Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis represents management's view of the financial condition and results of operations of the Corporation. This discussion and analysis should be read in conjunction with the consolidated financial statements and other financial schedules included in this quarterly report, and in conjunction with the 2024 Annual Report to Shareholders of the Corporation. The financial condition and results of operations presented are not indicative of future performance.

Forward-Looking Statements

The U.S. Private Securities Litigation Reform Act of 1995 provides safe harbor in regards to the inclusion of forward-looking statements in this document and documents incorporated by reference. Forward-looking statements pertain to possible or assumed future results that are made using current information. These forward-looking statements are generally identified when terms such as: "believe," "estimate," "anticipate," "expect," "project," "forecast," and other similar wordings are used. The readers of this report should take into consideration that these forward-looking statements represent management's expectations as to future forecasts of financial performance, or the likelihood that certain events will or will not occur. Due to the very nature of estimates or predications, these forward-looking statements should not be construed to be indicative of actual future results. Additionally, management may change estimates of future performance, or the likelihood of future events, as additional information is obtained. This document may also address targets, guidelines, or strategic goals that management is striving to reach but may not be indicative of actual results.

Readers should note that many factors affect this forward-looking information, some of which are discussed elsewhere in this document and in the documents that are incorporated by reference into this document. These factors include, but are not limited to, the following:

●

National, regional and local economic conditions

●

Interest rate and monetary policies of the Federal Reserve Board

●

Inflation and monetary fluctuations and volatility

●

Instability in the banking system caused by bank failures and continuous financial uncertainty of various banks which may adversely impact the corporation and its securities values, deposit stability, capital adequacy, financial condition, operations, liquidity, and results of operations

●

Health of the housing market

●

Volatility of the securities markets including the valuation of securities

●

Real estate valuations and its impact on the loan portfolio

●

Future actions or inactions of the United States government, including a failure to increase the government debt limit, a prolonged shutdown of the federal government, increase in taxes or regulations, or increasing debt balances

●

Political changes and the impact of new laws and regulations

●

Competitive forces

●

Impact of mergers and acquisition activity in the local market and the effects thereof

●

Potential impact from continually evolving cybersecurity and other technological risks and attacks, including additional costs, reputational damage, regulatory penalties, and financial losses

●

Changes in customer behavior impacting deposit levels and loan demand

●

Changes in accounting principles, policies, or guidelines as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standards setters

●

Ineffective business strategy due to current or future market and competitive conditions

●

Management's ability to manage credit risk, liquidity risk, interest rate risk, and fair value risk

●

Operational, legal, and reputational risk

●

Results of the regulatory examination and supervision process

●

Possible changes to the capital and liquidity requirements and other regulatory pronouncements, regulations and rules

●

Large scale global disruptions such as pandemics, terrorism, trade wars, and armed conflict.

●

Local market area disruptions due to flooding, severe weather, or other natural disasters

●

The risk that our analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful

●

Business and competitive disruptions caused by new market and industry entrants

Readers should be aware if any of the above factors change significantly, the statements regarding future performance could also change materially. The safe harbor provision provides that the Corporation is not required to publicly update or revise forward-looking statements to reflect events or circumstances that arise after the date of this report. Readers should review any changes in risk factors in documents filed by the Corporation periodically with the Securities and Exchange Commission, including Item 1A of Part II of this Quarterly Report on Form 10-Q, Annual Reports on Form 10-K, and Current Reports on Form 8-K.

Results of Operations

Overview

The Corporation recorded net income of $5,919,000 for the three-month period ended September 30, 2025, a $2,583,000, or 77.4% increase over the three months ended September 30, 2024. Net income for the nine-month period was $16,045,000, a $4,454,000, or 38.4% increase over earnings in the nine-month period ended September 30, 2024. The earnings per share, basic and diluted, were $1.04 for the three months ended September 30, 2025, compared to $0.59 which represents a 76.3% increase over the same period in 2024, and for the year-to-date period, earnings per share were $2.83, compared to $2.05 which represents a 38.0% increase from 2024.

The Corporation's net interest income (NII) increased by $3,405,000, or 24.0%, and $9,231,000, or 22.2%, for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024. Interest and fees on loans increased by $2,032,000, or 10.9%, and $6,041,000, or 11.2%, for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024. Interest income on securities available for sale increased by $2,042,000, or 54.7%, and $6,302,000, or 57.8%, for the three and nine months ended September 30, 2025, compared to the same periods in 2024. Conversely, interest expense on deposits and borrowings increased by $154,000, or 1.6%, and $2,309,000, or 8.9%, for the three and nine months ended September 30, 2025, compared to the same periods in the prior year.

The Corporation recorded a provision for credit losses of $20,000 in the third quarter of 2025, and $632,000 for the year-to-date period, compared provision expense of $497,000 in the third quarter of 2024 and a release of provision expense of $354,000 for the nine months ended September 30, 2024. For the quarter comparison, the removal of an economic qualitative factor which was causing duplication within the quantitative calculation resulted in a decrease in provision while year-to-date provision increased due to loan growth and improved forward economic indicators resulted in the release of provision expense in the prior year. The allowance as a percentage of total loans was 1.12% as of September 30, 2025, 1.13% as of December 31, 2024, and 1.05% as of September 30, 2024.

Other income increased by $425,000, or 9.4%, for the three months ended September 30, 2025, compared to the same period in 2024, and decreased $33,000, or 0.2%, for the nine months ended September 30, 2025, compared to the same period in the prior year. The primary reason for the quarterly increase was related to sales tax refunds recorded in the second quarter of 2025.

Total operating expenses increased by $1,057,000, or 7.5%, and $2,476,000, or 6.0%, for the three and nine months ended September 30, 2025, compared to the same periods in 2024. Salary and benefit expenses, which make up the largest portion of operating expenses, increased by $311,000, or 3.6%, and $274,000, or 1.1% for the three and nine months ended September 30, 2025, compared to the same periods in the prior year. Other operating expenses outside of salaries and benefits increased due to expanded investments and initiatives in technology, increased occupancy and equipment costs, some residual core conversion expenses, acquisition related costs, and increases in fraud related to losses on customer deposit accounts.

The financial services industry uses two primary performance measurements to gauge performance: return on average assets (ROA) and return on average equity (ROE). ROA measures how efficiently a bank generates income based on the amount of assets or size of a company. ROE measures the efficiency of a company in generating income based on the amount of equity or capital utilized. ROA and ROE increased for the quarter and year-to-date period ended September 30, 2025 compared to the same periods in the prior year due to increased earnings.

Key Ratios		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2025				2024				2025				2024
Return on Average Assets			1.06%				0.65%				0.97%				0.77%
Return on Average Equity			16.60%				10.17%				15.66%				12.50%

The results of the Corporation's operations are best explained by addressing, in further detail, the five major sections of the income statement, which are as follows:

●

Net interest income

●

Provision for credit losses

●

Other income

●

Operating expenses

●

Provision for income taxes

The following discussion analyzes each of these five components.

Net Interest Income (NII)

NII represents the largest portion of the Corporation's operating income. In the first nine months of 2025, NII generated 79.3% of the Corporation's revenue stream, which consists of NII and non-interest income. This compared to 75.8% for the first nine months of 2024. This increase is a result of higher levels of NII in the first nine months of 2025 resulting in NII contributing to a larger portion of total revenue. The overall performance of the Corporation is highly dependent on the changes in NII since it comprises such a significant portion of operating income.

The following table shows a summary analysis of NII on a fully taxable equivalent (FTE) basis. For analytical purposes and throughout this discussion, yields, rates, and measurements such as NII, net interest spread, and net yield on interest earning assets are presented on an FTE basis. The FTE NII shown in both tables below will exceed the NII reported on the consolidated statements of income, which is not shown on an FTE basis. The amount of FTE adjustment totaled $105,000 for the three months ended September 30, 2025, and $301,000 for the nine months ended September 30, 2025, compared to $75,000 and $279,000 for the same periods in 2024.

NET INTEREST INCOME

(DOLLARS IN THOUSANDS)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2025				2024				2025				2024
		$				$				$				$
Total interest income			27,065				23,506				79,046				67,506
Total interest expense			9,490				9,336				28,279				25,970
Net interest income			17,575				14,170				50,767				41,536
Tax equivalent adjustment			105				75				301				279
Net interest income (fully taxable equivalent)			17,680				14,245				51,068				41,815

NII is the difference between interest income earned on assets and interest expense incurred on liabilities. Accordingly, two factors affect NII:

●

The rates earned on interest earning assets and paid on interest bearing liabilities

●

The average balance of interest earning assets and interest bearing liabilities

NII is impacted by yields earned on assets and rates paid on liabilities. During the first nine months of 2025, asset yields increased due to a higher interest rate environment despite some variable rate assets repricing to lower rates with the several decreases in the Federal Reserve overnight rates. Liability costs decreased as the Corporation was able to reduce deposit costs during 2025. Market interest rates stabilized and moderated in 2025 but the Corporation still felt the lingering effects of the prior rate movements as customers continued to move funds to higher yielding deposit products. This was offset by lower rates on most deposit products. Higher market rates have helped the Corporation's asset yields, and the discipline around lowering the cost of funds has enabled the Corporation to increase NIM. Management believes continued improvement will be dependent on the rate at which overnight interest rates change throughout the remainder of 2025.

The Corporation's net interest margin increased to 3.27% for the quarter ended September 30, 2025, and 3.15% for the year-to-date period ended September 30, 2025, compared to 2.89% for the same quarter in 2024 and 2.86% for the year-to-date period. The Corporation's NII on a fully taxable equivalent basis increased by $3,435,000, or 24.1%, for the three months ended September 30, 2025, and $9,253,000, or 22.1%, for the nine months ended September 30, 2025, compared to the same periods in 2024.

The Corporation's overall cost of funds rose significantly throughout 2024 but moderated during 2025. Core deposit interest rates and time deposit rates have decreased over the past year. The Corporation also increased its reliance on brokered time deposits as part of an overall funding strategy that caused higher costs on time deposits. These changes resulted in the total cost of deposits decreasing by $369,000 for the quarter but increasing by $725,000, for the nine months ended September 30, 2025, compared to the same periods in the prior year. The average balance of borrowings was higher for the first nine months of 2025 compared to 2024, and interest rates were higher, resulting in the total cost of borrowings increasing by $523,000, and $1,584,000, for the three and nine months ended September 30, 2025, compared to the same periods in 2024.

The following table provides an analysis of year-to-date changes in NII on a FTE basis by distinguishing what changes were a result of average balance increases or decreases and what changes were a result of interest rate increases or decreases.

RATE/VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME

(TAXABLE EQUIVALENT BASIS, DOLLARS IN THOUSANDS)

		Three Months Ended September 30,												Nine Months Ended September 30,
		2025 vs. 2024												2025 vs. 2024
		Increase (Decrease)												Increase (Decrease)
		Due To Change In												Due To Change In
										Net												Net
		Average				Interest				Increase				Average				Interest				Increase
		Balances				Rates				(Decrease)				Balances				Rates				(Decrease)
		$				$				$				$				$				$
INTEREST INCOME
Interest on deposits at other banks			(211	)			(354	)			(565	)			(92	)			(800	)			(892	)
Securities available for sale:
Taxable			1,313				778				2,091				4,479				1,934				6,413
Tax-exempt			(54	)			20				(34	)			(153	)			(22	)			(175	)
Total securities			1,259				798				2,057				4,326				1,912				6,238
Loans			1,089				948				2,037				2,890				3,183				6,073
Regulatory stock			52				8				60				66				77				143
Total interest income			2,189				1,400				3,589				7,190				4,372				11,562
INTEREST EXPENSE
Deposits:
Demand deposits			209				(546	)			(337	)			1,047				(1,398	)			(351	)
Savings deposits			1				-				1				(4	)			-				(4	)
Time deposits			722				(755	)			(33	)			2,374				(1,294	)			1,080
Total deposits			932				(1,301	)			(369	)			3,417				(2,692	)			725
Borrowings:
Total borrowings			451				72				523				1,328				256				1,584
Total interest expense			1,383				(1,229	)			154				4,745				(2,436	)			2,309
NET INTEREST INCOME			806				2,629				3,435				2,445				6,808				9,253

The following table shows a more detailed analysis of NII on a FTE basis with all the major elements of the Corporation's balance sheet, which consists of interest earning and non-interest earning assets and interest bearing and non-interest bearing liabilities.

COMPARATIVE AVERAGE BALANCE SHEETS AND NET INTEREST INCOME

(DOLLARS IN THOUSANDS)

		For the Three Months Ended September 30,
		2025												2024
										(c)												(c)
		Average								Annualized				Average								Annualized
		Balance				Interest				Yield/Rate				Balance				Interest				Yield/Rate
		$				$				%				$				$				%
ASSETS
Interest earning assets:
Federal funds sold and interest on deposits at other banks			40,340				242				2.38				60,165				808				5.33
Securities available for sale:
Taxable			500,930				5,257				4.20				367,002				3,166				3.45
Tax-exempt			138,433				666				1.92				149,755				700				1.87
Total securities (d)			639,363				5,923				3.70				516,757				3,866				2.99
Loans (a)			1,477,344				20,757				5.62				1,398,128				18,721				5.36
Regulatory stock			10,872				247				9.08				8,550				186				8.71
Total interest earning assets			2,167,919				27,169				5.01				1,983,600				23,581				4.75
Non-interest earning assets (d)			47,309												55,485
Total assets			2,215,228												2,039,085
LIABILITIES &
STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Demand deposits			537,518				3,404				2.51				507,942				3,742				2.92
Savings deposits			285,973				71				0.10				280,915				70				0.10
Time deposits			444,414				4,173				3.73				374,017				4,205				4.46
Borrowed funds			171,519				1,842				4.26				129,293				1,319				4.05
Total interest bearing liabilities			1,439,424				9,490				2.62				1,292,167				9,336				2.87
Non-interest bearing liabilities:
Demand deposits			620,461												603,768
Other			13,903												12,707
Total liabilities			2,073,788												1,908,642
Stockholders' equity			141,440												130,443
Total liabilities & stockholders' equity			2,215,228												2,039,085
Net interest income (FTE)							17,679												14,245
Net interest spread (b)											2.39												1.88
Effect of non-interest bearing deposits											0.88												1.01
Net yield on interest earning assets (c)											3.27												2.89

(a) Includes balances of nonaccrual loans and the recognition of any related interest income. The quarter-to-date average balances include net deferred loan costs of $1,757 as of September 30, 2025, and $1,873 as of September 30, 2024. Such fees and costs recognized through income and included in the interest amounts totaled ($105) in 2025, and ($29) in 2024.

(b) Net interest spread is the arithmetic difference between the yield on interest earning assets and the rate paid on interest bearing liabilities.

(c) Net yield, also referred to as net interest margin, is computed by dividing NII (FTE) by total interest earning assets.

(d) Securities recorded at amortized cost. Unrealized holding gains and losses are included in non-interest earning assets.

COMPARATIVE AVERAGE BALANCE SHEETS AND NET INTEREST INCOME

(DOLLARS IN THOUSANDS)

		For the Nine Months Ended September 30,
		2025												2024
										(c)												(c)
		Average								Annualized				Average								Annualized
		Balance				Interest				Yield/Rate				Balance				Interest				Yield/Rate
		$				$				%				$				$				%
ASSETS
Interest earning assets:
Federal funds sold and interest on deposits at other banks			44,548				867				2.60				47,198				1,759				4.98
Securities available for sale:
Taxable			507,291				15,605				4.10				354,451				9,192				3.46
Tax-exempt			140,622				2,032				1.93				151,209				2,207				1.95
Total securities (d)			647,913				17,637				3.63				505,660				11,399				3.01
Loans (a)			1,456,558				60,169				5.51				1,384,562				54,097				5.21
Regulatory stock			10,881				674				8.26				9,740				530				7.26
Total interest earning assets			2,159,900				79,347				4.90				1,947,160				67,785				4.64
Non-interest earning assets (d)			44,154												53,650
Total assets			2,204,054												2,000,810
LIABILITIES &
STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Demand deposits			540,283				10,099				2.50				488,338				10,449				2.86
Savings deposits			285,834				213				0.10				291,186				217				0.10
Time deposits			432,646				12,366				3.82				352,646				11,287				4.28
Borrowed funds			176,262				5,602				4.25				134,091				4,017				4.01
Total interest bearing liabilities			1,435,025				28,280				2.64				1,266,261				25,970				2.74
Non-interest bearing liabilities:
Demand deposits			618,657												598,016
Other			13,371												12,635
Total liabilities			2,067,053												1,876,912
Stockholders' equity			137,001												123,898
Total liabilities & stockholders' equity			2,204,054												2,000,810
Net interest income (FTE)							51,067												41,815
Net interest spread (b)											2.26												1.90
Effect of non-interest bearing deposits											0.89												0.96
Net yield on interest earning assets (c)											3.15												2.86

(a) Includes balances of nonaccrual loans and the recognition of any related interest income. The year-to-date average balances include net deferred loan costs of $1,773 as of September 30, 2025, and $2,047 as of September 30, 2024. Such fees and costs recognized through income and included in the interest amounts totaled ($153) in 2025, and ($159) in 2024.

(b) Net interest spread is the arithmetic difference between the yield on interest earning assets and the rate paid on interest bearing liabilities.

(c) Net yield, also referred to as net interest margin, is computed by dividing net interest income (FTE) by total interest earning assets.

(d) Securities recorded at amortized cost. Unrealized holding gains and losses are included in non-interest earning assets.

The Corporation's average balances on securities increased by $122.6 million, or 23.7%, for the three months ended September 30, 2025, and $142.3 million, or 28.1%, for the nine months ended September 30, 2025, compared to the same periods in 2024. This increase was related to a strategic decision to add investments during the last six months of 2024 in order to generate higher earnings with no overhead costs while offsetting interest rate risk with off-balance sheet derivative products. The tax equivalent yield on investments increased by 71 basis points for the quarter-to-date period and 62 basis points for the year-to-date period when comparing both years. Interest income on securities increased by $2,057,000, or 53.2%, and $6,238,000, or 54.7%, for the three and nine months ended September 30, 2025, compared to the same periods in the prior year.

Average balances on loans increased by $79.2 million, or 5.7%, for the three months ended September 30, 2025, and $72.0 million, or 5.2%, for the nine months ended September 30, 2025, compared to the same periods in the prior year. Loan yields increased by 26 basis points for the quarter, and 30 basis points for the year-to-date period and loan interest income increased by $2,037,000, or 10.9%, and $6,073,000, or 11.2%, for both time frames due to the increase in loan balances and higher yields.

The average balance of interest-bearing deposit accounts increased by $105.0 million, or 9.0%, and $126.6 million, or 11.2%, for the three and nine months ended September 30, 2025, compared to the same periods in the prior year. The average balance of interest-bearing demand deposits increased by $29.6 million, or 5.8%, and $51.9 million, or 10.6%, for the three and nine months ended September 30, 2025, compared to the same periods in the prior year. The average balance of savings accounts increased by $5.1 million, or 1.8%, and decreased by $5.4 million, or 1.8%, for the three and nine months ended September 30, 2025. Time deposit balances increased by $70.4 million, or 18.8%, and $80.0 million, or 22.7%, for the three and nine months ended September 30, 2025, compared to the same periods in the prior year driven by the movement of funds into higher-yielding accounts discussed above. In addition, the Corporation had more brokered time deposits at September 30, 2025, compared to September 30, 2024, as this was the primary source of funding to grow investments as part of a derivative strategy. Brokered time deposits increased by $51.1 million, or 111.3%, during this year-to-date timeframe. The interest rate paid on all interest-bearing deposits decreased from the prior year with the rate on interest-bearing demand deposits decreasing 36 basis points, the rate on savings accounts remaining the same, and the rate on time deposits decreasing 46 basis points for the year-to-date period. The combination of these changes resulted in a decrease in interest expense on deposits of $369,000, for the three months ended September 30, 2025, and an increase of $725,000, for the nine months ended September 30, 2025, compared to the same periods in 2024.

The Corporation's average balance on borrowed funds increased by $42.2 million, or 32.7%, for the three months ended September 30, 2025, and $42.2 million, or 31.4%, for the nine months ended September 30, 2025, compared to the same periods in 2024. The Corporation's borrowed funds consist of FHLB advances as well as subordinated debt issued in December of 2020 and July of 2022 which was used to support capital growth for the Bank. The rate paid on borrowed funds increased by 21 and 24 basis points for the three and nine months ended September 30, 2025, compared to the same periods in the prior year.

For the three months ended September 30, 2025, the net interest spread increased by 51 basis points to 2.39%, compared to 1.88% for the three months ended September 30, 2024. For the nine months ended September 30, 2025, the net interest spread increased by 36 basis points to 2.26%, compared to 1.90% for the nine months ended September 30, 2024. The effect of non-interest bearing funds decreased to 88 basis points for the three months ended September 30, 2025, from 101 basis points for the three months ended September 30, 2024, and decreased to 89 basis points from 96 basis points for the nine months ended September 30, 2025, compared to the same periods in 2024. The effect of non-interest bearing funds refers to the benefit gained from deposits on which the Corporation does not pay interest. As rates go higher, the benefit of non-interest bearing deposits increases because there is more difference between non-interest bearing funds and interest bearing liabilities. The Corporation's NIM for the third quarter of 2025 was 3.27%, compared to 2.89% for the third quarter of 2024. For the year-to-date period, the Corporation's NIM was 3.15%, compared to 2.86% for the same period in 2024.

The Asset Liability Committee (ALCO) carefully monitors the NIM because it indicates trends in NII, the Corporation's largest source of revenue. For more information on the plans and strategies in place to protect the NIM and moderate the impact of changes in rates, refer to Item 7A: Quantitative and Qualitative Disclosures about Market Risk.

Provision for (Release of) Credit Losses

The provision for (release of) credit losses includes a provision for losses on loans, available-for-sale debt securities, and unfunded loan commitments. The provision provides for losses inherent in the financial assets as determined by a quarterly analysis and calculation of various factors related to the financial assets. The amount of the provision reflects the adjustment management determines necessary to ensure the Allowance for Credit Losses (ACL) is adequate to cover any losses inherent in the financial assets. The Corporation recorded a provision expense of $591,000 for credit losses related to loans, a provision expense of $41,000 for unfunded commitments, and $0 related to available-for-sale securities for the first nine months of 2025, compared to a release of provision expense of $400,000 related to loans, and provision expense of $46,000 for unfunded commitments, and $0 related to available-for-sale securities for the nine months ended September 30, 2024. As of September 30, 2025, the allowance as a percentage of total loans was 1.12%, compared to 1.05% at September 30, 2024. More detail is provided under Allowance for Credit Losses in the Financial Condition section that follows.

Other Income

Other income for the third quarter of 2025 was $4,964,000, an increase of $425,000, or 9.4%, compared to the $4,539,000 earned during the third quarter of 2024. Other income for the year-to-date period was $13,253,000, a decrease of $33,000, or 0.2% from the year-to-date period in 2024. The following tables detail the categories that comprise other income.

OTHER INCOME

(DOLLARS IN THOUSANDS)

		Three Months Ended September 30,
		2025				2024				Increase (Decrease)
		$				$				$				%
Trust and investment services			826				794				32				4.0
Service fees			1,598				1,532				66				4.3
Commissions			1,036				1,039				(3	)			(0.3	)
Net gains on debt and equity securities			63				211				(148	)			(70.1	)
Gains on sale of mortgages			506				369				137				37.1
Earnings on bank owned life insurance			294				279				15				5.4
Other miscellaneous income			641				315				326				103.5
Total other income			4,964				4,539				425				9.4

OTHER INCOME

(DOLLARS IN THOUSANDS)

		Nine Months Ended September 30,								Increase (Decrease)
		2025				2024
		$				$				$				%
Trust and investment services			2,477				2,604				(127	)			(4.9	)
Service fees			4,302				4,331				(29	)			(0.7	)
Commissions			3,062				3,061				1				0.0
Net losses on debt and equity securities			(222	)			(17	)			(205	)			1205.9
Gains on sale of mortgages			1,336				1,391				(55	)			(4.0	)
Earnings on bank owned life insurance			847				979				(132	)			(13.5	)
Other miscellaneous income			1,451				937				514				54.9
Total other income			13,253				13,286				(33	)			(0.2	)

Trust and investment services income increased by $32,000, or 4.0%, for the quarter but decreased $127,000, or 4.9% year-to-date as a result of the gain on sale of a limited number of trust assets sold in 2024. Service fees and commissions remained relatively flat from the prior year. The Corporation incurred $63,000 of net gains on debt and equity securities in the third quarter of 2025 compared to $211,000 in the third quarter of 2024. For the year-to-date period, the Corporation incurred $222,000 of losses on debt and equity securities compared to losses of $17,000 for the year-to-date period in 2024, as a result of strategic sales of debt securities to fund higher yielding loan growth. Mortgage gains increased by $137,000, or 37.1%, and decreased by $55,000, or 4.0%, for the three and nine months ended September 30, 2025, compared to the same periods in the prior year. The quarterly increase was due to increased volume of loans sales. This year-to-date decrease was primarily a result of compressed margins and the Corporation selling the permanent financing for construction loans with points that were recorded as income in the prior year. Earnings on bank owned life insurance were higher by $15,000, or 5.4%, and lower by $132,000, or 13.5%, for the three and nine months ended September 30, 2025, compared to the same period in the prior year. This year-to-date decrease was due to a death benefit received in 2024. Other miscellaneous income increased by $326,000, or 103.5%, and $514,000, or 54.9%, for the three and nine months ended September 30, 2025, compared to the prior year as a result of sales tax refunds received in 2025.

Operating Expenses

Operating expenses for the third quarter of 2025 were $15,181,000, an increase of $1,057,000, or 7.5%, compared to the $14,124,000 for the third quarter of 2024. For the year-to-date period ended September 30, 2025, operating expenses totaled $43,562,000, an increase of $2,476,000, or 6.0%, compared to the same period in 2024. The following tables detail the categories that comprise operating expenses.

OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

		Three Months Ended September 30,
		2025				2024				Increase (Decrease)
		$				$				$				%
Salaries and employee benefits			8,955				8,644				311				3.6
Occupancy expenses			908				830				78				9.4
Equipment expenses			420				311				109				35.0
Advertising & marketing expenses			267				371				(104	)			(28.0	)
Computer software & data processing expenses			1,739				1,550				189				12.2
Bank shares tax			412				317				95				30.0
Professional services			912				831				81				9.7
Other operating expenses			1,568				1,270				298				23.5
Total Operating Expenses			15,181				14,124				1,057				7.5

OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

		Nine Months Ended September 30,
		2025				2024				Increase (Decrease)
		$				$				$				%
Salaries and employee benefits			25,592				25,318				274				1.1
Occupancy expenses			2,690				2,493				197				7.9
Equipment expenses			1,131				964				167				17.3
Advertising & marketing expenses			1,009				816				193				23.7
Computer software & data processing expenses			5,339				4,718				621				13.2
Bank shares tax			1,155				1,032				123				11.9
Professional services			2,566				2,395				171				7.1
Other operating expenses			4,080				3,350				730				21.8
Total Operating Expenses			43,562				41,086				2,476				6.0

Salaries and employee benefits are the largest category of operating expenses. For the third quarter of 2025, salaries and benefits increased $311,000, or 3.6%, and for the nine months ended September 30, 2025, salaries and benefits increased $274,000, or 1.1%, compared to the same periods in 2024. Occupancy and equipment costs were higher by a combined total of $187,000, or 16.4%, and $364,000, or 10.5%, for the three and nine months ended September 30, 2025, compared to the prior year as result of costs associated with new lease expense and costs associated with a new branch and work on future construction projects. Advertising and marketing expenses were lower by $104,000, or 28.0%, and higher by $193,000, or 23.7%, for the three and nine months ended September 30, 2025, compared to the prior year. The year-to-date increase was primarily related to advertising and media production costs as the Corporation continues to pursue marketing opportunities in the communities it serves. Computer software and data processing expenses increased by $189,000, or 12.2%, and $621,000, or 13.2%, for the three and nine months ended September 30, 2025, compared to the same periods in the previous year as a result of higher costs associated with the new core system as well as other technology initiatives. Shares tax expense is based on the Corporation's level of shareholders' equity and has increased commensurately from 2024 to 2025. Professional services costs increased by $81,000, or 9.7%, and $171,000, or 7.1%, for the quarter and year-to-date periods. The increase is primarily related to higher legal fees as well as increased costs for other outside services. Other operating expenses increased by $298,000, or 23.5%, and $730,000, or 21.8%, for the three and nine months ended September 30, 2025, compared to the same periods in the prior year due largely to higher FDIC insurance costs, checking account charge-off costs, an increased level of fraud-related charge-offs, and costs related to the Corporation's previously-announced acquisition of Cecil Bank.

Income Taxes

Federal income tax expense was $1,419,000 for the third quarter of 2025 compared to $752,000 for the same period in 2024. For the nine months ended September 30, 2025, the Corporation recorded Federal income tax expense of $3,781,000, compared to $2,499,000 for the nine months ended September 30, 2024. The effective tax rate for the Corporation was 19.1% for the nine months ended September 30, 2025, and 17.7% for the nine months ended September 30, 2024. Certain items of income are not subject to Federal income tax, such as tax-exempt interest income on loans and securities, and Bank Owned Life Insurance (BOLI) income; therefore, the effective income tax rate for the Corporation is lower than the stated tax rate.

Financial Condition

Investment Securities

The Corporation classifies all of its debt securities as available for sale and reports the portfolio at fair value. As of September 30, 2025, the Corporation had $590.4 million of debt securities available for sale, which accounted for 26.6% of assets, compared to 27.8% as of December 31, 2024, and 24.7% as of September 30, 2024. Based on ending balances, the debt securities portfolio increased 14.0% from September 30, 2024, and decreased 4.2% from December 31, 2024.

The debt securities portfolio was showing a net unrealized loss of $32,729,000 as of September 30, 2025, compared to $47,248,000 as of December 31, 2024, and $33,332,000 as of September 30, 2024. The valuation of the Corporation's debt securities portfolio is impacted by both the U.S. Treasury rates and the perceived forward direction of interest rates.

Each quarter, management sets portfolio allocation guidelines and adjusts the security portfolio strategy generally based on the following factors:

●

ALCO positions as to liquidity, credit risk, interest rate risk, and fair value risk

●

Growth of the loan portfolio

●

Slope of the U.S. Treasury curve

●

Relative performance of the various instruments, including spread to U.S. Treasuries

●

Duration and average length of the portfolio

●

Volatility of the portfolio

●

Direction of interest rates

●

Economic factors impacting debt securities

The investment policy of the Corporation establishes guidelines to promote diversification within the portfolio. The diversity specifications provide opportunities to shorten or lengthen duration, maximize yield, and mitigate credit risk.

The Corporation's U.S. Treasury and U.S. government agency sectors decreased $6.8 million during the first nine months of 2025 due to the maturity of bonds. These sectors represent safe credits, but generally carry a lower yield due to the investments made in 2020 and 2021 when rates were lower.

The Corporation's U.S. agency mortgage-backed securities (MBS) and collateralized mortgage obligations (CMO) have remained stable since December 31, 2024. MBS and CMOs both consist of mortgage instruments that pay monthly interest and principal, however the behavior of the two types vary according to the structure of the mortgage pool or CMO instrument. Management desires to maintain some amount of MBS and CMOs in order to assist in adding to and maintaining a stable five-year ladder of cash flows, which is important in providing stable liquidity and interest rate risk positions. U.S. agency MBS and CMO securities pay contractual monthly principal and interest, but are also subject to additional prepayment of principal. The combined effect of all of these instruments paying monthly principal and interest provides the Corporation with a reasonably stable base cash flow. Cash flows coming off of MBS and CMOs do slow down and speed up as interest rates increase or decrease, which has an impact on the portfolio's length and yield.

The portfolio of non-agency MBS and CMO securities stood at $148.3 million as of September 30, 2025, or 24.7% of the total portfolio. This sector better structures the portfolio to achieve higher yields and shortens the duration while also protecting in a rates-up environment. The non-agency portfolio stood at $145.2 million at December 31, 2024.

The Corporation's asset-backed securities declined slightly by $2.5 million, or 4.4%, from December 31, 2024, to September 30, 2025. Most of the bonds in this sector generate regular monthly principal payments which caused the value to decline. These bonds are primarily floating rate instruments, so in the current rate environment, they have added to the overall yield increase for the portfolio.

As of September 30, 2025, the fair value of the Corporation's corporate bonds decreased by $7.3 million, or 13.8%, from balances at December 31, 2024. This decrease was due to two bonds maturing and several bonds being sold during the first nine months of 2025. Like any security, corporate bonds have both positive and negative qualities and management must evaluate these securities on a risk versus reward basis. Corporate bonds add diversity to the portfolio and provide strong yields for short maturities; however, by their very nature, corporate bonds carry a high level of credit risk should the entity experience financial difficulties. As a result of the higher level of credit risk taken by purchasing a corporate bond, management has in place procedures to closely analyze the financial health of the company. Financial analysis is conducted prior to every corporate bond purchase with ongoing monitoring performed on all securities held.

Obligations of states and political subdivisions, or municipal bonds, consist of both tax-free and taxable securities. They carry the longest duration on average of any instrument in the securities portfolio. Municipal tax-equivalent yields generally start above other taxable bonds. These instruments also experience significant fair market value gains and losses when interest rates decrease and increase. Municipal securities were purchased throughout 2020 and 2021 due to the levels of excess liquidity experienced due to deposit inflows. The balance of municipal bonds decreased by $8.2 million, or 4.6%, in the first nine months of 2025, primarily due to the sale of a number of these bonds. Municipal bonds represented 28.4% of the securities portfolio as of September 30, 2025 and 28.5% as of December 31, 2024.

Loans

Net loans outstanding increased by 3.9%, to $1.5 billion at September 30, 2025, an annualized rate of 5.1%, from $1.4 billion at December 31, 2024. The following table shows the composition of the loan portfolio as of September 30, 2025 and December 31, 2024.

LOANS BY MAJOR CATEGORY

(DOLLARS IN THOUSANDS)

		September 30,								December 31,
		2025								2024
		$				%				$				%
Agriculture			299,493				20.2				289,284				20.3
Business Loans			367,521				24.8				360,805				25.3
Consumer			5,983				0.4				6,603				0.5
Home Equity			139,673				9.4				118,329				8.3
Non-Owner Occupied CRE			171,386				11.6				136,298				9.6
Residential Real Estate (a)			496,123				33.6				514,120				36.0
Total loans			1,480,179				100				1,425,439				100
Less:
Deferred loan costs, net			2,096								1,830
Allowance for credit losses			(16,637	)							(16,122	)
Total net loans			1,465,638								1,411,147

(a) Residential real estate loans do not include mortgage loans serviced for others which totaled $368,100 as of September 30, 2025 and $342,640 as of December 31, 2024.

There was moderate growth in the loan portfolio since December 31, 2024. Agriculture loans, business loans, home equity loans, and non-owner occupied CRE loans grew since December 31, 2024, while the other categories of loans decreased minimally.

The agriculture loan segment increased $10,209,000, or 3.5%, the business loan segment increased $6,716,000, or 1.9%, the consumer loan segment decreased $620,000, or 9.4%, the home equity segment increased $21,344,000, or 18.0%, the non-owner occupied CRE segment increased $35,088,000, or 25.7%, and the residential real estate segment decreased $17,997,000, or 3.5% from balances at December 31, 2024. The agriculture segment is concentrated primarily in loans to dairy operators, poultry operators, and crop farmers. Business loans are fairly diverse with small concentrations in lessors of residential buildings and dwellings and lessors of non-residential buildings. These concentrations are less than 10% of the total business loan portfolio.

In the first nine months of 2025, mortgage production decreased 41.4% compared to the first nine months of 2024. Purchase money origination constituted 94.1% of the Corporation's mortgage originations for the nine months ended September 30, 2025. The held-for-investment production is 52.9% of total originations with construction-only and construction-permanent loans making up 53.2% of the total held-for-investment production. As of September 30, 2025, adjustable-rate mortgage balances were $331.2 million, representing 66.6% of the 1-4 family residential loan portfolio of the Corporation.

Non-Performing Assets

Non-performing assets include:

●

Nonaccrual loans

●

Loans past due 90 days or more and still accruing

●

Other real estate owned

NON-PERFORMING ASSETS

(DOLLARS IN THOUSANDS)

		September 30,				December 31,				September 30,
		2025				2024				2024
		$				$				$
Nonaccrual loans			9,857				11,887				9,862
Loans past due 90 days or more and still accruing			-				-				-
Total non-performing loans			9,857				11,887				9,862
Other real estate owned			-				-				-
Total non-performing assets			9,857				11,887				9,862
Non-performing assets to net loans			0.67%				0.83%				0.71%

The total balance of non-performing loans did not change materially since September 30, 2024, and decreased $2,030,000, or 17.1%, from balances at December 31, 2024.

The decrease from December 31, 2024 was net of paydowns and payoffs of various unrelated relationships offsetting the addition of a number of unrelated relationships experiencing payment defaults including four agricultural mortgage loans totaling $2.1 million and four residential mortgage loans totaling $614,000. To further offset the additions, one $1.1 million residential mortgage relationship that was nonaccrual at December 31, 2024 subsequently became other real estate owned during April 2025 and was later sold in July 2025.

No loans were past due 90 days and still accruing at September 30, 2025, December 31, 2024 or September 30, 2024.

There was no other real estate owned (OREO) property as of September 30, 2025, December 31, 2024, or September 30, 2024.

Allowance for Credit Losses

The allowance for credit losses (ACL) is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on total loans. Management reviews the adequacy of the ACL on a quarterly basis. The ACL represents management's estimate of lifetime credit losses inherent in loans as of the balance sheet date. The ACL is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Corporation measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Additionally, the ACL calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending policies and procedures, loan portfolio trends, lending management experience, asset quality, loan review, underlying collateral, and credit concentrations. Loans that do not share risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date adjusted for selling costs as appropriate. Based on the quarterly calculation, management will adjust the ACL through the provision for credit losses as necessary.

Strong and disciplined credit and collateral policies and practices have been instrumental in producing a favorable history of credit losses for the Corporation. The Net Charge-Off table below shows the net charge-offs for each segment of the Corporation's loan portfolio as of September 30, 2025 and September 30, 2024.

Net Charge-Offs

(DOLLARS IN THOUSANDS)

		September 30,				September 30,
		2025				2024
		$				$
Loans charged-off:
Agriculture			-				-
Business Loans			-				-
Consumer Loans			45				55
Home Equity			3				-
Non-Owner Occupied CRE			-				-
Residential Real Estate			84				-
Total loans charged-off			132				55
Recoveries of loans previously charged-off
Agriculture			25				-
Business Loans			5				5
Consumer Loans			26				16
Home Equity			-				-
Non-Owner Occupied CRE			-				-
Residential Real Estate			-				-
Total recoveries			56				21
Net charge-offs (recoveries)
Agriculture			(25	)			-
Business Loans			(5	)			(5	)
Consumer Loans			19				39
Home Equity			3				-
Non-Owner Occupied CRE			-				-
Residential Real Estate			84				-
Total net charge-offs			76				34

The Corporation has historically experienced very low net charge-off percentages due to disciplined credit practices. As of September 30, 2025, there were $132,000 in charge-offs and $56,000 of recoveries, representing a net charge-off position of $76,000 as shown above. As of September 30, 2024, there were $55,000 in charge-offs and $21,000 in recoveries, representing a net charge-off position of $34,000.

Management regularly reviews the overall risk profile of the loan portfolio and the impact that current economic trends have on the Corporation's loans. The financial industry typically evaluates the quality of loans on a scale with "unclassified" representing healthy loans, "special mention" being the first indication of credit concern, and several successive classified ratings indicating further credit declines of "substandard," "doubtful," and, ultimately, "loss."

The Corporation's level of classified loans was $34.9 million on September 30, 2025, compared to $23.4 million on December 31, 2024. Total classified loans have increased from the prior year due to the downgrading of a number of unrelated agriculture and business relationships. Having more loans in a classified status could result in a larger allowance as higher amounts of projected historical losses and qualitative factors are attached to these loans.

Deposits

The Corporation's total ending deposits at September 30, 2025, decreased by $5.7 million, or 0.3%, from December 31, 2024, and increased by $69.3 million, or 3.8%, from September 30, 2024. Customer deposits are the Corporation's primary source of funding for loans and securities. The mix of the Corporation's deposit categories has changed since September 30, 2024, with increases across all categories of deposits. Since September 30, 2024, there has been a $24.2 million, or 4.0% increase in non-interest bearing demand deposit accounts, a $12.9 million, or 3.6% increase in interest bearing demand balances, a $0.5 million, or 0.3% increase in money market account balances, a $8.0 million, or 2.9% increase in savings account balances, and a $23.7 million, or 5.6% increase in time deposit balances. The increase in time deposit balances was a result of the increased rate environment and offering promotional rates on specific time deposit terms. Time deposits are typically a more rate-sensitive product, making them a source of funding that is prone to balance variations depending on the interest rate environment and how the Corporation's time deposit rates compare with the local market rates. Time deposits fluctuate as consumers search for the best rates in the market, with less allegiance to any particular financial institution.

As of September 30, 2025 and 2024, the total uninsured deposits of the Corporation were approximately $224.4 million and $205.0 million, respectively or 11.9% and 11.3%, of total deposits. Total uninsured deposits is calculated based on regulatory reporting requirements and reflects the portion of any deposit of a customer at an insured depository institution that exceeds the applicable FDIC insurance coverage for that depositor at that institution and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regime.

The Deposits by Major Classification table, shown below, provides the balances of each category for September 30, 2025, December 31, 2024, and September 30, 2024.

DEPOSITS BY MAJOR CLASSIFICATION

(DOLLARS IN THOUSANDS)

		September 30,				December 31,				September 30,
		2025				2024				2024
		$				$				$
Non-interest bearing demand			623,270				631,711				599,025
Interest bearing demand			375,477				384,236				362,573
Money market deposit accounts			157,048				162,514				156,541
Savings accounts			284,230				280,526				276,212
Time deposits			444,724				431,456				421,064
Total deposits			1,884,749				1,890,443				1,815,415

The growth and mix of deposits is often driven by several factors including:

●

Convenience and service provided

●

Current rates paid on deposits relative to competitor rates

●

Level of and perceived direction of interest rates

●

Financial condition and perceived safety of the institution

●

Possible risks associated with other investment opportunities

●

Level of fees on deposit products

Borrowings

Total borrowings were $170.7 million, $183.5 million, and $127.5 million as of September 30, 2025, December 31, 2024, and September 30, 2024, respectively. Short-term borrowings with the Federal Home Loan Bank (FHLB) were $60.0 million as of September 30, 2025 and December 31, 2024. There were no short-term borrowings as of September 30, 2024. Short-term funds are used for immediate liquidity needs and are not typically part of an ongoing liquidity or interest rate risk strategy; therefore, they fluctuate more rapidly. When short-term funds are used, they are purchased through correspondent and member bank relationships as overnight borrowings or through the FHLB for terms less than one year.

Total long-term borrowings, borrowings initiated for terms longer than one year, were $70.8 million as of September 30, 2025, $83.8 million as of December 31, 2024, and $87.8 million as of September 30, 2024, respectively. The long-term borrowings for the Corporation were made up entirely of FHLB long-term advances. FHLB advances are used as a secondary source of funding and to mitigate interest rate risk. These long-term funding instruments are typically a more effective funding instrument in terms of selecting the exact amount, rate, and term of funding rather than trying to source the same through deposits. In this manner, management can efficiently meet known liquidity and interest rate risk needs. The Corporation continues to be within the FHLB maximum borrowing capacity (MBC), which is currently $721.3 million. The Corporation's internal policy limits are far more restrictive than the FHLB MBC, which is calculated and set quarterly by FHLB.

In addition to the long-term advances funded through the FHLB, on December 30, 2020, the Corporation completed the sale of a subordinated debt note offering. The Corporation sold $20.0 million of subordinated debt notes with a maturity date of December 30, 2030. These notes are non-callable for 5 years and carry a fixed interest rate of 4% per year for 5 years and then convert to a floating rate for the remainder of the term. The notes can be redeemed at par beginning 5 years prior to maturity. The notes are structured to qualify as Tier 2 capital for the Corporation and any funds it invests in the Bank qualify as Tier 1 capital at the Bank. As of September 30, 2025, $16.0 million of funds were invested in the Bank. The Corporation paid an issuance fee of 2% of the total issue that will be amortized to the call date on a pro-rata basis.

On July 22, 2022, the Corporation completed the sale of an additional subordinated debt note offering. The Corporation sold $20.0 million of subordinated debt notes with a maturity date of September 30, 2032. These notes are all non-callable for 5 years and carry a fixed interest rate of 5.75% per year for the 5 years and then convert to a floating rate for the remainder of the term. The notes can be redeemed at par beginning 5 years prior to maturity. The notes are structured to qualify as Tier 2 capital for the Corporation and any funds it invests in the Bank qualify as Tier 1 capital at the Bank. As of September 30, 2025, $17.0 million of funds were invested in the Bank. The Corporation paid an issuance fee of 2% of the total issue that will be amortized to the call date on a pro-rata basis.

Stockholders' Equity

Federal regulatory authorities require banks to meet minimum capital levels. The Corporation, as well as the Bank, as the solely owned subsidiary of the Corporation, maintains capital ratios well above those minimum levels. The risk-weighted capital ratios are calculated by dividing capital by total risk-weighted assets. Regulatory guidelines determine the risk-weighted assets by assigning assets to specific risk-weighted categories. The calculation of tier I capital to risk-weighted average assets does not include an add-back to capital for the amount of the allowance for credit losses, thereby making this ratio lower than the total capital to risk-weighted assets ratio.

The consolidated asset limit on small bank holding companies is $3 billion and a company with assets under that limit is not subject to the consolidated capital rules but may disclose capital amounts and ratios. The Corporation has elected to disclose those amounts and ratios.

The following tables reflect the capital ratios for the Corporation and Bank compared to the regulatory capital requirements.

REGULATORY CAPITAL RATIOS:

						Regulatory Requirements
						Adequately				Well
As of September 30, 2025		Capital Ratios				Capitalized				Capitalized
Total Capital to Risk-Weighted Assets
Consolidated			15.1%				N/A				N/A
Bank			14.9%				8.0%				10.0%
Tier 1 Capital to Risk-Weighted Assets
Consolidated			11.4%				N/A				N/A
Bank			13.8%				6.0%				8.0%
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated			11.4%				N/A				N/A
Bank			13.8%				4.5%				6.5%
Tier 1 Capital to Average Assets
Consolidated			7.9%				N/A				N/A
Bank			9.5%				4.0%				5.0%
As of December 31, 2024
Total Capital to Risk-Weighted Assets
Consolidated			14.6%				N/A				N/A
Bank			14.4%				8.0%				10.0%
Tier I Capital to Risk-Weighted Assets
Consolidated			10.9%				N/A				N/A
Bank			13.2%				6.0%				8.0%
Common Equity Tier I Capital to Risk-Weighted Assets
Consolidated			10.9%				N/A				N/A
Bank			13.2%				4.5%				6.5%
Tier I Capital to Average Assets
Consolidated			7.5%				N/A				N/A
Bank			9.1%				4.0%				5.0%
As of September 30, 2024
Total Capital to Risk-Weighted Assets
Consolidated			14.7%				N/A				N/A
Bank			14.4%				8.0%				10.0%
Tier 1 Capital to Risk-Weighted Assets
Consolidated			14.7%				N/A				N/A
Bank			13.3%				6.0%				8.0%
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated			10.9%				N/A				N/A
Bank			13.3%				4.5%				6.5%
Tier 1 Capital to Average Assets
Consolidated			7.8%				N/A				N/A
Bank			9.5%				4.0%				5.0%

As of September 30, 2025, the Bank's Tier 1 Leverage Ratio stood at 9.5% while the Corporation's Tier 1 Leverage Ratio was 7.9%. Tier 1 Capital at the Corporation level was not impacted by the subordinated debt issuance since subordinated debt only qualifies as Tier 2 Capital at the corporate level. As such, in terms of the Corporation's regulatory capital ratios, only the Total Capital to Risk-Weighted Assets ratio was enhanced as a result of the $40 million subordinated debt issuance. Most of the marked improvement in capital ratios occurred at the Bank level.

Off-Balance Sheet Arrangements

In the normal course of business, the Corporation typically has off-balance sheet arrangements related to loan funding commitments. These arrangements may impact the Corporation's financial condition and liquidity if they were to be exercised within a short period of time. As discussed in the following liquidity section, the Corporation has in place sufficient liquidity alternatives to meet these obligations. The following table presents information on the commitments by the Corporation as of September 30, 2025.

OFF-BALANCE SHEET ARRANGEMENTS

(DOLLARS IN THOUSANDS)

		September 30,
		2025
		$
Commitments to extend credit:
Revolving home equity			277,209
1-4 family residential construction loans			10,532
Commercial real estate, other construction and land development loans			43,968
Commercial and industrial loans			103,034
Other			138,390
Standby letters of credit			18,704
Total			591,837