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

In addition, there are continuing concerns related to, among other things, the level of U.S. government debt and fiscal actions that may be taken to address that debt, a potential resurgence of economic and political tensions with Chinainstability and uncertainty, wars and military conflict, such as in Ukraine, the RussianMiddle invasion ofEast Ukraine,and Venezuela, all of which may have a destabilizing effect on financial markets and economic activity. Economic pressure on consumers and overall economic uncertainty may result in changes in consumer and business spending, borrowing and saving habits. These economic conditions and/or other negative developments in the domestic or international credit markets or economies may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes and high unemployment or underemployment may also result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity and financial condition.

Interest Rate Volatility Could Adversely Affect Our Results of Operations and Financial Condition. We cannot predict or control changes in interest rates. Interest rates are highly sensitive to many factors that are beyond the Company’s control, including monetary policy of the federal government, inflation and deflation, volatility of domestic and global financial markets, volatility of credit markets, and competition. During 2024,2025, the Federal Reserve Board begancontinued reducing the federal funds rate, which had been been raised significantly during 2022 and 2023 to combat rising inflation in the U.S. Notwithstanding these reductions, there can be no assurances that the Federal Reserve Board will continue to cut the target federal funds rate in 20252026 and it may remain open open to increasing rates further should inflation dynamics remain unfavorable. Changes in monetary policy, including changes in interest interest rates, influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such changes could affect our ability to originate loans and obtain deposits, the fair value of financial assets and liabilities, and the average duration of our assets.

Inflation Can Have an Adverse Impact on the Company’s Business and its Customers. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. While the Federal Reserve began reducingreduced the federal funds rate in 2024,2025, there can be no assurances that the Federal Reserve will continue to cut target target funds rates in 20252026 and it may remain open to increasing rates further should inflation dynamics remain unfavorable in 2025. 2026. Additionally, the Federal Reserve has raised certain benchmark interest rates in response to this elevated inflation. As discussed above, changes in interest rates could hurt our profits, as inflation increases and market interest rates rise, the value of the Company’s investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation generally increases the cost of goods and services the Company uses in its business operations, such as electricity and other utilities, and also generally increases employee wages, any of which can increase the Company’s non-interest expenses. Furthermore, the Company’s customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with the Company. Sustained higher interest rates by the Federal Reserve Board to tame persistent inflationary price pressures could also push down asset prices and weaken economic activity. A deterioration in economic conditions in the United States and the Company’s markets could result in an increase in loan delinquencies and non-performing assets, decreases decreases in loan collateral values and a decrease in demand for the Company’s products and services, all of which, in turn, would would adversely affect the Company’s business, financial condition and results of operations.

The credit loss estimation process involves procedures to appropriately consider the unique characteristics of loan portfolio segments, which consist of commercial real estate loans, residential real estate loans, commercial and industrial loans, and consumer loans. These segments are further disaggregated into loan classes, the level at which credit risk is monitored. For each of these pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The quantitative component of the ACL on loans is model-based and utilizes a forward-looking macroeconomic forecast. The Company uses a discounted cash flow method, incorporating probability of default and loss given default forecasted based on statistically derived economic variable loss drivers, to estimate expected credit losses. This process includes estimates which involve modeling loss projections attributable to existing loan balances, and considering historical experience, current conditions, and future expectations for pools of loans over a reasonable and supportable forecast period. The historical information either experienced by the Company or by a selection of peer banks, when appropriate, is derived from a combination of recessionary and non-recessionary performance periods for which data is available. The expected loss estimates for the consumer loan segment are based on historical loss rates using the WARM method.

Increases in the Company’s Nonperforming Assets Could Adversely Affect the Company’s Results of Operations and Financial Condition in the Future. Nonperforming assets adversely affect net income in various ways. While the Company pays interest expense to fund nonperforming assets, no interest income is recorded on nonperforming loans or other real estate owned, thereby adversely affecting income and returns on assets and equity. In addition, loan administration and workout costs increase, resulting in additional reductions of earnings. When taking collateral in foreclosures and similar proceedings, the Company is required to carry the property or loan at its then-estimated fair market value less estimated cost to sell, which, when compared to the carrying value of the loan, may result in a loss. These nonperforming loans and other real estate owned also increase the Company’s risk profile and the capital that regulators believe is appropriate in light of such risks,risks and have an impact on the Company’s FDIC risk-based risk based deposit insurance premium rate. The resolution of nonperforming assets requires significant time commitments from management and and staff. The Company may experience further increases in nonperforming loans in the future, and nonperforming assets may result in further costs and losses in the future, either of which could have a material adverse effect on the Company’s financial condition and results of operations.

The Bank’s Reliance on Brokered and Reciprocal Deposits Could Adversely Affect its Liquidity and Operating Results. Among other sources of funds, the Company, from time to time, relies on brokered deposits to provide funds with which to make loans and provide for other liquidity needs. AtThere were no brokered time deposits at December 31, 2024 and 2023, the Bank had $1.7 million in brokered time deposits.2025. One of the Bank’s sources for deposits is CDARS. At December 31, 2024,2025, the Bank has $36.9$45.4 million in CDARS reciprocal deposits and $22.3$89.7 million in ICS network deposits. These amounts, are reciprocal and are not considered brokered deposits under recent regulatory reform.

Financial laws, regulations and policies are subject to amendment by Congress, state legislatures and federal and state regulatory agencies. Changes to statutes, regulations or policies, including changes in the interpretation of regulations or policies and changes in enforcement and regulatory priorities, could materially impact our business. These changes could also impose additional costs on us and limit the types of products and services that we may offer our customers. Compliance with laws and regulations can be difficult and costly, and the failure to comply with any law, regulation or policy could result in sanctions by financial regulatory agencies, including civil monetary penalties, private lawsuits, or reputational damage, any of which could adversely affect our business, financial condition, or results of operations. While we have policies and procedures designed to prevent such violations, there can be no assurance that violations will not occur. We cannot provide assurance that future changes in laws, regulations and policies will not adversely affect our business. See the section titled, “Supervision and Regulation” in ITEM ITEM 1. Business.

We Face Cybersecurity Risks and Risks Associated with Security Breaches Which Have the Potential to Disrupt Our Operations, Cause Material Harm to Our Financial Condition, Result in Misappropriation of Assets, Compromise Confidential Information and/or Damage Our Business Relationships and Can Provide No Assurance That the Steps We and Our Service Providers Take in Response to These Risks Will Be Effective. We depend upon data processing, communication and information exchange on a variety of computing platforms and networks and over the internet. In addition, we rely on the services of a variety of vendors to meet our data processing and communication needs. We face cybersecurity risks and risks associated with security breaches or disruptions such as those through cyber-attacks or cyber intrusions over the internet, malware, computer viruses, attachments toand links in emails, social engineering engineering and phishing schemes or persons inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusions, including by computer hackers, nation-state affiliated actors, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. These incidents may result in disruption of our operations, material harm to our financial condition, cash flows and the market price of our common stock, misappropriation of assets, compromise or corruption of confidential information collected in the course of conducting our business, liability for stolen information or assets, increased cybersecurity protection and insurance costs, regulatory enforcement, litigation and damage to our stakeholder relationships. These risks require continuous and likely increasing attention and other resources from us to, among other actions, identify and quantify these risks, upgrade and expand our technologies, systems and processes to adequately address them and provide periodic training for our employees to assist them in detecting phishing, malware and other schemes. Such attention diverts time and other resources from other activities and there is no assurance that our efforts will be effective.

In the normal course of business, we collect and retain certain personal information provided by our customers, employees and vendors. We also rely extensively on computer systems to process transactions and manage our business. We can provide no assurance that the data security measures designed to protect confidential information on our systems established by us will be able to prevent unauthorized access to this personal information. There can be no assurance that our efforts to maintain the security and integrity of the information we and our service providers collect and our and their computer systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protectedwell-protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.

We Continually Encounter Technological Change and The Failure to Understand and Adapt to These Changes Could Hurt Our Business. The financial services industry is undergoing rapid technological change with frequent introductions of new technology-driven products and servicesservices, and technological advances are likely to intensify competition. The effective use of technology, including emerging technologies, 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. Many of our competitors have substantially greater resources to invest in technological improvements.improvements, including the use of artificial intelligence. We may not be able to keep pace with technological change or effectively implement new technology-driven products and services or be successful in marketing these products and services to customers. Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

Changes in the Local Economy May Affect our Future Growth Possibilities. The Company’s success depends principally on the general economic conditions of the primary market areas in which the Company operates. The local economic conditions in these regions have a significant impact on the demand for the Company’s products and services, as well as the ability of the Company’s customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding sources. The Company’s market area is principally located in Hampden and Hampshire Counties, Massachusetts and Hartford and Tolland Counties in northern Connecticut. The local economy may affect future growth possibilities. The Company’s future growth opportunities depend on the growth and stability of our regional economy and the ability to expand in our market area.

For the twelve months ended December 31, 2024,2025, the Company reported net income wasof $15.3 million, or $0.75 per diluted share, compared to $11.7 million, or $0.56 diluted earnings per share, compared to net income of $15.1 million, or $0.70 diluted earnings per share, for the twelve months ended December 31, 2023.2024. The results for the twelve months ended December 31, 2024 showed decreases in netNet interest income andincreased the$10.3 million, or 17.2%, provision for credit losses,losses asincreased well$1.0 as increases inmillion, non-interest income decreased $387,000, or 3.0%, and non-interest expense expense.increased $4.1 million, or 6.9%, during the same period in 2024.

During the twelve months ended December 31, 2024,2025, net interest income decreasedincreased $8.1$10.3 million, or 11.9%,17.2%, to $59.8$70.1 million, compared to $67.9$59.8 million for the twelve months ended December 31, 2023.2024. The decreaseincrease in net interest income was primarily due to an increase in interest income of $8.8 million, or 8.0%, and a decrease in interest expense of $16.8$1.5 million, or 50.6%, partially offset by an increase in interest and dividend income of $8.7 million, or 8.6%.3.0%.

During the twelve months ended December 31, 2024,2025, the Company recorded a provision for credit losses of $335,000, compared to a reversal of credit losses of $665,000, compared to a provision for credit losses of $872,000$665,000 during the twelve months ended December 31, 2023.2024. The decrease$1.0 million increase in reservesthe provision for credit losses was primarily due to changes an increase in thetotal economic environment and related adjustments to the quantitative componentsloans of the$113.2 CECLmillion, methodology.or 5.5%.

We believe that it is common practice in the banking industry to present interest income and related yield information on tax-exempt loans and securities on a tax-equivalent basis, basisas well as presenting tangible book value per share and that such information is useful to investors because it facilitates comparisons comparisons among financial institutions. However, the adjustment of interest income and yields on tax-exempt loans and securities to a tax-equivalent amount, as well as the presentation of tangible book value per share may be considered to include financial amountinformation that is considerednot ain non-GAAPcompliance financialwith measure.GAAP. A reconciliation from GAAP to non-GAAP is provided below.

At December 31, 2024,2025, total assets were $2.7 billion, an increase of $88.5increased $83.4 million, or 3.5%,3.1%, from December 31, 2023.2024 to $2.7 billion. The increase in total assets was primarily due to an increase in total loans of $113.2 million, or 5.5%, partially offset by a decrease in cash and cash equivalents of $26.1 million, or 39.2%. The balance sheet composition and changes since December 31, 20232024 are discussed below.

At December 31, 2024,2025, the Company reported gross unrealized losses on the available-for-sale securities portfolio of $23.4 million, or 11.8% of the amortized cost basis of the available-for-sale securities portfolio, compared to gross unrealized losses of $31.2 million, or 16.2% of the amortized cost basis of the available-for-sale securities at December 31, 2024. At December 31, 2025, the Company reported gross unrealized losses on the held-to-maturity securities portfolio of $30.5 million, or 16.2% of the amortized cost basis of the available-for-saleheld-to-maturity securities portfolio, compared to unrealized losses of $29.2 million, or 17.5% of the amortized cost basis of the available-for-sale securities at December 31, 2023. At December 31, 2024, the Company reported unrealized losses on the held-to-maturity securities portfolio of $39.4 million, or 19.2% of the amortized cost basis of the held-to-maturity securities portfolio, compared to $35.7 million, or 16.0% of the amortized cost basis of the held-to-maturity securities portfolio at December 31, 2023.2024.

At December 31, 2024, totalTotal loans increased by $42.9$113.2 million, or 2.1%, 5.5%, from $2.1 billion, or 77.9% of total assets, at December 31, 2023,2024 to $2.1$2.2 billion.billion, or 79.7% of total assets, at December 31, 2025. The increase in total loans was dueprimarily todriven by an increase in residential real estate loans, including home equity loans, of $53.5$81.2 million, or 7.4%,10.5%, partially offsetan by a decrease in commercial real estate loans of $4.0 million, or 0.4%, a decreaseincrease in commercial and industrial loans of $5.7 $10.1 million, or 2.7%4.8%, and an increase in commercial real estate loans of $23.3 million, or 2.2%. The increase in total loans was partially offset by a decrease in consumer loans of $1.1$1.5 million, or 19.8%.33.3%.

Our commercial real estate portfolio is comprised of diversified property types and primarily within our geographic footprint. At December 31, 2024,2025, the commercial real estate portfolio totaled $1.1 billion,billion and represented 52.0%50.4% of total loans. Of the $1.1 billion, $880.8$900.5 million, or 81.9%, was categorized as non-owner occupied commercial real estate and represented 325.2%325.1% of the bank’s Bank’s total risk-based capital.

1. Total reported loans for construction, land development, and other land represent 100 percent or more of the institution’s total risk-based capital; or 2. Total commercial real estate loans loans, as defined in this guidanceguidance, represent 300 percent or more of the institution’s total risk-based capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50 percent or more during the prior 36 months.

The Company holds a concentration in commercial real estate loans. As of December 31, 2024,2025, commercial real estate loans represented 396.8% of consolidated bank risk-based capital. Non-owner occupied commercial real estate loans totaled $900.5 million, or 325.1% of consolidated bank risk-based capital, and owner-occupied commercial real estate loans totaled $198.6 million, or 71.7% of consolidated bank risk-based capital. As of December 31, 2025, construction, land development and other land loans represented 37.9%39.0% of consolidated bank risk-based capital. During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio of 16.1%.9.0%.

The management team has extensive experience in underwriting commercial real estate loans and has implemented and continues to maintain heightened risk management procedures and strong underwriting criteria with respect to its commercial real estate portfolio. The Company’s Board of Directors (the “Board”) has established internal maximum limits on CRE as an asset class overall as well as sub limits within CRE by property class, to better manage and control the exposure to property classes during periods of changing economic conditions. The Board also has minimum targets for regulatory capital ratios that are in excess of well capitalized ratios.

Our total office-relatedoffice related commercial real estate loans (which is comprised of loans within our commercial real estate portfolio that are secured by office space, medical office space, and mixed-use where rental income is primarily from office space) totaled $200.1 $195.2 million, or 73.9%70.5% of total bank risk-based capital and $216.2$200.1 million, or 79.6%73.9% of total bank risk-based capital, as of December 31, 20242025 and December 31, 2023, 2024, respectively.

The table below breaks the office-related commercial real estate estateoffice loans by collateral type for the periods noted:

Office-related CRE office loans are primarily concentrated in Massachusetts, where approximately 41.5%42.3% at December 31, 20242025 and 43.9%,41.5%, at December 31, 2023, 2024, of the total balance of office-related CRE office loans are located. The Company does not have office CRE loans secured by office real estate in greater Boston or New York.

The following table sets forth the office-related CRE office loans for non-owner occupied and owner occupied CRE and their credit quality indicators as of the dates indicated:

The Company indirectlyowns utilizesbank-owned thelife earnings on insurance (“BOLI”) to help offset the cost of the Company’semployee benefit plans. BOLI is recorded at its cash surrender value. BOLI policies insure the lives of officers and certain employees and names the Bank as beneficiary. The change in the cash surrender value is included as a component of non-interest income and is exempt from federal and state income taxes as long as the policies are held until the death of the insured individuals. The cash surrender value of BOLI was $77.1$79.0 million and $75.1$77.1 million at December 31, 2024 2025 and 2023,December 31, 2024, respectively, and was issued by eleven insurance companies rated investment grade or better.

At December 31, 2024,2025, total deposits were $2.4 billion and increased $118.9$98.3 million, or 5.6%,4.3%, from $2.1 billion at December 31, 2023 to $2.3 billion.2024. Core deposits, which the Company defines as all deposits except time deposits, increased $26.7$111.9 million, or 1.7%,7.2%, from $1.5 billion, or 71.5% of total deposits, at December 31, 2023, to $1.6 billion, or 68.9% of total deposits, at December 31, 2024.2024, to $1.7 billion, or 70.8% of total deposits, at December 31, 2025. Non-interest-bearing deposits decreasedincreased $14.0$28.9 million, or 2.4%, 5.1%, to $565.6$594.5 million, and represent 25.0%25.2% of total deposits, money market accounts increased $27.1 $54.1 million, or 4.3%,8.2%, to $661.5$715.6 million, interest-bearing savings accounts decreased $5.8 million, or 3.1%, to $181.6 million and interest-bearing checking accounts increased $19.3$23.9 million, or 14.7%,15.9%, to $150.3$174.2 million, and savings accounts increased $5.0 million, or 2.7%, to $186.6 million.

Time deposits increaseddecreased $92.2$13.7 million, or 15.1%,1.9%, from $611.4 million at December 31, 2023 to $703.6 million at December 31, 2024.2024 to $689.9 million at December 31, 2025. Brokered time deposits, which are included in time deposits, totaled $1.7 million at December 31, 20242024. andThe Company did not have any brokered time deposits at December 31, 2023. The Company has experienced growth and movement in both money market accounts and time deposits as a result of relationship pricing, the current interest rate environment, and customer behaviors, as opposed to time deposit specials or interest rate adjustments.2025. We continue our disciplined and focused approach to core relationship management and customer outreach to meet funding requirements and liquidity needs, with an emphasis on retaining a long-term core customer relationship base by competing for and retaining deposits in our local market. At December 31, 2024,2025, the Bank’s uninsured deposits representedtotaled $697.6 million, or 29.5% of total deposits, compared to $643.6 million, or 28.4% of total deposits, compared to 26.8% at December 31, 2023.2024.

At December 31, 2024,2025, total borrowings decreased $33.4$17.1 million, or 21.3%,13.9%, from $156.5$123.1 million at December 31, 20232024 to $123.1$106.1 million. At December 31, 2024,2025, short-term borrowings decreasedincreased $10.7$7.9 million, or 66.5%,146.2%, to $5.4$13.3 million, compared to $16.1 million at December 31, 2023. Long-term borrowings decreased $22.6 million, or 18.8%, from $120.6$5.4 million at December 31, 20232024. toLong-term borrowings decreased $25.0 million, or 25.5%, from $98.0 million at December 31, 2024. At December 31, 2024 to $73.0 million at December 31, 2025. At December 31, 2025 and December 31, 2023,2024, borrowings also consisted of $19.8 million and $19.7 million, respectively, in fixed-to-floating rate subordinated notes.

As of December 31, 2024,2025, the Company had $464.1 $538.6 million of additional borrowing capacity at the FederalFHLB, Home Loan Bank, $382.9$349.0 million of additional borrowing capacity under the Federal Reserve BankFRB Discount Window and $25.0 million of other unsecured lines of credit with correspondent banks.

At December 31, 2024,2025, shareholders’ equity was $247.6 million, or 9.1% of total assets, compared to $235.9 million, or 8.9% of total assets, compared to $237.4 million, or 9.3% of total assets, at December 31, 2023. 2024. The change was primarily attributable to annet increaseincome of $15.3 million and a decrease in accumulated other comprehensive loss of $1.5 $6.6 million, partially offset by cash dividends paid of $5.9$5.7 million,million and the repurchase of shares at a cost of $7.8 million, partially offset by net income of $11.7$6.2 million. At December 31, 2024,2025, total shares outstanding were 20,875,713.20,372,786. The Company’s regulatory capital ratios continue to be strong and in excess of regulatory minimum requirements to be considered well-capitalized as defined by regulators and internal Company targets.

The Company’s book value per share was was$12.16 at December 31, 2025, compared to $11.30 at December 31, 2024, compared to $10.96 at December 31, 2023, while tangible book value per share, a non-GAAP financial measure, increased $0.33,$0.86, or 3.2%,8.1%, from $10.30$10.63 at December 31, 20232024 to $10.63$11.49 at December 31, 2024. Tangible book value is a Non-GAAP measure.2025. For more information regarding the Company’s use of Non-GAAP financial measures see “Explanation of Use of Non-GAAP Financial Measurements.” As of December 31, 2024, the Company’s and the Bank’s regulatory capital ratios continued to exceed the levels required to be considered “well-capitalized” under federal banking regulations.

For the twelve months ended December 31, 2024, 2025, the Company reported net income of $15.3 million, or $0.75 per diluted share, compared to $11.7 million, or $0.56 per diluted share, compared to $15.1 million, or $0.70 per diluted share, for the twelve months ended December 31, 2023.2024. Net interest income decreasedincreased $8.1 $10.3 million, or 11.9%,17.2%, provision for credit losses decreasedincreased $1.5$1.0 million, non-interest income increaseddecreased $2.0 million,$387,000, or 18.4%,3.0%, and non-interest expense increased $78,000,$4.1 million, or 0.1%,6.9%, duringcompared theto same period in 2023.2024. Return on average assets and return on average equity were 0.56% and 6.35% for the twelve months ended December 31, 2025, respectively, compared to 0.45% and 4.93% for the twelve months ended December 31, 2024, respectively, compared to 0.59% and 6.47% for the twelve months ended December 31, 2023, respectively.

During the twelve months ended December 31, 2024,2025, net interest income decreasedincreased $8.1$10.3 million, or 11.9%,17.2%, to $59.8$70.1 million, compared to $67.9 $59.8 million for the twelve months ended December 31, 2023.2024. The decreaseincrease in net interest income was primarily due to an increase in interest expense of $16.8 million, or 50.6%, partially offset by an increase in interest and dividend income of $8.7$8.8 million, or 8.6%.8.0%, and a decrease in interest expense of $1.5 million, or 3.0%.

The net interest margin for the twelve months ended December 31, 2025 was 2.75%, compared to 2.45% for the twelve months ended December 31, 2024. The net interest margin, on a tax-equivalent basis, was 2.77% for the twelve months ended December 31, 2025, compared to 2.47% for the twelve months ended December 31, 2024. During the twelve months ended December 31, 2024, the Company had fair value hedge income of $1.4 million, which contributed six basis points to the net interest margin. The adjusted net interest margin, excluding income from the fair value hedge, a non-GAAP financial measure, increased 36 basis points from 2.39% for the twelve months ended December 31, 2024 was 2.45%, compared to 2.82% for the twelve months ended December2.75% 31, 2023. The net interest margin, on a tax-equivalent basis, was 2.47% for the twelve months ended December 31, 2024,2025. comparedThe fair value hedge matured in October of 2024. For more information regarding to 2.84% for the twelveCompany’s monthsuse endedof DecemberNon-GAAP 31,financial 2023.measures see “Explanation of Use of Non-GAAP Financial Measurements.”

The average yield on interest-earning assets, without the impact of tax-equivalent adjustments, increased 3015 basis points from 4.20% for the twelve months ended December 31, 2023 to 4.50% for the twelve months ended December 31, 2024 2024.to The average yield on loans, without the impact of tax-equivalent adjustments, increased 32 basis points from 4.54%4.65% for the twelve months ended December 31, 2025. The average yield on loans, without the impact of tax-equivalent adjustments, 2023increased to14 basis points from 4.86% for the twelve months ended December 31, 2024.2024 to 5.00% for the twelve months ended December 31, 2025. During the twelve months ended December 31, 2024,2025, average interest-earning assets increased $33.5$108.9 million, or 1.4%, 4.5%, to $2.4$2.5 billion, compared to the twelve months ended December 31, 2023,2024, primarily due to an increase in average loans of $29.0 $73.6 million, or 1.4%,3.6%, an increase in average short-term investments, consisting of cash and cash equivalents, of $12.8$21.5 million, or 62.5%, 64.7%, and an increase in average other investmentssecurities of $2.2$13.6 million, or 18.1%, partially offset by a decrease in average securities of $10.6 million, or 2.9%.3.8%.

During the twelve months ended December 31, 2024,2025, the average cost of funds, including non-interest-bearing demand accounts and borrowings, increased 70decreased 15 basis points from 1.44% 2.14% for the twelve months ended December 31, 20232024 to 2.14%.1.99%. For the twelve months ended December 31, 2024,2025, the average cost of core deposits, including non-interest-bearing demand deposits, increased 2415 basis points from 0.65% 0.89% for the twelve months ended December 31, 2023,2024, to 0.89%.1.04%. The average cost of time deposits increaseddecreased 12963 basis points from 3.03% 4.32% for the twelve months ended December 31, 20232024 to 4.32%3.69% for the twelve months ended December 31, 2024.2025. The average cost of borrowings, which include borrowings and subordinated debt, increased 162 basis points from 4.84% for the twelve months ended December 31, 2023 to 5.00% for the twelve months ended December 31, 2024.2024 to 5.02% for the twelve months ended December 31, 2025.

For the twelve months ended December 31, 2024, 2025, average demand deposits, an interest-free source of funds, decreasedincreased $41.4 million, or 6.9%, from $602.7$20.9 million, or 27.8%3.7%, from $561.3 million, or 25.8% of total average deposits, for the twelve months ended December 31, 2023,2024, to $561.3$582.2 million, or 25.8%25.1% of total average deposits.

The credit loss estimation process involves procedures to appropriately consider the unique characteristics of loan portfolio segments, which consist of commercial real estate loans, residential real estate loans, commercial and industrial loans, and consumer loans. These segments are further disaggregated into loan classes, the level at which credit risk is monitored. For each of these pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The quantitative component of the ACL on loans is model-based and utilizes a forward-looking macroeconomic forecast. The Company uses a discounted cash flow method, incorporating probability of default and loss given default forecasted based on statistically derived economic variable loss drivers, to estimate expected credit losses. This process includes estimates which involve modeling loss projections attributable to existing loan balances, and considering historical experience, current conditions, and future expectations for pools of loans over a reasonable and supportable forecast period. The historical information either experienced by the Company or by a selection of peer banks, when appropriate, is derived from a combination of recessionary and non-recessionary performance periods for which data is available. The expected loss estimates for the consumer loan segment are based on historical loss rates using the WARM method.

During the twelve months ended December 31, 2025, the Company recorded a provision for credit losses of $335,000, compared to a reversal of credit losses of $665,000 during the twelve months ended December 31, 2024. The decrease $1.0 million increase in the provision for credit losses was primarily due to changesan increase in thetotal loan mix as well as economic environment and related adjustments to the quantitative componentsloans of the$113.2 CECLmillion, methodology.or 5.5%. The provision for credit losses was determined by a number of factors: the continued strong credit performance of the Company’s loan portfolio, changes in the loan portfolio mix and Management’s Management’s consideration of existing economic conditions and the economic outlook from the Federal Reserve’sReserve Bank’s actions to control inflation. Management continues to monitor macroeconomic variables related to increasing interest rates, tariffs, inflation and and the concerns of an economic downturn, and believes it is appropriately reserved for the current economic environment.

During the twelve months ended December 31, 2024, service charges and fees increased $346,000, or 3.9%, and income from BOLI increased $91,000, or 5.0%, from $1.8 million forFor the twelve months ended December 31, 2025, 2023 to $1.9 million. During the twelve months ended December 31, 2024, the Company recorded othernon-interest income decreased $387,000, or 3.0%, from loan-level$12.9 swap fees on commercial loans of $261,000 and did not have comparable incomemillion during the twelve months ended December 31, 2023.2024 to $12.5 million. During the same period, service charges and fees on deposits increased $715,000, or 7.8%, and income from BOLI increased $52,000, or 2.7%. During the twelve months ended December 31, 2024,2025, the Company reported $347,000 in other income from loan-level swap fees on commercial loans, compared to $261,000 during the same period in 2024. During the twelve months ended December 31, 2025, the Company reported a gain of $1.3 million$243,000 on non-marketable equity investments, compared to a gain of $590,000$1.3 million during the twelve months ended December 31, 2024. During the twelve months ended December 31, 2025, the Company reported unrealized gains on marketable equity securities of $35,000, compared to unrealized gains on marketable equity securities of $13,000 during the twelve months ended December 31, 2024. Gains and losses from the investment portfolio vary from quarter to quarter based on market conditions, as well as the related yield curve and valuation changes. During the twelve months ended December 31, 2025, the Company reported $11,000 in gains from mortgage banking activities, compared to $235,000 during the twelve months ended December 31, 2023.2024 due Duringto the sale of fixed rate residential real estate loans. In addition, during the twelve months ended December 31, 2024, the Company reported a loss on the disposal of premises and equipment of $6,000,$6,000 comparedand todid not have a comparable gain or loss of $3,000 during the twelve months ended December 31, 2023. During the twelve months ended December 31, 2023, the Company also reported unrealized losses on marketable equity securities of $1,000, compared to unrealized gains on marketable equity securities of $13,000 during the twelve months ended December 31, 2024.2025.

At December 31, 2024 2025 and December 31, 2023,2024, outstanding borrowings from the FHLB were $98.0$83.0 million and $40.6$98.0 million, respectively. At December 31, 2024, 2025, we had $464.1$538.6 million in available borrowing capacity with the FHLB.FHLB, including our $9.5 million overnight Ideal Way Line of Credit. We have the ability to increase our borrowing capacity with the FHLB by pledging investment securities or additional loans.

The Company’s primary activities are the origination of commercial real estate loans, commercial and industrial loans and residential real estate loans, as well as and the purchase of mortgage-backed and other investment securities. During the year ended December 31, 2023,2025, we originated $336.4 $380.2 million in loans, compared to $225.6$336.4 million in 2023.2024. DuringTotal theloans yearincreased ended$113.2 million, or 5.5%, from $2.1 billion, or 77.9% of total assets, at December 31, 2024, total2024 loansto increased$2.2 $42.9 million,billion, or 2.1%, compared to an increase79.7% of $35.9total million,assets, or 1.8%, for the year endedat December 31, 2023. 2025. At December 31, 2024, 2025, the Company had approximately $122.4$144.0 million in loan commitments and letters of credit to borrowers and approximately $343.1 $357.3 million in available home equity and other unadvanced lines of credit.

Deposit inflows and outflows are affected by the level of interest rates, the products and interest rates offered by competitors and by other factors. At December 31, 2024,2025, time deposit accounts scheduled to mature within one year totaled $694.9$678.1 million.million, or 98.3% of total time deposits. Based on on the Company’s deposit retention experience and current pricing strategy, we anticipate that a significant portion of these time deposits will remain on deposit. We monitor our liquidity position frequently and anticipate that it will have sufficient funds to meet our current funding commitments for the next 12 months and beyond.

The Company entered into a long-term contractual obligation with a vendor for use of its core provider and ancillary services beginning in 2016. Total remaining contractual obligations outstanding with this vendor as of December 31, 20242025 were estimated to be $7.1 $3.6 million, withwhich $6.1 millionis expected to be paid within one year and the remaining $1.0 million to be paid within the next three years.year. Further, the Company has operating leases for certain of its banking offices and ATMs. Our leases have remaining lease terms of less than one year to fourteenthirteen years, some of which include options to extend the leases for additional five-year terms up to ten years. Undiscounted lease liabilities totaled $8.9$7.7 million as of December 31, 2024.2025. Principal payments expected to be made on our lease liabilities during the twelve months ended December 31, 2025 were $1.5$1.4 million. The remaining lease liability payments totaled $7.4$6.3 million and are expected to be made after December 31, 20252026 (See Note 12, Leases, to our consolidated financial statements for further information on our lease obligations).

In addition,On April 20, 2021, the Company completed an offering of $20its private placement of $20.0 million in aggregate principal amount of its 4.875% Notesfixed-to-floating rate subordinated notes due on May 1, 2031, unless earlier redeemed, to certain qualified institutional buyers in a private placement transaction on April 20, 2021. Unless earlier redeemed, (the “Notes mature on May 1,”). 2031. At December 31, 2024, $19.8 million aggregate principle amount of the Notes was outstanding. The Notes will bear interest from the initial issue date to, but excluding, May 1, 2026, or the earlier redemption date, at a fixed rate of 4.875% per annum, payable quarterly in arrears on May 1, August 1, November 1 and February 1 of each year, beginning August 1, 2021, and from and including May 1, 2026, but excluding the maturity date or earlier redemption date, equal to the benchmark rate, which is the 90-day average secured overnight financing rate,rate (“SOFR”), plus 412 basis points, determined on the determination date of the applicable interest period, payable quarterly in arrears on May 1, August 1, November 1 and February 1 of each year. The Company may also redeem the Notes, in whole or in part, on or after May 1, 2026, and at any time upon the occurrence of certain events, subject in each case to the approval of the Board of Governors of the Federal Reserve (See Note 8, Long-Term Debt, to our consolidated financial statements for further information on our long-term debt). At December 31, 2025 and December 31, 2024, $19.8 million in aggregate principal amount of the Notes was outstanding.

In 2024, 2025, cash flows from deposit inflows were used to first to fund loan growth,growth. andDuring then2025, tothe purchaseCompany securities, primarily AFS securities. Whileexperienced net loan growth during 2024 was centered in residential real estate loans, thecommercial real estate loans and commercial and industrial loans. The Company’s long-term focus continues to be on growing commercial loans that present the appropriate levels of risk and return. Commercial loans typically have variable interest interest rates and shorter maturities than residential loans.

You should read the following financial results for the three months and six months ended MarchJune 31,30, 2026 in the context of this strategy.

Critical accounting estimates are necessary in the application of certain accounting policies and procedures,procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions.

There have been no material changes to our critical accounting policies during the threesix months ended MarchJune 31,30, 2026. For additional information on our critical accounting policies, please refer to the information contained in Note 1 of the accompanying unaudited consolidated financial statements and Note 1 of the consolidated financial statements included in our 2025 Annual Report.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31,JUNE 30, 2026 AND DECEMBER 31, 2025

At June March 31,30, 2026, total assets were $2.8$2.7 billion, an increasea decrease of $28.0$4.2 million, or 1.0%,0.1%, from December 31, 2025. The increasedecrease in total assets was primarily due to ana increasedecrease in total loansinvestment securities of $17.2$12.2 million, or 0.8%,3.4%, and ana increasedecrease in cash and cash equivalents of $15.8$2.7 million, or 39.0%.6.7%, partially offset by an increase in total loans of $9.9 million, or 0.5%.

At June March 31,30, 2026, the investment securities portfolio totaled $359.2$353.0 million, or 13.0%12.9% of total assets, compared to $365.2 million, or 13.3% of total assets, at December 31, 2025. At March 31,June 30, 2026, the Company’s available-for-sale securities portfolio, recorded at fair market value, wasdecreased $173.2 million, a decrease of $2.6$5.2 million, or 1.5%,3.0%, from $175.8 million at December 31, 2025.2025 to $170.6 million. The held-to-maturity securities portfolio, recorded at amortized cost, decreased $3.4$7.1 million, or 1.8%,3.8%, from $188.8 million at December 31, 20252025, to $185.4$181.7 million at MarchJune 31,30, 2026.

At June March 31,30, 2026, the Company reported net unrealized losses on the available-for-sale securities portfolio of $23.0$22.9 million, or 11.7% 11.8% of the amortized cost basis of the available-for-sale securities portfolio, compared to net unrealized losses of $22.4 million, or 11.3% of the amortized cost basis of the available-for-sale securities at December 31, 2025. At MarchJune 31,30, 2026, the Company reported net unrealized losses on the held-to-maturity securities portfolio of $30.6$30.5 million, or 16.5%16.8% of the amortized cost basis of the held-to-maturity securities portfolio, compared to $30.3 million, or 16.1% of the amortized cost basis of the held-to-maturity securities portfolio at December 31, 2025.

The securities in which the Company may invest are limited by regulation. Federally chartered savings banks have authority to invest in various types of assets, including U.S. Treasury obligations, securities of various government-sponsored enterprises, mortgage-backed securities, certain certificates of deposit of insured financial institutions, repurchase agreements, overnight and short-term loans to other banks, corporate debt instruments, instruments and marketable equity securities. The securities, with the exception of $11.0 $13.1 million in corporate bonds, are issued by the United States government or government-sponsored enterprises and are therefore either explicitly or implicitly guaranteed as to the timely payment of contractual principal and interest. These positions are deemed to have no credit impairment, therefore, the disclosed unrealized losses withwithin the securities portfolio relate primarily to changes in prevailing interest rates. In all cases, price improvement in future periods will be realized as the issuances approach maturity.

Management regularly reviews the portfolio for securities in an unrealized loss position. At MarchJune 31,30, 20262026, and December 31, 2025, the Company did not record any credit impairment charges on its securities portfolio and attributed the unrealized losses primarily due to fluctuations in general interest rates or changes in expected prepayments and not due to credit quality. The primary objective of the Company’s investment portfolio is to provide liquidity and to secure municipal deposit accounts while preserving the safety of principal. The available-for-sale and held-to-maturity portfolios are both eligible for pledging to the Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) as collateral for borrowings. The portfolios are comprised of high-credit quality investments and both portfolios generated cash flows monthly from interest, principal amortization, amortization and payoffs, which supports the Bank’sBank's objective to provide liquidity.

Total loans increased $17.2$9.9 million, or 0.8%, 0.5%, from $2.2 billion, or 79.7% of total assets, at December 31, 20252025, to $2.2 billion, or 79.5% 80.2% of total assets, at MarchJune 31,30, 2026. The increase in total loans was primarily driven by an increase in residential real estate loans, including home equity loans, of $9.6$31.7 million, or 1.1%, 3.7%, an increase in commercial and industrial loans of $6.0$12.5 million, or 2.7%,5.6%, andpartially anoffset increaseby a decrease in commercial real estate loans of $2.1 $33.7 million, or 0.2%.3.1%. The decrease in commercial real estate loans was primarily driven by an increased level of prepayments in the commercial real estate loan portfolio and the partial charge-off of $1.8 million on the participation loan discussed above. Non-owner occupied commercial real estate loans decreased $27.3 million, or 3.0%, to $883.0 million, or 40.3% of total loans and owner-occupied commercial real estate loans decreased $6.5 million, or 3.4%, to $182.4 million, or 8.3% of total loans.

Total delinquency was $3.2$4.7 million, or 0.14% 0.21% of total loans, at MarchJune 31,30, 2026, compared to $3.1 million, or 0.14% of total loans,loans at December 31, 2025. Of the $4.7 million in past due loans, 95.1% are residential real estate loans. At MarchJune 31,30, 2026, nonaccrual loans totaled $4.7$7.8 million, or 0.21%0.35% of total loans, compared to $5.2 million, or 0.24% of total loans, at December 31, 2025. The increase in nonaccrual loans was primarily due to the participation loan discussed above, which was placed on nonaccrual status following the borrower’s June 2026 Bankruptcy Filing. At March 31,June 202630, 2026, and December 31, 2025, there were no loans 90 or more days past-due and still accruing interest. Total nonperforming assets, defined as nonaccrual loans and other real estate owned, totaled $4.7$7.8 million, or 0.17%0.28% of total assets, at MarchJune 31,30, 2026, compared to $5.2 million, or 0.19% of total assets, at December 31, 2025. At MarchJune 31,30, 20262026, and December 31, 2025, the Company did not have any other real estate owned.

At June March 31,30, 2026, total criticized loans, defined as special mention and substandard loans, totaled $58.7$63.9 million, or 2.7%2.9% of total loans, compared to $39.7 million, or 1.8% of total loans, at December 31, 2025. Loans designated special mention, which are not considered classified, increased $20.5$23.1 million, from $17.1$17.2 million, or 0.8% of total loans, at December 31, 20252025, to $37.6$40.3 million, or 1.7%1.8% of total loans, at MarchJune 31,30, 2026. During the same period, substandard loans decreasedincreased $1.4$1.1 million, or 6.1%,4.9%, to $21.1 $23.6 million, or 1.0%1.1% of total loans.

Of the $37.6$40.3 million in loans designated special mention at MarchJune 31,30, 2026, $14.7$17.8 million, or 39.1%,44.2%, are commercial and industrial loans, and $22.9$22.5 million, or 60.9%,55.8%, are commercial real estate loans. Of the $21.1$23.6 million in loans categorized substandard at June March 31,30, 2026, $7.3$7.2 million, or 34.4%,30.5%, are commercial and industrial loans, $9.5$10.5 million, or 44.8%,44.5%, are commercial real estate loans, and $4.4$5.9 million, or 20.8%,25.0%, are residential real estate loans. Of the total $58.7$63.9 million in criticized loans at MarchJune 31, 30, 2026, 96.1%95.6% are current and paying as agreed.

The increase in special mention loans from December 31, 20252025, to MarchJune 31,30, 20262026, resulted from the downgrade of two commercial relationships totaling $21.5 million, from “pass” risk ratings to special mention. The twoincrease relationshipsin aresubstandard payingloans asfrom agreedDecember and31, are2025, beingto June monitored30, closely2026, bywas management.primarily due to the downgrade of the participation loan discussed above. At June 30, 2026, the Company’s portion of the remaining carrying value of the participation loan was $1.6 million.

Our commercial real estate portfolio consists is comprised of diversified property types that are primarily within our geographic footprint. At MarchJune 31,30, 2026, the commercial real estate portfolio totaled $1.1 billion and represented 50.1%48.6% of total loans. Of the $1.1 billion, $918.2$883.0 million, or 83.4%,82.9% of the commercial real estate portfolio, was categorized as non-owner occupied commercial real estate and represented 329.8%317.6% of the Bank’s total risk-based capital.

The Company holds a concentration in commercial real estate loans. As of MarchJune 31,30, 2026, commercial real estate loans represented 395.5%383.2% of of consolidated bank risk-based capital. Non-owner occupied commercial real estate loans totaled $918.2$883.0 million, or 329.8%317.6% of consolidated consolidated bank risk-based capital, and owner-occupied commercial real estate loans totaled $182.9$182.4 million, or 65.7%65.6% of consolidated bank risk-based capital. As of MarchJune 31,30, 2026, construction, land development, and other land loans represented 39.6%33.7% of consolidated bank risk-based capital. During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio of 7.6%.5.0%.

The table below breaks down the commercial real estate portfolio outstanding balance by non-owner and owner occupied and by concentration as of MarchJune 31,30, 2026:

At June March 31,30, 2026, of the $1.1 billion in commercial real estate loans, $918.2$883.0 million, or 83.4%82.9% of total commercial real estate loans, were categorized as non-owner occupied and represented 329.8% 317.6% of total bank risk-based capital.

The following table further breaks down the non-owner occupied commercial real estate portfolio balances by concentration, collateral location and weighted average loan-to-value (“LTV”) as of MarchJune 31,30, 2026:

The table below depicts a well-diversified portfolio of owner occupied commercial real estate portfolio as of MarchJune 31,30, 2026:

Our total office related commercial real estate loans (which is comprised of loans within our commercial real estate portfolio that are secured by office space, medical office space, and mixed-use where rental income is primarily from office space) totaled $194.5 $190.4 million, or 69.9%68.5% of total bank risk-based capital, and $195.2 million, or 70.5% of total bank risk-based capital, as of March 31,June 30, 2026 and December 31, 2025, respectively.

CRE office loans are primarily concentrated in Massachusetts, where approximately 42.3%42.7% of the total balance of CRE office loans were located at bothJune March30, 31,2026, 2026compared andto 42.3% at December 31, 2025, respectively.2025. The Company does not have CRE loans secured by office real estate in greater Boston or New York.

At June March 31,30, 2026, total deposits were $2.4 billion, anbillion increaseand ofincreased $20.9$40.5 million, or 0.9%,1.7%, from December 31, 2025. Core deposits, which the Company defines as all deposits except time deposits, increaseddecreased $1.0$5.3 million, or 0.1%,0.3%, from $1.7 billion, or 70.8% of total deposits, at December 31, 2025, to $1.7 billion, or 70.2%69.4% of total deposits, at MarchJune 31,30, 2026. Non-interest-bearing deposits increased $3.2 $6.1 million, or 0.5%,1.0%, to $597.7 $600.6 million, and represented 25.1%25.0% of total deposits;deposits, money market accounts increased $18.1$2.7 million, or 0.4%, to $718.4 million, orand 2.5%, to $733.7 million; and savings accounts increased $10.5$6.6 million, or 5.6%,3.5%, to $197.1$193.2 million. These increases were partially offset by a decrease in interest-bearing checking accounts of $30.8$20.7 million, or 17.7%,11.9%, to $143.5$153.5 million.

Time deposits increased $19.9$45.8 million, or 2.9%, 6.6%, from $689.9 million at December 31, 20252025, to $709.8$735.7 million at MarchJune 31,30, 2026. The Company did not have brokered time deposits at March 31,June 202630, 2026, and December 31, 2025. We continue our disciplined and focused approach to core relationship management and customer outreach to meet funding requirements and liquidity needs, with an emphasis on retaining a long-term core customer relationship base by competing for and retaining deposits in our local market. At March 31, 2026, the Bank’s uninsured deposits totaled $706.2 million, or 29.6% of total deposits, compared to $697.6 million, or 29.5% of total deposits, at December 31, 2025. At March 31, 2026, there was one deposit relationship, which is our largest deposit relationship, with a household concentration comprising 5.7% of total deposits, compared to 5.0% of total deposits at December 31, 2025. The next largest deposit relationship is to a local municipality with a concentration of 1.5% of total deposits at March 31, 2026 and 1.9% at December 31, 2025.

At June March 31,30, 2026, total borrowings weredecreased $116.6 million, an increase of $10.5$43.5 million, or 9.9%,41.0%, from $106.1 million at December 31, 2025.2025, to $62.6 million. At MarchJune 31,30, 2026, short-term borrowings increased $10.5 $4.5 million, or 79.4%,33.7%, to $23.8$17.7 million, compared to $13.3 million at December 31, 2025. At MarchJune 31,30, 2026 and December 31, 2025,2026, long-term borrowings totaleddecreased $48.0 million, or 65.8%, to $25.0 million from $73.0 million.million Atat March December 31, 2026 and December 31, 2025, borrowings also consisted of $19.8 million in fixed-to-floating rate subordinated notes.2025.

As of MarchJune 31,30, 2026, the Company had $485.1$547.5 million of additional borrowing capacity at the FHLB, $337.3$392.7 million of additional borrowing capacity under the FRB Discount Window and $25.0 million of other unsecured lines of credit with two correspondent banks.

At June March 31,30, 2026, shareholders’ equity was $248.1$248.3 million, or 9.0%9.1% of total assets, compared to $247.6 million, or 9.1% of total assets, at December 31, 2025. The change was primarily attributable to net income of $4.8$8.4 million, partially offset by an increase in accumulated other comprehensive loss of $458,000,cash cash dividends paid of $1.4$2.8 million and the repurchase of 186,000381,000 shares at a cost of $2.5$5.2 million. At MarchJune 31,30, 2026, total shares outstanding outstanding were 20,240,872.20,045,872. The Company’s regulatory capital ratios continue to be strong and in excess of regulatory minimum requirements requirements to be considered well-capitalized as defined by regulators and internal Company targets.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCHJUNE 31,30, 2026 AND MARCHJUNE 31,30, 2025

The Company reported ana increasedecrease in net income of $2.5$992,000, or 21.6%, from $4.6 million, or 107.4%,$0.23 fromper $2.3diluted share, for the three months ended June 30, 2025, to $3.6 million, or $0.11$0.18 per diluted share, for the three months ended MarchJune 31,30, 2025,2026. toNet $4.8interest income increased $1.7 million, or 9.5%, provision for credit losses increased $2.2 million, non-interest income decreased $17,000, or $0.240.5%, perand dilutednon-interest share,expense increased $699,000, or 4.5%. Return on average assets and return on average equity were 0.53% and 5.84%, respectively, for the three months ended MarchJune 31,30, 2026.2026, Net interest income increased $3.3 million, or 21.2%,compared to $18.8 million,0.69% and 7.76%, respectively, for the three months ended MarchJune 31, 2026, from $15.5 million for the three months ended March 31,30, 2025.

The following tables set forth the information relating to our average balance and net interest income for the three months ended June March 31,30, 2026 and the three months ended March 31, 2025, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Yields and costs are derived by dividing annualized interest income by the average balance of interest-earning assets and annualized interest expense by the average balance of interest-bearing liabilities for the periods shown. The interest rate spread is the difference between the total average yield on interest-earning assets and the cost of interest-bearing liabilities. Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. Average balances are derived from actual daily balances over the periods indicated. Interest income includes fees earned when the real estate loans are prepaid or refinanced. For analytical purposes, the interest earned on tax-exempt assets is adjusted to a tax-equivalent basis to recognize the income tax savings which facilitates comparison between taxable and tax-exempt assets.

Net interest income increased $3.3$1.7 million, or 21.2%, 9.5%, to $18.8$19.3 million, for the three months ended MarchJune 31,30, 2026, from $15.5$17.6 million for the three months ended MarchJune 31,30, 2025. The increase in net interest income was due to an increase in interest and dividend income of $1.8$1.2 million, or 6.5%,3.9%, and a decrease in interest expense of $1.4$510,000, or 4.3%. During the three months ended June 30, 2026, and the three months ended June 30, 2025, the Company recorded prepayment penalties related to payoffs in the commercial real estate portfolio of $82,000 and $425,000, respectively. Excluding the prepayment penalties, net interest income increased $2.0 million, or 11.2%.11.7%. The decreaseincrease in interest expenseand dividend income was primarily due to athe decreaseincrease in average loans of $108.5 million, or 5.2%, and an increase of seven basis points in the average costloan yield, without the impact of interest-bearingtax-equivalent adjustments, liabilities of 36 basis points, from 2.82% for the three months ended MarchJune 31,30, 2025 to 2.46% for the three months ended MarchJune 31,30, 2026. As a result, the net interest margin increased from 2.49% for the three months ended March 31, 2025, to 2.95% for the three months ended March 31, 2026. The net interest margin, on a tax-equivalent basis, increased 46 basis points from 2.51% for the three months ended March 31, 2025 to 2.97% for the three months ended March 31, 2026.

The average yield on interest-earning assets, without the impact of tax-equivalent adjustments, increased 18 basis points from 4.56% for the three months ended March 31, 2025 to 4.74% for the three months ended March 31, 2026. The average loan yield, without the impact of tax-equivalent adjustments, increased 19eight basis points, points from 4.90% 4.69% for the three months ended MarchJune 31,30, 2025,2025 to 5.09%4.77%, for the three months ended MarchJune 31,30, 2026. The average loan yield, without the impact of tax-equivalent adjustments, increased seven basis points from 5.05% for the three months ended June 30, 2025, to 5.12% for the three months ended June 30, 2026. During the three months ended MarchJune 31,30, 2026, average interest-earning assets increased $61.2 $55.9 million, or 2.4%,2.2%, to $2.6 billion, primarily due to an increase in average loans of $113.0$108.6 million, or 5.5%,5.2%, partially offset by a decrease in average short-term investments, consisting of cash and cash equivalents, of $51.2$32.6 million, or 67.3%.55.6%, and a decrease in average securities of $19.2 million, or 5.1%.

The average cost of total funds, including non-interest bearing accounts and borrowings, decreased 2812 basis points from 2.16%1.98% for the three months ended June 30, 2025, to 1.86% for the three months ended MarchJune 31, 2025, to 1.88% for the three months ended March 31,30, 2026. The average cost of core deposits, which the Company defines as all deposits except time deposits, decreased sixincreased two basis points from 1.08%1.01% for the three months ended MarchJune 30, 31, 20252025, to 1.02%1.03% for the three months ended MarchJune 31,30, 2026. The average cost of time deposits decreased 7031 basis points from 4.11% 3.69% for the three months ended MarchJune 31,30, 20252025, to 3.41%3.38% for the three months ended March 31,June 30, 2026. The average cost of borrowings, including subordinated debt, decreasedincreased 2911 basis points from 5.04% for the three months ended MarchJune 31,30, 20252025, to 4.75%5.15%, for the three months ended MarchJune 31,30, 2026. Average demand deposits, an interest-free source of funds, increased $18.9 $20.3 million, or 3.3%, 3.5%, from $569.6$572.8 million, or 24.8%24.9% of total average deposits, for the three months ended MarchJune 31,30, 2025, to $588.5 $593.1 million, or 25.1% 24.9% of total average deposits, for the three months ended MarchJune 31,30, 2026.

Provision for for(Reversal of) Credit Losses.

The provision for credit losses is reviewed by management based upon our evaluation of economic and business conditions affecting our key lending areas and other conditions, such as new loan products, credit quality trends (including trends in nonaccrual nonperforming loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions using reasonable and supportable forecasts and the impact that such conditions were believed to have had on the collectability of the loan portfolio.

During the three months ended March 31, 2026,The the Company recorded a provision for credit losses of $75,000, a decrease of $67,000, or 47.2%, from $142,000 for the three months ended March 31, 2025. The decrease was primarily due to a decrease in unfunded commitments. The provision for credit losses was also determined by a number of factors, including,factors: the continued strongoverall credit performance of the Company’s diversified loan portfolio, changes in the loan portfolio mix and management’sManagement’s consideration of existing economic conditions.conditions and the economic outlook from the Federal Reserve’s actions to control inflation. Management will continuecontinues to monitor macroeconomic variables related to the currentincreasing interest rate environment,rates, tariffs, global unrest resulting from conflicts,inflation and the concerns of an economic downturn. Managementdownturn, and believes it is appropriately reserved for the current economic environmentenvironment. Management believes that the allowance for credit losses are at adequate levels, however, future adjustments may be necessary if economic, real estate market values and supportableother forecast.conditions differ substantially from the current operating environment.

Non-interest expense increased $824,000, orFor 5.4%, from $15.2 million for the three months ended MarchJune 31,30, 20252026, non-interest expense increased $699,000, or 4.5%, to $16.0$16.4 million from $15.7 million for the three months ended MarchJune 31,30, 2026.2025. The increase in non-interest expense was primarily due to an increase of $816,000, or 9.7%, in salaries and benefits of $645,000, or 7.3%, due to increases in health insurance benefits and annual merit increases.increases Occupancyand expense increased $150,000, or 10.6%, due to $255,000increases in snow removalhealth costsinsurance duringbenefits, thean threeincrease months ended March 31, 2026, compared to $143,000 for the three months ended March 31, 2025. Debit card processing and ATM network costs increased $86,000, or 14.9%;in software related expensesexpense of increased $30,000,$67,000, or 4.6%;10.4%, and advertisingan increase in occupancy expense increasedof $13,000,$54,000, or 3.0%.4.3%, Thesean expenses were partially offset by a decreaseincrease in other non-interest expense of $31,000, $80,000, or 5.9%,2.3%, aan decreaseincrease in data processing expense of $61,000,$28,000, or 6.9%,3.0%, and an increase in advertising and marketing expense of $14,000, or 3.2%. These increases were partially offset by a decrease in furniture and equipment expense of $54,000, $87,000, or 11.1%,17.7%, a decrease in debit card and ATM processing fees of $30,000, or 4.5%, and a decrease in FDIC insurance expense of $39,000,$22,000, or 9.0%, and a decrease in professional fees of $37,000, or 6.8%.5.5%.

For the three months ended June 30, 2026, the efficiency ratio was 72.0%, compared to 74.4% for the three months ended June 30, 2025. For the three months ended MarchJune 31, 2026 and the three months ended March 31, 2025, the efficiency ratio was 71.9% and 83.0%, respectively. For the three months ended March 31,30, 2026, the adjusted efficiency ratio, a non-GAAP financial measure, was 73.4%72.2% compared to 83.0% 75.3% for the three months ended MarchJune 31,30, 2025. The decreases in both the efficiency ratio and the adjusted efficiency ratio were driven by a $4.0 million, or 21.7%,an increase in total revenues fromrevenues, defined as the sum of net interest income and non-interest income, during the three months ended June March30, 31,2026, 2025compared to the three months ended MarchJune 31,30, 2026, while expenses increased $824,000, or 5.4%, during the same period.2025. See “Explanation of Use of Non-GAAP Financial Measurements” for the related efficiency ratio and adjusted efficiency ratio calculationscalculation and a reconciliation of GAAP to non-GAAP financial measures.

ForIncome tax expense for the three months ended MarchJune 31,30, 2026, income tax expense was $1.4$1.2 million, withor an effective tax rate of 22.6%,25.1%, compared to $664,000,$1.4 withmillion, or an effective tax rate of 22.4%,23.7%, for the three months ended MarchJune 30, 2025. The increase is due to higher projected pre-tax income for the twelve months ended December 31, 2025.2026.