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

Our loan portfolio includes commercial, commercial real estateestate, and commercial construction loans that may have higher risks than other types of loans.

Regulators have the right to require banks to maintain elevated levels of capital or liquidity due to commercial real estate loan concentrations, and could do so, especially if there is a downturn in our local real estate markets. In addition, when underwriting a commercial or industrial loan, we may take a security interest in commercial real estate, and, in some instances upon a default by the borrower, we may foreclose on and take title to the property, which results in added expense in the incurrenceform of taxtax, insurance and other maintenance costscosts, and which may lead to potential financial risks for us under applicable environmental laws. If hazardous substances were discovered on any of these properties, we may be liable to governmental agencies or third parties for the costs of remediation of the hazard, as well as for personal injury and property damage. Many environmental laws can impose liability regardless of whether the accused lender knew of, or had been responsible for, the contamination.

Furthermore, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related real estate or commercial project. If the cash flows from the project are reduced, a borrower's ability to repay the loan may be impaired. This cash flow shortage may result in the failure to make loan payments. In such cases, we The First Bancorp - 2025 Form 10-K - Page 8 may be compelled to modify the terms of the loan. In addition, the nature of these loans is such that they are generally less predictable and more difficult to evaluate and monitor. As a result, repayment of these loans may, to a greater extent than residential loans, be subject to adverse conditions in the real estate market or the broader economy.

Residential foreclosures in Maine occur through the judicial system. Under ideal circumstances, it can take as little as six months to foreclose on a Maine property; however, if the borrower contests the foreclosure or the court delays the foreclosure, the process may take up to two years, or longer in some instances. In 2009, the Maine Legislature passed "An Act to Preserve Home Ownership and Stabilize the Economy by Preventing Unnecessary Foreclosures." This law provides for mediation of foreclosure of residential mortgages and borrowers may choose mediation in which partieseach party must attend court supervised mediation sessions and evaluate foreclosure alternatives in good faith. This law also provides that issues such as reinstatement of the mortgage, modification of the loan and restructuring of the mortgage debt are to be addressed at these mediation sessions. Given the uncertain timeframe related to foreclosure in Maine, the Bank can incur additional legal fees and other costs, such as payment of property taxes and insurance, if the foreclosure process is extended. In addition, the value of the property may further decline if the borrower fails to maintain the property in good order or market conditions worsen during this extended period.

Changes in interest rates have and could continue to adversely affect our net interest income and profitability.

Our earnings and cash flows are largely dependent upon our net interest income. Net interest income is the difference between interest income earned on interest-earning assets, such as loans and securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions, demand for loans, securities and deposits, and policies of various governmental and The First Bancorp - 2024 Form 10-K - Page 10 regulatory agencies and, in particular, the Board of Governors of the Federal Reserve System. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but such changes could also affect:

Volatile market conditions may detrimentally affect the value of securities held in our portfolio due to the perception of heightened credit and liquidity risks. There can be no assurance that the declines in market value associated with these disruptions will not result in other than temporary impairments of these assets, which would lead to accounting charges that could have a material adverse effect on our net income and capital levels. Our mortgage-backed bond portfolio may be subject to extension risk as interest rates rise, extending the average life of the bonds. As of December 31, 2024,2025, wethe Bank's investment portfolio had $274.7market values of $264.5 million and $369.9$356.1 million in available for sale and held to maturity investment securities, respectively. Numerous factors, including lack of liquidity for re-sales of certain investment securities, absence of reliable pricing information for investment securities, adverse changes in business climate, adverse actions by regulators, rising interest rates, or unanticipated changes in the competitive environment could have a negative effect on our investment portfolio in future periods. If an impairment charge is significant enough it could affect the ability of the Bank to renew funding. This could have a material adverse effect on our liquidity and the Bank's ability to upstream dividends to the Company and for the Company to then pay dividends to shareholders. It could also negatively impact our regulatory capital ratios and result in our not being classified as "well-capitalized" for regulatory purposes.

Liquidity is essential to our business. An inability to raise funds through traditional deposits, brokered deposit renewalsissuance, renewal or rollovers,rollover, secured or unsecured borrowings, the sale of securities or loans or other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry or the economy in general, or could be available only under terms which are unacceptable to us. We rely primarily on commercial and retail deposits and, to a lesser extent, brokered deposit issuances, renewals and rollovers, advances from the Federal Home Loan Bank of Boston (the "FHLB") and other secured and unsecured borrowings to fund our operations. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated, adverse regulatory action against us, changes in market interest rates or increased competition for funding within our market. Disruptions in the capital markets or interest rate changes may make the terms of wholesale funding sources less favorable and may make it difficult for us to sell securities when needed to provide additional liquidity. In addition, if we fall below the FDIC's thresholds to be considered "well capitalized", we will be unable to issue new brokered deposits, continue to roll over or renew brokered funds, and the interest rate we pay on deposits in general would be subject to restrictions. As a result, there is a risk that our cost of funding will increase or we will not have sufficient funds to meet our obligations when they become due.

Checking and savings, NOW, and money market deposit account balances and other forms of customer deposits can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return proposition. If The First Bancorp - 2025 Form 10-K - Page 10 customers move money out of bank deposits and into other investments, we could lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income. Advances from the FHLB are typically a reliable source of funding and often less expensive than other types of wholesale funding. The availability of qualified collateral on the Bank's balance sheet determines the level of advances available from FHLB and a deterioration in quality in the Bank's loan portfolio can adversely impact the availability of this source of funding, which could increase our funding costs and reduce our net interest income.

Our future success and profitability are substantially dependent upon the management and banking abilities of our senior executives. Changes in key personnel may be disruptive to our business and could have a material adverse effect on our business, financial condition and results of operations. We believe that our future results will also depend in part upon our attracting and retaining highly skilled and qualified management. The current employment landscape includes a low national and local unemployment rate, continued upward wage pressures, and for some positions increased workplace flexibility brought about by remote work options. Competition for the best people in most activities in which we are engaged can be intense, and we may not be able to retain or hire the people we want and/or need. In order to attract and retain qualified employees, we must compensate such employees at market levels. Typically, those levels have caused employee compensation to be our greatest operating expense. If we are unable to continue to attract and retain qualified employees, or do so at increased rates necessary to maintain our competitive position, our performance, including our competitive position, could suffer, and, in turn, have a material adverse effect on us. Although we have incentive compensation plans aimed, in part, at long-term employee retention, the unexpected loss of services of one or more of our key personnel could still occur, and such events may have a material adverse effect on us because of the loss of the employee's skills, knowledge of our market, and years of industry experience, and the difficulty of promptly finding qualified replacement personnel for our talented executives and/or relationship managers.

We face the risk that the design of our controls and procedures, including those intended to mitigate the risk of fraud by employees or outsiders, may prove to be inadequate or may be circumvented, thereby causing delays in detection of errors or inaccuracies in data and information. Although Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures, the Company's systems of internal controls, disclosure controls and corporate governance policies and procedures are inherently limited. The inherent limitations of our system of internal controls include the use of judgment in decision-making that can be faulty; breakdowns can occur because of The First Bancorp - 2025 Form 10-K - Page 11 human error; and controls can be circumvented by individual acts or by collusion of two or more people. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations of a cost-effective control system, misstatements due to error or fraud may occur and may not be detected, which may have an adverse effect on the Company's business, results of operations or financial condition. While the Company is not aware of any such events, remediation of any identified limitations may be ineffective in improving internal controls.

We continually encounter technological change that may be difficult (costly) to keep up with. The financial services industry is continually undergoing technological change with frequent introductions of new technology-driventechnology driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Our largest competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry, and increased costs due to efforts to keep pace with change, could have a material adverse effect on us. To date, there has been no material adverse effect on our business or operations due to failure of keeping pace with technological change. As a result of recent innovations related to artificial intelligence ("AI"), the Bank has created a task force to analyze current and future use cases for AI to ensure it is used effectively and securely.

In the event of a failure, interruption or breach of our information systems and business operations, we may be unable to avoid impact to our customers and business. Other U.S. financial service institutions and companies have reported breaches in the security of their websites or other systems and have experienced significant distributed denial-of-service attacks, some of which involved sophisticated and targeted attacks intended to disable or degrade service, or sabotage systems. Other potential attacks have attempted to obtain unauthorized access to confidential information or destroy data, often through the introduction of computer viruses or malware, cyberattacks and other means. To date, none of these efforts has had a material adverse effect on our business or operations. However, our costs of preventing, detecting, and addressing such threats or attacks continue to increase. Such security attacks can originate from a wide variety of sources, including persons who are involved with organized The First Bancorp - 2025 Form 10-K - Page 12 crime or who may be linked to terrorist organizations or hostile foreign governments. Those same parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or funds or those of our customers or clients. The Bank regularly works with a third party information security consultant to review and test various systems, and has an ongoing information security training program for employees. Despite these efforts our security systems may not be able to protect our information systems from similar attacks due to the rapid evolution and creation of sophisticated cyberattacks. We are also subject to the risk that our employees, without authorization,authorization may intercept and transmit confidential or proprietary information. An interception, misuse or mishandling of personal, confidential or proprietary information being sent to or received from a customer or third party could result in legal liability, remediation costs, regulatory action and reputational harm.

We also have risk related to data or security breaches affecting other companies. Under Federal banking regulations, if a consumer’s debit card is compromised, the liability for unauthorized transactions falls primarily on the issuing financial institution, not on the consumer or the company which experienced the data or security breach. Since the introduction of EMV The First Bancorp - 2024 Form 10-K - Page 13 or Chip cards, we have had the ability to charge back fraudulent transactions to the acquiring merchant if that merchant does not have an EMV capable terminal. In the normal course of business the Bank issues EMV/Chip debit cards to its customers to keep this risk as low as possible. Since most terminals are now EMV compliant, we have added processing rules to reject any transactions presented on our customers' cards with only magnetic stripe (fall back) data.

Banking regulators and other supervisory authorities, investors and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change both directly and with respect to their customers. This focus may result in financial institutions coming under increased pressure regarding the monitoring and disclosure, and management of climate risks in related lending and investment activities. OngoingAny potential future legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs, and may affect the activities in which we engage and the products that we offer.

Our business has been andWe may continue to be adversely affected by conditionsvolatility in theUnited financial marketsStates and global economic conditions generallyand changes in fiscal, monetary, trade, and byregulatory increased regulation.policies.

Bank holding companies and nationally charterednational banks operate in a highly regulated environment and are subject to supervision and examination by various regulatory agencies.agencies, as discussed earlier. The cost of compliance with regulatory requirements may adversely affect our results of operations or financial condition. Federal and state laws and regulations govern numerous matters including but not limited to: changes in the ownership or control of banks and bank holding companies; maintenance of adequate capital and the financial condition of a financial institution; permissible types, amounts and terms of extensions of credit and investments; permissible non-banking activities; the required level of reserves against deposits; assessments for federal deposit insurance, and restrictions on dividend payments. These and other restrictions limit the manner in which we may conduct our business and obtain financing. If we fail to meet minimum regulatory capital guidelines and other regulatory requirements, our financial condition would be materially and adversely affected. Our failure to maintain the status of "well-capitalized" under our regulatory framework could affect the confidence of our customers in us, thus compromising our competitive position, or could cause our regulators to take corrective or other supervisory action. The newregulatory administrationframework electedmay tochange theover leadtime thebased upon economic conditions, legislative or executive branch ofinitiatives, theor federalother governmentfactors couldand seek to makethese changes in the regulatory framework which may or may not be beneficial to the Company.Company or the Bank.

Basel III Capital Rules may increase our capital requirements or otherwise limit future activity.

In July 2023 US bank regulators jointly published proposed rulemaking for Basel III Finalization, also referred to as Basel III Endgame or B3E. The proposal significantly altersaltered the regulatory capital regime for US banks, generally increasing required capital levels for banks with $100 billion or more in assets,assets however,with thepotential proposal is expected to be abandoned or substantially altered by the new executive branch leadership . If implemented in its current form, B3E could havefor unintended consequences on regional and community banks whose total assets are below threshold, such as the Bank, andwhich could result in lower returns on equity, require additional capital, limit lending activities, or limit distributions such as dividends. The 2023 B3E proposal was ultimately withdrawn, and a new proposal is expected in 2026 with likely implementation in 2027. The Company and Bank will continue to monitor and assess any changes.

In addition, in a weak economic environment, bank regulators may imposeexpect the Bank or the Company to adopt capital requirementsstandards that are more stringent than those required by applicable existing regulations. The application of more stringent capital requirementsstandards could result in lower returns on equity, require the raising of more capital, or result in adverse regulatory actions or other consequences if we are unable to comply with such requirements.standards. Implementation of changes to asset risk weightings for risk-based capital calculations, items included or deducted in calculating regulatory capital, or additional capital conservation buffers could result in management modifying our business strategy and could limit our ability to make distributions, including paying dividends or repurchasing our shares, or to grow the Bank's business.

We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and have more financial resources than we do.do and, in some cases, are not subject to the same regulatory restrictions as the Company and the Bank. We compete with other providers of financial services such as commercial and savings banks, savings and loan associations, credit unions, money market and mutual funds, mortgage companies, asset managers, insurance companies and a wide array of other local, regional and national institutions which offer financial services. MergersWe face competitive pressure from multiple directions. Large out-of-state banks maintain a growing presence in our primary market, offering both brick-and-mortar branch networks and sophisticated mobile and digital platforms. At the same time, smaller community banks and local credit unions compete for the same customer base by offering similar banking products and services, often with a The First Bancorp - 2025 Form 10-K - Page 15 similarly personalized approach. The introduction and growing acceptance of digital currencies represents an emerging form of competition for deposits and payment services. Furthermore, mergers between financial institutions within Maine and in nearby states have added competitive pressure. If we are unable to compete effectively, we will lose market share and our income generated from loans, deposits, and other financial products will decline.

Our Board of Directors may determine from time to time that we need to raise additional capital by issuing additional shares of our common stock or other securities. Except pursuant to the rules of the NASDAQ Stock Market, we are not restricted from issuing additional shares of common stock, including securities that are convertible into or exchangeable for, or that represent the right to receive, common stock to the extent of our authorized but unissued capital stock. Because our decision to issue The First Bancorp - 2025 Form 10-K - Page 16 securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future offerings, or the prices at which such offerings may be effected. Such offerings could be dilutive to common shareholders or reduce the market price of our common stock. Holders of our common stock are not entitled to preemptive rights or protection against dilution. New investors also may have rights, preferences and privileges that are senior to, and that adversely affect, our then-current common shareholders. We may attempt to increase our capital resources or, if our or the Bank's capital ratios fall below the required minimums, we could be forced to raise additional capital, by making offerings of debt or preferred equity securities, including medium-term notes, trust preferred securities, senior or subordinated notes and preferred stock. Upon liquidation, holders of shares of our preferred stock and lenders with respect to other borrowings would receive distributions of our available assets prior to the holders of our common stock. Our Board of Directors is authorized to issue one or more series of preferred stock from time to time without any action on the part of our shareholders (except as may be required under NASDAQ Stock Market rules). Our Board of Directors also has the power, without shareholder approval (except as may be required under NASDAQ Stock Market rules), to set the terms of any such series of preferred stock that may be issued, including voting rights, dividend rights and preferences over our common stock with respect to dividends or upon our dissolution, winding-up and liquidation and other terms. If we issue preferred stock in the future that has a preference over our common stock with respect to the payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the rights of holders of our common stock and the market price of our common stock could be adversely affected.

Some investors may consider how corporations, such as the Company, are addressing environmental, social and governance matters, commonly known as "ESG" matters when making investment decisions. Investor advocacy groups, investment funds and influential investors (collectively "influencers") are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Specific examples of matters being evaluated as part of the investment decision or recommendation by certain investors and influencers include the business risks of climate The First Bancorp - 2024 Form 10-K - Page 17 change and the adequacy of companies’ responses to climate change, diversity of a company's management and/or board of directors, community involvement and charitable giving, and the inclusion of ESG factors in the determination of executive compensation. These shifts in investing priorities may result in adverse effects on the trading price of the Company’s common stock if investors determine, whether real or perceived, that the Company's ESG actions are not satisfactory. In addition, new government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. Increased ESG related compliance costs could result in increases to our overall operational costs.

The abbreviations and descriptions identified below aremay be used throughout Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation and Item 8 - Financial Statement and Supplementary Data. The following is provided to aid the reader and provide a reference page when reviewing these sections of the Form 10-K.

Fair Value of Securities. Determining a market price for securities carried at fair value is a critical accounting estimate in the Company's financial statements. Pricing of individual securities is subject to a number of factors including changes in market interest rates, changes in prepayment speeds and assumptions, changes in market tolerance for risk, and any changes in the risk profile of the security. The Company subscribes to a widely recognized, independent pricing service and updates The First Bancorp - 2024 Form 10-K - Page 23 carrying values no less frequently than monthly. It also validates the values provided by the pricing service no less frequently than quarterly by measuring against security prices provided by a secondary source. Results of the validation are reported to the ALCO each quarter and any variances between the two sources above defined thresholds are investigated by management. A finding that the Company's methodology for valuation of its investment securities is materially incorrect could result in changes to the carrying value of securities on its balance sheet and corresponding changes in shareholders equity position. As of December 31, 20242025 the fair value of AFS securities decreased by $7.4$10.2 million and the fair value of HTM securities decreasedincreased by $23.6 million$489,000 from that of December 31, 2023.2024. These changes are due to a combination of rate-driven market price adjustments for the underlying securities and reinvestment of incoming cash flow to other segments of the balance sheet. Further discussion of the fair value of securities may be found in Note 3, "Investment Securities", to the consolidated financial statements contained in Item 8 of the Form 10-K.

Derivative Financial Instruments Designated as Hedges. The Company recognizes all derivatives in the consolidated balance sheets at fair value. On the date a derivative contract is entered into, the derivative is designated as a hedge of either a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), or a held for trading instrument (“trading instrument”). The relationships between hedging instruments and hedged items is formally documented, as is the risk management objectives and strategy for undertaking various hedge transactions. Both at the hedge’s inception and on an ongoing basis, determination is made as to whether the derivatives that are used in hedging transactions are effective in offsetting changes in cash flows or fair values of hedged items. Changes in fair value of a derivative The First Bancorp - 2025 Form 10-K - Page 24 that is effective and that qualifies as a cash flow hedge are recorded in OCI and are reclassified into earnings when the forecasted transaction or related cash flows affect earnings. Changes in fair value of a derivative that qualifies as a fair value hedge and the change in fair value of the hedged item are both recorded in earnings and offset each other when the transaction is effective. Those derivatives that are classified as trading instruments, including customer loan swaps, are recorded at fair The First Bancorp - 2024 Form 10-K - Page 24 value with changes in fair value recorded in earnings. Hedge accounting is discontinued when it is determined that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item, that it is unlikely that the forecasted transaction will occur, or that the designation of the derivative as a hedging instrument is no longer appropriate. Among the factors that may influence the fair value of a derivative instrument are changes in market interest rates, changes in the time remaining to maturity of the instrument, or credit quality of the counter-party. Further information, including period-to-period changes in the fair value of derivatives, may be found in Note 14, "Financial Derivative Instruments", to the consolidated financial statements contained in Item 8 of the Form 10-K.

Certain information in release Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Report contains financial information determined by methods other than in accordance with GAAP. Management uses these “non-GAAP” measures in its analysis of the Company's performance (including for purposes of determining the compensation of certain executive officers and other Company employees) and believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods and with other financial institutions, as well as demonstrating the effects of significant gains and charges in the current period, in light of the disclosure practices employed by many other publicly-traded financial institutions. The Company believes that a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. Management believes that investors may use these non-GAAP financial measures to analyze financial performance without the impact of unusual items that may obscure trends in the Company's underlying performance. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non- GAAP performance measures that may be presented by other companies.

To provide period-to-period comparison of operating results prior to consideration of credit loss provision and income taxes, the non-GAAP measure of Pre-Tax, Pre-ProvisionPTPP Net Income is presented. The following table provides a reconciliation to Net Income:

The Company reported net income for the year ended December 31, 20242025 of $27.0$34.4 million, downup $2.5$7.3 million or 8.4%27.2% from $29.5$27.0 million reported for the year ended December 31, 2023.2024. Earnings per common share on a fully diluted basis were $2.43$3.07 and $2.66,$2.43, respectively, for the same periods, downup $0.24$0.64 or 8.9%.26.3%.

During 2024,2025, total assets increased $210.3$9.3 million or 7.1%,0.3%, ending the year at $3.157$3.166 billion. The loan portfolio increased $211.5$53.2 million or 9.9%2.3% in 2024,2025, ending the year at $2.341$2.394 billion. The investment portfolio was down $19.1$22.9 million or 2.8%3.5% as cash flow from matured and amortizing securities was redeployed to other segments of the balance sheet rather than reinvested. On the liability side of the balance sheet, core deposits increased $81.0$77.0 million or 5.3%,4.8%, to $1.610$1.687 billion as of December 31, 2024.2025. Certificates of deposit increaseddecreased $44.6$137.5 million or 4.2%12.3% from the end of 2023.2024. Local CDs increaseddecreased $5.3$12.2 million and wholesale CDs increaseddecreased $39.3$125.3 million at December 31, 20242025 compared to December 31, 2023.2024.

Asset quality continues to be strong and stable.favorable. Non-performing loans stood at 0.18%0.54% of total loans as of December 31, 20242025 consistentup withfrom the 0.10% level0.18% of non-performing loans a year ago.ago, but remaining below long-term averages. Net chargeoffs were $463,000,$1.6 million, or 0.02%0.07% of average loans in 2024,2025, compared to $233,000,$463,000, or 0.01%0.02% of average loans for the year ended December 31, 2023.2024. Past due loans were 0.40%0.90% of total loans as of December 31, 2024,2025, a modestan increase from 0.18%0.40% of total loans at December 31, 2023.2024. The allowance as a percentage of loans outstanding stood at 1.06% in 2024,2025, downlevel from 1.13% atwith December 31, 2023.2024. The provision for credit losses on loans was $1.3$2.0 million in 2024,2025, as compared to $1.3 million in 2023.2024.

MaintainingThe a strongCompany's capital position isimproved in 2025, the result of improved profitability and a topslower priorityrate forof balance sheet expansion as compared to the Company.prior several years. The Company's total risk-based capital ratio was 13.22%14.02% as of December 31, 2024,2025, solidly above the well-capitalized threshold of 10.0% set by the FDIC, the FRB, and the OCC.

EarningsOn performancea intax-equivalent 2024basis, was solid though down from the prior year's level. Netnet interest income onincreased a tax-equivalent basis decreased $1.2$13.5 million or 1.7%20.3% for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. Total interest income increased $20.7$11.4 million, or 16.1%,7.7%, from 2023,2024, while total interest expense increaseddecreased $22.0$2.0 million, or 34.9%.2.4%. The Company's tax-equivalent net interest margin was 2.29%2.63% in 2024,2025, compared to 2.49%2.29% in 2023.2024. Net interest margin by quarter was 2.22%,2.48%, 2.21%,2.52%, 2.32%2.70% and 2.42%2.83% for the first through fourth quarters of 2024,2025, respectively, as compared to 2.78%,2.22%, 2.46%,2.21%, 2.40%,2.32%, and 2.34%2.42% in the same periods of 2023.2024.

Non-interest expense in 20242025 was $47.2$50.9 million, an increase of $3.4$3.8 million or 7.8%8.0% from the $43.8$47.2 million reported in 2023.2024. Employee salary and benefit expense increased $2.3$2.8 million or 10.4%11.4% from the prior year. Asset growth and premium calculation variances led to a $429,000$331,000 increase in deposit insurance premiums from the prior year. Income taxes on operating earnings were $5.5$7.5 million for the year ended December 31, 2024,2025, downup $645,000$2.0 million from the same period in 2023.2024.

TheImproved earnings performance led to a corresponding improvement in the Company's operating ratiosratios. remain favorable, with a returnReturn on average assets of 0.89%1.08% and a return on average tangible common equity (non-GAAP) of 12.35%14.50% for the year ended December 31, 2024.2025, compare favorably to 0.89% and 12.35%, respectively, for the prior year. Our non-GAAP efficiency ratio continues to be an important component in our overall performance and stoodimproved atto 56.66%52.09% infor 2024.2025. Dividends paid to shareholders totaled $1.43$1.47 per share, representing 58.44%47.39% of basic earnings per share for the year.

Net interest income on a tax-equivalent basis decreasedincreased 1.7%20.3% or $1.2$13.5 million to $66.7$80.2 million for the year ended December 31, 20242025 from the $67.9$66.7 million reported for the year ended December 31, 2023.2024. The Company's net interest margin was 2.29%2.63% in 2024,2025, compared to 2.49%2.29% in 2023.2024.

Total interest income on a tax-equivalent basis in 20242025 was $151.6$163.1 million, an increase of $20.8$11.5 million or 15.9%7.6% from the $130.8$151.6 million posted by the Company in 2023.2024. GrowthA shift in earning assetsasset composition from investments to higher-yielding loans The First Bancorp - 2025 Form 10-K - Page 27 coupled with higher interest rates on both new loans and re-pricing ofre-priced legacy transactions resultedcontributed to the increase in theinterest period to period increase.income. Total interest expense in 20242025 was $84.9$82.9 million, ana increasedecrease of $22.0$2.0 million or 34.9%2.4% from the $63.0$84.9 million posted by the Company in 2023.2024. HigherGenerally lower market interest rates resulting from prior FOMC actions coupled with changinggrowth customerin productlocal preferencesdeposits tothat higherallowed costfor moneya marketreduction andin CDhigher-cost productswholesale ledfunding each contributed to the period to period increase, resulting in the decrease in net interest income.expense decrease. Tax-exempt interest income amounted to $10.7 million for the year ended December 31, 2025, and $10.5 million for the year ended December 31, 2024, and $9.9 million for the year ended December 31, 2023.2024.

Non-interest income in 20242025 was $16.36$17.3 million, an increase of $918,000$985,000 or 5.9%6.0% from the $15.44$16.4 million reported in 2023.2024. The year-to-year increase in non-interest income is primarily attributable to Wealth Management revenue growth of $309,000$464,000 or 6.6%9.3% from 2023,2024, and an increase in other operating income of $395,000$357,000 or 14.6%,11.5%, during the same period. Mortgage banking revenue droppedincreased 2.3%$52,000 or 6.5% from 2023, as higher interest rates muted origination activity, negatively impacting both gain on sale income2024 and mortgage servicing rights valuation. Debit card revenue increased $72,000 or 1.3% year-over-year, while service charge revenues increased $161,000,$113,000, or 8.5%.5.5% year-over-year.

Non-interest expense in 20242025 was $47.2$50.9 million, an increase of $3.4$3.8 million or 7.8%8.0% from the $43.8$47.2 million reported in 2023.2024. Employee salary and benefit expense increased 10.4%$2.8 million or 11.4% from the prior year, centeredattributable into wagea combination of salary adjustments, FTEincentive count,compensation accruals, increased benefit costs, and benefitseveral costs.one-time Aexpenses largerresulting assetfrom baseretirements. coupledFDIC withinsurance premiums increased by $331,000 attributable to various factor changes in several pricing formulas factors led to $429,000 increase in deposit insurance premiums from the priorpremium year.calculation. Occupancy expenseFurniture and furniture & equipment expense eachwas hadup modest$256,000 dollaror increases4.6% on higher software costs, and other operating expense increased $396,000 or 3.4%. from 2023.2024.

The Company's provision to the ACL-LoansACL loans was $2.0 million in 2025, up from $1.3 million in 2024, level with provision of $1.3 millionprovisioned in 2023.2024. The ACL-LoansACL loans stood at 1.06% of total loans as of December 31, 2024,2025, compared to 1.13%1.06% as of December 31, 2023.2024.

Net loan charge-offs in 20242025 were $463,000$1.6 million or 0.02%0.07% of average loans, up from $233,000$463,000 or 0.01%0.02% of loans in 2023.2024. Non-performing assets stood at 0.14%0.41% of total assets as of December 31, 20242025 compared to 0.07%0.14% of total assets at December 31, 2023.2024. The change in non-performing assets is primarily centered in two credit relationships in which resolution activities have commenced and against which specific reserves have been established. Past-due loans were 0.90% of total loans as of December 31, 2025, an increase from 0.40% of total loans as of December 31, 2024, a modest increase from 0.18% of total loans as of December 31, 2023.2024.

Income taxes on operating earnings were $5.5$7.5 million for the year ended December 31, 2024,2025, downup $645,000$2.0 million from 2023.2024.

Net income for 20242025 was $27.0$34.4 million, downup 8.4%27.2% or $2.5$7.3 million from net income of $29.5$27.0 million that was posted in 2023.2024. Earnings per share on a fully diluted basis for 20242025 were $2.43,$3.07, downup $0.24$0.64 or 8.9%26.3% from the $2.66$2.43 reported for the year ended December 31, 2023.2024.

Return on average assets in 20242025 was 0.89%,1.08%, downup from the 1.03%0.89% posted in 2023.2024. Return on average tangible common equity was 12.35%14.50% in 2024,2025, compared to 14.50%12.35% in 2023.2024. In 2024,2025, the Company's dividend payout ratio (dividends declared per share divided by earnings per share) was 58.44%,47.39%, compared to 51.87%58.44% in 2023.2024. The Company's non-GAAP efficiency ratio – a benchmark measure of the amount spent to generate a dollar of income – was 56.66%52.09% in 2024,2025, compared to 52.43%56.66% in 2023.2024.

Non-performing assets to total assets stood at 0.14%0.41% at December 31, 2024,2025, up slightly from the 0.07%0.14% of total assets at December 31, 2023.2024. In general terms, the Company's long-standing approach to working with borrowers and ethical loan underwriting standards helps alleviate some of the payment problems on customers' loans and minimizes actual loan losses, in Management's opinion. There was no OREO or related allowance at December 31, 2025. The Companycompany held one OREO property with a carrying value of $173,000, net of an allowance of $35,000 aton December 31, 2024. There was no OREO or related allowance at December 31, 2023.

Net chargeoffs in 20242025 were $463,000$1.6 million or 0.02%0.07% of average loans outstanding, up $230,000$1.1 million from 2023.2024. Residential real estate term loans represent 30.4%30.9% of the total loan portfolio, and this loan category generally has a lower level of losses in comparison to other loan types. In 2024,2025, residential mortgages had a lossnet ratiorecovery of 0.001% compared to a loss ratio of 0.020%0.065% for the entire loan portfolio. The Company does not have a credit card portfolio or offer dealer consumer loans, which generally carry more risk and potentially higher losses than other types of consumer credit.

As of December 31, 2024,2025, the Company had AFS debt securities in an unrealized loss position with a fair value of $257.6$228.7 million and unrealized losses of $54.2$40.1 million, as identified in the table below. Securities in a continuous unrealized loss position of twelve months or more amounted to a fair value $234.1$226.9 million as of December 31, 2024,2025, compared with $257.7$234.1 million at December 31, 2023.2024. The Company has concluded that these securities are fully collectible and that no charge against the allowance is required. This conclusion was based on the issuer's continued satisfaction of the securities obligations in accordance with their contractual terms and the expectation that the issuer will continue to do so, Management's intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in fair value which may be at maturity, the expectation that the Company will receive 100% of future contractual cash flows, as well as the evaluation of the fundamentals of the issuer's financial condition and other objective evidence. The following table summarizes AFS debt securities in an unrealized loss position for which an ACL has not been recorded at December 31, 2024.2025:

AFS Obligations of state and political subdivisions. As of December 31, 2024,2025, the total unrealized losses on municipal securities amounted to $6.9$5.0 million, compared with $5.7$6.9 million at December 31, 2023.2024. Municipal securities are supported by the general taxing authority of the municipality and, in the cases of school districts, are generally supported by state aid. At December 31, 2024,2025, all municipal bond issuers were current on contractually obligated interest and principal payments. The Company attributes the unrealized losses at December 31, 20242025 to changes in prevailing market yields and pricing spreads since the date the underlying securities were purchased, combined with current market liquidity conditions and disruptionmarket in the financial marketsconditions in general. The Company has the ability and intent to hold these securities until a recovery of their amortized cost, which may be at maturity, and believes that 100% of the amounts contractually due will be realized.

AFS Asset-backed securities. As of December 31,2024,31, 2025, total unrealized losses on asset-backed securities were $0,$15,000, compared with $9,000none at December 31, 2023.2024. These securities consist of U.S Government backed student loans along with other credit enhancements.

The loan portfolio increased $211.5$53.2 million or 9.9%2.3% in 2024,2025, with total loans of $2.394 billion at December 31, 2025, compared to $2.341 billion at December 31, 2024, compared to $2.129 billion at December 31, 2023.2024. Commercial loans increased $141.6$17.5 million or 11.4%1.3% between December 31, 20232024 and December 31, 2024.2025. Residential term loans increased by $36.0$28.4 million or 5.3%4.0%, home equity lines of credit increased $19.2 million or 15.6%, and municipal loans increaseddecreased by $10.4$9.8 million or 20.2%15.8% over the same period.

As of December 31, 2024 and 2023,2025, the Bank had twoone concentrationsconcentration of loans in twoone particular industriesindustry that exceeded 10% of its total loan portfolio: (1) loans to lessors of residential buildings and dwellings, totaling $266.1 million, or 11.11%. This compares to two concentrations of loans in two particular industries that exceeded 10% of its total loan portfolio as of December 31, 2024: (1) loans to lessors of residential buildings and dwellings, totaling $260.7 million, or 11.14%, and $217.5 million, or 10.21%, of total loans, respectively; and (2) loanloans to hotels (except Casino hotels) and motels, totaling $242.1 million, or 10.34%, and $231.5 million, or 10.87%,10.34% of total loans, respectively.loans.

The ACL is increased by provisions charged against current earnings. Loan losses are charged against the allowance when Management believes that the collectibility of the loan principal is unlikely. Recoveries on loans previously charged off are credited to the allowance. The adequacy of the ACL is overseen by the ACL Committee whose membership includes senior level personnel from the Executive, Lending, Credit Administration,Risk, and Finance functions of the Bank. While Management uses available information to assess possible losses on loans, future additions to the allowance may be necessary based on increases in non-performing loans, changes in economic conditions or outlook, growth in loan portfolios, or for other reasons. Any future additions to the allowance would be recognized in the period in which they were determined to be necessary. In addition, various regulatory agencies periodically review the Company's ACL as an integral part of their examination process. Such agencies may require the Company to record additions to the allowance based on judgments different from those of Management.

The ACL includes reserve amounts assigned to IAL. This includes loans with balances of $250,000 or more that have either been placed into non-accrual or are loans identified by management as having characteristics that may impact ultimate collectability and therefore merit individual analysis. A specific reserve is allocated to an individual loan when the amount of a probable loss is estimable on the basis of its collateral value, the present value of anticipated future cash flows, or its net realizable value. At December 31, 2024,2025, IALs with specific reserves totaled $1.7$4.1 million and the amount of such reserves was $1.0$2.7 million. This compares to IALs with specific reserves of $919,000$1.7 million at December 31, 20232024 and the amount of such reserves was $264,000.$1.0 million. Additional detail on IALs may be found in Note 5 of the accompanying financial statements.

Based upon Management's evaluation, provisions are made to maintain the allowance as a best estimate of expected losses within the portfolio. The provision for credit losses to maintain the allowance was $1.3$2.0 million in 20242025 compared to $1.3 million in 2023.2024. Net charge offs were $463,000$1.6 million in 20242025 compared to net charge offs of $233,000$463,000 in 2023.2024. The ACL as a percentage of outstanding loans was at 1.06% at December 31, 20242025 compared to 1.13%1.06% at December 31, 2023.2024.

The amounts shown for total nonperforming loans do not include loans 90 or more days past due and still accruing interest. These are loans in which we expect to collect all amounts due, including past-due interest. As of December 31, 2024,2025, loans 90 or more days past due and still accruing interest totaled $1.0 million,$665,000, compared to $429,000$1.0 million at December 31, 2023.2024.

The Bank's overall loan delinquency ratio was 0.90% at December 31, 2025, versus 0.40% at December 31, 2024, versus 0.18% at December 31, 2023.2024. Loans 90 days delinquent and accruing increaseddecreased from $429,000$1.0 million at December 31, 20232024 to $1.0 million$665,000 as of December 31, 2024.2025.

Potential problem loans consist of classified, accruing commercial and commercial real estate loans that were between 30 and 89 days past due. Such loans are characterized by weaknesses in the financial condition of borrowers or collateral deficiencies. Based on historical experience, the credit quality of some of these loans may improve due to improvements in the economy as well as changes in collateral values or the financial condition of the borrowers, while the credit quality of other loans may deteriorate, resulting in some amount of loss. At December 31, 2024,2025, there waswere five potential problem loans with a balance of $3.7 million or 0.156% of total loans. This compared to one potential problem loan with a balance of $84,000 or 0.004% of total loans. This compares to three potential problem loans with a balance of $180,000 or 0.010% of total loans at December 31, 2023.2024.

As of December 31, 2024,2025, there were threeseven residential loans in the process of foreclosure with a total balance of $192,000.$1.8 million and one home equity line of credit totaling $63,000. The Bank's residential foreclosure process begins when a loan becomes 75 days past due at which time a Demand/Breach Letter is sent to the borrower. If the loan becomes 120 days past due, copies of the promissory note and mortgage deed are forwarded to the Bank's attorney for review and a complaint for foreclosure is then prepared. An authorized Bank officer signs the affidavit certifying the validity of the documents and verification of the past due amount which is then forwarded to the court. Once a Motion for Summary Judgment is granted, a POR begins which gives the customer 90 days to cure the default. A foreclosure auction date is then set 30 days from the POR expiration date if the default is not cured.

As of December 31, 2024,2025, there were noseven commercial loans in the process of foreclosure.foreclosure with a total balance of $3.8 million. The Bank's commercial foreclosure process begins when a loan becomes 60 days past due, at which time a default letter is issued. At expiration of the period to cure default, which lasts 12 days after the issuing of the default letter, copies of the The First Bancorp - 2025 Form 10-K - Page 41 promissory note and mortgage deed are forwarded to the Bank's attorney for review. A Notice of Statutory Power of Sale is then prepared. This notice must be The First Bancorp - 2024 Form 10-K - Page 41 published for three consecutive weeks in a newspaper located in the county in which the property is located. A notice also must be issued to the mortgagor and all parties of interest 21 days prior to the sale. The foreclosure auction occurs and the Affidavit of Sale is recorded within the appropriate county within 30 days of the sale.

The Bank’s written policies and procedures for foreclosures, along with its implementation of same,said policies and procedures, are subject to annual review by its internal audit provider. The scope of this review includes loans held in portfolio and loans serviced for others. There were no issues requiring management attention in the most recent review. Servicing for others includes loans sold to FHLMC, FNMA, and the FHLBB through its MPF program. The Bank follows the published guidelines of each investor. Loans serviced for FHLMC and FNMA have been sold without recourse, and the Bank has no liability for these loans in the event of foreclosure. A de minimis volume of loans has been sold to and serviced for MPF to date. The Bank retains a second loss layer credit enhancement obligation; no losses have been recorded on this credit enhancement obligation since the Bank started selling loans to MPF in 2013.

OREO and repossessed assets are comprised of properties or other assets acquired through a foreclosure proceeding, or acceptance of a deed or title in lieu of foreclosure. Real estate acquired through foreclosure is carried at the lower of cost or fair value less estimated cost to sell or the cost of the asset and is not included as part of the ACL totals. At December 31, 2025 there were no OREO properties and no allowance for losses. This compares to December 31, 2024 when there was one OREO property owned with an OREOa balance of $173,000, net of an allowance for OREO losses of $35,000. This compares to December 31, 2023, when there were no OREO properties and no allowance for losses. The table below presents the composition of OREO at December 31, 20242025 and 20232024:

Liquidity is the ability of a financial institution to meet maturing liability obligations, depositor withdrawal requests, and customer loan demand. The Bank's lead source of liquidity is deposits, including brokered deposits, which funded 85.6%85.1% of total average assets in 2024,2025, as compared to 87.3%85.6% a year ago. Other sources of funding include discretionary use of purchased liabilities (e.g., FHLBB term or overnight advances, and other borrowings), cash flows from the securities portfolio and loan repayments. Securities designated as AFS may also be sold in response to short-term or long-term liquidity needs, although The First Bancorp - 2025 Form 10-K - Page 42 Management has no intention to do so at this time. While the generally preferred funding strategy is to attract and retain low cost deposits, our ability to do so is affected by competitive interest rates and terms in the marketplace.

During 2024,2025, total deposits increaseddecreased by $125.6$60.5 million, ending the year at $2.725$2.665 billion compared to $2.600$2.725 billion at December 31, 2023.2024. Low-costCore depositsdeposit (demand, NOW, and savings accounts)balances increased by $10.3$77.0 million or 0.8%4.8%, duringfocused the year,in money market depositsaccounts. increasedCertificates $70.7of Deposit decreased $137.5 million or 23.1%,12.3% andwith certificatesthe preponderance of depositthe increaseddecrease $44.6being millionbrokered ortime 4.2%.deposits.

Borrowed funds consists of advances from the FHLBB, advances from the FRBB Discount Window, and securities repurchase agreements with customers. Advances from the FHLBB are secured with pledged collateral consisting of FHLBB stock, funds on deposit with FHLBB, U.S. Agency notes, mortgage-backed securities, and qualifying first mortgage loans. FRBB Discount Window advances are similarly secured with collateral consisting of FRBB stock, funds on deposit at FRBB, U.S. Agency notes or other eligible securities, and qualifying commercial, home equity and construction loans. As of December 31, 2024,2025, term advances from FHLBB totaled $95.0$137.5 million, with a weighted average interest rate of 3.74%3.77% per annumannum. Overnight and short-term (maturing within thirty days) advances totaled $42 million, while longer term advances with remaining maturities ranging from twoone to five years; theretotaled were$95.5 no overnight advances.million. This compares to no term advances from FHLBB and overnight advances totaling $20.1$95.0 million, with an interest rate of 5.52%3.74% per annum as of December 31, 2023.2024; Eachthere ofwere no overnight advances. Of the $95.5 million in longer term advances takenoutstanding downas inof 2024December 31, 2025, advances totaling $95.0 million grant a put option to FHLBB to recall the advance at periodic intervals based upon interest rate movement and outlook.

The maximum amount of borrowed funds outstanding at any month-end during each of the last two years was $218.4 million at the end of February in 2025 and $230.6 million at the end of June in 2024 and $165.6 million at the end of April in 2023.2024. The average amount outstanding during 20242025 was $178.1 million with a weighted average interest rate of 3.48% per annum. This compares to an average outstanding amount of $162.9 million with a weighted average interest rate of 3.38% per annum. This compares to an average outstanding amount of $105.0 million with a weighted average interest rate of 1.87% per annum in 2023.2024.

During 2024,2025, the Company declared cash dividends of $0.35$0.36 per share in the first quarter and $0.36$0.37 per share in the remaining three quarters, or $1.43$1.47 per share for the year. The dividend payout ratio, which is calculated by dividing dividends declared per share by dilutedbasic earnings per share, was 47.39% for the year ended December 31, 2025 compared to 58.44% for the year ended December 31, 2024 compared to 51.87% for the year ended December 31, 2023.2024. In determining future dividend payout levels, the Board of Directors carefully analyzes capital requirements and earnings retention, as set forth in the Company's Dividend Policy. The ability of the Company to pay cash dividends to its shareholders depends on receipt of dividends from its subsidiary, the Bank. The subsidiary may pay dividends to its parent out of so much of its net profits as the Bank's directors deem appropriate, subject to the limitation that the total of all dividends declared by the Bank in any calendar year may not exceed the total of its net profits of that year combined with its The First Bancorp - 20242025 Form 10-K - Page 44 with its retained net profits of the preceding two years. The amount available for dividends in 20252026 is this year's net income plus $27.9$31.8 million.

Capital at December 31, 20242025 was sufficient to meet the requirements of regulatory authorities. Leverage capital of the Company, or total shareholders' equity divided by average total assets for the current quarter less goodwill and any net unrealized gain or loss on securities AFS and postretirement benefits, stood at 8.47%8.84% on December 31, 20242025 and 8.61%8.47% at December 31, 2023.2024. To be rated "well-capitalized", regulatory requirements call for a minimum leverage capital ratio of 5.00%. Given itstheir capital structure,structures, the regulatory Tier 1 capital and CET1 ratios are equal.equal for both the Bank and the Company. At December 31, 2024,2025, the Company had CET1 and tier-one risk-based capital ratios of 12.04%,12.84%, and a tier-two, or total, risk-based capital ratio of 13.22%,14.02%, versus 12.42%12.04% and 13.66%,13.22%, respectively, at December 31, 2023.2024. To be rated "well-capitalized", regulatory requirements call for minimum CET1, tier-one and tier-two risk-based capital ratios of 6.50%, 8.00% and 10.00%, respectively. The Company's actual levels of capitalization were comfortably above the standards to be rated "well-capitalized" by regulatory authorities.

In the threesix months ended MarchJune 31,30, 2026 the ACL-Loans decreased by $156,000,$810,000, the ACL-Off-Balance Commitments decreased by $29,000$12,000 and the ACL-HTM Securities decreased by $1,000.$3,000. Further discussion of the ACL may be found in Note 2, "Investment Securities", Note 3, "Loans", and Note 4, "Allowance for Credit Losses", to the consolidated financial statements contained in Item 1 of the Form 10-Q.

Fair Value of Securities. Determining a market price for securities carried at fair value is a critical accounting estimate in the Company's financial statements. Pricing of individual securities is subject to a number of factors including changes in market interest rates, changes in prepayment speeds and assumptions, changes in market tolerance for risk, and any changes in the risk profile of the security. The Company subscribes to a widely recognized, independent pricing service and updates carrying values no less frequently than monthly. It also validates the values provided by the pricing service no less frequently than quarterly by measuring against security prices provided by a secondary source. Results of the validation are reported to the ALCO each quarter and any variances between the two sources above defined thresholds are investigated by management. A finding that the Company's methodology for valuation of its investment securities is materially incorrect could result in changes to the carrying value of securities on its balance sheet and corresponding changes in shareholders equity position. As of MarchJune 31,30, 2026 the fair value of AFS securities decreasedincreased by $7.7$11.6 million and the fair value of HTM securities decreased by $6.8$4.3 million from that of December 31, 2025. The decreaseincrease in the fair value of AFS securities is attributable to new purchases, and partially offset by a combination of rate-driven market price adjustments for the underlying securities, and principal returned via maturity, call, sale, or amortization, and new purchases.amortization. The decrease in the fair value of HTM securities is primarily attributable to a combination of rate-driven price adjustments for the underlying securities,securities along withand principal return via call or maturity. Further discussion of the fair value of securities may be found in Note 2, "Investment Securities", to the consolidated financial statements contained in Item 1 of the Form 10-Q.

Net income for the threesix months ended MarchJune 31,30, 2026 was $9.0$18.6 million, up $1.9$3.4 million or 27.1%22.5% from the same period in 2025. Earnings per common share on a fully diluted basis were $0.80$1.65 for the threesix months ended MarchJune 31,30, 2026, up $0.17$0.29 or 26.8%22.0% from the $0.63$1.35 posted for the same period in 2025. Dividends totaling $0.37$0.75 per share have been declared year-to-date, representing a payout to our shareholders of 45.7%44.9% of basic earnings per share for the period. On a PTPP basis, earnings for the threesix months ended MarchJune 31,30, 2026 were $11.5$24.0 million, up $2.6$4.7 million, or 28.7%24.2% from the prior year.

Net interest income on a tax-equivalent basis was up $2.8$5.6 million or 15.4%14.8% in the threesix months ended MarchJune 31,30, 2026 compared to the same period in 2025. The tax equivalent net interest margin for the threesix months ended MarchJune 31,30, 2026, was 2.86%,2.87%, up from 2.48%2.50% for the same period in 2025. The period-to-period change in net interest income and net interest margin is attributable to favorable changes on both sides of the balance sheetsheet. as an increase inThe tax equivalent yield on earning assets wasremained coupledstable withdespite decreaserate cuts by the FOMC, while funding costs fell. The same factors influenced the quarter ended June 30, 2026, as net interest income on a tax-equivalent basis increased $2.7 million or 14.3% compared to the same three-month period in 2025, and net interest margin improved to 2.88%, up from 2.52% for the costsame ofperiod totalin liabilities.2025.

Non-interest income for the threesix months ended MarchJune 31,30, 2026 was $4.5$9.1 million, up $449,000$981,000 or 11.2%,12.1%, from the threesix months ended MarchJune 31,30, 2025. The increase was centered in Wealth Management revenue which was up $169,000$381,000 or 12.8%14.4% from the prior year, and other operating income which increased $228,000$439,000 or 28.9%.28.6%.

Non-interest expense for the threesix months ended MarchJune 31,30, 2026 was $13.6$27.0 million, up $772,000$2.0 million or 6.0%7.8% from the threesix months ended MarchJune 31,30, 2025. The period-to-period change is centered in employee salaries and benefits, resulting from annual salary adjustments, lower deferred salaries, and higher health insurance expenses.

Asset quality continues to be satisfactory. Non-performing assets stood at 0.51%0.54% of total assets as of MarchJune 31,30, 2026, up slightly from 0.41%0.51% as of December 31, 2025 and up from 0.19% of total assets as of MarchJune 31,30, 2025. Total past-due loans were 1.14%0.93% of total loans as of MarchJune 31,30, 2026, up slightly from 0.90% and up from 0.33%0.23% of total loans as of December 31, 2025 and MarchJune 31,30, 2025, respectively.

The provision for credit losses on loans for the first threesix months of 2026 was $650,000,$1.6 million, up from the $396,000$744,000 provisioned in the same period in 2025. Net charge-offs for the threesix months ended MarchJune 31,30, 2026 were $806,000$2.4 million or 0.034%0.20% of total loans, compared to net charge-offs of $153,000$786,000 or 0.026%0.07% as of the threesix months ended MarchJune 31,30, 2025. The ACL for loans decreased $156,000$810,000 between December 31, 2025 and MarchJune 31,30, 2026, with $415,000 of the reduction coming from changes in reserve estimates on IALs, and $395,000 from pooled reserve requirements resulting from changes in portfolio composition, economic factors and other quantitative inputs. The ACL-Loans now stands at 1.05%1.01% of loans outstanding as of MarchJune 31,30, 2026, as compared to 1.06%1.05% at December 31, 2025 and 1.05%1.04% at MarchJune 31,30, 2025.

The Company's balance sheet continued to expand in the first threesix months of 2026 as total assets increased $34.5$49.8 million or 1.1%1.6% year-to-date. The loan portfolio increased $11.0$29.6 million or 0.5%1.2% in the threesix months ended MarchJune 31,30, 2026 and $22.0has increased $29.7 million or 0.9% from a year ago. CommercialDriving loansbalance increasedchanges byyear-to-date $2.3 million duringin the period,commercial ledloan bysegments increasesof inthe owner-occupiedportfolio were commercial real estate of& $4.3construction millionloans andwhich decreased $14.7 million, commercial & industrial loans ofwhich $16.1increased million, while non-owner occupied commercial real estate decreased $4.8 million, multifamily decreased $8.5$17.2 million, and constructionmultifamily loanloans balanceswhich decreased $4.8$19.1 million. ResidentialElsewhere, residential loans increased by $4.0$16.0 million andmillion, home equity loans increased by $4.9$18.0 million, and municipal loans increased $8.8 million in the first threesix months of 2026. The investment portfolio has decreasedincreased $9.5$8.1 million year-to-date and decreased $37.7$17.1 million from a year ago based upon cash flow of amortizing securities, limitedmeasured levels of reinvestment or new purchases, and changes in the carrying value of AFS securities.

On the liability side of the balance sheet, total deposits at MarchJune 31,30, 2026 were $2.66$2.68 billion, unchangedan increase of $15.0 million from year-end 2025. Low-cost deposits (Demand, NOW, Savings) decreased $42.1$39.7 million year-to-date and money market balances decreased $16.5$47.6 million. These decreases in non-maturity deposits are consistent with historical, seasonal patterns in the first half of the year. Local CDs increaseddecreased $5.8$5.2 million while wholesale CDs decreasedhave $52.7increased $107.6 million year-to-date.year-to-date During the same period,and borrowings increased by $8.0$26.2 million.million, mostly short-term.

Remaining well capitalized is a top priority for Thethe Company. The Company's total risk-based capital ratio was 14.05%14.23% as of MarchJune 31,30, 2026, solidly above the well-capitalized threshold of 10.0% set by the FDIC, the FRBB, and the OCC.

Among the Company's operating ratios, the return on average assets was 1.15%1.18% and return on average tangible common equity of 14.15%14.41% for the threesix months ended MarchJune 31,30, 2026 compared to 0.91%0.96% and 12.64%,13.31%, respectively, for the same period in 2025. The Company's PTPP return of average assets for the threesix months ended MarchJune 31,30, 2026 was 1.47%1.52% compared to 1.15%1.22% in the prior year period. Our non-GAAP efficiency ratio continues to be an important component in the Company's overall performance and stood at 52.64%51.47% for the threesix months ended MarchJune 31,30, 2026 compared to 56.93%54.63% for the same period in 2025, the change being attributable primarily to higher levels of net interest income.income, complimented by higher non-interest revenue and controlled operating expenses.

Total interest income of $39.1$79.0 million for the threesix months ended MarchJune 31,30, 2026 was an increase of $430,000$444,000 or 1.1%0.6% compared to total interest income of $38.7$78.5 million for the same period of 2025. TheComparing increasethe respective year-to-date periods, the overall average volume of earning assets was essentially unchanged, however balances shifted from lower yielding investments to higher yielding loans, resulting in interesta income3 isbasis attributablepoint lift in average yield on earning assets to the loan portfolio resulting from both greater volume and higher average yields as compared to the prior year.5.34%.

Total interest expense of $18.5$37.1 million for the threesix months ended MarchJune 31,30, 2026, was a decrease of $2.5$5.2 million or 11.8%12.3% compared to total interest expense for the threesix months ended MarchJune 31,30, 2025. Interest expense on deposits fell $2.6$5.4 million year-to-date as compared to prior year on lower average funding rates and modestly lower volume. Borrowed funds expense was up $107,000$209,000 compared to the prior year period attributable to higher utilization of short-term FHLB funding. The total average cost of interest bearing liabilities was 2.88% for the period, a reduction of 39 basis points.

As a result, net interest income of $20.7$41.9 million for the threesix months ended MarchJune 31,30, 2026 was an increase of $2.9$5.6 million or 16.2%15.6% compared to net interest income of $17.8$36.2 million for the threesix months ended MarchJune 31,30, 2025. The Company's net interest margin on a tax-equivalent basis for the threesix months ended MarchJune 31,30, 2026 was 2.86%,2.87%, up from 2.48%2.50% for the first threesix months of 2025. Tax-exempt interest income amounted to $2.5$5.0 million for the threesix months ended MarchJune 31,30, 2026 compared to $2.7$5.3 million for the threesix months ended MarchJune 31,30, 2025.

The following tabletables presentspresent the amount of interest earned or paid, as well as the average yield or rate on an annualized basis, for each major category of assets or liabilities for the threesix months and quarters ended MarchJune 31,30, 2026 and 2025. Tax-exempt income is calculated on a tax-equivalent basis, using a 21.0% Federal Income Tax rate:

The following tabletables presentspresent changes in interest income and expense attributable to changes in interest rates and volume for interest-earning assets and liabilities for the threesix months and quarters ended MarchJune 31,30, 2026 compared to 2025. Tax-exempt income is calculated on a tax-equivalent basis, using a 21% Federal Income Tax rate:

The following table shows the Company's average daily balance sheets for the threesix months and quarters end ended MarchJune 31,30, 2026 and 2025:

Non-interest income of $4.5$9.1 million for the threesix months ended MarchJune 31,30, 2026 is an increase of $449,000$981,000 compared to the same period in 2025. The increase was centered in Wealth Management revenue which was up $169,000$381,000 or 12.8%14.4% from the prior year, and other operating income which increased $228,000$439,000 or 28.9%.28.6%. Over the same period, service charges on deposit accounts were up $29,000,$75,000, or 5.5%,7.0%, debit card revenue increased $30,000,$119,000, or 2.6%,4.8%, and mortgage banking revenue decreased $19,000$45,000 or 9.7%.10.8%. Non-interest income of $4.7 million for the quarter ended June 30, 2026 is an increase of $532,000 compared to the same period in 2025.

Non-interest expense of $13.6$27.0 million for the threesix months ended MarchJune 31,30, 2026 is an increase of 6.0%7.8% or $772,000$2.0 million compared to the same period in 2025. Salaries and employee benefits increased $480,000,$1.3 million, or 7.0%,10.1%, attributable to annual salary adjustments, lower deferred salaries, and higher health insurance expenses. Furniture and equipment expense was up $81,000$97,000 or 5.5%3.3% on higher software costs, and other operating expense increased $256,000$711,000 or 8.7%.12.1%. Non-interest expense of $13.4 million for the quarter ended June 30, 2026 is an increase of 9.7% compared to non-interest expense of $12.2 million million for the same period in 2025 due to the reasons mentioned.

Income taxes on operating earnings were $1.9$3.9 million for the threesix months ended MarchJune 31,30, 2026, up $423,000$584,000 from the same period in 2025.

The carrying value of the Company's investment portfolio decreasedincreased by $9.5$8.1 million between December 31, 2025 and MarchJune 31,30, 2026 from $628.7 million to $619.2$636.8 million. The change in value of the portfolio is attributable to lack of like-kind re-investment of incoming cash flow from amortizing investments, limited new purchases and the negative effects of interest rate movementmovements on the fair value of AFS holdings. As of MarchJune 31,30, 2026, mortgage-backed securities had a carrying value of $253.9$270.6 million and a fair value of $245.0$261.7 million. Of this total, securities with a fair value of $63.6$60.9 million or 26.0%23.3% of the mortgage-backed portfolio were issued by GNMA and securities with a fair value of $181.4$200.8 million or 74.0%76.7% of the mortgage-backed portfolio were issued by FHLMC and FNMA.

During the third quarter of 2014, the Company transferred securities with a total amortized cost of $89,780,000 and a corresponding fair value of $89,757,000 from AFS to HTM. The net unrealized loss, net of taxes, on these securities at the date of the transfer was $15,000. The net unrealized holding loss at the time of transfer continues to be reported in AOCI, net of tax and is amortized over the remaining lives of the securities as an adjustment of the yield. The amortization of the net unrealized loss reported in AOCI will offset the effect on interest income of the discount for the transferred securities. The remaining unamortized balance of the net unrealized losses for the securities transferred from AFS to HTM was $35,000$32,000 at MarchJune 31,30, 2026. This compares to $38,000 and $45,000,$60,000, net of taxes, at December 31, 2025 and MarchJune 31,30, 2025, respectively. These securities were transferred as a part of the Company's overall investment and balance sheet strategies.

The following table sets forth the Company's investment securities at their carrying amounts as of MarchJune 31,30, 2026 and 2025 and December 31, 2025:

Holdings of AFS Securities and HTM securities have been evaluated to determine the need to establish an ACL, if any. The total ACL for HTM securities was $145,000$143,000 as of MarchJune 31,30, 2026, $146,000 as of December 31, 2025 and $197,000$198,000 Marchas 31,of June 30, 2025. Further details are included in Note 2 of the accompanying financial statements.

The following table sets forth yields and contractual maturities of the Company's investment securities as of MarchJune 31,30, 2026. Yields on tax-exempt securities have been computed on a tax-equivalent basis using a tax rate of 21%. Mortgage-backed securities are presented according to their final contractual maturity date, while the calculated yield takes into effect the intermediate cash flows from repayment of principal which results in a much shorter average life.

The securities portfolio contains certain AFS securities where the amortized cost of which exceeds fair value, which at MarchJune 31,30, 2026 amounted to $41.7$41.2 million, or 13.99%13.00% of the amortized cost of the total securities portfolio. At December 31, 2025, this amount was $40.1 million, or 13.19% of the amortized cost of total securities portfolio.

As of MarchJune 31,30, 2026, the Company had AFS debt securities in an unrealized loss position with a fair value of $233.3$253.7 million and unrealized losses of $41.7$41.2 million, as identified in the table below. AFS Securities in a continuous unrealized loss position for more than twelve months amounted to a fair value of $212.3$207.8 million as of MarchJune 31,30, 2026, compared with $226.9 million at December 31, 2025. The Company has concluded that these securities are fully collectible and that no charge against the allowance is required. This conclusion was based on the issuer's continued satisfaction of the securities obligations in accordance with their contractual terms and the expectation that the issuer will continue to do so, Management's intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in fair value which may be at maturity, the expectation that the Company will receive 100% of future contractual cash flows, as well as the evaluation of the fundamentals of the issuer's financial condition and other objective evidence. The following table summarizes AFS debt securities in an unrealized loss position for which an ACL has not been recorded at MarchJune 31,30, 2026:

AFS Securities issued by the U.S. Treasury and U.S. Government-sponsored agencies & enterprises. As of MarchJune 31,30, 2026, there were $5.1 million of unrealized losses on these securities compared to $5.0 million at December 31, 2025. All of these securities were credit rated "AAA" or "AA+" by the major credit rating agencies. Management believes that securities issued by the U.S. Treasury and U.S. Government-sponsored agencies and enterprises carry zero or near-zero credit risk, and that 100% of the amounts contractually due will be collected.

AFS Mortgage-backed securities issued by U.S. Government agencies and U.S. Government-sponsored enterprises. As of MarchJune 31,30, 2026, there were $30.8$31.0 million of unrealized losses on these securities compared with $30.1 million at December 31, 2025. All of these securities were credit rated "AAA" or "AA+" by the major credit rating agencies. Management believes that securities issued by U.S. Government agencies bear no credit risk because they are backed by the full faith and credit of the United States and that securities issued by U.S. Government-sponsored enterprises have minimal credit risk, as these agencies and enterprises play a vital role in the nation's financial markets. Management believes that the unrealized losses at MarchJune 31,30, 2026 were attributable to changes in current market yields and spreads since the date the underlying securities were purchased, and that 100% of the amounts contractually due will be realized. The Company also has the ability and intent to hold these securities until a recovery of their amortized cost, which may be at maturity.

AFS Obligations of state and political subdivisions. As of MarchJune 31,30, 2026, there were $5.9$5.1 million of unrealized losses on these securities compared to $5.0 million at December 31, 2025. Municipal securities are supported by the general taxing authority of the municipality or a dedicated revenue stream, and, in the case of school districts, are generally supported by state aid. At MarchJune 31,30, 2026, all municipal bond issuers were current on contractually obligated interest and principal payments. The Company attributes the unrealized losses at MarchJune 31,30, 2026 to changes in prevailing market yields and pricing spreads since the date the underlying securities were purchased, combined with general market conditions. The Company has the ability and intent to hold these securities until a recovery of their amortized cost, which may be at maturity, and believes that 100% of the amounts contractually due will be realized.

AFS Asset-backed securities. As of MarchJune 31,30, 2026, there were no unrealized losses on these securities compared with $15,000 at December 31, 2025. These securities consist of U.S. Government backed student loans along with other credit enhancements.

The Bank is a member of the FHLBB, a cooperatively owned wholesale bank for housing and finance in the six New England States. As a requirement of membership in the FHLBB, the Bank must own a minimum required amount of FHLBB stock, calculated periodically based primarily on its level of borrowings from the FHLBB. The Bank uses the FHLBB for a portion of its wholesale funding needs. As of MarchJune 31,30, 2026, the Bank's investment in FHLBB stock totaled $7.3$7.7 million. This compares to $7.2 million as of December 31, 2025 and $6.5$6.7 million as of MarchJune 31,30, 2025. FHLBB stock is a non-marketable equity security and therefore is reported at cost, subject to adjustments for any observable market transactions on the same or similar instruments of the investee. No impairment losses have been recorded through MarchJune 31,30, 2026.

The Bank is also a member of the FRBB. As a requirement for membership in the FRBB, the Bank must own a minimum required amount of FRBB stock. The Bank uses FRBB for certain correspondent banking services and maintains borrowing capacity at its discount window. The Bank's investment in FRBB stock totaled $1.0 million at MarchJune 31,30, 2026 and 2025, and December 31, 2025.

The Company periodically evaluates its investment in FHLBB and FRBB stock for impairment based on, among other factors, the capital adequacy of the Banks and their overall financial condition. No impairment losses have been recorded through MarchJune 31,30, 2026. The Bank will continue to monitor its investment in these restricted equity securities.

Loans held for sale are carried at the lower of cost or market value. As of MarchJune 31,30, 2026, the Bank had no$190,000 in loans held for sale. This compares to no loans held for sale at December 31, 2025 and MarchJune 31,30, 2025.

The loan portfolio increased during the first threesix months of 2026, with total loans at $2.41$2.42 billion at MarchJune 31,30, 2026, up $11.0$29.6 million or 0.5%1.2% from total loans of $2.39 billion at December 31, 2025. Commercial loans increaseddecreased by $2.3$14.4 million during the period,period. led by increases in owner-occupiedOwner-occupied commercial real estate ofincreased $4.3$1.3 million and commercial & industrial loans ofincreased $16.1$17.2 million, while non-owner occupied commercial real estate decreased $4.8$10.0 million, multifamily decreased $8.5$19.1 million, and construction loan balances decreased $4.8$6.0 million. Residential loans increased by $4.0$16.0 million and home equity loans increased by $4.9$18.0 million in the first threesix months of 2026.

The following table summarizes the loan portfolio, by class, at MarchJune 31,30, 2026 and 2025 and December 31, 2025:

The following table sets forth certain information regarding the contractual maturities of the Bank's loan portfolio as of MarchJune 31,30, 2026:

The following table provides a listing of loans by class, between variable and fixed rates as of MarchJune 31,30, 2026:

As of MarchJune 31,30, 2026, the Bank had one concentration of loans in one particular industry that exceeded 10% of its total loan portfolio: (1) loans to lessors of residential buildings and dwellings, totaling $252.2$245.1 million, or 10.49%10.11% of total loans. This compares to twoone concentrationsconcentration of loans in twoone particular industriesindustry that exceeded 10% of its total loan portfolio as of MarchJune 31,30, 2025: (1) loans to hotels (except Casino hotels) and motels, totaling $253.4 million, or 10.63% of total loans, and (2) loans to lessors of residential buildings and dwellings, $266.7$272.0 million, or 11.19%11.36% of total loans.

The ACL includes reserve amounts assigned to IAL. This includes loans with balances of $250,000 or more that have been placed into non-accrual or are loans identified by management as having characteristics that may impact ultimate collectibility and therefore merit individual analysis. A specific reserve is allocated to an individual loan when the amount of a probable loss is estimable on the basis of its collateral value, the present value of anticipated future cash flows, or its net realizable value. At MarchJune 31,30, 2026, IAL with specific reserves totaled $5.0$4.1 million and the amount of such reserves was $2.7$2.3 million. This compares to IAL with specific reserves of $4.1 million at December 31, 2025 and the amount of such reserves was $2.7 million.

The total ACL on loans at MarchJune 31,30, 2026 is considered by Management to be appropriate to address the potential for credit losses inherent in the loan portfolio at that date. However, determination of the appropriate allowance level is based upon a number of assumptions made about future events, which management believes are reasonable, but which may or may not prove valid. Thus, there can be no assurance charge-offs in future periods will not exceed the ACL or that additional increases in the ACL will not be necessary.

The following table summarizes the allocation of allowance by loan class as of MarchJune 31,30, 2026 and 2025 and December 31, 2025. The percentages are the portion of each loan class to total loans:

A breakdown of the ACL on loans as of MarchJune 31,30, 2026, by loan class and allowance element, is presented in the following table:

Based upon Management's evaluation, provisions are made to maintain the allowance as a best estimate of expected losses within the portfolio. The provision for credit losses to maintain the allowance was $650,000$1.6 million for the first threesix months of 2026 and $396,000$744,000 the first threesix months of 2025. Net charge-offs were $806,000$2.4 million in the first threesix months of 2026, compared to net charge-offs of $153,000$786,000 in the first threesix months of 2025. The ACL as a percentage of outstanding loans was 1.05%1.01% as of MarchJune 31,30, 2026, 1.06% as of December 31, 2025, and 1.05%1.04% as of MarchJune 31,30, 2025.

The following table summarizes the activities in the ACL for the threesix months ended MarchJune 31,30, 2026 and 2025 and for the year ended December 31, 2025:

The Bank's modeling methodology applies the same class level credit loss factors used in the ACL for loans model to applicable classes of unfunded commitments to determine an appropriate ACL level. Utilization assumptions are based upon an independent analysis of the Bank's historical data. The ACL for unfunded commitments is reported on the Company's consolidated balance sheets within other liabilities and totaled $536,000$553,000 as of MarchJune 31,30, 2026.

Nonperforming loans, expressed as a percentage of total loans, totaled 0.67%0.71% at MarchJune 31,30, 2026 compared to 0.54% at December 31, 2025 and 0.25% at MarchJune 31,30, 2025. The following table shows the distribution of nonperforming loans by class as of MarchJune 31,30, 2026 and 2025 and December 31, 2025:

The amounts shown for total nonperforming loans do not include loans 90 or more days past due and still accruing interest. These are loans for which we expect to collect all amounts due, including past-due interest. As of MarchJune 31,30, 2026, loans 90 or more days past due and still accruing interest totaled $596,000,$756,000, compared to $665,000 at December 31, 2025 and $695,000$457,000 at MarchJune 31,30, 2025.

The Bank's overall loan delinquency ratio was 1.14%0.93% at MarchJune 31,30, 2026 compared to 0.90% at December 31, 2025 and 0.33%0.23% at MarchJune 31,30, 2025. Loans 90 or more days delinquent and accruing decreasedincreased from $665,000 at December 31, 2025 to $596,000$756,000 as of MarchJune 31,30, 2026. The following table sets forth loan delinquencies as of MarchJune 31,30, 2026 and 2025 and December 31, 2025:

Potential problem loans consist of classified, accruing commercial and commercial real estate loans that were between 30 and 89 days past due. Such loans are characterized by weaknesses in the financial condition of borrowers or collateral deficiencies. Based on historical experience, the credit quality of some of these loans may improve due to improvements in the economy as well as changes in collateral values or the financial condition of the borrowers, while the credit quality of other loans may deteriorate, resulting in some amount of loss. At MarchJune 31,30, 2026, there were twoseven potential problem loans reported with a balance of $241,000$4.0 million or 0.010%0.167% of total loans. This compares to five potential problem loans with a balance of $3.7 million or 0.156% of total loans at December 31, 2025.

As of MarchJune 31,30, 2026, there were eightseven residential loans in the process of foreclosure totaling $1.8$1.6 million, one home equity line of credit totaling $63,000 and one consumer loan totaling $7,000. The Bank's residential foreclosure process begins when a loan becomes 75 days past due at which time a Demand/Breach Letter is sent to the borrower. If the loan becomes 120 days past due, copies of the promissory note and mortgage deed are forwarded to the Bank's attorney for review and a complaint for foreclosure is then prepared. An authorized Bank officer signs the affidavit certifying the validity of the documents and verification of the past due amount which is then forwarded to the court. Once a Motion for Summary Judgment is granted, a POR begins which gives the customer 90 days to cure the default. A foreclosure auction date is then set 30 days from the POR expiration date if the default is not cured.

As of MarchJune 31,30, 2026, there were 13eight commercial loans commercial loans in the process of foreclosure with a total balance of $6.4$4.7 million. The Bank's commercial foreclosure process begins when a loan becomes 60 days past due, at which time a default letter is issued. At expiration of the period to cure default, which lasts 12 days after the issuing of the default letter, copies of the promissory note and mortgage deed are forwarded to the Bank's attorney for review. A Notice of Statutory Power of Sale is then prepared. This notice must be published for three consecutive weeks in a newspaper located in the county in which the property is located. A notice also must be issued to the mortgagor and all parties of interest 21 days prior to the sale. The foreclosure auction occurs and the Affidavit of Sale is recorded within the appropriate county within 30 days of the sale.

OREO and repossessed assets are comprised of properties or other assets acquired through a foreclosure proceeding, or acceptance of a deed or title in lieu of foreclosure. Real estate acquired through foreclosure is carried at the lower of fair value less estimated cost to sell or the cost of the asset and is not included as part of the ACL totals. There were no OREO properties and no allowance for losses at MarchJune 31,30, 2026, December 31, 2025 and MarchJune 31,30, 2025.

Liquidity is the ability of a financial institution to meet maturing liability obligations, depositor withdrawal requests, and customer loan demand. The Bank's lead source of liquidity is deposits, including brokered deposits, which funded 83.8%83.7% of total average assets in the first threesix months of 2026, down slightly from 85.0% a year ago. Other sources of funding include discretionary use of purchased liabilities (e.g., FHLBB term or overnight advances, and other borrowings), cash flows from the securities portfolio and loan repayments. Securities designated as available for sale may also be sold in response to short-term or long-term liquidity needs, although Management has no intention to do so at this time. While the generally preferred funding strategy is to attract and retain low cost deposits, the ability to do so is affected by competitive interest rates and terms in the marketplace.

The Company defines its primary sources of contingent liquidity as cash & equivalents, unencumbered U.S. Government or Agency bond collateral, available capacity at FHLBB, and available authorized brokered deposit issuance capacity. As of MarchJune 31,30, 2026, the Bank had primary sources of contingent liquidity of $914.0$858.0 million or 28.8%26.9% of its total assets. It is Management's opinion that this is an appropriate level. In addition, the Bank has $320.0$328.0 million in borrowing capacity at FRBB under the FRBB's Borrower in Custody program as well as securities available as collateral, $101.0 million in credit lines with correspondent banks, and $40.0$45.0 million in other unencumbered securities available as collateral for borrowing. These bring the Bank's total sources of liquidity to $1.375$1.332 billion or 43.4%41.8% of its total assets.

The Company is dependent upon the payment of cash dividends by the Bank to service its commitments. As the sole shareholder of the Bank, the Company is entitled to such dividends when and as declared by the Bank's Board of Directors from legally available funds. For the three-monthssix-month periods ended MarchJune 31,30, 2026 and 2025 the Bank declared dividends to the Company of $4.2$8.5 million and $4.0$8.2 million, respectively. The Bank's regulator, the OCC, may limit the amount of dividends declared and paid in a calendar year based upon certain factors. Further discussion may be found in Shareholder's Equity below.