity of $603.2 million as reported in the unaudited consolidated balance sheets.

Previous wording

For the three months ended September 30, 2025 and 2024, the Company incurred merger-related expenses of zero and $17.0 million, respectively. For the nine months ended September 30, 2025 and 2024, the Company incurred merger-related expenses of $2.6 million and $18.8 million, respectively. The merger-related expenses are included in non-interest expenses in the unaudited consolidated statements of operations.

Current wording

For the three months ended March 31, 2026 and 2025, the Company had net income of $21.8 million and $18.1 million, respectively. Diluted earnings per share were $1.12 and $0.93 for the three months ended March 31, 2026 and 2025, respectively. For the three months ended March 31, 2026 and 2025, the Company incurred merger-related expenses of zero and $1.6 million, respectively. The merger-related expenses are included in non-interest expenses in the unaudited consolidated statements of income.

Previous wording

Certain statements appearing herein, which are not historical in nature, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, we may make other written and oral communications, from time to time, that contain such statements. Such forward-looking statements reflect the current views of the Company's management with respect to, among other things, future events and the Company's financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature. Forward-looking statements are statements that include projections, predictions, expectations, estimates or beliefs about events or results or otherwise are not statements of historical facts, many of which, by their nature, are inherently uncertain and beyond the Company's control, and include, but are not limited to, statements related to new business development, new loan opportunities, growth in the balance sheet and fee-based revenue lines of business, merger and acquisition activity, cost savings initiatives, reducing risk assets, and mitigating losses in the future. Accordingly, the Company cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements and there can be no assurances that the Company will achieve the desired level of new business development and new loans, growth in the balance sheet and fee-based revenue lines of business, cost savings initiatives, and continued reductions in risk assets or mitigate losses in the future. Factors which could cause the actual results to differ from those expressed or implied by the forward-looking statements include, but are not limited to, the following: interest rate changes or volatility; general economic conditions (including inflation and concerns about liquidity) on a national basis or in the local markets in which the Company operates; ineffectiveness of the Company’s strategic growth plan due to changes in current or future market conditions; the effects of competition and how it may impact our community banking model, including industry consolidation and development of competing financial products a…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain statements appearing herein, which are not historical in nature, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, we may make other written and oral communications, from time to time, that contain such statements. Such forward-looking statements reflect the current views of the Company's management with respect to, among other things, future events and the Company's financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature. Forward-looking statements are statements that include projections, predictions, expectations, estimates or beliefs about events or results or otherwise are not statements of historical facts, many of which, by their nature, are inherently uncertain and beyond the Company's control, and include, but are not limited to, statements related to new business development, new loan opportunities, growth in the balance sheet and fee-based revenue lines of business, merger and acquisition activity, cost savings initiatives, reducing risk assets, and mitigating losses in the future. Accordingly, the Company cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements and there can be no assurances that the Company will achieve the desired level of new business development and new loans, growth in the balance sheet and fee-based revenue lines of business, cost savings initiatives, and continued reductions in risk assets or mitigate losses in the future. Factors which could cause the actual results to differ from those expressed or implied by the forward-looking statements include, but are not limited to, the following: interest rate changes or volatility; general economic conditions (including inflation and concerns about liquidity) on a national basis or in the local markets in which the Company operates; ineffectiveness of the Company’s strategic growth plan due to changes in current or future market conditions; the effects of competition and how it may impact our community banking model, including industry consolidation and development of competing financial products a…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The national unemployment rate was 4.3% in August 2025 compared to 4.1% in June 2025 and 4.1% in September 2024. Within the Company's geographic footprint, the unemployment rate in Pennsylvania was 4.0% in August 2025 compared to 4.0% in March 2025 and 3.4% in September 2024. The unemployment rate increased in Maryland from 2.9% in September 2024 and 3.3% in June 2025 to 3.6% in August 2025; however, it remains below the national level. These state-wide unemployment rates are consistent with those experienced by the counties in which the Company operates branches and other corporate offices. There were job gains nationally in healthcare during the third quarter of 2025.

Current wording

The national unemployment rate was 4.3% in March 2026 compared to 4.4% in December 2025. During the first quarter of 2026, there were job gains reported in healthcare, construction, transportation and warehousing. Within the Company's geographic footprint, the unemployment rate in Pennsylvania was 4.3% in March 2026 compared to 3.7% in December 2025. The unemployment rate in Maryland increased from 4.2% in December 2025 to 4.3% in March 2026. The unemployment rates in Pennsylvania and Maryland both remain aligned with the national level. These state-wide unemployment rates are consistent with those experienced by the counties in which the Company operates branches and other corporate offices.

Previous wording

The FOMC cut the Federal Funds rate by 50 basis points in September 2024, 25 basis points in December 2024, 25 basis points in September 2025 and 25 basis points in October 2025. The Federal Funds rate had remained unchanged from the prior rate increase of 25 basis points in July 2023. The change was based on the FOMC's assessment of inflation, the unemployment rate and jobs report.

Current wording

Following a 25 basis point increase in July 2023, the Federal Funds rate remained unchanged until September 2024, when the FOMC cut the Federal Funds rate by 50 basis points. The FOMC subsequently implemented additional rate cuts of 25 basis points in December 2024, September 2025, October 2025 and December 2025. These changes were based on the FOMC's assessment of inflation, the unemployment rate and jobs report.

Previous wording

The majority of the assets and liabilities of a financial institution are monetary in nature and, therefore, differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. However, inflation does have an impact on the Company, particularly with respect to the growth of total assets and noninterest expenses, which tend to rise during periods of general inflation. Risks also exist due to supply and demand imbalances, the interest rate environment, geopolitical tensions, uncertainty related to the impact of tariffs and the shutdown of the U.S. government, the scope and timing of changes to fiscal, regulatory and trade policies.

Current wording

The majority of the assets and liabilities of a financial institution are monetary in nature and, therefore, differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. However, inflation does have an impact on the Company, particularly with respect to the growth of total assets and noninterest expenses, which tend to rise during periods of general inflation. Risks also exist due to supply and demand imbalances, the interest rate environment, geopolitical tensions, uncertainty related to the impact of tariffs, the scope and timing of changes to fiscal, regulatory and trade policies.

Previous wording

The Company accounts for its mergers and acquisitions using the acquisition method of accounting under the provisions of the FASB ASC Topic 805, Business Combinations. Under ASC 805, the assets acquired, including identified intangible assets such as core deposit intangibles and customer list intangibles, and liabilities assumed in a business combination are recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combination are expensed as incurred. The excess of the merger consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.

Current wording

The Company accounts for its mergers and acquisitions using the acquisition method of accounting under the provisions of FASB ASC Topic 805 ("ASC 805"), Business Combinations. Under ASC 805, the assets acquired, including identified intangible assets such as core deposit intangibles and customer relationship intangibles, and liabilities assumed in a business combination are recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combination are expensed as incurred. The excess of the merger consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.

Previous wording

The ACL represents the amount that, in management’s judgment, appropriately reflects credit losses inherent in the loan portfolio at the balance sheet date. A provision for credit losses is recorded to adjust the level of the ACL as determined by management. In accordance with ASU 2016-13, the CECL methodology requires an organization to measure all expected credit losses over the contractual term for financial assets measured at amortized cost based on historical credit loss experience, current conditions, and reasonable and supportable forecasts.

Current wording

The ACL represents the amount that, in management’s judgment, appropriately reflects credit losses inherent in the loan portfolio at the balance sheet date. A provision for credit losses is recorded to adjust the level of the ACL as determined by management. The CECL methodology requires an organization to measure all expected credit losses over the contractual term for financial assets measured at amortized cost based on historical credit loss experience, current conditions, and reasonable and supportable forecasts.

Previous wording

Utilizing a third-party vendor, the ACL for loans collectively evaluated is measured using a lifetime expected loss rate model. The model applies the neutral scenario, which incorporates historical loss performance and past events in addition to forecasted future economic conditions. The Company elected to use the DCF methodology for the quantitative analysis for the majority of its loan segments, which applies the probability of default to future cash flows, using a loss driver model and loss given default factors, and then adjusts to the net present value to derive the required reserve. The probability of default estimates are derived from the application of reasonable and supportable economic forecasts to the regression models, which incorporates the Company's and peer loss-rate data, unemployment rate and GDP sourced from the Federal Reserve Economic Database. The reasonable and supportable forecasts of the selected economic metrics are then input into the regression model to calculate an expected default rate. The expected default rates are then applied to expected loan balances estimated from contractual repayment terms and expected prepayments. The prepayment and curtailment assumptions adjust the contractual terms of the loan to arrive at the expected cash flows, which are obtained from the third-party vendor. The model incorporates an annualized prepayment rate and a twelve-month rate for curtailment based on a "statistical tendency to repay." Changes in the prepayment and curtailment speeds that vary from the current model inputs could result in an inaccurate forecast of expected credit losses. The development and validation of credit models also included determining the length of the reasonable and supportable forecast and regression period and utilizing national peer group historical loss rates, applying a four-quarter forecast period followed by a four-quarter straight-line reversion period.

Current wording

The ACL for loans collectively evaluated is measured using a lifetime expected loss rate model under the vendor's neutral scenario that considers historical loss performance and past events in addition to forecasts of future economic conditions. The Company elected to use the DCF methodology for the quantitative analysis for the majority of its loan segments, which applies the probability of default to future cash flows, using a loss driver model and loss given default factors, and then adjusts to the net present value to derive the required reserve. The probability of default estimates are derived through the application of reasonable and supportable economic forecasts to the regression models, which incorporates the Company's and peer loss-rate data, unemployment rate and GDP and can be obtained from the Federal Reserve Economic Database. The reasonable and supportable forecasts of the selected economic metrics are then input into the regression model to calculate an expected default rate. The expected default rates are then applied to expected loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The prepayment and curtailment assumptions adjust the contractual terms of the loan to arrive at the expected cash flows. The model incorporates an annualized prepayment rate and a twelve-month rate for curtailment based on a "statistical tendency to repay." Changes in the prepayment and curtailment speeds that vary from the current model inputs could result in inaccurate expected credit losses. The development and validation of credit models also included determining the length of the reasonable and supportable forecast and regression period and utilizing national peer group historical loss rates, which a four-quarter forecast period followed by a four-quarter straight-line reversion period were applied.

Previous wording

Management incorporates the national unemployment rate and GDP as the drivers of the quantitative portion of collectively evaluated reserves on loan classes reliant upon the DCF methodology, primarily as a result of high correlation coefficients identified in regression modeling, which represents a significant judgment in determining the ACL. Accordingly, changes in the macroeconomic forecast could significantly impact the calculated ACL. For the consumer loan segment, the quantitative reserve was calculated using the remaining life methodology where the average historical bank-specific and peer loss rates are applied to expected loan balances over an estimated remaining life of loans. The estimated remaining life is calculated using historical bank-specific loan attrition data.

Current wording

Management incorporates the national unemployment rate and GDP as the drivers of the quantitative portion of collectively evaluated reserves on loan classes reliant upon the DCF methodology, primarily as a result of high correlation coefficients identified in regression modeling, which represents a significant judgment in determining the ACL; however, changes in the macroeconomic forecast could significantly impact the calculated ACL. For the consumer loan segment, the quantitative reserve was calculated using the remaining life methodology where the average historical bank-specific and peer loss rates are applied to expected loan balances over an estimated remaining life of loans. The estimated remaining life is calculated using historical bank-specific loan attrition data.

Previous wording

The Company is subject to federal and state income taxes in the jurisdictions in which it operates. Due to the complexity of the tax laws, management may make judgments in computing income tax expense, which are subject to varying interpretations by management and the taxing authorities, and could result in changes upon final determination. Income tax expense is based upon income before taxes, adjusted for the effect of certain tax-exempt income, non-deductible expenses and credits. Temporary differences may occur as a result of certain income and expense items being reported in different periods for financial reporting and tax purposes. Deferred taxes are calculated, using the applicable enacted marginal tax rate, based on the differences between the tax basis and carrying value of the asset or liability on the financial statement. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in income tax expense in the consolidated statements of operations. Under FASB ASC 740, Income Taxes, the Company must apply a more likely than not probability threshold on its tax positions before a financial statement benefit is recognized. A valuation allowance would be recognized if any deferred tax assets were determined to be more likely than not unrecoverable.

Current wording

The Company is subject to federal and state income taxes in the jurisdictions in which it operates. Due to the complexity of the tax laws, management may make judgments in computing income tax expense, which are subject to varying interpretations by management and the taxing authorities, and could result in changes upon final determination. Income tax expense is based upon income before taxes, adjusted for the effect of certain tax-exempt income, non-deductible expenses and credits. Temporary differences may occur as a result of certain income and expense items being reported in different periods for financial reporting and tax purposes. Deferred taxes are calculated, using the applicable enacted marginal tax rate, based on the differences between the tax basis and carrying value of the asset or liability on the financial statement. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in income tax expense in the consolidated statements of income. Under FASB ASC 740, Income Taxes, the Company must apply a more likely than not probability threshold on its tax positions before a financial statement benefit is recognized. A valuation allowance would be recognized if any deferred tax assets were determined to be more likely than not unrecoverable.

Previous wording

Net income totaled $21.9 million for the three months ended September 30, 2025 compared to net loss of $7.9 million for the same period in 2024. Diluted earnings per share for the three months ended September 30, 2025 totaled $1.13 compared to diluted loss per share of $0.41 for the three months ended September 30, 2024. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $5.8 million for the three months ended September 30, 2025 compared to $6.8 million for the three months ended September 30, 2024. For the three months ended September 30, 2024, the Company incurred merger-related expenses of $17.0 million, provision for credit losses on acquired non-PCD loans of $15.5 million and retirement expenses for one executive of $4.8 million, which were included in non-interest expenses in the unaudited condensed consolidated statements of operations. The Company did not incur merger-related or other non-recurring expenses for the three months ended September 30, 2025. Excluding these non-recurring expenses, net income and diluted earnings per share totaled $21.4 million and $1.11, respectively, for the three months ended September 30, 2024. See “Supplemental Reporting of Non-GAAP Measures” for additional information.

Current wording

Net income totaled $21.8 million for the three months ended March 31, 2026 compared to $18.1 million for the same period in 2025. Diluted earnings per share for the three months ended March 31, 2026 totaled $1.12 compared to $0.93 for the three months ended March 31, 2025. For the three months ended March 31, 2026 and 2025, the Company incurred merger-related expenses of zero and $1.6 million, respectively, which were included in non-interest expenses of the unaudited condensed consolidated statements of income. For the three months ended March 31, 2025, excluding these non-recurring expenses, net income and diluted earnings per common share totaled $19.3 million and $1.00, respectively. See “Supplemental Reporting of Non-GAAP Measures” for additional information.

Previous wording

Income tax expense totaled $15.8 million and $2.3 million for the nine months ended September 30, 2025 and 2024, respectively. The Company's effective tax rate was 21.0% for the nine months ended September 30, 2025 compared to 21.6% for the nine months ended September 30, 2024.

Current wording

Income tax expense totaled $5.7 million and $4.7 million for the three months ended March 31, 2026 and 2025, respectively. The Company's effective tax rate was 20.7% for both the three months ended March 31, 2026 and 2025.

Previous wording

The following table presents the impact of rate and volume, primarily due to the Merger, on the change in taxable-equivalent net interest income from the nine months ended September 30, 2024 compared to the nine months ended September 30, 2025:

Current wording

The following table presents the impact of rate and volume on the change in taxable-equivalent net interest income for the three months ended March 31, 2025 compared to the three months ended March 31, 2026:

Previous wording

Taxable-equivalent net interest margin decreased by three basis points to 4.11% for the three months ended September 30, 2025 from 4.14% for the three months ended September 30, 2024. The taxable-equivalent yield on interest-earning assets decreased by 42 basis points from 6.61% for the three months ended September 30, 2024 to 6.19% for the three months ended September 30, 2025 due to the accretion recognized on fair value marks to loans and securities assumed in the Merger, the impact of which was partially offset by the impact of a decline in the Fed Funds rate since late 2024. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $5.8 million, which represented 52 basis points of net interest margin during the third quarter of 2025 compared to net accretion of $6.8 million and 57 basis points of net interest margin during the third quarter of 2024. Net interest margin benefited from a decrease of 40 basis points in the cost of interest-bearing liabilities from 3.07% for the three months ended September 30, 2024 to 2.67% for the three months ended September 30, 2025, reflecting the impact of deposit rate reductions over that time period and the runoff of higher rate time deposits and money market balances partially offset by the impact of the accelerated amortization of remaining debt issuance costs totaling $298 thousand from the redemption of subordinated notes.

Current wording

Taxable-equivalent net interest margin decreased by 10 basis points to 3.90% for the three months ended March 31, 2026 from 4.00% for the three months ended March 31, 2025. The taxable-equivalent yield on interest-earning assets decreased by 26 basis points from 6.17% for the three months ended March 31, 2025 to 5.91% for the three months ended March 31, 2026 due primarily to the impact of the decline in the Fed Funds rate and the decrease in the accretion income recognized on fair value marks to acquired loans and securities. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $4.7 million during the three months ended March 31, 2026 compared to $6.9 million in net accretion during the three months ended March 31, 2025. The net interest margin benefited from the decrease of 20 basis points in the cost of interest-bearing liabilities from 2.76% to 2.56%, reflecting the impact of deposit rate reductions over that time period and the runoff of higher rate time deposits and money market balances.

Previous wording

Average loans increased by $1.0 billion to $3.9 billion for the nine months ended September 30, 2025 compared to $2.9 billion for the nine months ended September 30, 2024. Average investment securities increased by $255.2 million from $636.8 million for the nine months ended September 30, 2024 to $892.0 million for the nine months ended September 30, 2025. Average interest-bearing liabilities increased by $922.8 million to $3.9 billion for the nine months ended September 30, 2025 from $3.0 billion for the nine months ended September 30, 2024.

Current wording

Average loans increased by $161.2 million to $4.1 billion for the three months ended March 31, 2026 from $3.9 billion for the three months ended March 31, 2025. Average investment securities increased by $119.0 million to $984.1 million for the three months ended March 31, 2026 from $865.1 million for the three months ended March 31, 2025. Average interest-bearing liabilities increased by $84.8 million to $4.0 billion for the three months ended March 31, 2026 from $3.9 billion for the three months ended March 31, 2025.

Previous wording

The average yield on loans decreased by seven basis points to 6.56% for the nine months ended September 30, 2025 compared to 6.63% for the nine months ended September 30, 2024. Taxable-equivalent interest income earned on loans increased by $49.9 million primarily due to an increase in the average balances, which was attributed to the acquired loans from the Merger and from the impact of the accretion of the fair value marks on loans partially offset by a decline in market interest rates.

Current wording

The average yield on loans decreased by 30 basis points to 6.29% for the three months ended March 31, 2026 compared to 6.59% for the three months ended March 31, 2025. Taxable-equivalent interest income earned on loans decreased by $427 thousand primarily due to the impact of a decline in the Fed Funds rate and the decrease in the accretion income recognized on fair value marks to acquired loans, partially offset by an increase in the average loan balances.

Previous wording

The average balance of commercial loans decreased by $59.2 billion to $3.1 billion for the three months ended September 30, 2025 from $3.2 billion for the three months ended September 30, 2024. Average residential mortgage loans increased by $45.5 million from $455.0 million during the three months ended September 30, 2024 to $500.5 million during the three months ended September 30, 2025. Average home equity loans decreased by $4.3 million from $301.5 million for the three months ended September 30, 2024 to $297.2 million for the three months ended September 30, 2025. Average installment and other consumer loans increased by $7.8 million from $34.2 million for the three months ended September 30, 2024 to $42.0 million for the three months ended September 30, 2025.

Current wording

The average balance of commercial loans increased by $96.1 million from $3.1 billion for the three months ended March 31, 2025 to $3.2 billion for the three months ended March 31, 2026. Average residential mortgage loans increased by $46.2 million from $461.8 million during the three months ended March 31, 2025 to $508.0 million during the three months ended March 31, 2026. Average home equity loans increased by $23.6 million from $288.7 million for the three months ended March 31, 2025 to $312.3 million for the three months ended March 31, 2026. Average installment and other consumer loans decreased by $4.7 million from $45.9 million for the three months ended March 31, 2025 to $41.2 million for the three months ended March 31, 2026.

Previous wording

Accretion of purchase accounting adjustments on loans included in interest income was $5.3 million and $7.3 million for the three months ended September 30, 2025 and 2024, respectively. Accelerated accretion on loans totaled $1.4 million and $2.2 million for the three months ended September 30, 2025 and 2024, respectively. Prepayment fee income on loans decreased from $620 thousand for the three months ended September 30, 2024 to $318 thousand for the three months ended September 30, 2025.

Current wording

Accretion of purchase accounting adjustments on loans included in interest income was $4.2 million and $6.6 million for the three months ended March 31, 2026 and 2025, respectively, which included accelerated accretion totaling $1.0 million and $1.4 million during the three months ended March 31, 2026 and 2025, respectively. Prepayment income on loans increased from $300 thousand for the three months ended March 31, 2025 to $579 thousand for the three months ended March 31, 2026.

Previous wording

Interest income on investment securities on a tax-equivalent basis increased by $470 thousand to $10.6 million for the three months ended September 30, 2025 from $10.1 million for the three months ended September 30, 2024, with the taxable equivalent yield decreasing from 4.77% for the three months ended September 30, 2024 to 4.67% for the three months ended September 30, 2025. The 10 basis point decrease reflects the impact fromthe decrease in accretion of discounts recorded on investment securities assumed from the Merger and a decline in the market interest rates. Accretion on acquired investment securities was $806 thousand for the three months ended September 30, 2025 compared to $950 thousand for the three months ended September 30, 2024. The average balance of investment securities increased by $56.7 million to $906.4 million for the three months ended September 30, 2025 from $849.7 million for the three months ended September 30, 2024 due primarily to purchases during 2025. During the three months ended September 30, 2025, the Company sold $41.6 million in GSE residential MBS securities, which resulted in a gain of $44 thousand, compared to sales of $162.7 million for no gain or loss during the three months ended September 30, 2024.

Current wording

Interest income on investment securities on a tax-equivalent basis increased by $1.0 million to $11.1 million for the three months ended March 31, 2026 from $10.1 million for the three months ended March 31, 2025, with the taxable equivalent yield decreasing from 4.65% for the three months ended March 31, 2025 to 4.51% for the three months ended March 31, 2026. The 14 basis point decrease reflects the impact from the decline in the market interest rates and the decrease in the accretion recognized on fair value marks to acquired securities. Accretion on acquired investment securities was $678 thousand for the three months ended March 31, 2026 compared to $839 thousand for the three months ended March 31, 2025. The average balance of investment securities increased by $119.0 million to $984.1 million for the three months ended March 31, 2026 from $865.1 million for the three months ended March 31, 2025 due primarily to investment security purchases. During the three months ended March 31, 2026 and 2025, the Company did not sell any investment securities.

Previous wording

Interest income on federal funds sold and interest-bearing bank balances on a tax-equivalent basis decreased by $1.4 million to $1.1 million for the three months ended September 30, 2025 from $2.5 million for the three months ended September 30, 2024. The average balance of federal funds sold and interest-bearing bank balances decreased by $82.7 million from $184.5 million for the three months ended September 30, 2024 to $101.7 million for the three months ended September 30, 2025, which was impacted by a decrease in deposits. The FOMC cut the Federal Funds rate by 50 basis points in September 2024, 25 basis points in December 2024 and 25 basis points in September 2025. The Federal Funds rate had remained unchanged from the prior rate increase of 25 basis points in July 2023.

Current wording

Interest income on federal funds sold and interest-bearing bank balances on a tax-equivalent basis decreased by $1.6 million to $637 thousand for the three months ended March 31, 2026 from $2.3 million for the three months ended March 31, 2025. The average balance of federal funds sold and interest-bearing bank balances decreased by $133.2 million from $203.3 million for the three months ended March 31, 2025 to $70.1 million for the three months ended March 31, 2026, which was derived from the increase in average loans and decrease in average deposits. The FOMC has cut the Federal Funds rate by 75 basis points since September 2025.

Previous wording

The ACL as a percentage of the total loan portfolio was 1.21% at September 30, 2025 compared to 1.25% at September 30, 2024. The Company recorded a recovery of credit losses on loans of $49 thousand for the nine months ended September 30, 2025 compared to provision expense of $14.8 million for the same period in 2024. Included in the provision for credit losses was a recovery of credit losses for unfunded commitments of $100 thousand and $557 thousand during the nine months ended September 30, 2025 and 2024, respectively.

Current wording

The ACL as a percentage of the total loan portfolio was 1.17% at March 31, 2026 compared to 1.23% at March 31, 2025. The Company recorded a provision for credit losses on loans of $728 thousand for the three months ended March 31, 2026 compared to a recovery of $554 thousand for the same period in 2025. The recovery of credit losses on unfunded loan commitments was $376 thousand and zero during the three months ended March 31, 2026 and 2025, respectively.

Previous wording

For the nine months ended September 30, 2025, the provision for credit losses was primarily impacted by the changes in certain qualitative factors and loan growth of $48.5 million. During the first quarter of 2025, a qualitative factor was added for Other External Factorsat a minor level for all loan classes due to the uncertainty created within the global and domestic markets from changes in U.S. economic policy, including the recently implemented tariffs. The Economic Conditions qualitative factor, at a minor level, and the Delinquency and Classified Loan Trends qualitative factor, at a moderate level, were added for the residential senior liens loan class. The Delinquency and Classified Loan Trends qualitative factor was added for the home equity loan class at a moderate level. The addition of the Economic Conditions qualitative factor was based on current market interest rates and prepayment speeds, and the addition of the Delinquency and Classified Loan Trends was based on delinquencies and downgrades within the aforementioned loan classes. During the second quarter of 2025, the Other External Factors qualitative factor was removed for all loan classes as the impact from the changes in U.S. economic policy was then reflected in the macroeconomic conditions within the quantitative ACL model. There was no change in qualitative factors during the third quarter of 2025.

Current wording

For the three months ended March 31, 2025, the provision for credit losses was primarily impacted by the decrease in loans, partially offset by increases in certain qualitative factors. A qualitative factor was added for Other External Factorsat a minor level for all loan classes due to the uncertainty created within the global and domestic markets from changes in U.S. economic policy, including the recently implemented tariffs;, the Economic Conditions qualitative factor at a minor level and the Delinquency and Classified Loan Trends qualitative factor at a moderate level were added for the residential senior liens loan class; and the Delinquency and Classified Loan Trends qualitative factor at a moderate level was added for the home equity loan class. An adjustment to the Economic Conditions qualitative factor was based on current market interest rates and prepayment speeds, and the adjustment to Delinquency and Classified Loan Trends was based on delinquencies and downgrades within the aforementioned loan classes.

Previous wording

Net charge-offs for the three months ended September 30, 2025 totaled $189 thousand compared to net charge-offs of $269 thousand for the three months ended September 30, 2024. Nonaccrual loans were 0.66% of gross loans at September 30, 2025, compared with 0.68% of gross loans at September 30, 2024. Nonaccrual loans decreased by $874 thousand from $27.1 million at September 30, 2024 to $26.2 million at September 30, 2025. During the fourth quarter of 2024, the Company sold $2.6 million of nonaccrual loans, consisting mostly of commercial and industrial loans. During the nine months ended September 30, 2025, there were additions of $12.5 million, primarily consisting of commercial construction and land development loans, residential mortgage and in commercial real estate loans, partially offset by repayments of $9.2 million and charge offs of $1.2 million.

Current wording

Net charge-offs for the three months ended March 31, 2026 totaled $946 thousand compared to net charge-offs of $331 thousand for the three months ended March 31, 2025. Nonaccrual loans were 0.74% of gross loans at March 31, 2026 compared with 0.59% of gross loans at March 31, 2025.

Previous wording

Noninterest income increased by $1.0 million from $12.4 million for the three months ended September 30, 2024 to $13.4 million for the three months ended September 30, 2025. The following were significant components of the change in this line item:

Current wording

Noninterest income increased by $4.0 million from $11.6 million for the three months ended March 31, 2025 to $15.6 million for the three months ended March 31, 2026. The following were significant components of the change in this line item:

Previous wording

•Service charges on deposits and other service charges, commissions and fees increased by $2.2 million and $1.0 million, respectively, due to an increase in cash management services and other deposit fees following the Merger.

Current wording

•Service charges on deposits and other service charges, commissions and fees increased by $339 thousand and $137 thousand, respectively, due to an increase in cash management services and other deposit fees.

Previous wording

•Swap fee income increased by $311 thousand due to successful swap generation.

Current wording

•Swap fee income increased by $945 thousand due to higher swap volume.

Previous wording

•Wealth management income, which includes trust and investment management income and brokerage income, increased due to improvement in market performance.

Current wording

•Wealth management income, which includes trust and investment management income and brokerage income, increased by $142 thousand due to improvement in market performance and increase in managed assets.

Previous wording

Noninterest expense decreased by $24.0 million from $60.3 million for the three months ended September 30, 2024 to $36.3 million for the three months ended September 30, 2025. The following were additional significant components of the change in this line item:

Current wording

Noninterest expense decreased by $1.5 million from $38.2 million for the three months ended March 31, 2025 to $36.7 million for the three months ended March 31, 2026. The following were additional significant components of the change in this line item:

Previous wording

•Automated teller machine and interchange fee expense increased by $108 thousand due to the increase in debit card activity.

Current wording

•ATM and interchange fee expense increased by $462 thousand due to an increase in debit card activity and costs incurred for enhanced ATM services.

Previous wording

•Merger-related expenses decreased by $16.2 million due to the timing of conversion work. The Merger costs incurred during 2025 included software conversion costs and professional fees, including external audit, associated with the conversion. The Company did not incur merger-related expenses during the third quarter of 2025.

Current wording

•During the first quarter of 2025, the Company incurred merger-related expenses of $1.6 million, which included software conversion costs and professional fees, including external audit, associated with the conversion.

Previous wording

Income tax expense totaled $5.8 million, an effective tax rate of 21.0%, for the three months ended September 30, 2025 compared with an income tax benefit of $2.0 million and an effective tax rate of 20.1% for the three months ended September 30, 2024. The Company’s effective tax rate is aligned with the 21% federal statutory rate due to disallowed interest expenses, partially offset by interest earned on tax-exempt loans and investment securities, income from life insurance policies and tax credits.

Current wording

Income tax expense totaled $5.7 million, an effective tax rate of 20.7%, for the three months ended March 31, 2026 compared with $4.7 million and an effective tax rate of 20.7% for the three months ended March 31, 2025. The Company’s effective tax rate is less than the 21% federal statutory rate primarily due to tax-exempt income, including interest earned on tax-exempt loans and securities and non-taxable income from life insurance policies and tax credits partially offset by the disallowed portion of interest expense against earnings in association with the Bank's tax-exempt investments under the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") and other nondeductible items.

Previous wording

The Company has established investment policies and an asset/liability management policy to assist in administering its investment portfolio. Decisions to purchase or sell these securities are based on economic conditions and management’s strategy to respond to changes in interest rates, liquidity, pledges to secure deposits and repurchase agreements and other factors while trying to maximize return on the investments. The Company may segregate its investment security portfolio into three categories: “securities available-for-sale,” “trading securities” and “securities held-to-maturity.” At September 30, 2025 and December 31, 2024, management classified the entire investment securities portfolio as AFS, which is accounted for at current market value with non-credit related losses and gains reported in OCI, net of income taxes.

Current wording

The Company has established investment policies and an asset management policy to assist in administering its investment portfolio. Decisions to purchase or sell these securities are based on economic conditions and management’s strategy to respond to changes in interest rates, liquidity, pledges to secure deposits and repurchase agreements and other factors while trying to maximize return on the investments. The Company may segregate its investment security portfolio into three categories: “securities held-to-maturity,” “trading securities” and “securities available-for-sale.” At March 31, 2026 and December 31, 2025, management classified the entire investment securities portfolio as AFS, which is accounted for at current market value with non-credit related losses and gains reported in OCI, net of income taxes.

Previous wording

The Company's investment securities portfolio includes debt investments that are subject to varying degrees of credit and market risks, which arise from general market conditions and factors impacting specific industries, as well as news that may impact specific securities. Management monitors its debt securities, using various indicators to determine whether unrealized losses on debt securities are credit related and require an ACL. These indicators include the amount of time the security has been in an unrealized loss position, the cause and extent of the unrealized loss and the credit quality of the issuer and underlying assets. In addition, management assesses whether it is likely the Company will have to sell the investment security prior to recovery, or it expects to be able to hold the investment security until the price recovers. The Company determined that the declines in market value were due to increases in interest rates and market movements, and not due to credit factors. The Company does not intend to sell these securities with unrealized losses and it is more likely than not that the Company will not be required to sell them before recovery of their amortized cost basis, which may be maturity. Therefore, the Company has concluded that the unrealized losses for the AFS securities did not require an ACL at September 30, 2025 and December 31, 2024.

Current wording

The Company's investment securities portfolio includes debt investments that are subject to varying degrees of credit and market risks, which arise from general market conditions, and factors impacting specific industries, as well as news that may impact specific issues. Management monitors its debt securities, using various indicators in determining whether unrealized losses on debt securities are credit-related and require an ACL. These indicators include the amount of time the security has been in an unrealized loss position, the cause and extent of the unrealized loss and the credit quality of the issuer and underlying assets. In addition, management assesses whether it is likely the Company will have to sell the investment security prior to recovery, or it expects to be able to hold the investment security until the price recovers. The Company determined that the declines in market value were due to increases in interest rates and market movements, and not due to credit factors. The Company does not intend to sell these securities with unrealized losses and it is more likely than not that the Company will not be required to sell them before recovery of their amortized cost basis, which may be maturity. Therefore, the Company has concluded that the unrealized losses on the AFS securities did not require an ACL at March 31, 2026 and December 31, 2025.

Previous wording

At September 30, 2025, AFS securities totaled $890.4 million, an increase of $60.7 million from $829.7 million at December 31, 2024. During the nine months ended September 30, 2025, the Company purchased $147.3 million of AFS securities, consisting of agency and non-agency MBS and CMO securities and securities issued by state and political subdivisions, which were partially offset by paydowns of $59.4 million and sales of $41.6 million. The balance of investment securities included net unrealized losses of $22.4 million at September 30, 2025 compared to net unrealized losses of $35.2 million at December 31, 2024 for a decrease of $12.8 million. This decrease in net unrealized losses was primarily due to lower market rates compared to December 31, 2024. The overall duration of the Company's investment securities portfolio was 4.4 years at September 30, 2025 compared to 4.1 years at December 31, 2024. The Company has sufficient access to liquidity such that management does not believe it would be necessary to sell any of its investment securities at a loss to offset any unexpected deposit outflows. Management believes the structure of the Company's investment security portfolio is appropriately aligned with the rest of the balance sheet to protect against volatile interest rate environments, to provide a source of liquidity and to generate steady earnings.

Current wording

At March 31, 2026, AFS securities totaled $947.0 million, a decrease of $5.7 million from $952.7 million at December 31, 2025. During the three months ended March 31, 2026, paydowns totaled $23.4 million. Net unrealized losses increased by $6.8 million to $26.2 million at March 31, 2026 compared to net unrealized losses of $19.4 million at December 31, 2025 due to higher market interest rates and widening of spreads at the end of the first quarter of 2026. During the three months ended March 31, 2026, the Bank purchased $23.1 million of investment securities, consisting of $15.1 million of agency mortgage backed securities and collateralized mortgage obligations, $6.9 million of non-agency collateralized mortgage obligations and $1.1 million of securities issued by state and political subdivisions. The remaining change in investment securities is due to net accretion recorded on the investment securities during the first quarter of 2026. The overall duration of the Company's investment securities portfolio was 4.7 years at March 31, 2026 compared to 4.6 years at December 31, 2025. The Company has sufficient access to liquidity such that management does not believe it would be necessary to sell any of its investment securities at a loss to offset any unexpected deposit outflows. Management believes the structure of the Company's investment security portfolio is appropriately aligned with the rest of the balance sheet to protect against volatile interest rate environments, to provide a source of liquidity and to generate steady earnings.

Previous wording

Total loans increased by $48.5 million from December 31, 2024 to September 30, 2025. Residential mortgages increased by $47.2 million and commercial loans increased by $3.0 million from December 31, 2024 to September 30, 2025, partially offset by a decrease in installment and other loans of $1.6 million. The Company purchased property assessed clean energy ("PACE") loans during the second quarter of 2025, with a balance of $23.7 million at September 30, 2025.

Current wording

Total loans increased by $40.6 million from December 31, 2025 to March 31, 2026. Commercial loans increased by $31.6 million and residential mortgages increased by $10.1 million from December 31, 2025 to March 31, 2026, partially offset by a decrease in installment and other loans of $1.1 million.

Previous wording

In accordance with ASU 2022-02, the Company is required to evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty and if the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan, which the Company refers to these loans as "financial difficulty modifications" or "FDMs."

Current wording

The Company is required to evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty and if the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan, which the Company refers to these loans as "financial difficulty modifications" or "FDMs."

Previous wording

Classified loans totaled $64.1 million at September 30, 2025, or 1.6% of total loans outstanding, reflecting a decrease from $76.2 million, or 2.0% of total loans outstanding, at December 31, 2024.

Current wording

Special Mention loans increased by $2.3 million from $108.3 million at December 31, 2025 to $110.6 million at March 31, 2026 due to net downgrades of $12.3 million, consisting primarily of commercial loans, partially offset by repayments totaling $10.0 million. Classified loans totaled $57.6 million at March 31, 2026, or 1.4% of total loans outstanding, reflecting a decrease from $58.4 million, or 1.5% of total loans outstanding, at December 31, 2025.

Previous wording

Non-IEL substandard loans are performing loans, which have characteristics that cause management concern over the ability of the borrower to perform under present loan repayment terms and which may result in the reporting of these loans as nonperforming, or individually evaluated, loans in the future. Generally, management feels that substandard loans that are currently performing and not considered individually evaluated result in some doubt as to the borrower’s ability to continue to perform under the terms of the loan and represent potential problem loans. Non-IEL substandard loans totaled $37.7 million at September 30, 2025, a decrease of $26.7 million from $64.4 million at December 31, 2024 due primarily to repayments of $19.1 million and upgrades of $14.4 million, partially offset by downgrades of $7.4 million and charge offs totaling $505 thousand. The Substandard-IEL category increased by $2.1 million from $24.3 million at December 31, 2024 to $26.4 million at September 30, 2025, primarily due to downgrades of $12.5 million, partially offset by repayments of $10.0 million and charge-offs totaling $398 thousand.

Current wording

Non-IEL substandard loans are performing loans, which have characteristics that cause management concern over the ability of the borrower to perform under present loan repayment terms and which may result in the reporting of these loans as nonperforming, or individually evaluated, loans in the future. Generally, management feels that substandard loans that are currently performing and not considered individually evaluated result in some doubt as to the borrower’s ability to continue to perform under the terms of the loan and represent potential problem loans. Non-IEL substandard loans totaled $27.4 million at

Previous wording

The following table presents the amortized cost basis of nonaccrual loans, according to loan class, with and without reserves on individually evaluated loans at September 30, 2025 and December 31, 2024. At September 30, 2025, there was a specific reserve of $5 thousand on nonaccrual loans, excluding the ACL recorded on acquired PCD loans from the Merger, compared to $7 thousand at December 31, 2024.

Current wording

The following table presents the amortized cost basis of nonaccrual loans, according to loan class, with and without reserves on individually evaluated loans at March 31, 2026 and December 31, 2025. At March 31, 2026, there was a specific reserve of $1 thousand on a nonaccrual loan, excluding the ACL recorded on acquired PCD loans, compared to $2 thousand at December 31, 2025.