ASRV 10-K & 10-Q changes, risk factors and insider trading

The Company reported net income of $3,601,000,$3.6 million, or $0.21 per diluted common share, forin 2024. This comparescompared to a net loss of $3,346,000,$3.3 million, or $0.20 per diluted common share, forin 2023. The year concluded with positive momentum driven by the Company’s strongest quarterly loan and deposit growth during the fourth quarter of 2024. Total loans grew by $30 million, or 2.9%, and deposits increased by $43 million, or 3.7%, for 2024. The earnings improvement between years was driven by thea favorable comparison in the provision for credit losses, improved total revenue, and lower non-interest expense. Specifically, the lower provision for credit losses forin 2024 reflectsreflected provision recoveries recognized in both the loan and securities portfolios during the first and third quarters while the 2023 provision was significantly higher due to the negative impact that the Rite Aid bankruptcy had on several commercial real estate properties. The Company saw solid growth in net interest income as its fourth quarter net interest margin increased by 17-basis points on a sequential basis. The community banking business continued to benefit from diversified revenue streams, with strong revenue and profit contribution from the wealth management division which caused total non-interest income to represent 33% of total revenue for 2024. Finally, because of the changing interest rate environment and effective capital management, the Company’s book value and tangible book value per share increased by 8.9% to $6.49 and 9.7% to $5.66(1), respectively, during the 2024 year.

Overall, in 2024,2025, the average balance of total interest earning assets was higher than the full year of 20232024 average, totaling $1.3 billion. Specifically, total loans averaged $1.038$1.061 billion in 20242025 which was $40.5$23.7 million, or 4.1%,2.3%, higher than the 20232024 full year average. Short-term investments and bank deposits averaged $3.9$18.6 million in 20242025 which was relatively$14.7 unchangedmillion fromhigher than the 20232024 full year average. Total investment securitiessecurities, including the available for sale, held to maturity, and trading portfolios, averaged $253.5$257.9 million in 20242025 which was $8.7$4.4 million, or 3.3%,1.7%, lowerhigher than the 20232024 full year average. The increase in the average balance of total interest earning assets along with an improvement in the yield on earning assets, which increased from 4.84%5.18% to 5.18%,5.35%, resulted in total interest income increasing by $5.6$4.8 million, or 9.3%,7.3%, between years.

Total deposits, including non-interest bearing demand deposits, averaged $1.169$1.236 billion for the full year of 2024,2025, which was $15.0$67.3 million, or 1.3%,5.8%, higher than the $1.154$1.169 billion average for the full year of 2023.2024. The 20242025 full year average of short-term and FHLB borrowed funds was $79.6$55.6 million, which represented ana increasedecrease of $21.6$24.0 million, or 37.3%.30.1%. Overall, the cost of total interest bearing liabilities increaseddecreased from 2.36%2.77% to 2.77%2.53% which resulted in total interest expense increasingdecreasing by $5.6$1.4 million, or 22.6%,4.5%, between years.

COMPONENT CHANGES IN NET INTEREST INCOME: 20242025 VERSUS 2023.2024. Regarding the separate components of net interest income, the Company’s total interest income in 20242025 increased by $5.6$4.8 million, or 9.3%,7.3%, when compared to 2023.2024. Overall, the 20242025 full year average balance of total interest earning assets increased over last year’s full year average by $31.8$42.8 million, or 2.5%,3.3%, as there was anwere increased levellevels of average total loans which was partially offset by decreased levels ofloans, short-term investments and bank depositsdeposits, and total investment securities. In addition, interest income was favorably impacted by an increase in the earning asset yield which improved by 34-basis17-basis points from 4.84% to 5.18%.5.35%. MostAll of the categories within the earning asset base, particularly loans and investment securities,loans, demonstrated an interest income increase between years. TheSpecifically, the average total loan portfolio yield increased by 29-basis15-basis points from 5.18%5.47% to 5.47%5.62% in 20242025. whileThe Company’s total interest expense in 2025 decreased by $1.4 million, or 4.5%, when compared to 2024. Overall, the 2025 full year average balance of total interest bearing liabilities increased over 2024’s average by $47.4 million, or 4.3%, as there was an increased level of average interest bearing deposits which was partially offset by a lower level of average short-term and FHLB borrowings. Despite the increase in the average yieldbalance onof total investmentinterest securitiesbearing increasedliabilities, the cost associated with these interest bearing liabilities decreased by 32-basis24-basis points from 3.43% to 3.75%.2.53% resulting in the decline in total interest expense.

Total average loans for the full year of 20242025 weregrew higher thanfrom the 2023full year average of 2024 by $40.5$23.7 million, or 4.1%.2.3%, Indue 2024,to consistent new loan originationsfunding opportunities. However, in the second half of 2025, commercial real estate (CRE) loan payoff activity exceeded payofforiginations activity,and resultingresulted in a $35.4 million, or 3.3%, decrease in total loans,loans onand anloans endheld offor period basis, demonstrating growth of $30.0 million, or 2.9%,sale since December 31, 2023. Loan originations were strongest in the fourth quarter of 2024 and more than doubled payoff activity.2024. Overall, total loans averagedcontinue $1.038to be well above the $1.0 billion threshold, averaging $1.061 billion for 2024.2025. Total loan interest income improved betweenin years2025 compared to 2024 due to the highermore nationalfavorable interest rate environment during 2024, the increased level of average total loans outstanding,environment, and also, a portion of CRE loans, that were booked at the onset ofduring the COVID pandemic when interest rates were low, repricedrepricing upward during 2025. Also favorably impacting loan interest income was a higher level of loan fee income primarily due to prepayment fees collected on the fourthincreased quarterearly CRE payoff activity experienced during 2025. Total 2025 full year loan fee income was $553,000, or 58.8%, higher when compared to the full year of 2024. These favorable items resulted in 2025 total loan interest income improving by $5.1$3.4 million, or 9.9%, for the full year of 20246.0%, when compared to last year.2024.

Total investment securitiessecurities, including the available for sale, held to maturity, and trading portfolios, averaged $253.5$257.9 million for the full year of 2024,2025, which was $8.7$4.4 million, or 3.3%,1.7%, lowerhigher than the $262.2$253.5 million average for 2024. Additionally, average short-term investments and bank deposits were sharply higher by $14.7 million in 2025. These increases reflect the fullhigher yearlevel of 2023.loan Theprepayment decreaseactivity, reflectsas management’swell strategyas the Company’s liquidity position strengthening during 2025 due to allocatedeposit growth. Therefore, more cashfunds flowwere fromavailable to invest in the securities portfolioportfolios toduring highera yieldingtime loanswhen whilesecurity yields improved, making purchases more attractive. As a result, the Companysecurities controlledportfolios thegrew amountby of$36.3 highmillion, costor overnight16.5%, borrowedsince funds.December Thus,31, new2024. New investment security purchases were primarilyalso usednecessary to replace cash flow from maturing securities to maintain appropriate balances for pledging purposes related to public fund deposits. In addition, during 2025, the Company established a $7.0 million investment trading account. The higher balances and improved yields for new securities purchases, along with management’s execution of an investment portfolio repositioning strategy in late December 2023,purchases caused interest income from investmentsinvestment securities and trading securities to increase by $515,000,$872,000, or 5.7%,9.2%, for the full year of 20242025 compared to last year. Overall, the full year of 2023. Finally, the full year of 2024 total average balance of short-termtotal investmentsinterest andearning bankassets depositsincreased remained relatively consistent withfrom last year’s full year totalingaverage $3.9by $42.8 million, asor 3.3%, while total interest income increased by $4.8 million, or 7.3%, from the Company2024 re-deployed its excess liquidity into higher yield loans.year.

On the liability side of the balance sheet, total average deposits for the full year of 2024 total average deposits2025 were $15.0$67.3 million, or 1.3%,5.8%, higher when compared to 2023.the Thefull increaseyear reflectsaverage of 2024 due to the Company’s successful business development efforts,efforts. which more than offset a portion ofAdditionally, the funds leaving the balance sheet from normal deposit run-off caused by greater pricing competition in the market to retain deposits because of the interest rate environment. The Company’s core deposit base continuedcontinues to demonstrate the strength and stability that it has for many years.years Totaldue to customer loyalty and confidence in AmeriServ Financial Bank. Specifically, total deposits grew during 20242025 by $42.6$47.1 million, or 3.7%,3.9%, on an end of period basis since December 31, 2023, demonstrating customer loyalty and confidence in the Bank. The Company does not utilize brokered deposits as a funding source.2024. In addition to its loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. The Company does not utilize brokered deposits as a funding source. The loan to deposit ratio averaged 89.1%83.8% in the fourth quarter of 2024,2025, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support its customers and community during times of economic volatility.

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) setting forth (i) average assets, liabilities, and shareholders’ equity, (ii) interest income earned on interest earning assets and interest expense paid on interest bearing liabilities, (iii) average yields earned on interest earning assets and average rates paid on interest bearing liabilities, (iv) interest rate spread (the difference between the average yield earned on interest earning assets and the average rate paid on interest bearing liabilities), and (v) net interest margin (net interest income as a percentage of average total interest earning assets). For purposes of this table, loan balances include non-accrual loans, and interest income on loans includes loan fees or amortization of such fees which have been deferred. Regulatory stock is included within available for sale investment securities for this analysis. Additionally, a tax rate of 21% was used to compute tax-equivalent interest income and yields (non-GAAP). The tax equivalent adjustments to interest income on loansloans, municipal securities, and trading securities for the years ended December 31, 20242025 and 20232024 was $26,000$75,000 and $15,000,$26,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table. Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material.

We also continue to closely monitor the loan portfolio given the number of relatively large-sized commercial and commercial real estate loans within the portfolio. As of December 31, 2024,2025, the 25 largest credits represented 24.0%24.6% of total loans outstanding, which representsrepresented ana slight increase from December 31, 20232024 when it was 22.7%.24.0%.

The allowance for loan credit losses declined since December 31, 20232024 by $1.1 million,$784,000, or 7.6%,5.6%, to $13.9$13.1 million at December 31, 2024.2025. Overall, the Company continuescontinued to maintain solid coverage of both total loans and non-performing loans as the allowance for loan credit losses provided 127%158% coverage of non-performing loans and 1.30%1.27% of total loans at December 31, 2024.2025. This compares to allowance coverage of non-performing loans of 122%127% and total loans of 1.45%1.30% as of December 31, 2023.2024.

The disproportionately higher allocations for commercial loans, including commercial loans secured by owner occupied real estate and commercial & industrial loans, and commercial loans secured by non-owner occupied real estateestate, reflect the increased credit risk associated with those types of lending, the Company’s historical loss experience in these categories, and other qualitative factors.

NON-INTEREST INCOME. Non-interest income for 20242025 totaled $18.0$17.0 million, ana increasedecrease of $1.6 million,$986,000, or 9.7%,5.5%, from 2023.2024. Factors contributing to the higherlower level of non-interest income in 20242025 included:

Non-interest income for 20232024 totaled $16.4$18.0 million, aan decreaseincrease of $303,000,$1.6 million, or 1.8%,9.7%, from 2022.2023. Factors contributing to the lowerhigher level of non-interest income in 20232024 included:

Non-interest expense for 20232024 totaled $49.4$48.7 million and increaseddecreased by $1.4 million,$628,000, or 2.8%,1.3%, from 2022.2023. Factors contributing to the higherlower non-interest expense in 20232024 included:

INCOME TAX EXPENSE. The Company recorded income tax expense of $1.2 million, or an effective tax rate of 17.4%, in 2025 compared to income tax expense of $798,000, or an effective tax rate of 18.1%, in 20242024. comparedThe tolower an incomeeffective tax benefit of $1.0 millionrate in 2023. The income tax benefit in 20232025 resulted from the Company’sadditional recognitiontax-free ofincome afrom net loss.BOLI. The Company’s deferred tax liability was $1.6 million at December 31, 2025 compared to a deferred tax asset wasof $1.4 million at December 31, 2024 compared to $2.7 million at December 31, 2023,2024, resulting primarily from the change in the allowance for credit losses, the fair value of the available for sale investment securities portfolio, and the pension liability, which were partially offset by the net operating loss.liability.

Total deposits increased by $42.6$47.1 million, or 3.7%,3.9%, during 2024.2025. ThisManagement believes this demonstrates customer confidence andas well as the strength and loyalty of ourthe Company’s core deposit base along with successful business development efforts, which more than offset a portion of funds leaving the balance sheet due to greater pricing competition.efforts. As of December 31, 2024,2025, the 25 largest depositors represented 27.6%28.5% of total deposits, which is an increase from December 31, 20232024 when it was 22.4%.27.6%. As of December 31, 20242025 and 2023,2024, the estimated amount of uninsured deposits was $435.7$476.2 million and $384.5$435.7 million, respectively. The estimate of uninsured deposits was done at a single account level and does not take into account total customer balances in the Bank. It should be noted that approximately 50%60% of these uninsured deposits relate to public funds from municipalities, government entities, and school districts which by law are required to be collateralized with investment securities or FHLB letters of credit to protect these depositor funds. Total short-term and FHLB borrowings havewere decreasedreduced by $14.8$26.1 million, or 17.3%,36.9%, since year-end 2023.2024 This change was driven byas a decreaseresult inof short-termthe borrowingshigher whichlevel wasof partially offset by an increase in FHLB term advances.deposits. Specifically, short-term borrowings decreased by $26.3$14.6 million, or 64.2%. Given the high cost of overnight borrowed funds, management has been effectively controlling the usage of this funding source. In addition, the inversion in the yield curve has causedwhile FHLB term advances todecreased have rates that are lower than the cost of overnight borrowed funds. Therefore, FHLB term advances increased in 2024 by $11.5$11.4 million, or 25.8%.20.4%, in 2025.

The Company’s total shareholders’ equity increased by $5.0$12.1 million, or 4.9%,11.2%, since year-end 2023.2024. Capital was increased during 20242025 by the Company’s $3.6$5.6 million of net income and the positive impact on accumulated other comprehensive loss from the recognition of the settlement charge in connection with the defined benefit pension plan and the revaluation of the pension obligation totaling $4.3$2.2 million, the increased market value of the available for sale investment securities portfolio totaling $398,000,$5.5 million, and the fair value adjustment on the interest rate hedges totaling $217,000.$41,000. In addition, capital was increased by $691,000 as a result of the common stock issuable under the amended and restated consulting agreement with SB Value Partners (as disclosed in the Company’s Current Report on Form 8-K filed on January 6, 2026). These increases were partially offset by the $2.0 million common stock cash dividend and the $1.5 million common stock repurchase completed in accordance with the Stock Purchase Agreement executed with the activist shareholder.dividend. The Company returned approximately 56%35.3% of its 20242025 earnings to its shareholders through the quarterly common stock cash dividend. The Company continues to be considered well capitalized for regulatory purposes with a risk based capital ratio of 12.70% and an asset leverage ratio of 7.68% at December 31, 2024. The Company’s book value per common share was $6.49 while its tangible book value per common share was $5.66(1) at December 31, 2024. The increase in the Company’s book value and tangible book value per share in 2024 reflects the favorable adjustment for both the unrealized loss on available for sale securities and the Company’s defined benefit pension plan and the accretive repurchase of 628,003 shares of common stock from the activist shareholder. In addition, the Company’s equity to assets ratio was 7.54% and its tangible common equity to tangible assets ratio was 6.64%(1) at December 31, 2024.

LIQUIDITY. The Company’s liquidity position continuesstrengthened during 2025 due to bea strong.higher Totallevel of loan prepayment activity as well as deposit growth. Specifically, total average deposits for the full year of 20242025 were $15.0$67.3 million, or 1.3%,5.8%, higher compared to the 20232024 full year average. The increase iswas reflective of the Company’s successful business development efforts, which more than offset a portion of the funds leaving the balance sheet from normal deposit run-off caused by greater pricing competition in the market to retain deposits because of the interest rate environment.efforts. The Company’s core deposit base continued to demonstrate the strength and stability that it has for many years. Total deposits grew during 20242025 by $42.6$47.1 million, or 3.7%,3.9%, on an end of period basis since December 31, 2023,2024, demonstrating customer loyalty and confidence in AmeriServ Financial Bank. The Company does not utilize brokered deposits as a funding source. In addition to its strong, loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. Overall, the core deposit base is adequate to fund the Company’s operations. Cash flow from maturities, prepayments and amortization of securities iscan also be used to help fund loan growth.

AverageFurther demonstrating the strength of the Company’s liquidity position, average short-term investments remained relatively stablegrew during 20242025 compared to last year, decreasing slightlyincreasing by $89,000,$14.7 million, or 2.3%.381.9%. Advances from the FHLB averaged $51.6$50.0 million in 20242025 which was $29.4$1.6 million, or 132.7%,3.0%, higherlower than the $22.2$51.6 million average in 2023. Management’s strategy to increase term advances to lock in lower rates than overnight borrowings due to the inversion in the short end of the yield curve has favorably impacted net interest income.2024. Management continues to monitor the changing economic conditions and adjust pricing strategies accordingly which largely determines customer behavior and the level of total deposits as well as shifts within the total deposit mix. DiligentAlso, diligent monitoring and management of our short-term investment position and our level of overnight borrowed funds remains a priority. Given the high cost of overnight borrowed funds, management has been effectively controlling the usage of this funding source. The Company’s utilization of overnight borrowed funds during 20242025 was lower than the 20232024 level. Short-term borrowings averaged $5.6 million in 2025 after averaging $28.0 million in 20242024. after averaging $35.8 million in 2023. Continued loanLoan growth and prudent investment in securities are critical to achieve the best return on the normal level of earning asset cash flow that occurs each month. InDue 2024,to purchasesthe ofCompany’s securitiesstrengthened wereliquidity slow asposition, more funds were allocatedavailable to invest in the securities portfolio during a time when security yields improved, making purchases in 2025 more attractive. In addition, loan portfolio. Loan pipelines are currently at a typical level. Total average loans in 2025 were higher than the 2024 average by $23.7 million, or 2.3%. We strive to operate our loan to deposit ratio in a range of 80% to 100%. The Company’s loan to deposit ratio averaged 88.8%85.9% in 2024,2025, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support its customers and community during times of economic volatility. We are also well positioned to service our existing loan pipeline and grow our loan to deposit ratio while remaining within our guideline parameters.

Liquidity can also be analyzed by utilizing the Consolidated Statements of Cash Flows. Cash and cash equivalents increased by $3.7$33.1 million from December 31, 20232024 to $17.7$50.9 million at December 31, 20242025, due to $24.1$18.9 million of net cash provided inby financing activitiesactivities, $11.1 million of net cash provided by investing activities, and $2.7$3.2 million of net cash provided by operating activities more than offsetting $23.1 million of net cash used in investing activities. Within investing activities, cash advanced for new loans originated totaled $183.0$146.0 million and was $33.5 million higher than the $149.5 million ofwhile cash received from loan principal payments.payments was $176.5 million leading to a net decrease in loans of $30.5 million. Within financing activities, total short-term borrowings decreased by $26.3$14.6 million, total borrowings on advances from FHLB borrowings increaseddecreased by $11.5$11.4 million while total deposits increased by $42.6$47.1 million.

The holding company had $6.8$5.4 million of cash, short-term investments, and investment securities at December 31, 2024,2025, which representsrepresented a $1.4 million decrease from the holding company’s cash position since December 31, 2023.2024. Dividend payments from our subsidiariessubsidiary provided ongoing cash to the holding company. At December 31, 2024,2025, our subsidiary Bank had $2.9$4.3 million of cash available for immediate dividends to the holding company under applicable regulatory formulas. Additionally, during 2025, the holding company established a $3 million line of credit with an unrelated financial institution which can be used for general corporate purposes. There were no borrowings under the line at December 31, 2025. Overall, we believe that the holding company has sufficient liquidity to meet its subordinated debt interest payments and its dividend payout level with respect to its common stock.

CAPITAL RESOURCES. The Bank exceeds all regulatory capital ratios for each of the periods presented and is considered well capitalized. The Company’sBank’s common equity tier 1 capital ratio was 9.19%,11.70%, the tier 1 capital ratio was 9.19%,11.70%, and the total capital ratio was 12.70%12.88% at December 31, 2024.2025. The Company’sBank’s tier 1 leverage ratio was 7.68%9.32% at December 31, 2024.2025. We anticipate that we will maintain our strong capital ratios throughout 2025.2026.

Capital generated from earnings will be utilized to pay the common stock cash dividend and will support controlled balance sheet growth. Total Parent Company cash was $6.8 million at December 31, 2024. There is a particular emphasis on ensuring that the subsidiary bank has appropriate levels of capital to support its non-owner occupied commercial real estate loan concentration, which stood at 379%352% of regulatory capital at December 31, 2024.2025. It should be noted that this ratio increaseddecreased from 375%379% at December 31, 20232024 due to growthcontraction in non-owner occupied commercial real estate loan balances whichcombined morewith than offset thean increase in total regulatory capital between years.

Our focus is on preserving capital to support customer lending and allow the Company to take advantage of business opportunities as they arise. The Company’s Board of Directors expects to continue the common stock dividend at its current level of $0.03 per quarter given the Company’s strong capital position and projected earnings power. While the Company has frequently executed common stock buyback programs in the past, we presently do not have one in place due to the reduced level of our tangible common equity ratio at 6.64%(1).place. At December 31, 2024,2025, the Company had approximately 16.5 million common shares outstanding.

When December 31, 20242025 is compared to December 31, 2023,2024, the Company’s cumulative GAP ratio through three months indicates that the Company’s balance sheet isremained liability sensitive and demonstratesdemonstrated ana increaseslight decrease in the level of sensitivity. This liability sensitivity. The increasesensitivity primarily resultsresulted from a substantial increase in the level of interest-bearinginterest bearing deposits whilewhich was tempered by a decrease in short-term borrowings and an increase in total rate sensitive assetsassets. remainedSpecifically, relativelythe consistent. WeCompany experienced a higher level of interest-bearingmoney demandmarket depositsaccounts and time deposits which more than offset a decline in the level of moneyinterest marketbearing accounts.demand deposits. In addition, the strengthening of the Company’s liquidity position during 2025 led to an increase in total rate sensitive assets as well as a decrease in short-term borrowings of $14.6 million from the prior year. The Company’s interest rate sensitivity position shifts from being liability sensitive to an asset sensitive position over sixthree months and beyond as more of ourits loansrate sensitive assets begin to reprice. In particular, a significant levelportion of commercial real estate loans that were booked during the onsetCOVID of COVIDpandemic when interest rates were significantly lower are scheduled to reprice in the second half of 2025 and through 2026. Finally, the balance of FHLB term advances at December 31, 2024 increased $11.5 million, or 25.8%, from the prior year, due to the modest inversion in the short end of the yield curve resulting in FHLB term advances having interest rates that are lower than the cost of overnight borrowings.repricing.

The Company believes that its overall interest rate risk position is well controlled. The execution of $70 million of interest rate hedges during 2023, in order to fix the cost of certain deposits that are indexed and move with short-term interest rates, reduced the Company’s negative variability of net interest income in a rising interest rate environment and helped slow net interest margin compression.compression while interest rates were rising. The fed funds rate is currently at a targeted range of 4.25%3.50% to 4.50%3.75% as the Federal Reserve took action during the third and fourth quarters of 20242025 to ease monetary policy and decrease the target fed funds rate a total of 100 basis75-basis points.

The Company’s interest rate risk position is relatively neutral. The variability of net interest income was slightly negative in the upward rate scenarios as the Company was marginally more exposed to liabilities repricing upward to a greater extent than assets. Specifically, the cost of funds was immediately impacted when short-term national interest rates increaseincreased because certain deposit products and overnight borrowed funds move with the market. This was partially offset by the Company’s investment securities portfolio and the scheduled repricing of loans tied to an index, such as SOFR or prime. In addition to the interest rate hedges discussed above, the Company has effectively utilized interest rate swaps for interest rate risk management purposes. The interest rate swaps allow our customers to lock in fixed interest rates while the Company retains the benefit of interest rates moving with the market. Regarding interest bearing liabilities, the Company will continue its disciplined approach to price its core deposit accounts in a controlled but competitive manner and control the amount of overnight borrowed funds. Overall, based on the slight change in theThe variability of net interest income is negative in the various interestdownward rate scenarios,scenarios at the Company ishas wellmore positionedexposure to sustainassets eitherrepricing downward to a rategreater increaseextent orthan decrease.liabilities.

OFF BALANCE SHEET ARRANGEMENTS. The Company incurs off-balance sheet risks in the normal course of business in order to meet the financing needs of its customers. These risks derive from commitments to extend credit and standby letters of credit. Such commitments and standby letters of credit involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated financial statements.risk. The Company’s exposure to credit loss in the event of nonperformance by the other party to these commitments to extend credit and standby letters of credit is represented by their contractual amounts. The Company uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending. The Company had various outstanding commitments to extend credit approximating $233.2$239.9 million and standby letters of credit of $8.7$8.8 million as of December 31, 2024.2025.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES. This document contains certain financial information determined by methods other than in accordance with generally accepted accounting principles in the United States (GAAP). The tangible common equity ratio and tangible book value per share are considered to be non-GAAP measures and are calculated by dividing tangible common equity by tangible assets or shares outstanding. The Company believes that these non-GAAP financial measures provide information to investors that is useful in understanding its financial condition. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures, and because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies.

The Company measures expected credit losses on held to maturity debt securities, which are comprised of U.S. government agency and mortgage-backed securities as well as taxable municipal, corporate, and other bonds. The Company’s agency and mortgage-backed securities are issued by U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. As such, no allowance for credit losses has been established for these securities. The allowance for credit losses on the taxable municipal, corporate, and other bonds within the held to maturity securities portfolio is calculated using the PD/LGD method. The calculation is completed on a quarterly basis using the default studies provided by an industry leading source. Based on management judgment, certain qualitative adjustments, such as the Company’s historical loss experience and/or the issuer’s credit quality, may be applied.

The Company measures expected credit losses on available for sale debt securities when the Company does not intend to sell, or when it is not more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available for sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. At times, based on management judgment, the Company may establish an allowance for credit losses in excess of the amount that the fair value is less than the amortized cost basis based on the specific circumstances surrounding the security.

Such factors include the following: (i) the effect of changing regional and national economic conditions; (ii) the effects of trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve; (iii) significant changes in interest rates and prepayment speeds; (iv) inflation, stock and bond market, and monetary fluctuations; (v) credit risks of commercial, real estate, consumer, and other lending activities; (vi) changes in federal and state banking and financial services laws and regulations and supervisory actions by such regulators, including bank failures; (vii) the presence in the Company’s market area of competitors with greater financial resources than the Company; (viii) the timely development of competitive new products and services by the Company and the acceptance of those products and services by customers and regulators (when required); (ix) the willingness of customers to substitute competitors’ products and services for those of the Company and vice versa; (x) changes in consumer spending and savings habits; (xi) unanticipated regulatory or judicial proceedings; (xii) the ability to attract new or retain existing deposits or to retain or grow loans, including growth from unfunded closed loans; (xiii) the ability to generate future revenue growth or to control future growth in non-interest expense, including, but not limited to, those related to technological changes, including changes regarding artificial intelligence and cybersecurity, changes affecting oversight of the financial services industry, and changes intended to manage or mitigate climate and related environmental risks; (xiv) the impact of failure in, or breach of, our operational or security systems or those of third parties with whom we do business, including as a result of cyberattacks or an increase in the incidence of fraud, illegal payments, security breaches or other illegal acts impacting us or our customers; (xv) unanticipated effects to our banking platform, including risks and unanticipated costs related to a core system migration; and (xvxvi) other external developments which could materially impact the Company’s operational and financial performance.

THREE MONTHS ENDED MARCHJUNE 31,30, 2026 VS. THREE MONTHS ENDED MARCHJUNE 31,30, 2025

The Company reported firstsecond quarter 2026 net income of $1,794,000,$2,738,000, or $0.11$0.16 per diluted common share. This performance represented a $114,000,$3.0 ormillion 6.0%, decreaseimprovement from the firstsecond quarter of 2025 when the net incomeloss totaled $1,908,000,$282,000, or $0.12$0.02 per diluted common share. DespiteRecord thequarterly lowerearnings level of net income, the Companywere achieved positive operating leverage in the firstsecond quarter of 2026 asdue to growth in total revenue increasedand atfavorable aasset fasterquality rate than total non-interest expense.trends. The increase in total revenue was theprimarily resultcaused ofby meaningful improvement in net interest income due to effective balance sheet management. Specifically,as the second quarter 2026 net interest margin increased by 25-basis24-basis points from the firstprior year’s second quarter of 2025 leading to ana $897,000$942,000 increase in net interest income. Overall,In addition, the improvementCompany’s inincreased net2026 interestsecond incomequarter wasearnings morereflected thana offset by higher total non-interest expense, the higherlower provision for credit losses, and the lower level of non-interest income resulting in the unfavorable earnings performance comparison between quarters.losses.

The following table compares the Company’s net interest income performance for the firstsecond quarter of 2026 to the firstsecond quarter of 2025 (in thousands, except percentages):

The Company's net interest income in the firstsecond quarter of 2026 increased by $897,000,$942,000, or 9.0%,9.1%, from the prior year's firstsecond quarter while the net interest margin of 3.26%3.34% for the firstsecond quarter of 2026 represented a 25-basis24-basis point improvement from the firstsecond quarter of 2025. The increase reflects controlled balance sheet growth, as both total earning assets and total deposits were at higher average levels due to the Company’s effective balance sheet management and business development strategies.management. This, combined with effective pricing strategies, resulted in both the total earning asset yield and cost of interest-bearing funds improving between years. The Federal Reserve’s action to lower short-term interest rates during the finallatter four monthsportion of 2025 favorably impacted total interest-bearing deposits and borrowings costs. In addition, while the U.S. Treasury yield curve was relatively flat on the short end, yields in the mid to long end of the curve were higher and demonstrated a more traditional steeper upward slope which favorably impacted earning asset yields. Management believes that the Company’s balance sheet is well positioned for further quarterly net interest income growth and net interest margin will continue to improve throughout 2026 given the Company’s effective execution of strategy.improvement.

Total average loans in the firstsecond quarter of 2026 declined from the 2025 firstsecond quarter average by $37.5$47.2 million, or 3.5%,4.4%, due to increased loan payoff activity, particularly from the commercial real estate (CRE) portfolio, during the second half of 2025 andwhich exceeded loan originations. TotalHowever, total loans continue to be above the $1.0 billion threshold, averaging $1.027$1.022 billion for the firstsecond quarter of 2026. Total loan interest income declineddecreased by $331,000, or 2.2%, in the firstsecond quarter of 2026 compared to last year’s firstsecond quarterquarter. asThis decline reflects the lower average loan balance more than offsetoffsetting the morebenefits favorableof a better interest rate environment in 2026, and a portion of CRE loans, that were booked during the COVID pandemic when interest rates were low, have been repricing upward during the first quarter of 2026. Total loan interest income decreased by $102,000, or 0.7%, when compared to the first quarter of 2025.

Investment securities, including the available for sale, held to maturity, and trading portfolios, averaged $278.8$303.3 million for the firstsecond quarter of 2026, which was $32.1$41.8 million, or 13.0%,16.0%, higher than the $246.7$261.5 million average for the firstsecond quarter of last year. Additionally, overnight short-term investments and bank deposits were higher by $17.0$21.1 million in the firstsecond quarter of 2026. These increases reflect the higher level of loan prepayment activityactivity, as well as the strengthening of the Company’s liquidity position throughout 2025 and the first quarter of 2026 due to deposit growth. Therefore, more funds were available to invest in the securities portfolio during a time when security yields improved, making purchases more attractive. New investment security purchases were also necessary to replace cash flow from maturing securities to maintain appropriate balances for pledging purposes related to public fundsfund deposits. The increased level of average investment securities along with improved yields for new securities purchased caused interest income from investment securitiesinvestments to increase by $438,000,$624,000, or 18.3%,24.2%, for the firstsecond quarter of 2026 compared to the same period in 2025. Overall, the average balance of total interest earning assets increased from last year’s firstsecond quarter average by $11.7$15.8 million, or 0.9%,1.2%, while total interest income increased by $480,000,$410,000, or 2.8%,2.3%, from the firstsecond quarter of 2025.

On the liability side of the balance sheet, total average deposits of $1.242$1.27 billion for the firstsecond quarter of 2026 were $24.5$29.8 million, or 2.0%,2.4%, higher than the 2025 firstsecond quarter average. The increase reflects the Company’s successful business development efforts. Additionally, the Company’s core deposit base continued to demonstrate the strength and stability that it has for many years due to customer loyalty and confidence in AmeriServ Financial Bank. The Company does not utilize brokered deposits as a funding source. The loan to deposit ratio averaged 82.7%80.5% in the firstsecond quarter of 2026, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support its customers and community during times of economic volatility.

Total interest expense in the firstsecond quarter of 2026 decreased favorably by $417,000,$532,000, or 5.9%,7.3%, when compared to the firstsecond quarter of 2025. Deposit interest expense decreased by $205,000,$344,000, or 3.3%,5.4%, despite total average interest-bearing deposits growing by $39.2$40.1 million, or 3.8%, compared to the firstsecond quarter of last year. The decrease in deposit interest expense reflects management’s effective deposit pricing strategies along with the benefit of the Federal Reserve easing monetary policy during the final four months of 2025. This reduction in interest-bearing deposit costs contributed to the previously mentioned improvement in the net interest margin. Overall, total deposit cost (including the benefit of non-interest-bearing demand deposits which decreased slightly between years) averaged 1.93%1.92% in the firstsecond quarter of 2026, which was ana 11-basis15-basis point improvement from the firstsecond quarter of 2025.

Total borrowings interest expense decreased by $212,000,$188,000, or 21.9%,21.2%, for the firstsecond quarter of 2026 when compared to the firstsecond quarter of 2025. The Company’s average utilization of overnight borrowed funds in the firstsecond quarter of 2026 was lower than the 2025 firstsecond quarter average level by $5.6$3.3 million, or 86.7%,91.5%, due to the higher level of total average deposits. Also, management elected not to replace the majority of maturing Federal Home Loan Bank (FHLB) term advances during the full year of 2025 and did not replace any during the first quarter of 2026 due to the strength of the Company’s liquidity position. Therefore, advances from the FHLB averaged $42.7 million for the first quarter of 2026, which was $12.2 million, or 22.2%, lower than the $54.9 million average for the 2025 first quarter. The decrease in borrowings interest expense also reflects the Federal Reserve’s 2025 action to ease monetary policy by 75-basis points which had an immediate and favorable impact on the cost of overnight borrowed funds. Additionally, advances from the Federal Home Loan Bank averaged $37.1 million for the second quarter of 2026, which was $13.8 million, or 27.0%, lower than the $50.9 million average for the 2025 second quarter.

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) for the three-month periods ended MarchJune 31,30, 2026 and 2025 setting forth (i) average assets, liabilities, and shareholders’ equity, (ii) interest income earned on interest earning assets and interest expense paid on interest bearing liabilities, (iii) average yields earned on interest earning assets and average rates paid on interest bearing liabilities, (iv) the Company’s interest rate spread (the difference between the average yield earned on interest earning assets and the average rate paid on interest bearing liabilities), and (v) the Company’s net interest margin (net interest income as a percentage of average total interest earning assets). For purposes of this table, loan balances include non-accrual loans and interest income on loans includes loan fees or amortization of such fees which have been deferred. Regulatory stock is included within available for sale investment securities for this analysis. Additionally, a tax rate of 21% was used to compute tax-equivalent interest income and yields (non-GAAP). The tax equivalent adjustments to interest income on loans, municipal securities, and trading securities for the three months ended MarchJune 31,30, 2026 and 2025 was $48,000$51,000 and $7,000,$14,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table. Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material.

Three months ended MarchJune 3130 (In thousands, except percentages)

…..PROVISION FOR CREDIT LOSSES…..The Company recorded a $217,000$294,000 provision for credit losses recovery in the second quarter of 2026 after recognizing a $3.1 million provision for credit losses in the first quarter of 2026 after recording a provision recovery of $97,000 in the firstsecond quarter of 2025, resulting in ana increasefavorable in expenseshift of $314,000.$3.4 million. The provision for credit losses recovery in the firstsecond quarter of 2026 reflected a $284,000$286,000 provision for credit lossesrecovery on loans resulting from updatesthe tocontinuing bothfavorable trend for historical loss rates andalong qualitativewith adjustments.a softening of reserve requirements due to the contraction in the size of the loan portfolio. In addition, $27,000a of$20,000 provision expenserecovery was recognized in the second quarter of 2026 for the investment securities portfolio primarily related to the creationcall of a partialheld reserveto maturity corporate security. The large provision for acredit seniorlosses debt corporate bond withinin the availablesecond for sale portfolio. Bothquarter of these2025 itemswas werenecessary partiallyto offset byresolve a $94,000large provisionnon-performing recoveryloan forwhich unfundedalso commitments due toincluded a declinerelated in$2.8 outstandingmillion loan commitments.charge-down.

…..NON-INTEREST INCOME…..Non-interest income for the firstsecond quarter of 2026 totaled $4.0$4.6 million and decreasedincreased by $154,000,$471,000, or 3.7%,11.5%, from the firstsecond quarter of 2025 performance. Factors contributing to the lowerhigher level of non-interest income for the quarter included:

…..NON-INTEREST EXPENSE…..Non-interest expense for the firstsecond quarter of 2026 totaled $12.4$12.8 million and increased by $595,000,$1.1 million, or 5.1%,9.3%, from the prior year’s firstsecond quarter. Factors contributing to the higher level of non-interest expense for the quarter included:

…..INCOME TAX EXPENSE…..The Company recorded income tax expense of $426,000,$661,000, or an effective tax rate of 19.2%,19.4%, in the firstsecond quarter of 2026. This compares to a credit for income tax expensetaxes of $478,000,$70,000 or an effective tax rate of 20.0%, forin the firstsecond quarter of 2025.

…..BALANCE SHEET…..The Company’s total consolidated assets were $1.5 billion at MarchJune 31,30, 2026, which increased by $18.8$8.3 million, or 1.3%,0.6%, from the December 31, 2025 asset level. This change was related primarily to higher levels of investment securities and other assets which were partially offset by reduced levels of cash and cash equivalents, investment securities,equivalents and otherloans assets.and loans held for sale. Investment securities, including held to maturity, available for sale and trading, increased by $14.5$43.5 million, or 5.7%,17.0%, as the Company’s liquidity position strengthened duringthroughout the first three monthshalf of 2026 allowing more funds to be available to invest in the securities portfolio. TheOther assets increased $4.3 million, or 9.6%, due to increases in the positive balance of the accrued pension liability, the market value for the interest rate swaps, and prepaid expenses as well as amounts receivable from the issuers of two called investment securities. Since the excess liquidity alsofrom resulteddeposit ingrowth was directed to the investment securities portfolio during the first half of 2026, cash and cash equivalents increasingdecreased by $3.2$22.8 million, or 6.3%.44.9%. OtherFinally, assetsloans increasedand $2.3loans held for sale decreased by $17.2 million, or 5.1%,1.7%, due to changespayoff inactivity theexceeding accruedloan pension obligation and prepaid expenses.originations.

Total deposits increased by $21.8$13.2 million, or 1.7%,1.1%, in the first threesix months of 2026. Management believes this demonstrates customer confidence as well as the strength and loyalty of the Company’s core deposit base. As of MarchJune 31,30, 2026, the 25 largest depositors represented 28.7%29.5% of total deposits, which increased slightly from December 31, 2025 when it was 28.5%. As of MarchJune 31,30, 2026 and December 31, 2025, the estimated amount of uninsured deposits was $495.1$497.0 million and $476.2 million, respectively. The estimate of uninsured deposits was done at the single account level and does not take into account total customer balances in the Bank. It should be noted that approximately 60% of these uninsured deposits relate to public funds from municipalities, government entities, and school districts which by law are required to be collateralized by investment securities or FHLB letters of credit to protect these depositor funds. FHLB term advances were reduced by $3.7$8.4 million, or 8.3%,18.9%, since year-end 2025 as a result of the higher level of deposits.

The Company’s total shareholders’ equity increased by $1.4$3.8 million, or 1.2%,3.2%, during the first quarterhalf of 2026. The increase in capital was the result of the Company’s earnings performance during the first threesix months of 2026 more than offsetting its common stock dividend paymentpayments to shareholders along with the positive impact on accumulated other comprehensive loss from the revaluation of the pension obligation. In addition, capital was increased as a result of the issuance of common stock under the amended and restated consulting agreement with SB Value Partners (as disclosed in the Company’s Current Report on Form 8-K filed on January 6, 2026).Partners. These increases were partially offset by the decline in the market value of the available for sale investment securities portfolio which had an unfavorable impact on accumulated other comprehensive loss.

The Bank continues to be considered well capitalized for regulatory purposes with a totalcommunity risk based capital ratio of 12.98% and an assetbank leverage ratio of 9.45%9.46% at MarchJune 31,30, 2026. See the discussion of the Basel III capital requirements under the Capital Resources section below. As of MarchJune 31,30, 2026, the Company’s book value per common share was $7.12$7.26 and its tangible book value per common share was $6.31$6.45(1). In addition, the Company’s equity to assetassets ratio was 8.20%8.42% and its tangible common equity to tangible assets ratio was 7.34%7.55%(1) at MarchJune 31,30, 2026. The tangible common equity ratio remainedincreased unchangedby from21-basis points when compared to December 31, 2025.

The slight decreaseincrease in accruing loan delinquency since year-end 2025 was attributable to a lowerhigher level of delinquency within the non-owner occupied commercial &real industrialestate retail loan class which was partially offset by ana increasedecrease in residential mortgage and consumer loan delinquency. Non-performing loans decreased from $8.3 million at December 31, 2025 to $8.0$7.7 million at MarchJune 31,30, 2026 due to the partial charge-down of a non-accrual CRE loan secured by retail property.property as well as paydown activity on a large non-accrual loan relationship. Risk rating upgrade activity and, to a lesser extent, the aforementioned charge-down and paydown activity contributed to the decrease in classified loans. Specifically, classified loans decreased $1.5$1.8 million, or 13.6%,16.1%, from December 31, 2025 and totaled $9.8$9.5 million at MarchJune 31,30, 2026.

Non-performing loans represented 0.78%0.76% of total loans as of MarchJune 31,30, 2026. The Company recognized net loan charge-offs of $206,000,$230,000, or 0.08%0.05% of total average loans, in the first quartersix months of 2026 compared to net loan charge-offs of $64,000,$3.0 million, or 0.02%0.56% of total average loans, in the first quartersix months of 2025.

We also continue to closely monitor the loan portfolio given the number of relatively large-sized commercial and commercial real estate loans within the portfolio. As of MarchJune 31,30, 2026, the 25 largest credits represented 25.8% of total loans outstanding, which increased from December 31, 2025 when it was 24.6%.

The banking regulatory agencies have expressed concerns about weaknesses in certain sectors of the current commercial real estate market. Banking regulators generally give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement enhanced risk management practices, including stricter underwriting, internal controls, risk management policies, more granular reporting, and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending growth and exposures. If the Company's banking regulators determine that our commercial real estate lending activities are particularly risky and are subject to such heightened scrutiny, the Company may incur significant additional costs or be required to restrict certain of our commercial real estate lending activities. Furthermore, failures in the Company's risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could have a material adverse effect on the Company's business, financial condition, and results of operations.

There is a particular regulatory emphasis on ensuring that a subsidiary bank has appropriate levels of capital to support its non-owner occupied commercial real estate loan concentration, which for the Bank stood at 352%335% as of MarchJune 31,30, 2026. It should be noted that this ratio remained unchangeddeclined from 352% at December 31, 2025 due to the growth of total regulatory capital in the first six months of 2026 combined with a decrease in the outstanding balance of non-owner occupied commercial real estate loans offsetting the growth in total regulatory capital during the first three months of 2026.loans. Further, non-owner occupied commercial real estate loans represented 50.8%50.0% and 50.4% of total loans as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

The allowance for loan credit losses increaseddecreased since December 31, 2025 by $78,000,$232,000, or 0.6%,1.8%, to $13.2$12.9 million at MarchJune 31,30, 2026. DespiteThe reduction in the slightallowance contractionbalance was the result of an improvement in asset quality and a decrease in outstanding loan balances since year-end 2025, the allowance balance grew as a result of updates to both the historical loss rates and qualitative adjustments.2025. Overall, the Company continues to maintain solid coverage of total loans as the allowance for loan credit losses provided 1.28%1.27% coverage of total loans at MarchJune 31,30, 2026. Additionally, at MarchJune 31,30, 2026, the allowance for loan credit losses provided 165%167% coverage of non-performing loans.

The allowance for credit losses on the investment securities portfolio was comprised of $34,000$30,000 on available for sale (AFS) securities and $83,000$67,000 on held to maturity (HTM) securities as of MarchJune 31,30, 2026. This compares to no reserve on available for saleAFS securities and $90,000 on held to maturityHTM securities as of December 31, 2025. The increase in the reserve on AFS securities reflects a partial reserve established for a senior debt corporate bond that was deemed to be credit impaired during the first quarterhalf of 2026. The decrease in the reserve on HTM securities reflects the call of a corporate bond. The decrease in the allowance for credit losses on unfunded commitments since year-end 2025 resulted primarily from a decline in outstanding loan commitments.

…..LIQUIDITY…..The Company’s liquidity position continued to strengthen during the first three monthshalf of 2026 due to loan prepayment activity as well as deposit growth. Specifically, total average deposits were $24.5$27.1 million, or 2.0%,2.2%, higher when compared to the 2025 first quartersix-month average. The increase reflects the Company’s successful business development efforts. The Company’s core deposit base continued to demonstrate the strength and stability that it has had for many years. As of MarchJune 31,30, 2026, total deposits grew by $21.8$13.2 million, or 1.7%,1.1%, since December 31, 2025, demonstrating customer loyalty and confidence in AmeriServ Financial Bank. In addition to its loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. The Company does not utilize brokered deposits as a funding source. Overall, deposit volumes continue to remain at a high level. The core deposit base is adequate to fund the Company’s operations. Cash flow from maturities, prepayments and amortization of securities can also be used to help fund loan growth.

Further demonstrating the strength of the Company’s liquidity position, average short-term investments and bank deposits grew in the first threesix months of 2026 compared to the first threesix months of last year, increasing by $17.0$19.1 million. Advances from the FHLB averaged $42.7$39.9 million in the first quarterhalf of 2026 which was $12.2$13.0 million, or 22.2%,24.5%, lower than the $54.9$52.9 million average in the first quarterhalf of 2025. Management continues to monitor the changing economic conditions and adjust pricing strategies accordingly which largely determines customer behavior and the level of total deposits as well as shifts within the total deposit mix. Also, diligent monitoring and management of our short-term investment position and our level of overnight borrowed funds remains a priority. Given the high cost of overnight borrowed funds, management has been effectively controlling the usage of this funding source. The Company’s utilization of overnight borrowed funds so far in the first quarter of 2026 washas been lower than the 2025 first quarter level. Total short-term borrowings averaged $851,000$577,000 for the first threesix months of 2026 after averaging $6.4$5.0 million for the first threesix months of 2025. Loan growth and prudent investment in securities are critical to achieve the best return on the normal level of earning asset cash flow that occurs each month. Due to the Company’s strengthened liquidity position, more funds were available to invest in the securities portfolio during a time when security yields improved, making purchases so far in 2026 more attractive. In addition, loan pipelines are currently at a typical level. Total average loans in the first quartersix months of 2026 were lower than the 2025 first quartersix-month average by $37.5$42.3 million, or 3.5%.4.0%. We strive to operate our loan to deposit ratio in a range of 80% to 100%. The Company’s loan to deposit ratio averaged 82.7%80.5% in the firstsecond quarter of 2026, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support its customers and community during times of economic volatility. We are also strongly positioned to service the existing loan pipeline and grow the loan to deposit ratio while remaining within the guideline parameters.

Liquidity can also be analyzed by utilizing the Consolidated Statements of Cash Flows. Cash and cash equivalents increaseddecreased by $3.2$22.8 million from December 31, 2025, to $54.1$28.0 million at MarchJune 31,30, 2026, due to $17.6$25.8 million of net cash used in investing activities and $759,000 of net cash used in operating activities which more than offset $3.7 million of net cash provided by financing activities and $356,000 of net cash provided by operating activities which more than offset $14.7 million of net cash used in investing activities. Within investing activities, cash advanced for new loans originated totaled $32.7$62.4 million while cash received from loan principal payments was $34.2$80.0 million leading to a net decrease in loans of $1.5$17.6 million. Additionally, investment security purchases exceeded maturities resulting in a net increase in securities of $15.9$43.1 million. Within financing activities, total borrowings on advances from FHLB decreased by $3.7$8.4 million while total deposits increased by $21.8$13.2 million.

The holding company had $5.6$6.2 million of cash, short-term investments, and investment securities at MarchJune 31,30, 2026, which represented a $167,000$801,000 increase infrom the holding company’s cash position since December 31, 2025. Dividend payments from our subsidiary provide ongoing cash to the holding company. At MarchJune 31,30, 2026, our subsidiary Bank had $8.7$10.9 million of cash available for immediate dividends to the holding company under applicable regulatory formulas. Additionally, the holding company has a $3 million line of credit with an unrelated financial institution which can be used for general corporate purposes. There were no borrowings under the line at MarchJune 31,30, 2026. Overall, we believe that the holding company has sufficient liquidity to meet its subordinated debt interest payments and its dividend payments on its common stock.

Financial institutions must maintain liquidity to meet the day-to-day requirements of depositors and borrowers, take advantage of market opportunities, and provide a cushion against unforeseen needs. Liquidity needs can be met by either reducing assets or increasing liabilities. Sources of asset liquidity are provided by short-term investments, interest bearing deposits with banks, and federal funds sold. These assets totaled $54.1$28.0 million and $50.9 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. Maturing and repaying loans, as well as the monthly cash flow associated with mortgage-backed securities and security maturities are other significant sources of asset liquidity for the Company.

Liability liquidity can be met by attracting deposits with competitive rates, using repurchase agreements, buying federal funds, or utilizing the facilities of the Federal Reserve or the FHLB systems. The Company utilizes a variety of these methods of liability liquidity. Additionally, the Company’s subsidiary bank is a member of the FHLB, which provides the opportunity to obtain short-term to longer-term advances based upon the Company’s investment in certain residential mortgage, commercial real estate, and commercial and industrial loans. At MarchJune 31,30, 2026, the Company had $288$268 million of overnight borrowing availability at the FHLB, $45$41 million of short-term borrowing availability at the Federal Reserve Bank and $35 million of unsecured federal funds lines with correspondent banks. The Company believes it has ample liquidity available to fund outstanding loan commitments if they were fully drawn upon.

Our current focus is on preserving capital to support customer lending and allow the Company to take advantage of business opportunities as they arise. We currently believe that we have sufficient capital and earnings power to continue to pay our common stock cash dividend at its current rate of $0.03 per quarter. The Company had a book value of $7.12$7.26 per common share and a tangible book value of $6.31$6.45(1) per common share on MarchJune 31,30, 2026. In addition, our common equity ratio was 8.20%8.42% and our tangible common equity ratio was 7.34%7.55%(1). At MarchJune 31,30, 2026, the Company had approximately 17.0 million common shares outstanding.

The Company believes that its overall interest rate risk position is well controlled. The fed funds rate was unchanged from year-end 2025 as the Federal Reserve has not taken further action to change interest rates so far in 2026. As of MarchJune 31,30, 2026, the fed funds rate was at a targeted range of 3.50% to 3.75%.

The variability of net interest income was slightly negative in the upward rate scenarios as the Company was marginally more exposed to liabilities repricing upward to a greater extent than assets. Specifically, the cost of funds was immediately impacted when short-term national interest rates increase because certain deposit products and overnight borrowed funds move with the market. This was partially offset by the Company’s investment securities portfolio and the scheduled repricing of loans tied to an index, such as SOFR or prime. In addition, the Company has effectively utilized interest rate swaps and hedges for interest rate risk management purposes. The interest rate swaps allow our customers to lock in fixed interest rates while the Company retains the benefit of interest rates moving with the market. The interest rate hedges fix the cost of certain deposits that are indexed and move with short-term interest rates which reduces the Company’s negative variability of net interest income in a rising interest rate environment. Regarding interest bearing liabilities, the Company will continue its disciplined approach to price its core deposit accounts in a controlled but competitive manner and control the amount of overnight borrowed funds. The variability of net interest income iswas negativeslightly positive in the downward rate scenarios as the Company has marginally more exposure to assetsshort-term liabilities repricing downward to a greater extent than liabilities.assets.

…..OFF BALANCE SHEET ARRANGEMENTS…..The Company incurs off-balance sheet risks in the normal course of business in order to meet the financing needs of its customers. These risks derive from commitments to extend credit and standby letters of credit. Such commitments and standby letters of credit involve, to varying degrees, elements of credit risk. The Company had various outstanding commitments to extend credit approximating $226.1$217.3 million and standby letters of credit of $8.8 million as of MarchJune 31,30, 2026. The Company’s exposure to credit loss in the event of nonperformance by the other party to these commitments to extend credit and standby letters of credit is represented by their contractual amounts. The Company uses the same credit and collateral policies in making commitments and conditional obligations as for all other lending.

The following table sets forth the calculation of the Company’s tangible common equity ratio and tangible book value per share at MarchJune 31,30, 2026 and December 31, 2025 (in thousands, except share and ratio data):

INCOME STATEMENT REFERENCE — Provision(Recovery) (recovery)provision for credit losses