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

General business, political and economic conditions, including inflation, unemployment, money supply fluctuationsfluctuations, the imposition of tariffs or other domestic or international governmental policies and the shape of the interest rate curve may adversely affect our profitability. Negative changes in these general business and economic conditions could have the following consequences, any of which could have a materially adverse impact on our business, financial condition and results of operations:

Inflation risk is the risk that the value of assets or income from investments willmay be worth less in the futuredecline as inflation decreasesreduces the valuepurchasing power of money. In the United States, the annualAlthough inflation ratemoderated peakedduring at2024 9.1%and in2025, Juneprice 2022.levels Byremained elevated as of December 31, 2024,2025, itand hadinterest decreasedrates remained higher than historical norms. Elevated inflation and interest rates have adversely affected, and may continue to 2.9%.adversely The Federal Reserve increasedaffect, the target federal funds rate to combat inflation. However, in 2024, the Federal Reserve implemented one 50 basis point and two 25 basis point rate cuts, bringing the target range to 4.25% to 4.50% by December 2024. As inflation increased, thefair value of our investment securities, particularly thoselonger-duration, withfixed-rate longersecurities, maturities,and decreased.have increased our non-interest expenses. In addition, inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-interest expenses. Furthermore, our customers are also affected by inflation and the risinghigher costs of goodsliving and servicesdoing usedbusiness inmay theiradversely householdsaffect our customers’ financial condition and businesses, which could have a negative impact on their ability to repay their loans with us.loans. A deterioration in economic conditions in the United States andor our marketsprimary market areas could result in an increase inincreased loan delinquencies and non-performing assets, decreasesdeclines in loan collateral valuesvalues, and a decrease inreduced demand for our products and services, allwhich ofcould which,materially in turn, wouldand adversely affect our business, financial conditioncondition, and results of operations.

Any material interruption in our customers’ supply chains, such as a material interruption of the resources required to conduct their business resulting from interruptions in service by third-party providers, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, social or labor unrest, natural disasters, epidemics or pandemics or political disputes and military conflicts, that cause a material disruption in our customers' supply chains, could have a negative impact on their business and ability to repay their borrowings with us. In the event of disruptions in our customers' supply chains, the labor and materials they rely on in the ordinary course of business may not be available at reasonable rates or at all. Additionally, changes in distribution of federal funds or freezing of federal funds, including reductions in federal workforce causing unemployment, could have an adverse effect on the ability of consumers and businesses to pay debts and/or affect the demand for loans and deposits.

Changes in interest rates also affect the value of our interest-earning assets and, in particular, our investment securities portfolio. Fluctuations in market value may be caused by changes in market interest rates, lower market prices for securities and limited investor demand. Generally, the fair value of fixed-rate securities fluctuates inversely with changes in interest rates. Stockholders'Stockholders’ equity, specifically accumulated other comprehensive income (loss), is increased or decreased by the amount of change in the estimated fair value of our securities available for sale, net of deferred income taxes. Increases in interest rates generally decrease the fair value of securities available for sale, which adversely impacts stockholders'stockholders’ equity. On December 31, 2024,2025, we recorded an accumulated other comprehensive losses,loss, net of tax, of $10.5$6.3 million related to net changes in unrealizedthe holdingfair lossesvalue inof our available-for-sale investment securities portfolio.

Any substantial or unexpected change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations. Changes in interest rates also may negatively impact our ability to originate real estate loans, the value of our assets and our ability to realize gains from the sale of our assets, all of which may ultimately affect our earnings. For further discussion of how changes in interest rates could impact us, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Management of Market Risk.”

We must maintain sufficient funds to respond to the needs of depositors and borrowers. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also receive funds from loan repayments, investment maturities and income on other interest-earning assets. While we emphasize generating transaction accounts, we cannot guarantee if and when this will occur. Further, the considerable competition for deposits in our market area also has made, and may continue to make, it difficult for us to obtain reasonably priced deposits. Moreover, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff. If we are not able to increase our lower-cost transactional deposits at a level necessary to fund our asset growth or deposit outflows, we may be forced seek other sources of funds, including certificates of deposit, FHLB advances, brokered deposits and lines of credit to meet the borrowing and deposit withdrawal requirements of our customers, which may be more expensive and have an adverse effect on our net interest margin and profitability. Total deposits decreased $9.7 million, or 0.9%, to $1.02 billion at December 31, 2024 from $1.03 billion at December 31, 2023.

A lack of liquidity could adversely affect our financial condition and results of operations and result in regulatory limits being placed on the Company.us.

Liquidity is essential to our business. We rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans to ensure that we have adequate liquidity to fund our operations. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our most important source of funds is deposits. Deposit balances can decrease when customers perceive alternative investments as providing a better risk/return tradeoff.tradeoff, which are strongly influenced by such external factors as the direction and level of interest rates, local and national economic conditions and the availability and attractiveness of alternative investments. Further, the demand for deposits may be reduced due to a variety of factors such as negative trends in the banking sector, the level of and/or composition of our uninsured deposits, demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, the monetary policy of the Federal Reserve Board or regulatory actions that decrease customer access to particular products. If customers move money out of deposits, we may lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income. Any changes made to the rates offered on deposits to remain competitive with other financial institutions may also adversely affect profitability and liquidity. Depending on the capitalization and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on interest rates paid on deposits and on the acceptance of brokered deposits. Significant deposit withdrawals could materially reduce our liquidity, and, in such an event, we may be required to replace such deposits with higher-costing borrowings.

Other primary sources of funds consist of cash flows from operations and sales of investment securities and borrowings from the FHLB of New York and the Federal Reserve.Reserve Board. We also may borrow funds from third-party lenders, such as other financial institutions. Our access to funding sources in amounts adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry. Our liquidity is also affected by a decrease in the sale of mortgage loans as a result of our decision to retain more mortgage loans in the portfolio, higher market interest rates negatively impacting originations, a downturn in our markets or by one or more adverse regulatory actions against us. A lack of liquidity could also attract increased regulatory scrutiny and potential restraints imposed on us by regulators.

Our long-term business strategy involves moderateorganic growth, and our financial condition and results of operations may be adversely affected if we fail to grow or fail to manage our growth effectively.

We are subject to extensive regulation, supervision and examination by our banking regulators. Such regulation and supervision govern the activities in which a financial institution and its holding company may engage and are intended primarily for the protection of insurance funds and theour depositors and borrowers of Rhinebeck Bank rather than for the protection of our stockholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the ability to impose restrictions on our operations, classify our assets and determine the level of our allowance for credit losses. These regulations, along with the currently existing tax, accounting, securities, deposit insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives, and govern financial reporting and disclosures. Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations, executive orders, legislation or supervisory action, may have a material impact on our operations. Further, compliance with such regulation may increase our costs and limit our ability to pursue business opportunities.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the FRB.Federal Reserve Board. An important function of the FRBFederal Reserve Board is to regulate the money supply and credit environment. Among the instruments used by the FRBFederal Reserve Board to implement these objectives are open market purchases and sales of U.S. Government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits. The FRB’sFederal Reserve Board’s policies determine in large part the cost of funds for lending and investing and the return earned on those loans and investments, both of which affect our net interest margin. Its policies can also adversely affect borrowers, potentially increasing the risk that they may fail to repay their loans. The monetary policies and regulations of the FRBFederal Reserve Board have had a significant effect on the overall economy and the operating results of financial institutions in the past and are expected to continue to do so in the future.

Changes in Federal Reserve Board and other governmental policies, fiscal policy, and our regulatory environment generally are beyond our control, and we are unable to predict what changes may occur or the manner in which any future changes may affect our business, financial condition and results of operations.

We are subject to more stringent capital requirements, which may adversely impact our return on equity, or constrain us from paying dividends or repurchasing shares.

The application of more stringent capital requirements could, among other things, require us to maintain higher capital levels resulting in lower returns on equity, raise capital and result in regulatory actions if we were to be unable to comply with such requirements. Furthermore, the imposition of additional liquidity requirements could result in our having to lengthen the term of our funding, restructure our business models, and/or increase our holdings of liquid assets. Implementation of changes to asset risk weightings for risk-based capital calculations, items included or deducted in calculating regulatory capital and/or additional capital conservation buffers could result in management modifying its business strategy, and could limit our ability to make distributions, including paying out dividends or buying back shares. See “Item 1. Supervision and Regulation — Federal Bank Regulation — Capital Requirements.”

We are subject to various privacy, information security and data protection laws, such as the Gramm-Leach-Bliley Act, which, among other things, requires privacy disclosures, and maintenance of a robust security program, which are increasingly subject to change and that could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee information, and some of our current or planned business activities.activities, including our expansion of digital and online offerings. New laws or changes to existing laws may increase our costs of compliance, could reduce income from certain business initiatives and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial conditions or results of operations. Our regulators also hold us responsible for privacy and data protection obligations performed by our third-party service providers while providing services to us. Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations.

Our operations depend upon our ability to protect our computer systems and network infrastructure against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Any damage or failure that causes an interruption in our operations could have a material adverse effect on our reputation, financial condition and results of operations. Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us. Although we, with the help of third-party service providers, continue to implement security technology and establish operational procedures designed to prevent such damage, our security measures may not be successful. In addition, advances in computer capabilities, new discoveries in the field of cryptographycapabilities or other developments could result in a compromise or breach of the algorithms we and our third-party service providers use to encrypt and protect customer transaction data. A failure of such security measures could have a material impact on the Bank’sour operations or a material adverse effect on our financial condition and results of operations.

Our Boardboard of Directorsdirectors takes an active role in our cybersecurity risk management and all members receive cybersecurity training annually. The Board reviews the annual risk assessments and approves information technology policies, which include cybersecurity. Furthermore, our Audit Committee is responsible for reviewing all audit findings related to information technology general controls, internal and external vulnerability, and penetration testing. The Board receives an annual information security report from our virtual Chief Information Security Officer and Chief ExecutiveTechnology Officer as it relates to cybersecurity and related issues. We also engage outside consultants to support our cybersecurity efforts. However, ourOur directors do not have significant experience in cybersecurity risk management outside of the Company and therefore, itsthe board’s ability to fulfill its oversight function remains dependent on the input it receives from management and outside consultants.

OurTechnological inability to successfully implement technological changechanges may adversely impact our business.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven products and servicesservices, which increases efficiency and enables financial institutions to better serve customers and 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. As part of our business strategy, we intend to make significant investments in technology to modernize and improve our product offerings. We may not be able to effectively implement new, technology-driven products and servicesservices, to recoup the costs associated with such improvements, or be successful in marketing these products and services to our customers, which failure could have a material adverse effect on our business, financial condition or results of operations.

Provision for Credit Losses.Losses on loans. The allowance for credit losses is a valuation allowance for the estimated lifetime credit losses. The allowance for credit losses is increased through charges to the provision for credit losses. Loans are charged against the allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on loans previously charged-off, if any, are credited to the allowance for credit losses when realized.

Significant Accounting Policies, Critical Accounting Estimates

The following accounting policiespolicy materially affectaffects our reported earnings and financial condition and requirerequires significant judgments and estimates.

The Company’sOur allowance for credit losses for loans totaled $8.5$8.4 million and $8.1$8.5 million as of December 31, 20242025 and December 31, 2023,2024, respectively. The $415,000$186,000 increasedecrease in our allowance for credit losses for loans was primarily driven by ana increasedecrease in our collectively evaluated loans, partially offset by aan decreaseincrease in the allowance for credit losses on individually analyzed loans.

The quantitative component of our allowance for credit losses on collectively evaluated loans, which is largely based on a selection of various economic forecasts, decreased by $151,000$181,000 as of December 31, 2024,2025, when compared to December 31, 2023.2024. The decrease was primarily attributable to decreased loan balances of indirect automobile loansloans, andpartially offset by an update to theour Lossloss Driverdriver Analysisanalysis that had aan favorableunfavorable impact on the Multifamilycommercial Realreal Estateestate Loanloan probability of default (“PD”) and loss given default (“LGD”) factors in the CECL model.

The qualitative component of our allowance for credit losses (“ACL”), which is largely based on management’s judgment of qualitative loss factors, was relatively unchangeddecreased during the first half of 2024, but was adjusted in the second half2025 to account for increaseddecreased delinquency and higherlower net charge-offs. TheA Company’smore conservative underwriting approach on our automobile loan portfolio has continued to experience elevateddecreased delinquency rates, and this combined with a simultaneous decreaseincrease in collateral values, has resulted in increasesdecreases to forecasted net charge-offs. Moderate qualitative adjustments were made to account for both of these risks. The CompanyWe also retained moderated qualitative adjustments related to economic conditions as inflationary pressures and higher interest rates continue to have an adverse effect on both consumers and businesses.

The Company’sOur allowance for credit losses for collectively evaluated loans totaled $8.4$7.9 million as of December 31, 2024,2025, which included nearly $4.0$2.8 million of allowance related to indirect automobile loans. In comparison, the Company’sour allowance related to indirect automobile loans totaled nearly $4.2$4.0 million as of December 31, 2023,2024, a reduction of nearly $200,000$1.2 from January 1, 2024.million. The allowance amount attributed to qualitative adjustments at year end for indirect automobile loans was $1.7$1.3 million, ana increasedecrease of approximately $400,000$410,000 from JanuaryDecember 1,31, 2024. As previously mentioned, actual as well as forecasted increasesdecreases in delinquencies and net charge-offs for automobile loans drove management’s increasedecrease in qualitative loss factors.

Our allowance for credit losses for individually analyzed loans is determined using the fair value of the collateral, less estimated selling costs, as applicable. As of December 31, 2024,2025, the Company’sour allowance for credit losses on individually analyzed loans decreasedincreased $56,000$262,000 from December 31, 2023.2024. This decreaseincrease was primarily due to aan decreaseincrease of individually analyzed commercial and indirect automobile loans, with additional decreases in commercial and commercial real estate loans also contributing to the overall decrease.loans.

As noted above, we consider a number of variables in our evaluation of the adequacy of the allowance for credit losses. The most significant variables are portfolio growth and any changing historical loss trends within the specific business segments. As of December 31, 2024,2025, $191,000 of the $264,000 decrease in our allowance for credit losses reflected the reduction in indirect automobile loan originations. Based on our model, if all segments of the portfolio grew by an additional 5% on a year-over-year basis, our allowance for credit losses as of December 31, 20242025 would have increased by $418,000$395,000 to $9.0$8.7 million, holding all other variables constant. Conversely, if all segment balances of our loan portfolio had fallen by 5% during the year ended December 31, 2024,2025, our allowance for credit losses would have decreased by $418,000$395,000 to $8.1$8.0 million, holding all other variables constant.

Net Loans. Net loans receivable were $953.4 million at December 31, 2025, a decrease of $18.4 million, or 1.9%, as compared to $971.8 million at December 31, 2024, a decrease of $37.1 million, or 3.7%, as compared to $1.01 billion at December 31, 2023.2024. The decrease was primarily due to a decrease in indirect automobile loans of $98.6$81.9 million, or 25.0%,27.7%, reflecting a strategic decision to decrease that loan portfolio as a percentage of the balance sheet. At December 31, 2024,2025, indirect automobile loans were 23.5%16.4% of assets, compared to 30.0%23.5% at December 31, 2023.2024. Partially offsetting the decrease in automobile loans were increases in commercial real estate loans of $54.5$52.1 million, or 12.7%,10.8%, and residential real estate loans of $9.4$13.4 million, or 12.2%.15.5%. The increase in commercial real estate loans was primarily due to the closing of three largefour loans totaling $43.3 million secured by a 2-4 family unit, a retail shopping centercenter, a medical building and twoan hotelsauto totaling $26.9 million.dealership. The increase in residential real estate loans reflected the strategic decision to hold new production in our portfolio instead of selling these loans.

Allowance for Credit Losses. During the year, the allowance for credit losses increaseddecreased $415,000,$186,000, or 5.1%,2.2%, reflecting ana increasedecrease of expected losses in our loan portfolio.portfolio due to the decrease in loans, particularly automobile loans that carry a higher general reserve, partially offset by an increase in the allowance for credit losses on individually analyzed loans primarily due to the increase in commercial and industrial loans. Non-accrual loans decreased $47,000,$434,000, or 1.1%,10.5%, to $3.7 million at December 31, 2025 from $4.1 million at December 31, 20242024. from $4.2 million at December 31, 2023. Non-performing assets decreased $72,000, or 1.7%. Non-performing assets included $25,000 in other real estate owned as of December 31, 2023. The CompanyWe had no other real estate owned as of December 31, 2025 or 2024. Past due loans decreased $2.5$2.2 million, or 12.8%,13.0%, between December 31, 20232024 and December 31, 2024,2025, finishing at $16.7$14.5 million, or 1.7%,1.52%, of total loans, down from $19.2$16.7 million, or 1.9%,1.71%, of total loans at year-end 2023.2024. The decrease was most notable in non-residentialindirect commercialautomobile real-estate,loans, asreflecting athe fewpositive largeimpact loansof weremore broughtconservative currentunderwriting and one loan was paid off.standards. Our allowance for credit losses was 0.87% of total loans and 225.76% of non-performing loans at December 31, 2025 as compared to 0.88% of total loans and 206.56% of non-performing loans at December 31, 2024 as compared to 0.81% of total loans and 194.31% of non-performing loans at December 31, 2023.2024.

Federal Home Loan Bank Stock. FHLB stock decreased $2.6$2.0 million, or 39.2%,50.6%, to $2.0 million at December 31, 2025, from $4.0 million at December 31, 2024, from $6.5 million at December 31, 2023, primarily due to a reduction in additionalthe shares required to support borrowing activity as advances from the FHLB decreased.

Stockholders’Deferred Equity.Tax Stockholders'Assets. equityDeferred increasedtax $8.1assets decreased $3.2 million, or 7.2%,39.1%, to $121.8$4.9 million at December 31, 2025, primarily due to a decrease in the unrealized loss on available for sale securities resulting from the balance sheet restructuring in 2024. The unrealized loss on available for sale securities, net of taxes, was $6.3 million at December 31, 2025 as compared to $10.5 million at December 31, 2024. The increase was primarily due to a $16.6 million decrease in accumulated other comprehensive loss reflecting the results of the balance sheet restructuring, which was partially offset by a net loss of $8.6 million. The Company's ratio of average equity to average assets was 9.23% for the year ended December 31, 2024 and 8.19% for the year ended December 31, 2023.

Net Income. Net lossincome for the year ended December 31, 20242025 was $8.6$10.0 million, compared to net incomeloss of $4.4$8.6 million for the year ended December 31, 2023,2024, aan decreaseincrease of $13.0$18.7 million, or 296.1%.million. Diluted earnings per share was $0.92 for the year ended December 31, 2025, compared to diluted loss per share wasof $0.80 for the year ended December 31, 2024, compared to diluted earnings per share of $0.40 for the year ended December 31, 2023.2024. The decreaseincrease in net income for the year ended December 31, 20242025 was primarily due to a balance sheet restructuring,restructuring in 2024, which resulted in a $16.0 million loss on sale of securities. Net income was also impacted by an increase in net interest income, ana increasedecrease in the provision for credit losses and an increase in non-interest expense. Interest and dividend income increased $3.1$5.7 million, or 5.1%,8.9%, interest expense increaseddecreased $2.8$3.0 million, or 12.5%,11.9%, and the provision for credit losses increaseddecreased $1.1 million, or 64.5%.40.8%. Non-interest income decreasedincreased $15.3$16.0 million, reflecting the loss on securities,securities in 2024, while non-interest expenses increased $419,000,$2.2 million, or 1.2%,5.9%, as compared to 2023.2024. Taxes decreasedincreased by $3.5$5.0 million due to the 20242025 net loss,income, in contrast to the net incomeloss in 2023.2024.

Net Interest Income. Net interest income increased $266,000,$8.7 million, or 0.7%,23.1%, to $38.2$46.4 million for the year ended December 31, 2024,2025, as compared to $38.0$37.7 million for the year ended December 31, 2023.2024. The increase was primarily driven by higher yields on interest-earning asset balances, which were partially offset by higherlower costs on interest-bearing liability balances.balances, an increase in the average balance of cash and cash equivalents and a decrease in the average balance of Federal Home Loan Bank advances. The yield on interest earning assets increased 4846 basis points to 5.36%5.77% in 20242025 from 4.88%5.31% in 2023,2024, primarily due to the risingbalance interestsheet raterestructuring environmentand ina 2024.higher percentage of commercial real estate loans. The costs of interest bearing liabilities increaseddecreased 4333 basis points to 2.54% in 2025 from 2.87% in 2024 from 2.44% in 2023 driven by increases in general market rates, competitive market forcesforces, a declining interest rate environment and a greaterdecrease percentagein ofFederal higher-yieldingHome certificatesLoan of deposits and FHLBBank advances. The interest rate spread increased by 579 basis points to 2.49%.3.23%. The net interest margin was 3.21%3.89% for the year ended December 31, 20242025 and 3.06%3.17% for the year ended December 31, 2023.2024. The ratio of average interest-earning assets to average interest-bearing liabilities decreasedincreased 0.9%0.8% to 133.68%.134.72%.

Interest Income. Interest income increased $3.1$5.7 million, or 5.1%,8.9%, to $63.8$68.9 million for 20242025 from $60.7$63.2 million for 2023.2024. The increase resulted primarily from increased asset yields,yields offsetand byan a decreaseincrease in the average balance.balance of cash and cash equivalents. The average yield on loans increased to 6.24% for 2025 from 5.86% in 2024. The average yield on investment securities increased to 3.25% for 2025 from 2.14% for 2024. The average yield on interest-bearing depository accounts increaseddecreased to 4.36% for 2025 from 5.29% for 2024 from 5.19% for 2023. The average yield on loans increased to 5.91% for 2024 from 5.47% in 2023. The average yields on investment securities increased to 2.14% for 2024 from 1.91% for 2023.2024. Average interest earning assets decreasedincreased $52.2$3.0 million from $1.24$1.190 billion for the year ended December 31, 20232024 to $1.19$1.193 billion for the year ended December 31, 2024.2025. The decreaseincrease in average interest earning assets during 20242025 compared to 20232024 included an increase in interest-bearing depository accounts of $38.8 million, partially offset by decreases of $19.3$27.2 million in average loan balances and $30.8$6.7 million in available for sale securities.securities and average loan balances, respectively.

Interest Expense. Interest expense increaseddecreased $2.8$3.0 million, or 12.5%,11.9%, to $22.5 million for 2025 from $25.5 million for 2024 from $22.7 million for 2023.2024. This was primarily due to a 4333 basis point increasedecrease in the overall cost of interest bearing liabilities to 2.54% for 2025 from 2.87% for 2024 fromalong 2.44% for 2023, partially offset bywith a decrease in average interest bearing liability balances of $38.3$4.6 million, or 4.1%,0.5%, year over year. The average balance of FHLB advances decreased $42.8 million, while the cost decreased 54 basis points. The average balance of the total interest-bearing deposits decreasedincreased by $23.8$38.7 million,million while(primarily thein costmoney increasedmarket 52accounts basisand points. The average balancecertificates of FHLB advances decreased $13.5 million,deposit), while the cost decreased 2421 basis points.

Provision for Credit Losses. TheWe Company recordsrecord a provision for credit losses, which is recognized in earnings. The Company adoptedUnder the CECL model beginning on January 1, 2023, which requires thatmodel, we are required to make assumptions of credit quality, macroeconomic factors and conditions, and loan compositioncomposition. whichThe arecalculation is inherently subjective due to the use of estimates that are susceptible to significant revision as more information becomes available or as future events occur. Although we believe that we use the best information available to establish the allowance for credit losses, based on industry standards and historical experience, future additions to the allowance may be necessary, as a result of changes in economic conditions and other factors. In addition, the FDIC and NYSDFS, as an integral part of their examination process, will periodically review our allowance for credit losses. These agencies may require us to recognize adjustments to the allowance, based on their judgments about information available to them at the time of their examination.

The CompanyWe recorded a provision for credit losses of $1.7 million for the year ended December 31, 2025, a decrease of $1.1 million, or 40.8%, as compared to $2.8 million for the year ended December 31, 2024, an increase of $1.1 million, or 64.5%, as compared to $1.7 million for the year ended December 31, 2023.2024. Of this $1.1 million increase,decrease, $1.1 million is related to the provision for credit losses on loans, while the provision for credit losses on unfunded commitments decreased $43,000.$78,000. The increasedecrease to the provision was primarily attributable to higherlower net charge-offs and updates to assumptions on prepayments and other qualitative and quantitative components in our expected credit loss analysis.

Net charge-offs increaseddecreased $333,000,$462,000, or 16.1%,19.3%, to $1.9 million for the year ended December 31, 2025 as compared to $2.4 million for the year ended December 31, 2024. The increasedecrease was primarily due to adecreased $291,000 commercial real estate loan charged-off in 2024. Netnet charge-offs on indirect automobile loans remained relatively stable at $1.4 million in both 2024 and 2023.commercial loans, partially offset by increased net charge-offs on commercial real estate loans. The percentage of overdue account balances to total loans decreased to 1.52% at December 31, 2025 from 1.71% as ofat December 31, 2024, from 1.90% as of December 31, 2023 andwhile non-performing assets decreased $72,000,$434,000, or 1.7%,10.5%, to $4.1$3.7 million at December 31, 2024.2025.

Income Taxes. Income tax provision decreasedincreased by $3.5$5.0 million,million orto 290.1%,an expense of $2.6 million for the year ended December 31, 2025 as compared to a net benefit of $2.3 million for the year ended December 31, 20242024, primarily due to pre-tax net income recorded in 2025 as compared to an expense of $1.2 million for the year ended December 31, 2023, primarily due to a pre-tax net loss recorded in 2024. Our effective tax rate for the year ended December 31, 20242025 was 21.18%20.81% compared to 21.71%21.18% in 2023.2024. The statutory tax rate was impacted by the benefits derived mainly from tax-exempt bond income and income received on the bank owned life insurance to arrive at the effective tax rate.

The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. TheWe Company doesdo not have any excludable out-of-period items or adjustments.

The table above shows that in the event of an instantaneous 200 basis point increase in interest rates, our EVE would decreaseincrease by 11.8%;2.8% and in the event of an instantaneous 200 basis point decrease in interest rates, our EVE would decrease by 2.1%.8.4%. Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The table above assumes that the composition of our interest-sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our EVE and will differ from actual results.

We maintain liquid assets at levels we consider adequate to meet both our short-termshort and long-term liquidity needs. We adjust our liquidity levels to fund deposit outflows, repay our borrowings and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.

As reported in the Consolidatedconsolidated Statementsstatements of Cashcash Flows,flows, our cash flows are classified for financial reporting purposes as operating, investing, or financing cash flows.activities. Net cash provided by operating activities was $8.5$11.7 million and $7.0$8.5 million for the years ended December 31, 20242025 and 2023,2024, respectively. These amounts differ from our net income becausedue ofto certain cashnon-cash receiptsitems and disbursementschanges in operating assets and liabilities that did not affect net income forduring the respective periods. Net cash provided by investing activities was $21.2 million in 2025 compared to $74.7 million in 20242024. asInvesting comparedcash toflows $14.7primarily reflect activity in the securities portfolio and changes in loan balances. The $16.7 million decrease in 2023.loans Netwas a significant contributor to cash provided by investing activities principallyin reflects2025, while higher securities maturities, calls and purchases drove investing cash flows in 2024. Deposit and borrowing activity continues to comprise the majority of our investment security and loan activities in the respective periods. Netfinancing cash inflowsflows. of $33.4 million for a decrease in loans was the primary contributor to theNet cash provided by investingfinancing activities forwas the year ended December 31, 2024, as loans increased $16.2$31.6 million in 2023.2025, Depositcompared and borrowing cash flows have traditionally comprised most of our financing activities, which resulted in ato net cash outflowused of $67.9 million in the year ended December 31, 2024, asprimarily comparedreflecting todeposit $31.0growth millionpartially offset by reductions in fiscalshort-term year 2023.borrowings.

ForThe a summarydiscussion of risk factors relevant to the Company,Company seeunder Partthe I, Item 1A,heading “Risk Factors,Factors” in the 2025prospectus Formfiled 10-K.on May 22, 2026 with the SEC pursuant to Rule 424(b)(3) of the Securities Act of 1933, as amended, is incorporated herein by reference. There have been no material changes to risk factors relevant to the Company’s operations since Decemberthat 31, 2025.prospectus. Additional risks not presently known to the Company, or that the Company currently deems immaterial, may also adversely affect the business, financial condition or results of operations.

Management’s discussion and analysis of financial condition and results of operations at MarchJune 31,30, 2026 and December 31, 2025, and for the three and six months ended MarchJune 31,30, 2026 and 2025, is intended to assist in understanding the financial condition and results of operations of the Company and the Bank. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.

This report may contain forward-looking statements,statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which can be identified by the use of words such as “estimate,” “approximate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “intend,” “predict,” “forecast,” “improve,” “continue,” “will,” “would,” “should,” “could,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:

Our most significant accounting policies are described in Note 1 to the Consolidated Financial Statements in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 13, 2026 (the “Annual Report on Form 10-K”)10-K. Certain of these accounting policies require management to use significant judgment and estimates, which can have a material impact on the carrying value of certain assets and liabilities. We consider these policies to be our critical accounting estimates. The judgment and assumptions made are based upon historical experience, future forecasts, and/or other factors that management believes to be reasonable. Because of the nature of the judgment and assumptions, actual results could differ from estimates, which could have a material effect on our financial condition and results of operations. We consider the allowance for credit losses to be our most critical accounting policy.

The Company's allowance for credit losses is its estimate of expected lifetime credit losses currently expected in the loan portfolio, on unfunded lending commitments, and on its available-for-sale securities portfolio over the expected life of those assets. While these estimates are based on substantive methods for determining the required allowance, actual outcomes may differ significantly from estimated results, especially when determining required allowances for larger, complex commercial credits or unfunded lending commitments to commercial borrowers. Consumer loans, including indirect automobile loans and single family residential real estate,estate loans, are smaller and generally behave in a similar manner, and loss estimates for these credits are considered more predictable. Additionally, the Company estimates the allowance for credit losses as a calculation of expected lifetime credit losses utilizingutilizes a forward-looking forecast of macroeconomic conditions, which may differ significantly from actual results. Further discussion of the methodology used in establishing the allowance is provided in Note 3 to the Notes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in the Annual Report on Form 10-K.

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

Total Liabilities.Assets. Total liabilitiesassets decreasedincreased $18.7by $168.3 million, or 1.6%,12.9%, to $1.15$1.47 billion atas Marchof 31,June 2026.30, The2026, decreasedue primarily to an increase in cash and cash equivalents of $202.6 million, or 198.6%, and an increase in available for sale securities of $9.2 million, or 5.7%. This increase was primarilypartially drivenoffset by a decrease in FHLBloans advancesreceivable of $20.0$34.9 million, or 79.5%,3.7%, to $918.5 million, and a decrease in other liabilitiesassets of $3.3$7.2 million, or 12.0%, partially offset by a $6.2 million increase in total deposits.28.1%.

Deposits. Deposits increased $6.2$185.6 million, or 0.6%,16.9%, to $1.10$1.28 billion at MarchJune 31,30, 2026. Interest-bearing deposits increased $7.8$170.1 million, or 0.9%,19.6%, while non-interest-bearing deposits decreasedincreased $1.6$15.5 million, or 0.7%.6.8%. The increase in interest-bearing deposits was primarily due to subscription deposits of $156.0 million, of which approximately $71.5 million (including interest) was subsequently returned to subscribers at closing due to oversubscription. This was augmented by increases in certificates of deposit of $6.0$7.7 million, NOW accounts of $5.6$7.7 million and savings accounts of $3.8$5.5 million. These increases were partially offset by a decrease in money market accounts of $7.7$6.8 million.

We participate in reciprocal deposit programs, obtained through the Certificate Deposit Account Registry Service (CDARS) and IntraFi Cash Service (ICS) networks, that provide access to FDIC-insured deposit products in aggregate amounts exceeding the current limits for depositors. This allows us to maintain deposits that might otherwise be uninsured. Our reciprocal deposits obtained through the CDARS and ICS networks totaled $36.4$37.6 million and $35.6 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. We had no brokered deposits at either MarchJune 31,30, 2026 or December 31, 2025.

Mortgagors’ Escrow Accounts. Mortgagors’ escrow accounts decreasedincreased $1.5$3.8 million, or 16.1%,40.5%, to $7.9$13.2 million at MarchJune 31,30, 2026, from $9.4 million at December 31, 2025, primarily due to the timing of property tax and insurance disbursements.

Advances from the Federal Home Loan Bank. FHLB advances declined $20.0 million, or 79.5%, to $5.2 million at MarchJune 31,30, 2026 from $25.2 million at December 31, 2025. The reduction reflects the Company’s use of excess liquidity from theincreased maturitycash of securitiesbalances and increased deposits to pay down borrowings.

Stockholders’ Equity. Stockholders’Stockholders' equity increased $1.8$2.8 million, or 1.3%,2.0%, to $138.6$139.6 million at MarchJune 31,30, 2026 from $136.9 million at December 31, 2025.2026. The increase was primarily due to $2.2$4.8 million in net income,income partially offset by a $400,000$1.8 million repurchase of common stock and a $733,000 increase in the total accumulated other comprehensive loss. The Company’s book value per share was $12.43$12.49 at MarchJune 31,30, 2026, compared to $12.28 at December 31, 2025. The ratio of stockholders’ equity to total assets increaseddecreased to 10.79%9.50% from 10.51% over the same period. Unearned common stock held by the Bank’s employee stock ownership planESOP was $2.7 million at June 30, 2026 and $2.8 million at March 31, 2026 and December 31, 2025.

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

Net Income. Net income for the firstsecond quarter of 2026 was $2.2$2.6 million, compared to $2.3$2.7 million for the firstsecond quarter of 2025. Diluted earnings per share were $0.20$0.24 for the firstsecond quarter of 2026, compared to $0.21$0.25 for the same quarter of 2025. Interest and dividend income decreasedincreased $27,000,$258,000, or 0.2%,1.5%, while interest expense decreasedincreased $184,000,$118,000, or 3.3%.2.2%. The provision for credit losses decreasedincreased $282,000,$90,000, or 79.9%.89.1%. Non-interest income decreasedincreased $285,000,$141,000, or 16.3%,8.8%, and non-interest expense increased $230,000,$301,000, or 2.4%.3.1%. The provision for income taxes decreasedremained $4,000unchanged between the comparable quarters.

Net Interest Income. Net interest income increased $157,000,$140,000, or 1.4%,1.2%, to $11.2$11.6 million for the three months ended MarchJune 31,30, 2026 compared to 2025. The increase was primarily due to higher interest-earning asset balances and lower costs on interest-bearing liabilities, partially offset by lower yields on interest-earning assets dueand tohigher theinterest-bearing lowerliability interest rate environment.balances. The net interest margin decreased by two19 basis points to 3.77%3.78% and the interest rate spread improveddecreased by two13 basis points from 3.13%3.33% for the three months ended MarchJune 31,30, 2025 to 3.15%3.20% for the three months ended MarchJune 31,30, 2026, reflecting slightly better pricing on assets versus liabilities.2026. The ratio of average interest-earning assets to average interest-bearing liabilities declineddecreased 12 basis points2.05% to 133.88%.133.06%.

Interest Expense. Interest expense decreasedincreased $184,000,$118,000, or 3.3%,2.2%, to $5.4 million for the three months ended MarchJune 31,30, 2026, compared to $5.6$5.3 million for the same quarter in 2025. The average cost of interest-bearing liabilities declined by 14 basis points, to 2.44%, reflecting lower funding costs and a favorable shift in the funding mix with an increase in deposits and a decrease in borrowings. The average balance of total interest-bearing liabilities increased $17.7$68.4 million, or 2.0%,8.0%, to $899.8$928.4 million, primarily due to a $69.1$96.8 million increase in the average balance of deposits partially offset by a $20.0$28.5 million declinedecrease in the average balance of Federal Home Loan BankFHLB advances, which decreased from $75.0$33.7 million to $23.8$5.2 million. The average cost of theseinterest-bearing advancesliabilities also declineddecreased by 12713 basis points, fromto 4.07%2.32%, reflecting lower funding costs, primarily due to 2.80% for the first quarterreceipt of 2025subscription deposits maintained at a low savings rate, and 2026,a respectively.decrease in borrowings.

Provision for Credit Losses. The provision for credit losses decreasedincreased by $282,000,$90,000, or 79.9%,89.1%, from $353,000a $101,000 credit for the quarter ended MarchJune 31,30, 2025 to $71,000an $11,000 credit for the current quarter.quarter, Thedriven decreaseby in the provision was primarily due toa lower amount of automobile loans and low non-performing loan balances.levels. Net charge-offs increased by $38,000,$12,000, from $510,000$91,000 for the firstsecond quarter of 2025 to $548,000$103,000 for the firstsecond quarter of 2026. The increase was primarily due to increased net charge-offs of $176,000$47,000 in indirect automobile loans and a $44,000 increase in consumer loans, substantially offset by decreased net charge-offs of $183,000$36,000 in commercialconsumer loans.

Non-Interest Income. Non-interest income totaled $1.5$1.7 million for the three months ended MarchJune 31,30, 2026, aan decreaseincrease of $285,000,$141,000, or 16.3%,8.8%, from the comparable period in 2025, due primarily to aan decreaseincrease of $222,000,$155,000, or 53.4%,57.6%, in other non-interest income as interest rate swap income decreased. Investmentinvestment advisory fee income decreasedoffset $33,000,by a $69,000 decrease in net gain on sale of loans decreasedas $38,000we anddiscontinued serviceoriginating chargesresidential onmortgage depositloans accounts decreased $9,000. These decreases were only slightly offset by a $10,000 increase in the cash surrender value of life insurance and a $7,000 gain on the disposal of premises and equipment.directly.

Non-Interest Expense. For the firstthree quartermonths ofended June 30, 2026, non-interest expense totaled $9.7$10.0 million, an increase of $230,000,$301,000, or 2.4%,3.1%, compared to the same period in 2025. This increase was primarily driven by higherincreases in: salaries and employee benefits expense of $399,000,$296,000, reflectingprofessional increased compensation and medical insurance costs, as well as higher occupancy costsfees of $152,000, due to increased repair expenses$144,000, and a rise in data processing costs of $84,000.$71,000. These increases were partially offset by declinesdecreases in professionalother feesnon-interest expenses of $84,000, FDIC insurance expense of $78,000,$85,000, marketing expenses of $55,000,$85,000, and amortizationFDIC deposit insurance and other insurance expenses of intangible assets of $13,000.$42,000.

Income Taxes. The provision for income taxes decreasedremained $4,000at to $635,000$762,000 for the three months ended MarchJune 31,30, 2026,2026 compared to $639,000 for the same period in 2025. The decreased income tax provision corresponds to lower pre-tax income during the quarter compared to the first quarter ofand 2025. The effective tax rate was 22.27%22.56% for the three months ended MarchJune 31,30, 2026 as compared to 21.83%21.85% for the three months ended MarchJune 31,30, 2025.

Average Balance Sheets for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

The following table presents the estimated changes in the Bank’s EVE that would result from changes in market interest rates at MarchJune 31,30, 2026.

Our primary sources of liquidity are the July 21, 2026 offering proceeds, deposits, loan sales, amortization and prepayment of loans and mortgage-backed securities, maturities, sales and calls of investment securities and other short-term investments, earnings, funds provided from operations, as well as access to FHLB advances and other borrowings. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan and security sales and prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits.

As reflected in the Consolidated Statements of Cash Flows, net cash provided by operating activities was $3.5$9.1 million for the threesix months ended MarchJune 31,30, 2026, compared to $4.3$6.7 million for the same period in 2025. These amounts differ from our net income because of a variety of cash receipts and disbursements that did not affect net income for the respective periods. Net cash provided by investing activities totaled $22.9$25.6 million in the first threesix months of 2026, ana increasedecrease from $13.0$35.3 million in the prior-year period, driven primarily by security purchases and a decrease in net loans of $16.6 million in the first three months of 2026 versus a net increase in loans of $5.1 million in the comparable 2025 period and $6.6 million in proceeds from maturities and principal repayments of securities.loans. Cash usedprovided inby financing activities was $15.5$167.9 million for the threesix months ended MarchJune 31,30, 2026, compared to $4.2$10.1 million for the same period in 2025, resulting primarily from the $156.0 million in proceeds from stock subscriptions and changes in deposit balances and debt repayments. As a result of these activities, cash and cash equivalents increased by $10.9$202.6 million to $112.9$304.6 million as of MarchJune 31,30, 2026, from a beginning balance of $102.0 million.

At MarchJune 31,30, 2026, we had the following main sources of availability of liquid funds and borrowings:

The Bank has access to a preapproved secured line of credit with the FHLB. At MarchJune 31,30, 2026, the Bank had pledged $523.5$523.3 million of assets to the FHLB, which resulted in a secured line of credit of $365.7$365.1 million. At MarchJune 31,30, 2026, the Bank had borrowed $5.2 million under this line, with remaining secured borrowing capacity of $360.6$359.9 million.