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

The following management discussion and analysis of the Company’s consolidated financial condition as of MarchJune 31,30, 2026 and the results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 should be read in conjunction with the audited Consolidated Financial Statements, including notes thereto, and the other information therein included in the Company’s Special Financial Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission,Commission on April 24, 2026, and in conjunction with the Consolidated Statements of Financial Condition as of MarchJune 31,30, 2026, the Consolidated Statements of Income, the Consolidated Statements of Comprehensive Income, the Consolidated Statements of Changes in Stockholders’ Equity and the Consolidated Statements of Cash Flows for the three and six months ended MarchJune 31,30, 2026 and 2025. The Consolidated Statement of Financial Condition as of December 31, 2025 was derived from the audited Consolidated Statements of Financial Condition that was included in the Company’s Special Financial Report on Form 10-K for the year ended December 31, 2025. As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” and the “Company” refer to Ballston Spa Bancorp, Inc., and its consolidated subsidiaries, unless otherwise noted.

Our accounting policies are integral to understanding the results reported. We consider accounting policies that require management to exercise significant judgment or discretion or to make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. As of MarchJune 31,30, 2026, there have been no material changes to our critical accounting policies as compared to the critical accounting policies disclosed in our most recent Special Financial Report on Form 10-K for the year ended December 31, 2025.

Comparison of Financial Condition at MarchJune 31,30, 2026 and December 31, 2025

CashTotal andAssets. CashTotal Equivalents. Cash and cash equivalentsassets increased $19.7$435.9 million, or 70.11%,46.95%, to $47.8$1.4 millionbillion at MarchJune 31,30, 2026 from $28.1$928.5 million at December 31, 2025,2025 primarily asdue ato resultthe acquisition of the Company’s junior subordinated note issuance of $25.4 million, net of applicable fees, on March 25, 2026.NBC.

Securities.Cash Totaland securitiesCash decreasedEquivalents. $3.9Cash and cash equivalents increased $65.0 million, or 5.86%,231.32%, to $62.7$93.1 million at MarchJune 31,30, 2026 from $66.6$28.1 million at December 31, 2025. The decreaseincrease was dueprimarily todriven by cash acquired in the BankNBC increasing its overall liquidity position as well as the regular principalacquisition and interesthigher paymentsshort-term oninvestment Ballston Spa’s securities portfolio.balances.

Loans. Loans held for investment, net, decreasedincreased $2.2$302.5 million, or 0.28%,38.07%, to $792.3$1.097 millionbillion at MarchJune 31,30, 2026 from $794.5 million at December 31, 2025. Commercial real estateGross loans decreasedincreased $1.6$306.9 million, or 0.43%,38.21%, to $368.8$1.110 millionbillion at MarchJune 31,30, 2026 from $370.4$803.2 million at December 31, 2025. ResidentialThese increases were due primarily to the loan portfolio acquired from NBC, partially offset by the sale of approximately $50 million of acquired mortgage loans decreasedduring $1.0the second quarter. Compared with December 31, 2025, commercial real estate and commercial and industrial loans increased by $192.9 million, orresidential 0.31%,real estate and HELOCs increased by $107.3 million, and consumer loans increased by $6.1 million As a result of purchase accounting on the acquired loan portfolio, the allowance for credit losses increased $4.4 million to $317.7$13.1 million at MarchJune 31,30, 2026 from $318.7$8.7 million at December 31, 2025.

TotalJunior Shareholders’subordinated Equity.debentures. TotalJunior shareholders’subordinated equitydebentures decreasedincreased $0.4$32.1 million, or 0.56%,411.54%, to $70.7$39.9 million at MarchJune 31,30, 2026 from $71.1$7.8 million at December 31, 2025. The decreaseincrease resultedreflected fromthe otherissuance comprehensiveof lossadditional duesubordinated to unrealized lossesdebt in the investmentfirst portfolioquarter, as well as dividendsubordinated paymentsdebt whichliabilities wereassumed offsetduring bythe netNBC income.acquisition.

Comparison of Operating Results for the Three Months Ended MarchJune 31,30, 2026 and 2025

General. Net income decreased $1.1$1.9 million, or 84.62%,158.33%, to $0.2a net loss of $0.7 million for the three months ended MarchJune 31,30, 2026 from $1.3$1.2 million of net income for the three months ended MarchJune 31,30, 2025. The decrease was driven by ana $7.9 million increase in non-interest expenses—expenses, primarily merger expenses, compensation and benefits, merger-relatedother expense, andexpenses, occupancy and equipment—equipment, data processing, and debit card processing, partially offset by ana $4.4 million increase in net interest income.income, a $0.7 million increase in non-interest income, and a $0.2 million decrease in provision for credit losses.

IncomeBased Taxon Expense.Ballston TheSpa’s evaluation of the above factors, Ballston Spa recorded no provision for incomecredit taxes was $0.2 millionlosses for the three months ended MarchJune 31,30, 2026, compared to $0.3 million$150,000 for the three months ended MarchJune 31,30, 2025.2025, a decrease of $0.2 million, or 100.00%.

Liquidity is the ability to fund assets and meet obligations as they come due. Ballston Spa’s primary sources of funds consist of deposit inflows, loan repayments, and repayments from investment securities. In addition, Ballston Spa has the ability to collateralize borrowings in the wholesale markets or borrow advances from the Federal Home Loan Bank of New York. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Ballston Spa’s ALCO Committee is responsible for establishing and monitoring its liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of its customers as well as unanticipated contingencies. Ballston Spa seeks to maintain a ratio of liquid assets (including cash and federal funds sold) as a percentage of total deposits ranging between 1% and 25%. At MarchJune 31,30, 2026, this ratio was 5.00%.7.76%. Ballston Spa believes that it has enough sources of liquidity to satisfy its short- and long-term liquidity needs as of MarchJune 31,30, 2026. Ballston Spa anticipates that it will maintain higher liquidity levels following the completion of the transaction.

Ballston Spa’s most liquid assets are cash and cash equivalents. The levels of these assets depend on its operating, financing and investing activities during any given period. At MarchJune 31,30, 2026, cash and cash equivalents totaled $47.8$93.1 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $62.7 million at March 31, 2026.

At MarchJune 31,30, 2026, Ballston Spa had $65.3$73.4 million in outstanding loan commitments and $35.2$37.6 million of unused lines of credit. Certificates of deposit due within one year of MarchJune 31,30, 2026 totaled $141.2$222.2 million, or 10.00%18.52% of total deposits. If these deposits do not remain with Ballston Spa, it will be required to seek other sources of funds, including loan sales, other deposit products, including replacement certificates of deposit, securities sold under agreements to repurchase (repurchase agreements) and advances from the Federal Home Loan Bank of New York and other borrowing sources. Depending on market conditions, Ballston Spa may be required to pay higher rates on such deposits or other borrowings than it currently pays on the certificates of deposit due on or after MarchJune 31,30, 2026. Ballston Spa believes, however, based on past experience that a significant portion of such deposits will remain with it. Ballston Spa has the ability to attract and retain deposits by adjusting the interest rates offered.

Ballston Spa’s primary investing activities are originating and purchasing loans and purchasing mortgage-backed securities. During the threesix months endingended MarchJune 31,30, 2026, Ballston Spa originated $19.3$87.1 million of loans. Ballston Spa didpurchased not$39.4 purchasemillion anyin investment securities during the threesix months ended MarchJune 31,30, 2026.

Financing activities consist primarily of activity in deposit accounts. Ballston Spa experienced a net increase in total deposits of $42.5$434.7 million for the threesix months ended MarchJune 31,30, 2026. The increase resulted primarily from athe $42.5acquisition millionof increase in NOW and money market accounts and a $4.1 million increase in time deposits, offset by a $2.3 million decrease in demand deposit accounts and a $1.8 million decrease in savings accounts.NBC. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by Ballston Spa and its local competitors, and by other factors.

Ballston Spa had $20.0$17.3 million and $74.0 million in borrowings with the Federal Home Loan Bank of New York at MarchJune 31,30, 2026 and December 31, 2025, respectively. The decrease in Federal Home Loan Bank of New York borrowings was due to an increaseincreased inlevel depositsof andliquidity stemming from the issuanceacquisition of $26.0NBC, millionenabling inBSNB juniorto subordinatedpay notesdown inits March, 2026.borrowings.

Ballston Spa National Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At MarchJune 31,30, 2026 and December 31, 2025, Ballston Spa National Bank exceeded all regulatory capital requirements. Ballston Spa National Bank is considered “well capitalized” under regulatory guidelines.

See tables below for a summary of actual capital amounts (dollars in thousands) and ratios as of MarchJune 31,30, 2026 and December 31, 2025 for the Bank and the Company (on a consolidated basis):

For a discussion of the impact of recent accounting pronouncements, see Note 1 of the Notes to the Ballston Spa Bancorp, Inc. unaudited financial statements included in this document.

Non-Performing Assets. The following table sets forth information regarding Ballston Spa’s non-performing assets as of MarchJune 31,30, 2026 and December 31, 2025.

Classification of Assets. Ballston Spa’s policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that Ballston Spa will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted. Assets that do not expose Ballston Spa to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve Ballston Spa’s close attention, are required to be designated as special mention. As of March 31, 2026 and December 31, 2025, Ballston Spa had $3.7$4.9 million and $4.9 million, respectively, in assets designated as special mention.

Allowance for Credit Losses. The allowance for credit losses is the amount estimated by management as necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. Ballston Spa’s determination as to the classification of its assets and the amount of its loss allowances are subject to review by the OCC, which can require that Ballston Spa establish additional loss allowances. Ballston Spa regularly reviews its asset portfolio to determine whether any assets require classification in accordance with applicable regulations. On the basis of Ballston Spa’s review of its assets at MarchJune 31,30, 2026, Ballston Spa had $1.8$17.2 million of assets classified as substandard, and no assets classified as doubtful or loss. At December 31, 2025, Ballston Spa had $2.2 million of assets classified as substandard, and no assets classified as doubtful or loss.

The following table sets forth activity in Ballston Spa’s allowance for credit losses by portfolio class for periods indicated (in thousands).indicated.

General. The goals of Ballston Spa’s investment policy isare to maximize portfolio yield over the long term in a manner that is consistent with minimizing risk, and meeting liquidity needs, pledging requirements, and asset/liability management and interest rate risk strategies. Subject to loan demand and Ballston Spa’s interest rate risk analysis, Ballston Spa will increase the balance of its investment securities portfolio when it has excess liquidity.

At MarchJune 31,30, 2026, Ballston Spa’s investment portfolio consisted primarily of securities and obligations issued by U.S. government-sponsored enterprises totaling $3.0$29.6 million, securities and obligations issued by New York and its political subdivisions of $11.9$27.5 million, residential mortgage-backed securities of $42.3$51.1 million, collateralized mortgage obligations totaling $42$2.8 thousandmillion and corporate securities of $5.5$4.0 million. At MarchJune 31,30, 2026, Ballston Spa also owned $5.7$7.0 million of Federal Home Loan Bank of New York stock. As a member of Federal Home Loan Bank of New York, Ballston Spa is required to purchase stock in the Federal Home Loan Bank of New York, which is carried at cost and classified as a restricted investment.

At MarchJune 31,30, 2026, all of Ballston Spa’s available-for-sale securities are carried at fair value through accumulated other comprehensive income.

Deposit Accounts. Deposits are primarily attracted from within Ballston Spa’s market area through the offering of a broad selection of deposit instruments, including non-interest-bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW accounts), savings accounts, money market accounts and certificates of deposit. As of MarchJune 31,30, 2026, Ballston Spa holds $144.1$157.7 million of accounts from a variety of local municipal relationships. As of MarchJune 31,30, 2026 Ballston Spa also has $60.4$85.2 million of brokered deposits.