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

The York Water Company (the “Company”) is the oldest investor-owned water utility in the United States, operated continuously since 1816. The Company also owns and operates three wastewater collection systems and eleventwelve wastewater collection and treatment systems. The Company is a purely regulated water and wastewater utility. Profitability is largely dependent on water revenues. Due to the size of the Company and the limited geographic diversity of its service territory, weather conditions, particularly precipitation, economic, and market conditions can have an adverse effect on revenues. The Company experienced increased revenues in 20242025 compared to 20232024 primarily due to the residual effects of a rate increase effective March 1, 2023, an increase in the number of customers,customers and higher revenues from the distribution system improvement charge, or DSIC. The DSIC allows the Company to add a charge to customers’ bills for qualified replacement costs of certain infrastructure without submitting a rate filing.

The Company has entered into agreements with several municipalities to provide billing and collection services. The Company also has a service line protection program on a targeted basis. The Company continues to review and consider opportunities to expand boththis initiativesinitiative to further diversify the business.

The Company’s performance in 20242025 was strong under the above measures. Operating revenues increased in 20242025 compared to 20232024 primarily due to thean residual effects of a rate increase effective March 1, 2023, an increase in the number of customers,customers and higher revenues from the DSIC. The increase in operating expenses offset the increase in operating revenues. The Company incurred higher interest expense and lower allowance for funds used during construction. The Company did benefit from a lower contributionincome totaxes theand pensiona plans.gain on life insurance. The overall effect was a decrease in net income in 20242025 over 20232024 of 14.4%1.3% and a return on year end common equity of 8.8%. The return on year end common equity of 8.3%. The return on year end common equity was lower than the 20232024 result and the five year historical average return on year end common equity of 10.7%.10.3%. The CompanyCompany’s expectsrecently to file aimplemented rate increase request in 2025 which may should increase its opportunity to earn a higher return on year end common equity in the future.

Net income for 20242025 was $20,325,$20,058, a decrease of $3,432,$267, or 14.4%,1.3%, from net income of $23,757$20,325 for the same period of 2023.2024. The primary contributing factors to the decrease were higher operating expenses, higher interest on debt, and a lower allowance for funds used during construction, and higher interest on debt, which were partially offset by higher operating revenuesrevenues, lower income taxes, and lowera pensiongain costs.on life insurance.

Operating revenues for 20242025 increased $3,928,$2,529, or 5.5%,3.4%, from $71,031 for 2023 to $74,959 for 2024.2024 Theto primary reason$77,488 for the2025. The increase was aprimarily ratedue increase effectiveto March 1, 2023. Growthgrowth in the customer base alsoand addedrevenues tofrom revenues.the DSIC of $1,986. The average number of water customers served in 20242025 increased as compared to 20232024 by 9991,165 customers, from 71,41672,415 to 72,41573,580 customers. The average number of wastewater customers served in 2024 2025 increased as compared to 20232024 by 522490 customers, from 5,9996,521 to 6,5217,011 customers, primarily due to acquisitions. There was increased revenues from the DSIC allowed by the PPUC of $137. The DSIC allows the Company to add a charge to customers’ water bills for qualified replacement costs of certain infrastructure without submitting a rate filing. The DSIC reset to zero on March 1, 2023 when the new rate order took effect and began again in June 2024 for bills rendered after July 1, 2024. Total per capita consumption for 20242025 was approximately 0.8%1.6% lower than the2024. same period of last year. In 2025, theThe Company expects revenues for 2026 to show a modest increase due to revenues from the DSIC and an increase in rates effective March 1, 2026, and the continued increase in the number of water and wastewater customers from acquisitions and growth within the Company’s service territory. Other regulatory actions, weather patterns, and economic conditions could impact results.

Operating expenses for 20242025 increased $5,418,$2,865, or 13.1%,6.1%, from $41,500 for 2023 to $46,918 for 2024.2024 to $49,783 for 2025. The increase was primarily due to higher expenses of approximately $1,216$1,279 for depreciation and amortization, $1,007$931 for wages and benefits, $992$424 for distribution system maintenance, $534$161 for antechnology increasedupgrades, allowance$93 for uncollectiblereduced accounts,capitalized $504overhead, for wastewater treatment, $268 for purchased power, $226 for insurance, $200 for outside services, $163$89 for water treatment, and $92$59 for billing and revenue collection services.purchased power. Other operating expenses increased by a net of $415.$358. The increase was partially offset by reduced fuel expenses of $199 $339 for the priorprovision yearfor pumpinguncollectible ofaccounts, raw$118 waterfor fromoutside theservices, Susquehannaand River,$72 notfor repeatedwastewater in 2024.treatment. In 2025,2026, the Company expects depreciation and amortization expense to continue to rise due to additional investment in utility plant, and other expenses to increase as costs to treat water and wastewater, and to maintain and extend the distribution system,and collection systems, continue to rise. Weather patterns could further increase operating expenses.

Interest on debt for 20242025 increased $1,857,$1,358, or 26.4%,15.3%, from $7,047 for 2023 to $8,904 for 2024.2024 to $10,262 for 2025. The increase was primarily due to an increase in long-term debt outstanding and higher interest rates upon issuance of the 5.67% Senior Notes.rates. The average debt outstanding under the line of credit and short-term borrowings was $29,857 for 2025 and $10,087 infor 2024 and $16,316 in 2023.2024. The weighted average interest rate on the line of credit and short-term borrowings was 5.41% during 2025 and 5.23% during 2024 and 5.36% during 2023.2024. Interest expense for 20252026 is expected to increase due to thean increase in long-term debt outstanding. A potential equity offering to pay down the line of credit and short-term borrowings may offset the expected increase.

Allowance for funds used during construction decreased $2,101,$1,232, from $4,153 in 2023 to $2,052 in 2024 to $820 in 2025 due to a higherlower volume of eligible construction in 2023. construction. Allowance for funds used during construction in 20252026 is expected to decreaseremain consistent based on athe projected decrease in the amount of eligible construction.

Other income (expenses), net for 20242025 reflects decreasedincreased expenses of $483$344 as compared to 2023.2024. The decreaseincrease was primarily due to lowerhigher retirement expenses of approximately $315, higher earnings on life insurance policies of approximately $113,$310 and lowerhigher charitable contributions of approximately $112.$114. Other expenses increaseddecreased by a net of $57.$80. In 2025,2026, other income (expenses) will be largely determined by the change in market returns and discount rates for retirement programs and related assets.

Income tax expense for 20242025 increaseddecreased $73$2,166 as compared to 20232024 due to lowerhigher deductions for the Internal Revenue Service, or IRS, tangible property regulations, or TPR. The Company’s effective tax rate was (4.2)% for 2025 and 6.2% for 2024 and 5.1% for 2023.2024. The Company’s effective tax rate for 20252026 will be largely determined by the level of eligible asset improvements expensed for tax purposes under IRS TPR. The Company expects the IRS TPRlevel eachto period.be lower in 2026, increasing the effective tax rate as compared to 2025.

Effective January 1, 2025,2026, the Company’s tariff included a DSIC on revenues of 2.20%.4.89%. The DSIC reset to zero when new rates took effect on March 1, 2026.

On JanuaryDecember 24,23, 2025, the Company signed an agreement to purchase the water assets of EagleLenwood ViewManagement, Manufactured Housing CommunityLLC in BerwickSouthampton Township, Adams Franklin County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the secondfourth halfquarter of 2025 2026 at which time the Company will add approximately 14090 water customers.

On FebruaryDecember 7,11, 2024,2025, the Company signed an agreement to purchase the wastewater collection water assets of MargarettaMt. MobileRock HomeManor ParkManagement, LLC in LowerSouthampton Windsor Township, YorkFranklin County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the second halffourth quarter of 20252026 at which time the Company will add approximately 65 wastewater140 water customers.

During 2024,2025, the Company invested $48,226$48,725 in construction expenditures for armoringmain extensions and replacingan upgrade to the spillwayenterprise ofsoftware the Lake Williams dam, wastewater treatment plant constructionsystem, as well as various replacements and improvements to infrastructure and routine items. In addition, the Company invested $783 in the acquisition of water and wastewater systems. The Company replaced approximately 50,200 54,100 feet of water main and 1,800 feet of wastewater main in 2024.2025. The Company was able to fund construction expenditures using internally-generated funds, line of credit borrowings, proceeds from its stock purchase plans and customer advances and contributions from developers, municipalities, customers, or builders. See Notes 1, 4 and 5 to the Company’s financial statements included herein.

The Company anticipates construction and acquisition expenditures for 20252026 and 20262027 of approximately $46,000$48,000 andin $48,500,each respectively,year, exclusive of any acquisitions acquisitions not yet approved. In addition to routine transmission and distribution projects, a portion of the anticipated 20252026 and 20262027 expenditures will be for additional main extensions, water tank replacement, wastewater treatment plant construction, an upgrade to the enterprise software system, water treatment plant construction, water tank replacement, wastewater treatment plant construction, and various replacements of infrastructure. The Company intends to use primarily internally-generated funds for its anticipated 20252026 and 20262027 construction and fund the remainder through line of credit borrowings, potential debt and equity offerings, proceeds from its stock purchase plans and customer advances and contributions (see Note 1 to the Company’s financial statements included herein). Customer advances and contributions are expected to account for between 5% and 10% of funding requirements in 20252026 and 2026.2027. The Company believes it will have adequate credit facilities and access to the capital markets, if necessary, during 20252026 and 2026,2027, to fund anticipated anticipated construction and acquisition expenditures.

The amount of internally-generated funds available for operations and construction depends on the Company’s ability to obtain timely and adequate rate relief, changes in regulations, customers’ water usage, weather conditions, customer growth and controlled expenses. In 2024,2025, the Company generated $30,559$29,860 internally as compared to $31,908$30,559 in 2023.2024. The decrease from 20232024 was primarily due to higher interest paid partially offset by increased cash receipts from customers and incomethe taxestiming paid.of payments to vendors.

Historically, the Company has borrowed under its lines of credit before refinancing with long-term debt or equity capital. As of December 31, 2024,2025, the Company maintained a $50,000, unsecured, committed line of credit at an interest rate of the Secured Overnight Financing Rate, or SOFR, plus 1.17% with an unused commitment fee and an interest rate floor. The Company had $15,808$32,290 in outstanding borrowings under its line of credit as of December 31, 2024.2025. The interest rate on line of credit borrowings as of December 31, 20242025 was 5.72%.5.04%. In the third quarter of 2024,2025, the Company renewed its committed line of credit and extended the maturity date to September 2026.2027. No other terms or conditions of the line of credit agreement were modified. On January 1, 2023, the interest rate changed from LIBOR plus 1.05% to a successor rate of the SOFR plus 1.17% in advance of the discontinuation of LIBOR in 2023. The Company expects to renew this line of credit as it matures under similar terms and conditions.

On AugustJuly 6,30, 2024,2025, Standard & Poor’s affirmed the Company’s credit rating at A-, with a stable outlook and adequate liquidity. The Company’s ability to maintain its credit rating depends, among other things, on adequate and timely rate relief, which it has been successful in obtaining, its ability to fund capital expenditures in a balanced manner using both debt and equity and its ability to generate cash flow. In 2025,2026, the Company’s objectives are to continue to maximize its funds provided by operations and maintain a strong capital structure in order to be able to attract capital.

The Company was granted approval by the PPUC to modify its tariff to include the cost of the annual replacement of up to 400 lead customer-owned service lines over nine years from the date of the agreement. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over a four-year period. The cost for the customer-owned lead service line replacements was approximately $1,961$2,087 and $1,762$1,961 through December 31, 20242025 and 2023,2024, respectively, and is included as a regulatory asset. Based on its experience, the Company estimates that lead customer-owned service lines replacements will cost $2,000.$2,100. This estimate is subject to adjustment as more facts become available. This tariff modification will expire on March 8, 2026 unless extended by the PPUC.

OnAs Novemberof 1,February 2024,18, 2026, Pennsylvania state officials declared a drought watch for 3334 counties in Pennsylvania, including allYork fourCounty within the Company’s service territory, and a drought warning for 17 counties in Pennsylvania, including Adams, Franklin, and Lancaster Counties within the Company’s service territory. The watch calls for a voluntary reduction in nonessential water use of 5 to 10 percent and the warning calls for a voluntary reduction in nonessential water use of 10 to 15 percent. TheThese watch conditionsmeasures could potentially impact future revenuesrevenues, operating expenses, and net income depending on the length and severity of the dry conditions.

The methods, estimates, and judgments the Company used in applying its accounting policies have a significant impact on the results reported in its financial statements. The Company’s accounting policies require management to make subjective judgments because of the need to make estimates of matters that are inherently uncertain. The Company’s most critical accounting estimates include: revenue recognition and accounting for its pension plans.

The Company adopted athe newPri-2012 mortality table in 2019, the Pri-2012,table, using the white collar table for the administrative and general plan and the blue collar table for the union plan. In 2021, the Company adopted the MP-2021 mortality improvement scale, which slightly increased the life expectancy of pension plan participants, resulting in a slight increase to the pension benefit obligation, and ultimately, a decrease in the Company’s funded status of the plans.

In 2023, the Company modified its investment policy statements. The Company’s estimate of the expected return on plan assets is primarily based on the historic returns and projected future returns of the asset classes represented in its plans. The target allocation of pension assets is 70% to 90% fixed income securities, 10% to 30% equity securities, and 0% to 10% cash reserves. The Company used 5.00% as its expected rate of return in 20232024 and 2024, a decrease from the 6.50% used in 2022 based on the modified investment policy statements.2025. A decrease in the expected pension return would normally cause an increase in pension expense; however due to the aforementioned rate settlement, the Company’s expense would continue to be equal to its contributions to the plans. The change would instead be recorded in regulatory assets.

Water service is supplied through the Company’s own distribution system. The Company obtains the bulk of its water supply for its primary system for York and Adams Counties from both the South Branch and East Branch of the Codorus Creek, which together have an average daily flow of approximately 73.0 million gallons from a combined watershed area of approximately 117 square miles. The Company has two reservoirs on this primary system, Lake Williams and Lake Redman, which together hold up to approximately 2.5 billion gallons of water. The Company supplements these reservoirs with a 15-mile pipeline from the Susquehanna River to Lake Redman which provides access to an additional supply of 12.0 million gallons of untreated water per day. The Company obtains its water supply for its system for Franklin County from the Roxbury Dam on the Conodoguinet Creek, which has an average daily flow of approximately 26.0 million gallons from a watershed area of approximately 33 square miles. The Company has a reservoir on this system which holds up to approximately 330 million gallons of water. The Company also owns fifteen wells which are capable of providing a safe yield of approximately 923,000 gallons per day to supply water to the customers of its groundwater satellite systems in York, Adams, and Lancaster Counties. As of MarchJune 31,30, 2026, the Company’s average daily availability was 41.1 million gallons, and average daily consumption was approximately 23.123.2 million gallons. The Company’s service territory had an estimated population of 214,000 as of December 31, 2025. Industry within the Company’s service territory is diversified, manufacturing such items as fixtures and furniture, electrical machinery, food products, paper, ordnance units, textile products, air conditioning systems, laundry detergent, barbells, and motorcycles.

Three Months Ended MarchJune 31,30, 2026 Compared

With Three Months Ended MarchJune 31,30, 2025

Net income for the firstsecond quarter of 2026 was $4,814,$7,615, an increase of $1,176,$2,563, or 32.3%,50.7%, from net income of $3,638$5,052 for the same period of 2025. The primary contributing factors to the increase were higher operating revenues and lower income taxes,revenues, which were partially offset by higher operating expenses and higherincome interest on debt.taxes.

Operating revenues for the firstsecond quarter of 2026 increased $1,618,$4,316, or 8.8%,22.5%, from $18,456$19,199 for the threesecond monthsquarter ended March 31,of 2025 to $20,074$23,515 for the corresponding 2026 period. The primary reason for the increase was a rate increase effective March 1, 2026. Growth in the customer base also added to revenues. The average number of water customers served in 2026 increased as compared to 2025 by 998 876 customers, from 73,18673,459 to 74,18474,335 customers. The average number of wastewater customers served in 2026 increased as compared to 2025 by 620643 customers, from 6,7127,017 to 7,3327,660 customers, primarily due to acquisitions. The increased revenues were partially offset by a $107$531 decrease from a lower distribution system improvement charge, or DSIC, allowed by the PPUC. The DSIC reset to zero on March 1, 2026 when the rate order took effect. Total per capita consumption for 2026 was approximately 2.2%2.7% lower than the same period of last year. For the remainder of the year, the Company expects revenues to increase due to the increase in rates, higher summer demand and an increase in the number of water and wastewater customers from acquisitions and growth within the Company’s service territory. Other regulatory actions, weather patterns, and economic conditions could impact results.

Operating expenses for the firstsecond quarter of 2026 increased $1,548,$1,594, or 12.7%,13.2%, from $12,173$12,113 for the firstsecond quarter of 2025 to $13,721$13,707 for the corresponding 2026 period. The increase was primarily due to higher expenses of approximately $398$529 for distribution system maintenance, $322$386 for wages and benefits, $198$249 for insurance,wastewater $185treatment, $154 for purchased power, $110$148 for depreciation and amortization, and $137 for the provision for uncollectible accounts, $95 for depreciation and amortization, $70 for technology upgrades, $52 for water treatment, and $50 for wastewater treatment.accounts. Other operating expenses increaseddecreased by a net of $68. For the remainder of the year, the Company expects depreciation and amortization expense to continue to rise due to additional investment in utility plant, and other expenses to increase as costs to treat water and wastewater, and to maintain and extend the distribution system, continue to rise. Weather patterns could further increase operating expenses.$9.

Interest on debt for the firstsecond quarter of 2026 increaseddecreased $296,$239, or 12.2%,9.5%, from $2,419$2,521 for the firstsecond quarter of 2025 to $2,715$2,282 for the corresponding 2026 period. The increasedecrease was primarily due to ana increasedecrease in short-term and long-term debt outstanding. Upon the completion of the underwritten common stock offering in April 2026, the Company repaid its term loan and line of credit. The average debt outstanding under the short-term borrowings and line of credit and short-term borrowings was $46,725$9,326 for the firstsecond quarter of 2026 and $19,163$25,762 for the first second quarter of 2025. The weighted average interest rate on the line of credit and short-term borrowings was 4.89%3.92% for the quarter ended MarchJune 31,30, 2026 and 5.49% for the quarter ended MarchJune 31,30, 2025. Interest expense for the remainder of the year is expected to decrease after the line of credit was substantially repaid upon the completion of the underwritten common stock offering in April 2026.

Allowance for funds used during construction increased $88,$142, from $185$191 in the firstsecond quarter of 2025 to $273$333 in the corresponding 2026 period due to a higher volume of eligible construction. Allowance for funds used during construction for the remainder of the year is expected to increase based on a projected increase in the amount of eligible construction.

Other income (expenses), net for the first quartersix months of 2026 wasreflects unchangedincreased expenses of $5 as compared to the same period of 2025. Higher charitable contributions of approximately $12$20 were offset by higher earnings on life insurance policies of approximately $12.$15. For the remainder of the year, other income (expenses) will be largely determined by the change in market returns and discount rates for retirement programs and related assets.

Income tax expense for the first quartersix months of 2026 decreased $1,317$784 as compared to the same period of 2025 due to higher deductions for the Internal Revenue Service, or IRS, tangible property regulations, or TPR. The Company’s effective tax rate was (21.35.8)% for the first quartersix months of 2026 and 11.5%1.2% for the first quartersix months of 2025. The Company’s effective tax rate for the remainder of 20262025 will largely be largely determined by the level of eligible asset improvements expensed for tax purposes under TPR.IRS TPR each period. The Company expects the level to be lower in the remainder of the year than the first quarter,six months, increasing the effective tax rate.rate

On January 24, 2025, the Company signed an agreement to purchase the water assets of Eagle View Manufactured Housing Community in Berwick Township, Adams County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the secondfourth quarter of 2026 at which time the Company will add approximately 140 water customers.

For the threesix months ended MarchJune 31,30, 2026, the Company invested $9,821$21,102 in construction expenditures for main extensionsextensions, wastewater treatment plant construction, and an upgrade to the enterprise software system, as well as various replacements and improvements to infrastructure and routine items. The Company was able to fund construction expenditures using internally-generated funds, line of credit borrowings, proceeds from its stock purchase plans and customer advances and contributions from developers, municipalities, customers, or builders.

The Company anticipates construction expenditures for the remainder of 2026 of approximately $38,100$26,800 exclusive of any potential acquisitions not yet approved. In addition to routine transmission and distribution projects, a portion of the anticipated expenditures will be for additional main extensions and an upgrade to the enterprise software system, as well as various replacements and improvements to infrastructure and routine items. The Company intends to use primarily internally-generated funds for its anticipated construction and fund the remainder through line of credit borrowings, proceeds from its stock purchase plans and customer advances and contributions. Customer advances and contributions are expected to account for between 5% and 10% of funding requirements during the remainder of 2026. The Company believes it will have adequate credit facilities and access to the capital markets, if necessary, during 2026,2026 and 2027, to fund anticipated construction and acquisition expenditures.

The Company manages its cash through a cash management account that is directly connected to its line of credit. Excess cash generated automatically pays down outstanding borrowings under the line of credit arrangement. If there are no outstanding borrowings, the cash is used as an earnings credit to reduce banking fees. Likewise, if additional funds are needed beyond what is generated internally for payroll, to pay suppliers, to fund capital expenditures, or to pay debt service, funds are automatically borrowed under the line of credit. As of MarchJune 31,30, 2026, the Company borrowedhad $37,401no borrowings on its line of credit and incurredhad a cash overdraft on its cash management accountbalance of $887.$555. Upon completion of the underwritten common stock offering in April 2026, the Company substantially repaid its line of credit.credit and generated a cash balance. The Company expects the cash balance to be fully utilized in 2026, after which the cash management facility connected to the line of credit is expected to provide the necessary liquidity and funding for the Company’s operations, capital expenditures, and acquisitions for the foreseeable future.

The accounts receivable balance tends to follow the change in revenues but is also affected by the timeliness of payments by customers and the level of the reserve for doubtful accounts. In the three months ended MarchJune 31,30, 2026, slightly higher revenue levels as compared to the three months ended December 31, 2025, resulted in a slightan increase in accounts receivable – customers. A reserve is maintained at a level considered adequate to provide for expected credit losses. Expected credit losses are based on historical write-offs combined with an evaluation of current conditions and reasonable and supportable forecasts including inactive accounts with outstanding balances, the aging of balances in payment agreements, adverse situations that may affect a customer’s ability to pay, economic conditions, and other relevant factors applied to the current aging of receivables. Customer accounts are written off when collection efforts have been exhausted. If the status of the evaluated factors deteriorate, the Company may incur additional expenses for uncollectible accounts and experience a reduction in its internally-generated funds.

The amount of internally-generated funds available for operations and construction depends on the Company’s ability to obtain timely and adequate rate relief, changes in regulations including taxes, customers’ water usage, weather conditions, customer growth and controlled expenses. During the first threesix months of 2026, the Company generated $5,368$17,241 internally from operations as compared to the $6,005$13,603 it generated during the first threesix months of 2025. The decreaseincrease was primarily due to higher interestnet paid and the timing of cash receipts from customers and payments to vendors.income.

On April 17, 2026, the Company closed an underwritten public offering of 1,521,739 shares of its common stock, with an offering price of $28.50 per share. On April 22, 2026, the Company closed on the full exercise of the underwriters’ option to purchase an additional 228,261 shares of its common stock at the same price. Huntington Capital Markets acted as sole book-running manager and Seaport Global Securities acted as co-manager for the offering. The Company received net proceeds in the offering, after deducting offering expenses and underwriters’ discounts and commissions, of approximately $47,700.$47,634. The net proceeds were used to repay the Company’s short-term borrowings under its term loan and borrowings under its line of credit agreement incurred to fund capital expenditures and acquisitions, and for general corporate purposes.

Common stockholders’ equity as a percent of the total capitalization was 51.3%60.5% as of MarchJune 31,30, 2026, compared with 51.7% as of December 31, 2025. Based on the equity percentage falling to near fifty percent, the Company completed the underwritten common stock offering, increasing equity as a percentage of total capitalization. The Company expects to use long-term debt for its future financing needs and allow the debt percentage to trend upward until it approaches fifty percent before considering additional equity. It is the Company’s general intent to target equity between fifty and fifty-five percent of total capitalization.

Historically, the Company has borrowed under its line of credit before refinancing with long-term debt or equity capital. As of MarchJune 31,30, 2026, the Company maintained an unsecured line of credit in the amount of $50,000 at an interest rate of the Secured Overnight Financing Rate plus 1.17% with an unused commitment fee and an interest rate floor. The Company had $37,401 inno borrowings under its line of credit as of MarchJune 31,30, 2026. The interest rate on the line of credit borrowing as of March 31, 2026 was 4.84%. Upon completion of the underwritten common stock offering in April 2026, the Company substantially repaid its line of credit. The Company expects to extend the maturity for this line of credit into 2028 under similar terms and conditions.

The Company has taken steps to manage the risk of reduced credit availability. It has established a committed line of credit with a 2-year revolving maturity that cannot be called on demand. There is no guarantee that the Company will be able to obtain sufficient lines of credit with favorable terms in the future. If the Company is unable to obtain sufficient lines of credit or to refinance its line of credit borrowings with long-term debt or equity when necessary, it may have to eliminate or postpone capital expenditures. Management believes the Company will have adequate capacity under its current line of credit to meet anticipated financing needs throughout 2026.2026 and 2027.

As of March 31, 2026, theThe Company maintained a $10,000 unsecured, committed term loan. Interest iswas payable monthly at an interest rate of SOFR plus 1.35% as established on the first day of each calendar month. The interest rate on the term loan was 5.02% as of March 31, 2026. Upon completion of the underwritten common stock offering in April 2026, the Company repaid this term loan.

The Company’s total long-term debt as a percentage of the total capitalization, defined as total common stockholders’ equity plus total long-term debt, was 48.7%39.5% as of MarchJune 31,30, 2026, compared with 48.3% as of December 31, 2025. Based on the debt percentage nearly reaching fifty percent, the Company completed an underwritten common stock offering in April 2026 and substantiallyrepaid repaid its line of credit, decreasing long-term debt as a percentage of total capitalization. The Company expects to use long-term debt for its future financing needs and allow the debt percentage to trend upward. A debt to total capitalization ratio between forty-five and fifty percent has historically been acceptable to the PPUC in rate filings.

The Company has determined there are no uncertain tax positions that require recognition as of MarchJune 31,30, 2026.

On JulyJune 30, 2025,2026, Standard & Poor’s affirmed the Company’s credit rating at A-, with a stable outlook and adequate liquidity. The Company’s ability to maintain its credit rating depends, among other things, on adequate and timely rate relief, which it has been successful in obtaining, its ability to fund capital expenditures in a balanced manner using both debt and equity and its ability to generate cash flow. The Company’s objectives are to continue to maximize its funds provided by operations and maintain a strong capital structure in order to be able to attract capital.

The Company was granted approval by the PPUC to modify its tariff to include the cost of the annual replacement of up to 400 lead customer-owned service lines over nine years from the date of the agreement. The tariff modification allowed the Company to replace customer-owned service lines at its own initial cost. The Company recorded the costs as a regulatory asset to be recovered in future base rates to customers, over a four-year period. The cost for the customer-owned lead service line replacements was approximately $2,093 and $2,087 through MarchJune 31,30, 2026 and December 31, 2025, respectively, and is included as a regulatory asset. The tariff modification expired on March 8, 2026. The Company has filed a Lead Service Line Replacement Plan with the PPUC and is awaiting a decision. If approved, the plan would establish the requirements for, and the associated cost recovery mechanisms related to, the future replacement of customer‑owned lead service lines.

As of AprilJune 27,29, 2026, Pennsylvania state officials maintained a drought watch for 2011 counties in Pennsylvania, including York and Lancaster Adams Counties within the Company’s service territory, and a drought warning for 58 counties in Pennsylvania, including AdamsFranklin and FranklinLancaster Counties within the Company’s service territory. The watch calls for a voluntary reduction in nonessential water use of 5 to 10 percent and the warning calls for a voluntary reduction in nonessential water use of 10 to 15 percent. These measures could potentially impact future revenues, operating expenses, and net income depending on the length and severity of the dry conditions.

The methods, estimates, and judgments the Company used in applying its accounting policies have a significant impact on the results reported in its financial statements. The Company’s accounting policies require management to make subjective judgments because of the need to make estimates of matters that are inherently uncertain. The Company’s most critical accounting estimates include regulatory assets and liabilities, revenue recognition, accounting for its pension plans, and income taxes. There has been no significant change in accounting estimates or the method of estimation during the quarter ended MarchJune 31,30, 2026.