{"url_path":"/sec/nwfl/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Conditions and Results of Operations.","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-03-13","source_url":"https://www.sec.gov/Archives/edgar/data/1013272/0001013272-26-000003-index.html","accession_number":"0001013272-26-000003","cik":"0001013272","ticker":"NWFL","issuer_name":"NORWOOD FINANCIAL CORP","edgar_url":"https://www.sec.gov/Archives/edgar/data/1013272/0001013272-26-000003-index.html","primary_entity_key":"0001013272","primary_entity_name":"NORWOOD FINANCIAL CORP"},"word_count":7573,"has_tables":true,"body_markdown":"Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations.\n\n# Introduction\n\nThis Management’s Discussion and Analysis and related financial data are presented to assist in the understanding and evaluation of the financial condition and results of operations for the Company and the Bank, as of December 31, 2025 and 2024, and for the years ended December 31, 2025 and 2024. This section should be read in conjunction with the consolidated financial statements and related footnotes.\n\nRECENT TRANSACTIONS\n\nDuring the year ended December 31, 2024, the Company’s financial condition and results of operations were significantly impacted by two transactions. On December 23, 2024, the Company completed the underwritten public offering and sale of 1,150,000 shares of its common stock at $26.00 per share, resulting in net proceeds to the Company of approximately $28 million (the “Offering”). Immediately subsequent to the Offering, the Company utilized a portion of the net proceeds from the Offering to reposition a substantial portion of the Company’s available-for-sale debt securities portfolio. The Company undertook the repositioning transactions with the objective of increasing the profitability of its investment portfolio, improving liquidity, strengthening its capital position and supporting future growth. Please see “Financial Condition—Securities” below for more information on the repositioning transactions.\n\n# Critical Accounting Policies\n\nNote 2 to the Company’s consolidated financial statements lists significant accounting policies used in the development and presentation of its financial statements. This discussion and analysis, the significant accounting policies, and other financial statement disclosures identify and address key variables and other qualitative and quantitative factors that are necessary for an understanding and evaluation of the Company and its results of operations.\n\nMaterial estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses and the determination of goodwill impairment. Please refer to the discussion of the allowance for credit losses calculation under “Allowance for Credit Losses and Non-performing Assets” in the “Financial Condition” section.\n\nIn connection with the acquisition of North Penn in 2011, we recorded goodwill in the amount of $9.7 million, representing the excess of amounts paid over the fair value of the net assets of the institution acquired at the date of acquisition. In connection with the acquisition of Delaware in 2016, we recorded goodwill in the amount of $1.6 million, representing the excess of amounts paid over the fair value of the net assets of the institution acquired at the date of acquisition. In connection with the acquisition of UpState in July 2020, we recorded goodwill in the amount of $17.9 million, representing the excess of amounts paid over the fair value of the net assets of the institution acquired at the date of acquisition. Goodwill is tested annually and deemed impaired when the carrying value of goodwill exceeds its implied fair value.\n\n11\n\nOVERVIEW\n\nThe following table provides an overview of selected financial data:\n\nFor the years ended December 31, (Dollars in thousands, except per share data)\n\n2025\n\n2024\n\n2023\n\nNet interest income\n\n$78,324\n\n$62,191\n\n$62,067\n\nProvision for credit losses\n\n1,773\n\n2,673\n\n5,548\n\nOther income before (losses) gains on sales of loans and investments\n\n9,291\n\n8,616\n\n8,270\n\nNet realized gains (losses) on sales of loans and securities\n\n326\n\n(19,767)\n\n(146)\n\nOther expenses\n\n51,149\n\n48,625\n\n43,497\n\nIncome (loss) before income taxes\n\n35,019\n\n(258)\n\n21,146\n\nIncome tax expense (benefit)\n\n7,264\n\n(98)\n\n4,387\n\nNET INCOME (LOSS)\n\n27,755\n\n(160)\n\n16,759\n\nNet income (loss) per share-Basic\n\n$3.01\n\n($0.02)\n\n$2.08\n\n-Diluted\n\n$3.01\n\n($0.02)\n\n$2.07\n\nCash dividends paid\n\n11,489\n\n9,719\n\n9,417\n\nDividend pay-out ratio\n\n41.39%\n\n-6074.38%\n\n56.19%\n\nReturn on average assets\n\n1.17%\n\n-0.01%\n\n0.79%\n\nReturn on average equity\n\n12.22%\n\n-0.09%\n\n9.67%\n\nBALANCES AT YEAR-END\n\nTotal assets\n\n2,424,842\n\n2,317,462\n\n2,201,079\n\nLoans receivable\n\n1,853,422\n\n1,713,638\n\n1,603,618\n\nAllowance for credit losses\n\n19,882\n\n19,843\n\n18,968\n\nTotal deposits\n\n2,078,645\n\n1,859,163\n\n1,795,159\n\nStockholders’ equity\n\n242,157\n\n213,508\n\n181,070\n\nTrust assets under management\n\n213,912\n\n205,097\n\n192,374\n\nBook value per share\n\n$26.06\n\n$23.02\n\n$22.33\n\nTier 1 Capital to risk-adjusted assets\n\n12.37%\n\n12.35%\n\n11.99%\n\nTotal Capital to risk-adjusted assets\n\n13.41%\n\n13.45%\n\n13.06%\n\nAllowance for credit losses to total loans\n\n1.07%\n\n1.16%\n\n1.18%\n\nNon-performing assets to total assets\n\n0.29%\n\n0.34%\n\n0.35%\n\nFINANCIAL CONDITION\n\nTotal Assets\n\nTotal assets as of December 31, 2025 were $2.425 billion compared to $2.317 billion as of year-end 2024, an increase of $107.4 million. The increase in total assets was primarily attributable to a $139.8 million increase in loans receivable, offset by a $27.9 million decrease in cash and cash equivalents.\n\nLoans Receivable\n\nAs of December 31, 2025, loans receivable totaled $1.853 billion compared to $1.714 billion as of year-end 2024, an increase of $139.8 million due primarily to a $42.6 million increase in consumer loans, an increase of $33.4 million in commercial real estate loans, and an increase of $32.4 million in construction loans.\n\nThe Bank’s loan products include loans for personal and business use. Personal lending includes mortgage lending to finance principal residences and, to a lesser extent, second home dwellings. The Bank’s loan products include fixed-rate mortgage products with terms up to 30 years which may be sold in the secondary market through the Federal National Mortgage Association (“Fannie Mae”) or the FHLB, or held in the Bank’s portfolio to the extent consistent with our asset/liability management strategies. Fixed-rate home equity loans are originated on terms up to 180 months. Home equity lines of credit tied to the prime rate are also offered. The Bank also offers indirect dealer financing of automobiles (new and used), boats, and recreational vehicles through a limited network of dealers in Northeast Pennsylvania and the Southern Tier of New York. At December 31, 2025, there were $328.0 million of indirect loans in the consumer loan portfolio.\n\nCommercial loans and commercial mortgages are provided to local small and mid-sized businesses at a variety of terms and rate structures. Commercial lending activities include lines of credit, revolving credit, term loans, mortgages, various forms of secured\n\n12\n\nlending and a limited amount of letter of credit facilities. The rate structure may be fixed, immediately repricing tied to the prime rate or adjustable at set intervals. Also included in commercial loans are municipal finance lending in which the Bank has been active in recent years. Municipal lending includes both general obligations of local taxing authorities and revenue obligations of specific revenue producing projects such as sewer authorities and educational units. At December 31, 2025, the Bank had approximately $178.7 million in loans on commercial rentals, as well as $116.6 million of loans outstanding on residential rentals.\n\nThe Bank’s construction lending has primarily involved lending for commercial construction projects and for single-family residences. All loans for the construction of speculative sale homes have a loan-to-value ratio of not more than 80%. For both commercial and single-family projects, loan proceeds are disbursed during the construction phase according to a draw schedule based on the stage of completion. Construction projects are inspected by contracted inspectors or bank personnel. Construction loans are underwritten on the basis of the estimated value of the property as completed. For commercial projects, the Bank typically also provides the permanent financing after the construction period, as a commercial mortgage.\n\nThe Bank also, from time to time, originates loans secured by undeveloped land. Land loans granted to individuals have a term of up to five years. Land loans granted to developers may have an interest only period during development. The substantial majority of land loans have a loan-to-value ratio not exceeding 75%. The Bank has limited its exposure to land loans but may expand its lending on raw land, as market conditions allow, to qualified borrowers experienced in the development and sale of raw land.\n\nLoans involving construction financing and loans on raw land have a higher level of risk than loans for the purchase of existing homes since collateral values, land values, development costs and construction costs can only be estimated at the time the loan is approved. The Bank has sought to minimize its risk in construction lending and in lending for the purchase of raw land by offering such financing primarily to builders and developers to whom the Bank has loaned funds in the past and to persons who have previous experience in such projects. The Bank also limits construction lending and loans on raw land to its market area, with which management is familiar.\n\nAdjustable-rate loans decrease the risks associated with changes in interest rates by periodically repricing, but involve other risks because as interest rates increase, the underlying payments by the borrower increase, thus increasing the potential for payment default. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustment of the contractual interest rate may also be limited by the maximum periodic interest rate adjustment permitted in certain adjustable-rate mortgage loan documents, and, therefore is potentially limited in effectiveness during periods of rapidly rising interest rates. These risks have not had an adverse effect on the Bank.\n\nConsumer lending, including indirect financing, provides benefits to the Bank’s asset/liability management program by reducing the Bank’s exposure to interest rate changes, due to their generally shorter terms. Such loans may entail additional credit risks compared to owner-occupied residential mortgage lending especially when unsecured or secured by collateral such as automobiles that depreciate rapidly.\n\nCommercial lending including real-estate related loans entail significant additional risks when compared with residential real estate and consumer lending. For example, commercial loans typically involve larger loan balances to single borrowers or groups of related borrowers. The payment experience on such loans typically is dependent on the successful operation of the project and these risks can be significantly impacted by the cash flow of the borrowers and market conditions for commercial office, retail, and warehouse space. In periods of decreasing cash flows, the commercial borrower may permit a lapse in general maintenance of the property causing the value of the underlying collateral to deteriorate. The liquidation of commercial property is often more costly and may involve more time to sell than residential real estate. The Bank offsets such factors with requiring more owner equity, a lower loan to value ratio and by obtaining the personal guaranties of the principals. In addition, a majority of the Bank’s commercial real estate portfolio is owner-occupied property.\n\nCommercial loans and leases are considered to have a higher degree of credit risk than secured real estate lending. The repayment of unsecured commercial business loans is wholly dependent on the success of the borrower’s business, while secured commercial business loans may be secured by collateral that may not be readily marketable in the event of default. Municipal financing includes lending to local taxing authorities and revenue-producing projects. Such loans may constitute the general obligation of the taxing authority or may rely on a specific revenue source which is responsible for the repayment of the debt. General obligations are considered to carry a lower level of risk than other loan types since they are backed by the full faith and credit of the taxing authority. Revenue obligations are backed solely by revenues generated by the project financed and repayment may be affected by the success of the project.\n\nDue to the type and nature of the collateral, consumer lending generally involves more credit risk when compared with residential real estate lending. Consumer lending collections are typically dependent on the borrower’s continuing financial stability, and thus, are more likely to be adversely affected by job loss, divorce, illness and personal bankruptcy. In most cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan balance. The remaining deficiency is usually turned over to a collection agency.\n\n13\n\nThere are additional risks associated with indirect lending since we must rely on the dealer to provide accurate information to us and accurate disclosures to the borrowers. These loans are principally done on a non-recourse basis. We seek to mitigate these risks by only dealing with dealers with whom we have a long-standing relationship.\n\nThe Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) prohibits lenders from making residential mortgages unless the lender makes a reasonable and good faith determination that the borrower has a reasonable ability to repay the mortgage loan according to its terms. A borrower may recover statutory damages equal to all finance charges and fees paid within three years of a violation of the ability-to-repay rule and may raise a violation as a defense to foreclosure at any time. As authorized by the Dodd-Frank Act, the Consumer Financial Protection Bureau (“CFPB”) has adopted regulations defining “qualified mortgages” that are presumed to comply with the Dodd-Frank Act’s ability-to-repay rules. Under the CFPB regulations, qualified mortgages must satisfy the following criteria: (i) no negative amortization, interest-only payments, balloon payments, or term greater than 30 years; (ii) no points or fees in excess of 3% of the loan amount for loans over $100,000; (iii) borrower’s income and assets are verified and documented; and (iv) the borrower’s debt-to-income ratio generally may not exceed 43%. Qualified mortgages are conclusively presumed to comply with the ability-to-pay rule unless the mortgage is a “higher cost” mortgage, in which case the presumption is rebuttable. Under the Economic Growth, Regulatory Relief, and Consumer Protection Act, enacted in 2018, residential mortgages originated for portfolio by insured depository institutions, like the Bank, with less than $10 billion in total consolidated assets will be treated as qualified mortgages; provided that the mortgage terms do not include interest-only payments or negative amortization, total points and fees do not exceed 3% of the loan amount, prepayment penalties are not in excess of those permitted for qualified mortgages under Regulation Z and the lender has considered and documented the debt, income and financial resources of the borrower.\n\nThe Bank has established various lending limits for its officers and also maintains an Officer Loan Committee to approve higher loan amounts. The Officer Loan Committee is comprised of the President and Chief Executive Officer, Chief Lending Officer and other Bank officers. The Officer Loan Committee has the authority to approve all loans up to set limits based on the type of loan and the collateral. Requests in excess of these limits must be submitted to the Directors’ Loan Committee or Board of Directors for approval. Additionally, the President and Chief Executive Officer, and the Chief Lending Officer and other officers have the authority to approve secured and unsecured loans up to amounts approved by the Board of Directors and maintained in the Bank’s Loan Policy. Notwithstanding individual lending authority, certain loan policy exceptions must be submitted to the Officer Loan Committee for approval.\n\nHazard insurance coverage is required on all properties securing loans made by the Bank. Flood insurance is also required, when applicable.\n\nLoan applicants are notified of the credit decision by letter. If the loan is approved, the loan commitment specifies the terms and conditions of the proposed loan including the amount, interest rate, amortization term, a brief description of the required collateral, and the required insurance coverage. The borrower must provide proof of fire, flood (if applicable) and casualty insurance on the property serving as collateral and title insurance, and these applicable insurances must be maintained during the full term of the loan.\n\nThe following table sets forth maturities and interest rate sensitivity for selected categories of loans as of December 31, 2025. Scheduled repayments are reported in the maturity category in which payment is due. Demand loans, loans having no stated schedule of repayments and no stated maturity and overdrafts are reported as due in one year or less.\n\nOne Year or Less\n\nAfter One to Five Years\n\nAfter Five Years Through 15 years\n\nAfter 15 years\n\nTotal\n\n(dollars in thousands)\n\nReal Estate:\n\nResidential\n\n$\n\n50,454\n\n$\n\n131,698\n\n$\n\n111,148\n\n$\n\n59,042\n\n$\n\n352,342\n\nCommercial\n\n74,502\n\n213,701\n\n371,910\n\n90,136\n\n750,249\n\nAgricultural\n\n6,065\n\n13,427\n\n31,977\n\n7,733\n\n59,202\n\nConstruction\n\n2,208\n\n27,201\n\n21,807\n\n34,177\n\n85,393\n\nCommercial loans\n\n97,024\n\n109,628\n\n22,552\n\n645\n\n229,849\n\nOther agricultural loans\n\n11,398\n\n12,832\n\n2,152\n\n48\n\n26,430\n\nConsumer loans\n\n137,846\n\n196,528\n\n14,844\n\n1,192\n\n350,410\n\nTotal\n\n$\n\n379,497\n\n$\n\n705,015\n\n$\n\n576,390\n\n$\n\n192,973\n\n$\n\n1,853,875\n\nLoans with fixed rates\n\n$\n\n27,359\n\n$\n\n235,304\n\n$\n\n419,018\n\n$\n\n213,882\n\n$\n\n895,563\n\nLoans with floating rates\n\n457,935\n\n447,618\n\n52,759\n\n-\n\n958,312\n\nTotal\n\n$\n\n485,294\n\n$\n\n682,922\n\n$\n\n471,777\n\n$\n\n213,882\n\n$\n\n1,853,875\n\n14\n\nallowance for CREDIT Losses\n\nThe allowance for credit losses totaled $19,882,000 as of December 31, 2025, and represented 1.07% of total loans receivable compared to $19,843,000 and 1.16% of total loans as of year-end 2024. Net charge-offs for 2025 totaled $1,890,000 and represented 0.11% of average loans compared to $1,671,000 and 0.10% of average loans in 2024.\n\nManagement reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the allowance for credit losses. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the allowance.\n\nThe Company has limited exposure to higher-risk loans. The Company does not originate option ARM products, interest only loans, sub-prime loans or loans with initial teaser rates in its residential real estate portfolio. As of December 31, 2025, the Company had $21,122,000 of junior lien home equity loans. For the year ended December 31, 2025, there were $0 of charge-offs in this portfolio, with recoveries of $0.\n\nLoan concentrations are considered to exist when there are amounts loaned to a number of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. Our lending activity is heavily concentrated in the geographic market areas we serve. At December 31, 2025, the Company had no concentrations of loans in any one industry exceeding 10% of its total loan portfolio. An industry for this purpose is defined as a group of businesses that are engaged in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.\n\nBanking regulators have established guidelines of less than 100% of tier 1 capital plus allowance for credit losses in construction lending and less than 300% of tier 1 capital plus allowance for credit losses in commercial real estate lending that management monitors as part of the risk management process. The construction concentration ratio is a percentage of the outstanding construction and land development loans to total tier 1 capital plus allowance for credit losses. The commercial real estate concentration ratio is a percentage of the outstanding balance of non-owner occupied commercial real estate, multifamily, and construction and land development loans to tier 1 capital plus allowance for credit losses. Management strives to operate within the thresholds set forth above.\n\nAs of December 31, 2025, the Company had $750.2 million of commercial real estate loans, which represented 40.5% of total loans outstanding. Non-owner occupied commercial real estate loans totaled $186.3 million, or 10.1% of total loans outstanding and 79.6% of regulatory capital requirements. As of December 31, 2025, the Company had $85.4 million of construction loans, which represented 4.6% of total loans outstanding and 36.5% of regulatory capital requirements.\n\nAs of December 31, 2025 and 2024, the Company considered its concentration of credit risk to be acceptable. As of December 31, 2025, the highest concentrations are in commercial rentals and the hotels/motels category, with loans outstanding of $178.7 million, or 9.7% of loans outstanding, to commercial rentals, and $125.1 million, or 6.8% of loans outstanding, to hotels/motels. For the year ended December 31, 2025, the Company recognized charge offs of $0 on commercial rentals and $0 on hotels/motels. The Company recognized charge offs of $0 on commercial rentals and $0 on residential rentals in 2024, the highest concentrations in 2024.\n\n15\n\nThe following table sets forth information with respect to the Bank’s allowance for credit losses as of December 31, 2025 and 2024:\n\nAs of December 31,\n\n2025\n\n2024\n\n(dollars in thousands)\n\nTotal loans receivable, net of deferred fees\n\n$\n\n1,853,422\n\n$\n\n1,713,638\n\nAllowance balance at beginning of period\n\n$\n\n19,843\n\n$\n\n18,968\n\nNet (charge-offs) recoveries:\n\nReal Estate-Residential\n\n(60)\n\n41\n\nReal Estate-Commercial\n\n(51)\n\n110\n\nReal Estate-Agricultural\n\n—\n\n—\n\nReal Estate-Construction\n\n—\n\n—\n\nCommercial loans\n\n(43)\n\n(100)\n\nOther agricultural loans\n\n(48)\n\n—\n\nConsumer\n\n(1,688)\n\n(1,722)\n\nTotal\n\n(1,890)\n\n(1,671)\n\nProvision Expense\n\n1,929\n\n2,546\n\nAllowance balance at end of period\n\n$\n\n19,882\n\n$\n\n19,843\n\nAverage loans receivable:\n\nReal Estate-Residential\n\n$\n\n337,223\n\n$\n\n319,984\n\nReal Estate-Commercial\n\n736,961\n\n691,673\n\nReal Estate-Agricultural\n\n61,732\n\n62,802\n\nReal Estate-Construction\n\n68,993\n\n49,542\n\nCommercial loans\n\n225,592\n\n204,876\n\nOther agricultural loans\n\n27,507\n\n30,988\n\nConsumer\n\n333,561\n\n286,263\n\nTotal average loans outstanding\n\n$\n\n1,791,569\n\n$\n\n1,646,128\n\nNet (charge-offs) recoveries as a percent of average loans outstanding\n\nReal Estate-Residential\n\n(0.02)\n\n%\n\n0.01\n\n%\n\nReal Estate-Commercial\n\n(0.01)\n\n0.02\n\nReal Estate-Agricultural\n\n-\n\n-\n\nReal Estate-Construction\n\n-\n\n-\n\nCommercial loans\n\n(0.02)\n\n(0.05)\n\nOther agricultural loans\n\n(0.17)\n\n-\n\nConsumer\n\n(0.51)\n\n(0.60)\n\nTotal net charge-offs\n\n(0.11)\n\n%\n\n(0.10)\n\n%\n\nCredit Quality Ratios:\n\nAs a percent of year-end loans, net of unearned income:\n\nAllowance for credit losses\n\n1.07%\n\n1.16%\n\nNonaccrual loans\n\n0.34%\n\n0.45%\n\nNonperforming loans\n\n0.34%\n\n0.46%\n\nAllowance for credit losses to nonaccrual loans\n\n319.85%\n\n257.03%\n\nAllowance for credit losses to nonperforming loans\n\n313.65%\n\n252.01%\n\nDuring the twelve month period ended December 31, 2025, the Bank recognized net charge-offs in the amount of $1,890,000 compared to the $1,671,000 of net charge-offs reported for the twelve months ended December 31, 2024. The provision for credit losses decreased to $1,773,000 for the twelve months ended December 31, 2025, compared to $2,673,000 for the twelve months ended December 31, 2024.\n\n16\n\nThe following table sets forth the allocation of the Bank’s allowance for credit losses by loan category and the percent of loans in each category to total loans at the date indicated. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which credit losses may occur. The total allowance is available to absorb losses from any type of loan.\n\nAs of December 31,\n\n2025\n\n2024\n\nAllowance\n\n% of\n\n% of\n\nAllowance\n\n% of\n\n% of\n\nfor Credit\n\nACL\n\nLoans\n\nfor Credit\n\nACL\n\nLoans\n\nLosses on\n\nto Total\n\nto Total\n\nLosses on\n\nto Total\n\nto Total\n\nLoans\n\nACL\n\nLoans\n\nLoans\n\nACL\n\nLoans\n\n(dollars in thousands)\n\nReal estate – residential\n\n$\n\n2,271\n\n11.5\n\n%\n\n19.0\n\n%\n\n$\n\n1,146\n\n5.8\n\n%\n\n19.3\n\nReal estate – commercial\n\n7,534\n\n37.9\n\n40.5\n\n11,406\n\n57.5\n\n41.8\n\nReal estate – agricultural\n\n395\n\n2.0\n\n3.2\n\n48\n\n0.2\n\n3.7\n\nReal estate – construction\n\n1,471\n\n7.4\n\n4.6\n\n884\n\n4.5\n\n3.1\n\nCommercial\n\n3,011\n\n15.1\n\n12.4\n\n1,732\n\n8.7\n\n12.4\n\nOther agricultural loans\n\n282\n\n1.4\n\n1.4\n\n162\n\n0.8\n\n1.7\n\nConsumer\n\n4,918\n\n24.7\n\n18.9\n\n4,465\n\n22.5\n\n18.0\n\nTotal\n\n$\n\n19,882\n\n100\n\n%\n\n100\n\n%\n\n$\n\n19,843\n\n100\n\n%\n\n100\n\nNon-Performing Assets\n\nNon-performing assets consist of non-performing loans and real estate owned as a result of foreclosure, which is held for sale. Loans are placed on non-accrual status when management believes that a borrower’s financial condition is such that collection of interest is doubtful. Commercial and real estate related loans are generally placed on non-accrual when interest is 90 days delinquent. When loans are placed on non-accrual, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses.\n\nThe following table sets forth information regarding non-performing loans and real estate as of December 31, 2025 and 2024:\n\nAs of December 31,\n\n2025\n\n2024\n\n(dollars in thousands)\n\nNon-accrual loans:\n\nReal Estate loans\n\nResidential\n\n$\n\n919\n\n$\n\n940\n\nCommercial\n\n4,064\n\n5,743\n\nAgricultural\n\n—\n\n—\n\nConstruction\n\n34\n\n—\n\nCommercial\n\n68\n\n127\n\nOther agricultural loans\n\n—\n\n—\n\nConsumer loans\n\n1,131\n\n910\n\nTotal non-accrual loans*\n\n6,216\n\n7,720\n\nAccruing loans which are contractually past-due 90 days or more\n\n123\n\n154\n\nTotal non-performing loans\n\n6,339\n\n7,874\n\nForeclosed real estate\n\n771\n\n—\n\nTotal non-performing assets\n\n$\n\n7,110\n\n$\n\n7,874\n\n17\n\nSecurities\n\nThe securities portfolio consists of U.S. Treasury securities, U.S. Government agencies, mortgage-backed securities issued by government sponsored entities and municipal obligations. The Company classifies its investments into two categories: held to maturity (HTM) and available for sale (AFS). The Company does not have trading securities. Securities classified as HTM are those in which the Company has the ability and the intent to hold the security until contractual maturity. As of December 31, 2025, there were no securities carried in the HTM portfolio. Securities classified as AFS are eligible to be sold due to liquidity needs or interest rate risk management. These securities are adjusted to and carried at their fair value with any unrealized gains or losses recorded net of deferred income taxes, as an adjustment to capital and reported in the equity section of the Consolidated Balance Sheet as other comprehensive income. As of December 31, 2025, $408.8 million of securities were so classified and carried at their fair value, with unrealized losses, net of tax, of $21.9 million included in accumulated other comprehensive income (loss) as a component of stockholders’ equity. The Company considers its investment portfolio a source of earnings and liquidity. Investment securities may also be pledged to secure public deposits and customer repurchase agreements.\n\nAs of December 31, 2025, the average life of the portfolio was 6.0 years. Purchases for the year totaled $63.3 million, while maturities and principal reductions totaled $67.8 million and proceeds from sales were $0 million.\n\nThe following table sets forth certain information regarding securities not carried at fair value through earnings, weighted average yields, and maturities of the Company’s securities portfolio as of December 31, 2025. Yields on tax-exempt securities are stated on a fully taxable equivalent basis using a Federal tax rate of 21%. Actual maturities may differ from contractual maturities as certain instruments have call features which allow prepayment of obligations. Maturity on the mortgage-backed securities is based upon contractual terms, the average life may differ as a result of changes in cash flow.\n\nAfter One\n\nAfter Five\n\nTotal Investment\n\nOne Year or Less\n\nThrough Five Years\n\nThrough Ten Years\n\nAfter Ten Years\n\nSecurities\n\nCarrying\n\nAverage\n\nCarrying\n\nAverage\n\nCarrying\n\nAverage\n\nCarrying\n\nAverage\n\nCarrying\n\nAverage\n\nValue\n\nYield\n\nValue\n\nYield\n\nValue\n\nYield\n\nValue\n\nYield\n\nValue\n\nYield\n\n(dollars in thousands)\n\nU.S. Treasury securities\n\n$\n\n3,988\n\n4.10\n\n%\n\n$\n\n16,870\n\n3.56\n\n%\n\n$\n\n—\n\n—\n\n%\n\n$\n\n—\n\n—\n\n%\n\n$\n\n20,858\n\n3.66\n\n%\n\nU.S. Government agencies\n\n—\n\n—\n\n1,912\n\n0.85\n\n5,763\n\n3.49\n\n—\n\n—\n\n7,675\n\n2.82\n\nState and political subdivision\n\n1,830\n\n3.64\n\n—\n\n—\n\n54,289\n\n2.06\n\n36,381\n\n2.48\n\n92,500\n\n2.25\n\nCorporate Securities\n\n—\n\n—\n\n1,971\n\n7.44\n\n11,580\n\n6.35\n\n—\n\n—\n\n13,551\n\n6.38\n\nMortgage-backed securities - government sponsored entities\n\n130\n\n2.25\n\n757\n\n2.94\n\n5,993\n\n3.87\n\n267,319\n\n3.78\n\n274,199\n\n3.78\n\nTotal Investment Securities\n\n$\n\n5,948\n\n3.92\n\n%\n\n$\n\n21,510\n\n3.64\n\n%\n\n$\n\n77,625\n\n2.86\n\n%\n\n$\n\n303,700\n\n3.55\n\n%\n\n$\n\n408,783\n\n3.42\n\n%\n\nThe portfolio had 8 adjustable-rate instrument as of December 31, 2025 and one adjustable-rate instrument as of December 31, 2024. The portfolio contained no private label mortgage-backed securities, collateralized debt obligations (CDOs), or trust preferred securities, and no off-balance sheet derivatives were in use. As of December 31, 2025, the portfolio did not contain any step-up bonds. The mortgage-backed securities portfolio includes pass-through bonds and collateralized mortgage obligations (CMO’s) issued by Fannie Mae, Freddie Mac and the Government National Mortgage Association (GNMA).\n\nThe Company evaluates the securities in its portfolio for credit losses as fair value declines below cost. In estimating credit losses, management considers the financial condition and near-term prospects of the issuer. As of December 31, 2025, the Company held 189 investment securities in a loss position, which had a combined unrealized loss of $30.7 million. Management believes that these losses are principally due to changes in interest rates and concluded that the decline in the value of these securities was not indicative of a credit loss. The Company did not recognize any credit losses on the available-for-sale debt securities for the twelve months ended December 31, 2025 and 2024.\n\nIn December 2024, the Company repositioned its available-for-sale debt securities portfolio. The repositioning was accomplished by the sale of debt securities with an amortized cost basis of approximately $175 million and an average yield of 1.98%. The Company recognized a pre-tax loss of $20 million on these sales. The Company purchased approximately $155 million of new debt securities with an annual yield of 5.17%. Additionally, the Company undertook full repayment of $60 million of borrowings under the Federal Reserve Bank Term Funding Program ($40 million in December 2024 and $20 million in January 2025). The Company also completed an underwritten public offering and sale of 1,150,000 shares of its common stock at $26.00 per share, resulting in net proceeds to the Company of approximately $28 million in December 2024 in connection with these repositioning activities.\n\n18\n\n## DEPOSITS\n\nThe Bank provides a full range of deposit products to its retail, business and municipal customers. These include interest-bearing and noninterest bearing transaction accounts, statement savings and money market accounts. Certificate of deposit terms range up to five years for retail instruments. As of December 31, 2025, the Bank did not have any brokered deposits obtained through internet listing services. As of December 31, 2025, broker deposits that were secured through Cede & Co totaled $33.2 million. The Bank participates in the Jumbo CD ($250,000 and over) markets with local municipalities and school districts which are typically priced on a competitive bid basis. Other services the Bank offers its customers include IntraFi CDARS and ICS, cash management, direct deposit, Remote Deposit Capture, mobile deposit capture, Zelle and Automated Clearing House (ACH) activity. The Bank operates thirty automated teller machines and is affiliated with the MoneyPass® ATM network. Internet banking including bill-pay is offered through the website at wayne.bank. Other services, such as eStatements and mobile banking are available online.\n\nThe following table sets forth information regarding deposit categories of the Company.\n\nYears Ended December 31,\n\n2025\n\n2024\n\nAverage\n\nAverage\n\nBalance\n\nRate Paid\n\nBalance\n\nRate Paid\n\n(dollars in thousands)\n\nNoninterest-bearing demand\n\n$\n\n399,948\n\n—\n\n%\n\n$\n\n393,616\n\n—\n\n%\n\nInterest-bearing demand\n\n397,801\n\n2.09\n\n279,231\n\n2.25\n\nMoney Market\n\n187,488\n\n1.92\n\n196,875\n\n2.15\n\nSavings\n\n203,765\n\n0.24\n\n220,190\n\n0.32\n\nTime\n\n821,710\n\n3.81\n\n744,895\n\n4.18\n\nTotal\n\n$\n\n2,010,712\n\n$\n\n1,834,807\n\nAs of December 31, 2025 and 2024, the total of uninsured deposits of the Company was $833,097,000 and $698,357,000, respectively. Total uninsured deposits is calculated based on regulatory reporting requirements and reflects the portion of any deposit of a customer at an insured depository institution that exceeds the applicable FDIC insurance coverage for that depositor at that institution and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regime.\n\nAs of December 31, 2025, the total of U.S. time deposits in excess of the FDIC insurance limits were $289,851,000. Time deposits over $250,000, which consist principally of school district funds, other public funds and short-term deposits from large commercial customers, with maturities are generally less than one year. These deposits are subject to competitive bid and the Company bases its bid on current interest rates, loan demand, investment portfolio structure and the relative cost of other funding sources.\n\nThe following table indicates the amount of time deposits that are uninsured by time remaining until maturity as of December 31, 2025:\n\nAmount\n\n(in thousands)\n\nThree months or less\n\n$\n\n90,190\n\nOver 3 through 6 months\n\n107,098\n\nOver 6 months through 12 months\n\n61,312\n\nOver 12 months\n\n31,251\n\n$\n\n289,851\n\nTotal deposits as of December 31, 2025, were $2.079 billion, an increase of $219.5 million from December 31, 2024. Non-maturity interest-bearing deposits increased $83.6 million in 2025, while non-interest bearing demand deposits increased $38.1 million. Time deposits increased $97.8 million during 2025.\n\nAs of December 31, 2025, non-interest bearing demand deposits totaled $419.6 million compared to $381.5 million at December 31, 2024. Cash management accounts in the form of securities sold under agreements to repurchase included in short-term borrowings, totaled $0 at December 31, 2025 compared to $36.3 million as of December 31, 2024. These balances represent commercial and municipal customers’ funds invested in overnight securities. The Company considers these accounts as a source of core funding.\n\n19\n\nRESULTS OF OPERATIONS\n\nThis Annual Report contains or references fully taxable-equivalent interest income and net interest income, which are non-GAAP financial measures. Tax-equivalent interest income and net interest income are derived from GAAP interest income and net interest income using a marginal tax rate of 21%. We believe the presentation of interest income and net interest income on a fully taxable-equivalent basis ensures comparability of interest income and net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.\n\n# Summary\n\nNet income for the Company for the year ended December 31, 2025 was $27,755,000, compared to the net loss of $160,000 in the year ended December 31, 2024. Earnings per share on a fully diluted basis were $3.01 for 2025 compared to losses per share on fully diluted basis of $0.02 in 2024. The return on average assets for the year ended December 31, 2025, was 1.17%, and the return on average equity was 12.22%, compared to (0.01)% and (0.09)%, respectively, for the year ended December 31, 2024. Net interest income increased $16,133,000 for the year ended December 31, 2025.\n\nFor the year ended December 31, 2025, fully taxable equivalent (“fte”) net interest income totaled $79,099,000, an increase of $16,089,000 from the year ended December 31, 2024 total. Average loans outstanding increased $145.4 million in 2025, which contributed to an increase in interest income (fte) of $10.6 million. During the year ended December 31, 2025, average interest-bearing deposits increased $169.6 million, which contributed to an increase in interest expense of $1.3 million. The cost of borrowed funds decreased $3.5 million in 2025, compared to the prior year due to a decrease in borrowings. During the year ended December 31, 2025, the resulting net interest spread (fte) decreased to 2.81% compared to 2.17% at December 31, 2024, due to a 0.38% increase in the yield earned, and a 0.26% decrease in the cost of funds.\n\nTotal other income was $9,617,000 for the year ended December 31, 2025, compared to a loss of $11,151,000 in the prior year, an increase of $20,768,000. Net realized losses on sales of securities decreased $19,962,000 during the year ended December 31, 2025, primarily as a result of the repositioning of the securities portfolio in December 2024, while gains on the sale of foreclosed real estate owned and gains on sale of loans increased $99,000 in aggregate. Earnings and proceeds on life insurance policies increased $32,000 in 2025 compared to 2024, while all other items of other income increased $675,000, net, in 2025.\n\nDuring the year ended December 31, 2025, other expenses were $51,149,000, compared to $48,625,000 for the year ended December 31, 2024, an increase of $2,524,000. Salaries and benefits costs increased $1,910,000 in 2025, while merger related expenses increased $1,238,000, and furniture and equipment expenses increased $284,000. All other operating expenses decreased $908,000, net, in 2025. Income tax expense for the 2025 year totaled $7,264,000, compared to an income tax benefit of $98,000 from the 2024 year ended. The effective tax rate in 2025 was 20.7% compared to 38.0% in 2024.\n\nThe following table sets forth changes in net income (loss) (in thousands):\n\nNet loss 2024\n\n$\n\n(160)\n\nNet interest income\n\n16,133\n\nProvision for credit losses\n\n900\n\nNet gains on sales of loans and securities\n\n20,093\n\nNet gains on sales of foreclosed real estate\n\n(32)\n\nOther income\n\n707\n\nSalaries and employee benefits\n\n(1,910)\n\nOccupancy, furniture and equipment\n\n(429)\n\nData processing and related operations\n\n(43)\n\nAdvertising\n\n188\n\nFDIC insurance assessment\n\n(208)\n\nIndirect dealer fees\n\n(559)\n\nShares tax expense\n\n(155)\n\nMerger related\n\n(1,238)\n\nOther expenses\n\n1,830\n\nIncome tax expense\n\n(7,362)\n\nNet income 2025\n\n$\n\n27,755\n\nNET INTEREST INCOME\n\nNet interest income (fte) totaled $79,099,000 for the year ended December 31, 2025 compared to $63,010,000 for 2024, an increase of $16,089,000. The resulting fte net interest spread and net interest margin were 2.81% and 3.49%, respectively, in 2025 compared to 2.17% and 2.91%, respectively, in 2024.\n\n20\n\nInterest income (fte) for the year ended December 31, 2025 totaled $127,303,000 compared to $113,399,000 in 2024. The fte yield on average earning assets was 5.62%, increasing 38 basis points from the 5.24% reported last year. The tax-equivalent yield on total loans was 6.16% in 2025, increasing from 6.06% in 2024, while average loans outstanding increased $145.4 million, resulting in an increase in interest income (fte) from loans of $10.6 million. The yield on securities increased 123 basis points in 2025 due primarily to the repositioning of the portfolio in December 2024. During the year ended December 31, 2025, while average securities outstanding decreased $20.8 million, interest income (fte) from securities outstanding, increased $5.0 million from the year ended December 31, 2024.\n\nInterest expense was $48,204,000 for the year ended December 31, 2025, which resulted in an average cost of interest-bearing liabilities of 2.81% compared to total interest expense of $50,389,000 during the year ended December 31, 2024, with an average cost of 3.07%. Total interest-bearing deposits cost was 2.71% for the year ended December 31, 2025, which was a decrease of 23 basis points over the 2024 fiscal year ended. The decrease in cost was due primarily to time certificates of deposit that repriced to current market rates upon maturity, resulting in a decrease in the interest rate paid from 4.18% in 2024 to 3.81% in 2025, along with a decrease in the interest-bearing demand and money market from 2.21% in 2024 to 2.04% in 2025, and a decrease in savings from 0.32% in 2024 to 0.24% in 2025.\n\nPROVISION FOR CREDIT LOSSES\n\nThe provision for credit losses was $1,773,000 in 2025 compared to $2,673,000 in 2024. Net charge-offs for the year ended December 31, 2025 decreased to $1,890,000 from net charge-offs of $1,671,000 for the year ended December 31, 2024.\n\nThe Company makes provisions for, or releases of, credit losses in an amount necessary to maintain the allowance for credit losses at an acceptable level under the current expected credit loss methodology analysis.\n\n## OTHER INCOME\n\nTotal other income was $9,617,000 for the year ended December 31, 2025, compared to a loss of other income of $11,151,000 for the year ended December 31, 2024, an increase of $20,768,000. Net realized losses on sales of securities decreased $19,962,000 to $0 during the year ended December 31, 2025, primarily as a result of the repositioning of the securities portfolio in December 2024. Service charges and fees increased $462,000 and gains on sale of loans increased $131,000. All other items of other income increased $213,000, net, during the year ended December 31, 2025.\n\nOther Income (dollars in thousands)\n\nFor the year ended December 31\n\nThe following table shows total other income:\n\n2025\n\n2024\n\nService charges and fees\n\n$\n\n6,421\n\n$\n\n5,959\n\nIncome from fiduciary activities\n\n1,033\n\n943\n\nNet realized (losses) gains on sales of securities\n\n—\n\n(19,962)\n\nNet gain on sale of loans\n\n326\n\n195\n\nNet gain on sale of foreclosed real estate owned\n\n—\n\n32\n\nEarnings and proceeds on life insurance policies\n\n1,088\n\n1,056\n\nOther\n\n749\n\n626\n\nTotal\n\n$\n\n9,617\n\n$\n\n(11,151)\n\n## OTHER EXPENSES\n\nOther expenses totaled $51,149,000 for the year ended December 31, 2025, compared to $48,625,000 in the 2024 fiscal year. For the year ended December 31, 2025, salaries and employee benefits increased $1,910,000 to $26,928,000, while merger related expenses increased $1,238,000. Furniture and equipment expenses increased $284,000 to $1,405,000 during the year ended December 31, 2025, compared to $1,121,000 for the year ended December 31, 2024. During the year ended December 31, 2025, all other operating expenses decreased $908,000, net. The Company’s efficiency ratio, which measures total other expenses as a percentage of net interest income (fte) plus other income excluding losses on securities sales was 58.2% in 2025 compared to 68.5% in 2024. Please see “Non-GAAP Financial Measures” later in this discussion for more information on this Non-GAAP Financial Measure.\n\n21\n\nOther Expenses (dollars in thousands)\n\nFor the year ended December 31\n\nThe following table shows total other expenses:\n\n2025\n\n2024\n\nSalaries\n\n$\n\n16,054\n\n$\n\n15,447\n\nEmployee benefits\n\n10,874\n\n9,571\n\nOccupancy\n\n4,073\n\n3,928\n\nFurniture and equipment\n\n1,405\n\n1,121\n\nData processing and related operations\n\n4,563\n\n4,520\n\nFederal Deposit Insurance Corporation insurance assessment\n\n1,552\n\n1,344\n\nAdvertising\n\n742\n\n930\n\nProfessional fees\n\n1,913\n\n2,173\n\nPostage and telephone\n\n1,311\n\n1,090\n\nTaxes, other than income\n\n770\n\n615\n\nForeclosed real estate\n\n142\n\n54\n\nAmortization of intangible assets\n\n54\n\n69\n\nMerger related\n\n1,238\n\n—\n\nOther\n\n6,458\n\n7,763\n\nTotal\n\n$\n\n51,149\n\n$\n\n48,625\n\n### INCOME TAXES\n\nIncome tax expense for the year ended December 31, 2025 totaled $7,264,000, which resulted in an effective tax rate of 20.7%, compared to an income tax benefit of $98,000 and 38.0% for 2024.\n\n### CAPITAL AND DIVIDENDS\n\nTotal stockholders’ equity as of December 31, 2025 was $242.2 million, compared to $213.5 million as of December 31, 2024. Earnings retention, net of an $11.6 million reduction resulting from cash dividends declared, contributed to the increase. Fluctuations in interest rates during the year ended December 31, 2025, impacted the fair value of the Company’s Available-for-Sale securities, and contributed to $11.8 million increase in accumulated other comprehensive income. As of December 31, 2025 the Company had a leverage capital ratio of 9.65%, a Tier 1 risk-based capital ratio and a common equity Tier 1 risk-based capital ratio of 12.37%, and a total risk-based capital ratio of 13.41%, compared to 9.36%, 12.35% and 13.45%, respectively, at December 31, 2024.\n\n## NON-GAAP FINANCIAL MEASURES\n\nThis Annual Report contains or references fully taxable-equivalent interest income and net interest income, which are non-GAAP financial measures. Tax-equivalent interest income and net interest income are derived from GAAP interest income and net interest income using a marginal tax rate of 21%. We believe the presentation of interest income and net interest income on a fully taxable-equivalent basis ensures comparability of interest income and net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.\n\nThe following table reconciles net interest income to net interest income on a fully taxable-equivalent basis:\n\n(dollars in thousands)\n\nYears ended December 31,\n\n2025\n\n2024\n\nNet interest income\n\n$\n\n78,324\n\n$\n\n62,191\n\nTax-equivalent basis adjustment\n\nusing a 21% marginal tax rate\n\n775\n\n819\n\nNet interest income on a fully\n\ntaxable equivalent basis\n\n$\n\n79,099\n\n$\n\n63,010\n\n22\n\nThe following table provides a reconciliation between certain GAAP financial measures (net interest income and other expense) and the related non-GAAP measures to derive the efficiency ratio measure:\n\n(dollars in thousands)\n\nYears ended December 31,\n\n2025\n\n2024\n\nNet interest income\n\n$\n\n78,324\n\n$\n\n62,191\n\nOther income\n\n9,617\n\n(11,151)\n\nAdd back net realized (losses) gains on sales of securities\n\n—\n\n(19,962)\n\nTotal adjusted revenue\n\n$\n\n87,941\n\n$\n\n71,002\n\nOther Expenses\n\n51,149\n\n48,625\n\nEfficiency ratio\n\n58.16%\n\n68.48%\n\n23\n\n## CONSOLIDATED AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND RATES\n\n(Tax-Equivalent Basis, dollars in thousands)\n\nYear Ended December 31\n\n2025\n\n2024\n\nAverage\n\nAverage\n\nAverage\n\nAverage\n\nBalance\n\nInterest\n\nRate\n\nBalance\n\nInterest\n\nRate\n\n(2)\n\n(1)\n\n(1)\n\n(2)\n\n(1)\n\n(1)\n\nASSETS\n\nInterest-earning assets:\n\nInterest-bearing deposits with banks\n\n$\n\n24,822\n\n$\n\n1,064\n\n4.29\n\n%\n\n$\n\n51,433\n\n$\n\n2,768\n\n5.38\n\n%\n\nSecurities available for sale:\n\nTaxable\n\n402,976\n\n14,563\n\n3.61\n\n400,050\n\n8,948\n\n2.24\n\nTax-exempt (1)\n\n44,294\n\n1,254\n\n2.83\n\n68,041\n\n1,868\n\n2.75\n\nTotal securities available for sale\n\n447,270\n\n15,817\n\n3.54\n\n468,091\n\n10,816\n\n2.31\n\nLoans receivable (1)(3)(4)\n\n1,791,569\n\n110,422\n\n6.16\n\n1,646,128\n\n99,815\n\n6.06\n\nTotal interest-earning assets\n\n2,263,661\n\n127,303\n\n5.62\n\n2,165,652\n\n113,399\n\n5.24\n\nNoninterest earning assets:\n\nCash and due from banks\n\n30,376\n\n26,629\n\nAllowance for credit losses\n\n(20,523)\n\n(18,450)\n\nOther assets\n\n96,136\n\n76,340\n\nTotal noninterest earning assets\n\n105,989\n\n84,519\n\nTOTAL ASSETS\n\n$\n\n2,369,650\n\n$\n\n2,250,171\n\nLIABILITIES AND STOCKHOLDERS’ EQUITY\n\nInterest-bearing liabilities:\n\nInterest-bearing demand and money market\n\n$\n\n585,289\n\n11,912\n\n2.04\n\n$\n\n476,106\n\n10,506\n\n2.21\n\nSavings\n\n203,765\n\n480\n\n0.24\n\n220,190\n\n711\n\n0.32\n\nTime\n\n821,710\n\n31,289\n\n3.81\n\n744,895\n\n31,117\n\n4.18\n\nTotal interest-bearing deposits\n\n1,610,764\n\n43,681\n\n2.71\n\n1,441,191\n\n42,334\n\n2.94\n\nShort-term borrowings\n\n18,173\n\n798\n\n4.39\n\n54,867\n\n1,363\n\n2.48\n\nOther borrowings\n\n84,543\n\n3,725\n\n4.41\n\n146,195\n\n6,692\n\n4.58\n\nTotal interest-bearing liabilities\n\n1,713,480\n\n48,204\n\n2.81\n\n1,642,253\n\n50,389\n\n3.07\n\nNoninterest-bearing liabilities:\n\nNoninterest-bearing demand deposits\n\n399,948\n\n393,616\n\nOther liabilities\n\n29,062\n\n28,350\n\nTotal noninterest-bearing liabilities\n\n429,010\n\n421,966\n\nStockholders’ equity\n\n227,160\n\n185,952\n\nTOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY\n\n$\n\n2,369,650\n\n$\n\n2,250,171\n\nNet Interest Income/spread\n\n(tax equivalent basis)\n\n79,099\n\n2.81\n\n%\n\n63,010\n\n2.17\n\n%\n\nTax-equivalent basis adjustment\n\n(775)\n\n(819)\n\nNet Interest Income\n\n$\n\n78,324\n\n$\n\n62,191\n\nNet interest margin\n\n(tax equivalent basis)\n\n3.49\n\n%\n\n2.91\n\n%\n\n(1)Interest and yields are presented on a tax-equivalent basis using a marginal tax rate of 21%.\n\n(2)Average balances have been calculated based on daily balances.\n\n(3)Loan balances include non-accrual loans and are net of unearned income.\n\n(4)Loan yields include the effect of amortization of purchased credit marks and deferred fees net of costs.\n\n‎\n\n24\n\n#### RATE/VOLUME ANALYSIS\n\nThe following table shows the fully taxable equivalent effect of changes in volumes and rates on interest income and interest expense.\n\nIncrease/(Decrease)\n\n(dollars in thousands)\n\n2025 compared to 2024\n\nVariance due to\n\nVolume\n\nRate\n\nNet\n\nINTEREST-EARNING ASSETS:\n\nInterest-bearing deposits\n\n$\n\n(1,376)\n\n$\n\n(328)\n\n$\n\n(1,704)\n\nSecurities available for sale:\n\nTaxable\n\n105\n\n5,511\n\n5,616\n\nTax-exempt securities\n\n(653)\n\n39\n\n(614)\n\nTotal securities available for sale\n\n(548)\n\n5,550\n\n5,002\n\nLoans receivable\n\n8,843\n\n1,764\n\n10,607\n\nTotal interest-earning assets\n\n6,919\n\n6,986\n\n13,905\n\nINTEREST-BEARING LIABILITIES\n\nInterest-bearing demand and money market\n\n2,351\n\n(945)\n\n1,406\n\nSavings\n\n(42)\n\n(189)\n\n(231)\n\nTime\n\n3,064\n\n(2,892)\n\n172\n\nTotal interest-bearing deposits\n\n5,373\n\n(4,026)\n\n1,347\n\nShort-term borrowings\n\n(1,035)\n\n471\n\n(564)\n\nOther borrowings\n\n(2,817)\n\n(150)\n\n(2,967)\n\nTotal interest-bearing liabilities\n\n1,521\n\n(3,705)\n\n(2,184)\n\nNet interest income (tax-equivalent basis)\n\n$\n\n5,398\n\n$\n\n10,691\n\n$\n\n16,089\n\nChanges in net interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate."}