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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2025

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36388

Peoples Financial Services Corp.

(Exact name of registrant as specified in its charter)



Pennsylvania	23-2391852
State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)

30 E D Preate Drive,

Moosic, PA 18507

(Address of principal executive offices) (Zip Code)

(570) 346-7741

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $2.00 par value	PFIS	The Nasdaq Stock Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant on June 30, 2025 was $454,334,000.00 (based on the closing sales price of the registrant’s common stock on that date).

The number of shares of the registrant’s common stock outstanding as of February 28, 2026 was 9,999,049.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed in connection with solicitation of proxies for its 2026 annual meeting of shareholders, within 120 days of the end of registrant’s fiscal year, are incorporated by reference into Part III of this Annual Report on Form 10-K.

Table of Contents

Peoples Financial Services Corp.

Form 10-K

For the Year Ended December 31, 2025

TABLE OF CONTENTS



		Page Number
PART I

Item 1.	Business	3
Item 1A.	Risk Factors	24
Item 1B.	Unresolved Staff Comments	36
Item 1C.	Cybersecurity	36
Item 2.	Properties	38
Item 3.	Legal Proceedings	38
Item 4.	Mine Safety Disclosures	38

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	38
Item 6.	Reserved	41
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	73
Item 8.	Financial Statements and Supplementary Data	75
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	146
Item 9A.	Controls and Procedures	146
Item 9B.	Other Information	148
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	148

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	148
Item 11.	Executive Compensation	148
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	148
Item 13.	Certain Relationships and Related Transactions, and Director Independence	148
Item 14.	Principal Accountant Fees and Services	149

PART IV

Item 15.	Exhibits, Financial Statement Schedules	149
Item 16.	Form 10-K Summary	149

SIGNATURES		153

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Cautionary Note Regarding Forward-Looking Statements.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to risks and uncertainties. These statements are based on assumptions and may describe future plans, strategies and expectations of Peoples Financial Services Corp. and its subsidiaries (the “Company”) that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond our control). These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. All statements in this report, other than statements of historical facts, are forward-looking statements.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Important factors that could cause our actual results to differ materially from those in the forward-looking statements include, but are not limited to: changes in interest rates, including their effect on our investment values; impairment charges relating to our investment portfolio; credit risks in connection with our lending activities; our exposure to commercial and industrial, construction, commercial real estate, and equipment finance loans; our ability to maintain an adequate allowance for credit losses; access to liquidity; the strength of our customer deposit levels; unrealized losses; reliance on our subsidiaries; accounting procedures, policies and requirements; changes in the value of goodwill; our ability to attract and retain key personnel; the strength of our disclosure controls and procedures and internal controls over financial reporting; potential for errors, omissions or fraud; environmental liabilities; reliance on third-party vendors and service providers; our ability to compete effectively in our industry and within our market area, including with respect to competition from financial technology companies and non-bank entities; the development and use of AI in business processes, services, and products; our ability to prevent, detect and respond to cybersecurity threats and incidents; a failure of information technology, whether due to a breach, cybersecurity incident, or ability to keep pace with growth and developments; our ability to comply with privacy and data protection requirements; changes in U.S. or regional economic conditions; the soundness of other financial institutions; changes in laws and regulations; fiscal and monetary policies of the federal government and its agencies; a failure to meet minimum capital requirements; our ability to realize the anticipated benefits of future acquisitions or a change in control; and our ability to pay dividends. Additional factors that may affect our results are discussed in Part I, Item 1A of this Annual report on Form 10-K.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, we do not undertake, and specifically disclaim any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

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Part I

Item 1.

Business.

General

Peoples Financial Services Corp., a bank holding company incorporated under the laws of Pennsylvania, provides a full range of financial services through its wholly-owned direct and indirect subsidiaries, including Peoples Security Bank and Trust Company and 1^st Equipment Finance, Inc (1^st Equipment Finance”).

Unless the context indicates otherwise, all references in this annual report to the “Peoples,” “Company,” “we,” “us” and “our” refer to Peoples Financial Services Corp. and its subsidiaries. Peoples Security Bank and Trust Company is sometimes referred to as “the Bank.”

The Bank is a state-chartered bank and trust company under the jurisdiction of the Pennsylvania Department of Banking and Securities (“Department of Banking”) and the Federal Deposit Insurance Corporation (“FDIC”). The Bank’s forty community banking offices, all similar with respect to economic characteristics, share a majority of the following aggregation criteria: products and services; operating processes; customer bases; delivery systems; and regulatory oversight. Accordingly, they are aggregated into a single operating segment.

Merger with FNCB Bancorp, Inc.

On July 1, 2024 (the “Acquisition Date”), the Company completed the acquisition of FNCB Bancorp, Inc., a Pennsylvania corporation (“FNCB”), in accordance with the definitive Agreement and Plan of Merger dated as of September 27, 2023, by and among the Company and FNCB. Pursuant to the agreement and plan, on the July 1, 2024, FNCB merged with and into Peoples, with Peoples continuing as the surviving corporation, and immediately following the merger, FNCB Bank, a Pennsylvania-chartered bank (“FNCB Bank”), merged with and into the Bank, with the Bank as the surviving institution (collectively, the “merger”).

At the time of the merger, Peoples added $1.8 billion in assets, $421.9 million in investments, $1.2 billion in loans, $1.4 billion in deposits, $226.3 million in Federal Home Loan Bank (the “FHLB”) advances and $8.0 million in trust preferred debentures. The excess of the purchase price consideration over the fair value of net FNCB assets resulted in $12.6 million of goodwill.

In connection with the completion of the merger, former FNCB shareholders received 0.1460 shares of the Company’s common stock for each share of FNCB common stock. The value of the total transaction consideration was approximately $133.7 million. The consideration included the issuance of 2,935,456 shares of the Company’s common stock, valued at $45.54 per share, which was the closing price of the Company’s common stock on June 28, 2024, the last trading day prior to the consummation of the merger. Also included in the total consideration was cash in lieu of any fractional shares, which was effectively settled upon closing.

Mission, Vision and Core Values

Our mission is to provide better banking to strengthen the communities where we live, work and play.

We are committed to improving the financial health of our neighbors by offering simple banking solutions while supporting and investing in the success of the communities we serve. We work together to: develop strong relationships built on trust, integrity, and exceptional service; foster an engaging environment where diverse perspectives are valued, and employees work together to achieve personal growth, collaboration, and development; and create a culture that empowers team members with the ability to provide exceptional customer service.

We believe that operating with a core set of values will be integral to the success of the Bank for our employees, customers, shareholders and communities. Our core values are People, Service, Better and Trust (“PSBT”).

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•

PEOPLE | Working together for a common good by engaging our customers and communities.

•

SERVICE | Consistently deliver a safe, reliable and positive banking experience for our customers.

•

BETTER | A commitment to excellence in every interaction.

•

TRUST | Integrity, accountability, guidance and support form the foundation for every customer engagement.

Market Area

Our principal market area consists of Allegheny, Bucks, Lackawanna, Lancaster, Lebanon, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Susquehanna, Wayne and Wyoming Counties in Pennsylvania, Middlesex County in New Jersey and Broome County in New York. In addition, parts of Bradford and Schuylkill Counties in Pennsylvania are also considered part of the market area. During 2025, we relocated our headquarters to Moosic, Lackawanna County.

Our legacy market stretched from Binghamton and the southern tier of New York down through Northeastern Pennsylvania. The Marcellus Shale formation located in the heart of our legacy market area provides economic benefits to the communities served and as a result to us. Natural gas producers have invested billions of dollars in our legacy market area in lease and land acquisition, well drilling, infrastructure development and community partnerships.

Beginning in 2014, we launched a growth strategy to expand our operations beyond our legacy footprint. In the fourth quarter of 2014, we entered the Greater Lehigh Valley market with the opening of a community banking office in Bethlehem, Lehigh County. This expansion continued with the 2017 addition of two additional community banking offices, in Allentown, Lehigh County and Bethlehem, Northampton County. This market consisting of the Allentown-Bethlehem-Easton metropolitan area, being Pennsylvania’s third most populous metropolitan area.

In 2015, we opened a loan production office with a team of experienced leaders in the King of Prussia market, which includes parts of suburban Philadelphia, including Pennsylvania’s wealthiest counties, Bucks and Montgomery. The expansion continued with the opening of a community bank office in the fourth quarter of 2016, replacing the loan production office. Prominent industries in the King of Prussia market include pharmaceuticals, health care, electronics, computer services, insurance, industrial machinery, retailing, schools and meat processing. In 2020, we expanded further into the Philadelphia metropolitan area by opening a community banking office in Doylestown, Bucks County and recruiting an experienced local lending team.

In 2019, we entered the south-central Pennsylvania market with the establishment of a full-service branch in Lebanon County with a team of experienced local lenders dedicated to serving customers in the Lancaster, Lebanon, and Harrisburg markets. Our expansion in south-central Pennsylvania continued in 2025, with the opening of an additional community banking office in Lancaster County.

During the fourth quarter of 2021 we continued our geographic expansion by recruiting experienced local lenders to new community banking offices in Warrendale, Pennsylvania, to serve the Greater Pittsburgh market, and in Piscataway, New Jersey, to serve the New Jersey market.

Digital Banking

We provide customers with 24/7 access to banking services through our online banking platforms at psbt.com and through our mobile app. Through these digital channels, customers can review deposit and loan account balances, transfer funds, pay bills, deposit checks remotely, and access other account-related services.

In 2025, we launched PSBTNow, our online account opening platform for consumer deposit products. This platform enables retail customers to open eligible personal deposit accounts through a digital application process. We expect to expand online account opening capabilities to include business deposit products in 2026.

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We have also established a Virtual Branch to support customers who prefer to engage digitally. The Virtual Branch provides access to dedicated bankers through live chat and other remote communication channels, allowing customers to open accounts, obtain information, and receive individualized assistance. Our digital banking strategy is designed to complement our physical network of community banking offices and enhance customer access, convenience, and service delivery.

Human Capital Resource

Staffing. At December 31, 2025, we had 547 full-time employees and 36 part-time employees. Our employees are the keys to our success. We are committed to attracting, retaining and promoting top quality talent, diligently seeking to identify and select the best candidates for all positions. We are dedicated to providing a supportive workplace that treats our employees with dignity, decency and respect; that is inclusive, supportive, and free of any form of discrimination or harassment. We reward and recognize our employees based on their individual results and performance. We celebrate all the characteristics that make each of our employees unique and valuable team members.

Health & Safety. Our health and safety policies, procedures and guidelines mandate that all tasks be conducted in a safe and efficient manner, in compliance with all local, state and federal safety and health regulations, and special safety concerns. Our policies and procedures encompass all facilities and operations and addresses on-site emergencies, injuries and illnesses, evacuation procedures, information systems and personal device usage and general safety rules.

Benefits. We are committed to offering a competitive total compensation package. We regularly compare compensation and benefits with peer companies and market data and make adjustments as needed to ensure compensation stays competitive. We also offer a wide array of benefits for our workforce and their families, including comprehensive medical, dental, and vision benefits, as well as group life insurance, accidental death and dismemberment insurance, voluntary life insurance, and short-term and long-term disability insurance for all eligible employees. We also offer additional benefits including:

●

Employee Assistance Program;

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401(k) Profit Sharing Plan;

●

Paid time off (“PTO”), holidays, bank holidays and birthdays;

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Unpaid leave of absence;

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Internal training and online development courses; and

●

Tuition reimbursement for eligible associates.

Products and Services

Our primary commercial loan products are targeted to small and medium sized businesses and include various types of commercial real estate loans (including multifamily); commercial and industrial loans; equipment financing; and municipal, non-profit tax-free loans. Other lending products include retail products such as one-to-four family residential mortgages, home equity loans, consumer and auto loans. We fund our loans, primarily, by offering deposits to individuals; commercial business customers; municipalities, school districts and other non-profit organizations. Our deposit products include certificates of deposit, money market accounts, savings accounts and various demand deposit accounts.

We generate interest income from our loan and securities portfolios. Other income is generated primarily from merchant transaction fees and interchange income, ATM fee income, trust and wealth management fees, fees generated from commercial loan interest rate swap transactions and service charges on deposit accounts. Our primary costs are interest paid on deposits and borrowings and general operating expenses. We provide a variety of commercial and retail banking services to business, non-profits, governmental, municipal agencies and professional customers, as well as retail customers, on a personalized basis. Our primary lending products are commercial and residential real estate loans, commercial loans, including commercial equipment financing alternatives, indirect automobile loans and consumer loans. We also offer ATM access, debit and credit cards, online banking, active investment accounts, trust department

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services and other various lending, depository and related financial services. Our primary deposit products are savings and demand deposit accounts and certificates of deposit.

We are not dependent upon a single customer, or a few customers, the loss of one or more of which would have a material adverse effect on our operations. In the ordinary course of our business, our operations and earnings are not materially affected by seasonal changes or by compliance with federal, state or local environmental laws or regulations.

Lending Activities

We provide a full range of commercial and retail lending products designed to meet the borrowing needs of small- and medium-sized businesses and consumers in our market areas. The majority of our loans are to customers located within our market area. We have no foreign loans or highly leveraged transaction loans, as defined by the Federal Reserve Board. Although we participate in loans originated by other banks, we have originated the majority of the loans in our portfolio.

Our commercial lending products include the following types of loans, among others: commercial real estate; construction; working capital; equipment and other commercial needs. Our retail lending products include the following types of loans, among others: residential real estate; automobiles; manufactured housing; personal and home equity. Peoples also offers specialized equipment financing alternatives including simple loans, direct finance leases and municipal leases to businesses within and outside our primary market area through its wholly owned subsidiary, 1st Equipment Finance. The terms offered on a loan or lease vary depending primarily on the type of loan or lease and credit-worthiness of the borrower.

Payment risk is a function of the economic climate in which our lending activities are conducted. Economic downturns in the economy generally or in a particular sector could cause cash flow problems for customers and make loan payments more difficult. We attempt to minimize this risk by avoiding loan concentrations of a single customer or a group of customers, the loss of any one or more of whom would have a materially adverse effect on our financial condition. Interest rate risk arises from our fixed rate loans in an environment of changing or volatile interest rates. We attempt to mitigate this risk by making adjustable-rate commercial loans and by limiting repricing terms to five years or less for customers requiring fixed rate loans. Additionally, we will execute interest rate swaps with certain commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that we execute with a third party, such that we minimize our net risk exposure resulting from such transactions. Our lending activity also exposes us to risks that any collateral we take as security is inadequate. We attempt to manage collateral risk by avoiding loan concentrations to particular borrowers, by perfecting liens on collateral and by obtaining appraisals on property prior to extending loans. We attempt to mitigate our exposure to these and other types of risks by stratifying authorization requirements by loan size and complexity.

We manage our payment risks by continuously monitoring our lending activities across our lending categories, amongst our customers, and with an eye to the broader market and macroeconomic trends. Through such activity, we proactively monitor and manage existing credit relationships and seek new opportunities for growth.

We do not engage in sub-prime residential mortgage lending, which is defined as mortgage loans advanced to borrowers who do not qualify for market interest rates because of problems with their credit history. We focus our lending efforts within our market area.

Commercial Real Estate Loans. Commercial loans secured by real estate with adjustable and fixed rates totaled $2.3 billion and comprise 56.9 percent of our loan portfolio at December 31, 2025. We originate a variety of commercial real estate loans generally for terms up to 25 years and repayments based on an amortization schedule of up to 25 years. These loans are typically based on either the Federal Home Loan Bank borrowing rate or our own pricing criteria and adjust every three, five, seven or ten years. Additionally, commercial real estate loans are originated for the acquisition and development of land, including development for residential use. Conditions of acquisition and development loans originated generally limit the number of model homes and homes built on speculation, and draws are scheduled against executed agreements of sale. Commercial real estate loans for the acquisition and development of land are typically based upon the prime rate and secured overnight funding rate (“SOFR”). Commercial real estate loans for developed real

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estate and for real estate acquisition and development are generally originated with loan-to-value ratios up to 75 percent, while loans for the acquisition of land are originated with a maximum loan to value ratio of 65 percent.

Loans secured by commercial real estate generally have larger balances and involve a greater degree of risk than one-to-four family residential mortgage loans. Of primary concern in commercial real estate lending is the borrower’s and any guarantor’s creditworthiness and the feasibility and cash flow potential of the financed project. Additional considerations include: location, market and geographic concentrations, loan to value, strength of guarantors and quality of tenants. Payments on loans secured by income properties often depend on the successful operation and management of the properties. As a result, repayment of such loans may be subject to adverse conditions in the real estate market or the economy to a greater extent than residential real estate loans. To monitor cash flows on income properties, we generally require borrowers and loan guarantors, if any, to provide annual consolidated financial statements on commercial real estate loans and rent rolls where applicable. In reaching a decision on whether to make a commercial real estate loan, we consider and review a cash flow analysis of the borrower and guarantor, when applicable, and consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property. We generally require that the properties securing these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt service) of at least 1.2 times. An environmental report is obtained when there is a known possibility that hazardous materials may exist or have existed on the site, or when the site may have been impacted by adjoining properties that handled hazardous materials.

Our multi-family commercial real estate loans are secured by projects that include five or more nonowner-occupied residential units. Our other commercial real estate loans are secured by nonresidential properties such as office buildings, industrial warehouse facilities, anchored and unanchored retail buildings, medical office buildings, healthcare facilities including nursing homes and assisted living facilities and other commercial facilities. At December 31, 2025, nearly all of our multi-family commercial real estate and commercial real estate loans were secured by properties located within our market area.

Our largest commercial real estate relationship with an aggregate total exposure of approximately $41.4 million as of December 31, 2025, is with a real estate developer whose projects include multi-family commercial real estate, commercial land development and construction and tenant occupied commercial real estate. All of the underlying loans were performing in accordance with their terms as of December 31, 2025.

Multi-family residential and commercial real estate loans are offered with both adjustable and fixed interest rates. The terms of each multi-family residential and commercial real estate loan are negotiated on a case-by-case basis. We generally originate multi-family commercial and commercial real estate loans in amounts up to 75 percent of the appraised value of the property collateralizing the loan.

Loans secured by multi-family residential and commercial real estate generally involve a greater degree of credit risk than residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multi-family commercial and commercial real estate is typically dependent upon the successful operation of the related real estate property. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

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The following table summarizes the outstanding principal balance of our commercial real estate loans by major loan sectors at December 31, 2025:



(Dollars in thousands, except percents)			$ Outstanding		% Outstanding
Multifamily (5+ Units)		$	533,145		23.04	%
Office			286,779		12.39
Industrial / Warehouse			259,472		11.21
Retail – Unanchored			224,812		9.71
1-4 Family Residential – Rental Property			189,609		8.19
Retail – Anchored			126,079		5.45
Other			109,215		4.72
Unassigned			83,457		3.61
Medical Office Building			66,328		2.87
Recreational			61,893		2.67
Gas Station/Convenience Store			54,630		2.36
Hospitality (Hotel / Motel)			53,601		2.32
Healthcare			42,156		1.82
Restaurant / Bar			39,098		1.69
Land – Unimproved			33,766		1.46
School / Campus Real Estate			31,609		1.37
Self-storage / Mini-warehouse			29,623		1.28
Land Acquisition & Development - Commercial			18,067		0.78
All other commercial real estate asset classes			70,771		3.06
Total commercial real estate loans		$	2,314,110		100.0	%

Commercial Loans. At December 31, 2025, commercial business loans to professionals, sole proprietorships, small businesses in our market area comprise 16.4 percent of our loan portfolio, and commercial loans to municipalities comprise 5.0 percent of our loan portfolio. We offer term loans for capital improvements, equipment acquisition and long-term working capital. These loans are typically priced at short-term fixed rates or variable rates based on the prime rate. These loans are secured by business assets other than real estate, such as business equipment and inventory, and, generally, are backed by personal guarantees of the owner or owners of the business. We originate lines of credit to finance the working capital needs of businesses to be repaid by seasonal cash flows or to provide a period of time during which the business can borrow funds for planned equipment purchases.

When making commercial business loans, we consider the financial statements of the borrower and any guarantors, the borrower’s payment history of both business and personal debt, the debt service capabilities of the borrower, the projected cash flows of the business and guarantor, the viability of the industry in which the customer operates and the value of the collateral.

Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property, the value of which tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Commercial Equipment Financing. At December 31, 2025, commercial equipment financing loans under our subsidiary 1^st Equipment Finance, Inc. totaled $169.0 million, or 4.2 percent, of our total loan portfolio. Equipment financing alternatives include direct finance loans and leases and municipal leases, to businesses and governmental units within and outside our primary market area. In addition, this loan segment includes purchased pools of secured loans. Our equipment financing loans and leases are primarily secured by commercial vehicles, machinery and equipment.

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One-to-Four Family Residential Loans. Residential real estate loans comprise 14.8 percent of our loan portfolio. We offer two types of residential mortgage loans: fixed-rate loans, with terms of up to 30 years, and adjustable-rate loans, with interest rates and payments that are adjusted annually after an initial fixed period of one, three, five, ten or fifteen years. Interest rates and payments on our adjustable-rate loans generally are adjusted to a rate equal to a percentage above the appropriate U.S. Treasury Security Index. Our adjustable-rate single-family residential real estate loans generally have caps on increases or floors on decreases in the interest rate at any adjustment date, and a maximum adjustment limit over the life of the loan. Although we offer adjustable-rate loans with initial rates below the fully indexed rate, loans tied to the one-year constant maturity Treasury are underwritten using methods approved by the Federal Home Loan Mortgage Corporation, which require borrowers to be qualified at a rate equal to 200 basis points above the discounted loan rate under certain conditions.

Borrower demand for adjustable-rate loans compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans as compared to the interest rates and loan fees for adjustable-rate loans, among other factors. The loan fees, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions.

Most of our residential loans are underwritten to standards established by the secondary market.

While one-to-four family residential real estate loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans. We do not offer loans with negative amortization or interest only loans.

We offer home equity loans and lines of credit, typically with a maximum combined loan-to-value ratio of 90 percent. Home equity loans generally have fixed rates of interest and are originated with terms of up to 15 years. Home equity lines of credit generally have variable rates and are indexed to the prime rate. Home equity lines of credit generally have draw periods with 20-year repayment periods.

We generally do not make high loan-to-value loans (defined as loans with a loan-to-value ratio exceeding 80 percent) without private mortgage insurance. The maximum loan-to-value ratio we generally permit is 95 percent with private mortgage insurance. We require all properties securing residential mortgage loans to be appraised by a board-approved independent appraiser. We generally require title insurance on all first mortgage loans. Borrowers must obtain hazard insurance, and flood insurance is required for loans on properties located in a flood zone.

Consumer Loans. We offer a variety of consumer loans, which represent 2.7 percent of our loan portfolio, including lines of credit, automobile loans and loans secured by savings accounts and certificates of deposit. We also offer unsecured loans.

Consumer loans may entail greater risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as motor vehicles. In the latter case, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state insolvency laws, may limit the amount that can be recovered on such loans.

We offer loans secured by new and used automobiles. We primarily offer such loans indirectly, through partnerships with dealerships within our market area. These loans have fixed interest rates and generally have terms up to seven years. We offer automobile loans with loan-to-value ratios of up to 100 percent or more of the purchase price of the vehicle depending upon the credit history of the borrower and other factors.

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Consumer loans secured by savings accounts and certificates of deposit held by us are offered based upon the deposit rates plus a margin with terms up to five years. We offer such loans up to 100 percent of the principal balance of the certificate of deposit or balance in the savings account. We also offer unsecured loans and lines of credit with terms up to five years. Our unsecured loans and lines of credit bear a substantially higher interest rate than our secured loans and lines of credit.

The procedures for underwriting consumer loans include an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loan. Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount.

We have adhered and continue to adhere to credit policies, which management believes are sound. Our loan policies require verification of information provided by loan applicants as well as an assessment of their ability to repay all loans. At no time have we made loans similar to those commonly referred to as “no doc” or “stated income” loans.

While the vast majority of the loans in our loan portfolio are secured by collateral, we have made and will continue to make loans on an unsecured basis. Unsecured commercial loans are only granted to those borrowers exhibiting historically strong cash flow and capacity with seasoned management. Unsecured consumer loans are made for relatively short terms and to borrowers with strong credit histories.

Requests to modify, restructure or otherwise change the terms of loans are considered on an individual basis as circumstances and/or reasons for such changes may vary. All such changes in terms must be authorized by the appropriate approval body. Also, our credit policy prohibits the modification of loans or the extension of additional credit to borrowers who are not current on their payments. Exceptions are approved only where our position in the credit relationship is expected to be enhanced by such action.

Adjustable-Rate Loans. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate loans, an increase in required monthly loan payment for borrowers with adjustable-rate loans in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of collateral also may be adversely affected in a high-interest rate environment. In addition, although adjustable-rate mortgage loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits on residential mortgage loans. We attempt to negotiate floors on most adjustable-rate commercial loans. The commercial adjustable-rate loans generally provide a fixed rate re-negotiation at the end of the initial fixed rate period. If we and the borrower are unable to agree on a new fixed rate then the rate converts to a floating rate obligation. In addition, some commercial loans adjust to a predetermined index plus a spread at the end of the initial fixed rate period, for a like period. To a lesser degree, we enter into transactions with collars generally for periods of five years or less.

Loan Originations. Loan originations come from a number of sources. The primary sources of loan originations are existing customers, walk-in traffic, advertising and referrals from customers. We also purchase participations in loans from local financial institutions to supplement our lending portfolio. Loan participations are subject to the same credit analysis and loan approvals as the loans we originate. We are permitted to review all the documentation relating to any loan in which we participate. However, in a purchased participation loan, we do not service the loan and are subject to the policies and practices of the lead lender with regard to monitoring delinquencies, pursuing collections and instituting foreclosure proceedings.

Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by our Board of Directors and management. The Board of Directors has granted loan approval authority to certain officers or groups of officers up to prescribed limits, based on the officer’s experience.

Loans to One Borrower. The maximum amount that we may lend to one borrower and the borrower’s related entities generally is limited, by regulation, to 15 percent of the capital accounts of the Bank. Capital accounts include the

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aggregate of capital, surplus, undivided profits, capital securities and reserve for credit losses. At December 31, 2025, our regulatory limit on loans to one borrower was $83.8 million.

For additional information about our lending activities see Item 7 – Management’s Discussion and Analysis of Financial Condition, Management’s Discussion and Analysis 2025 versus 2024, Loan Portfolio, in this Annual Report on Form 10-K.

Asset Quality


(Dollars in thousands, except percents)		December 31, 2025			December 31, 2024
Nonaccrual loans	$	10,796		$	22,499
Accruing loans past due 90 days or more:		524			458
Total nonperforming loans		11,320			22,957
Foreclosed assets		750			27
Total nonperforming assets	$	12,070		$	22,984
Total loans held for investment	$	4,066,896		$	3,993,505
Allowance for credit losses		39,007			41,776
Allowance for credit losses as a percentage of loans held for investment		0.96	%		1.05	%
Allowance for credit losses as a percentage of nonaccrual loans		361.31	%		185.68	%
Allowance for credit losses as a percentage of nonperforming loans		344.58	%		181.97	%
Nonaccrual loans as a percentage of loans held for investment		0.27	%		0.56	%
Nonperforming loans as a percentage of loans, net		0.28	%		0.58	%
Nonperforming assets as a percentage of total assets		0.23	%		0.45	%

Allowance for Credit Losses (“ACL”)

The ACL decreased $2.8 million to $39.0 million at December 31, 2025, from $41.8 million at the end of 2024. During the twelve months ended December 31, 2025, net charge-offs were $2.9 million and the provision for credit losses totaled $98 thousand.

The ACL, as a percentage of loans, net of unearned income, was 0.96 percent at the end of 2025, and 1.05 percent at the end of 2024. The coverage ratio, the ACL as a percentage of nonperforming loans, is an industry ratio used to test the ability of the ACL account to absorb potential losses arising from nonperforming loans. The coverage ratio was 344.6 percent at December 31, 2025, and 182.0 percent at December 31, 2024. We believe that our ACL was adequate to absorb probable credit losses at December 31, 2025.

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The tables below present the individually evaluated loans of the ACL as well as the pooled loans portion which consist of both a quantitative and qualitative components of the ACL.


	December 31, 2025				December 31, 2024
(Dollars in thousands, except percents)	Amount		%		Amount		%
Individually evaluated:
Commercial and industrial	$	404	1.04	%	$	325	0.78	%
Municipal
Real Estate:
Commercial		451	1.16
Residential		78	0.20			190	0.45
Consumer
Equipment financing		399	1.02			434	1.04
Total individually evaluated		1,332	3.42			949	2.27
Pooled:
Commercial and industrial		5,632	14.44			5,679	13.59
Municipal		1,413	3.62			1,072	2.57
Real Estate:
Commercial		19,547	50.11			21,614	51.74
Residential		4,885	12.52			4,924	11.79
Consumer		1,759	4.51			2,540	6.08
Equipment financing		4,439	11.38			4,998	11.96
Total pooled		37,675	96.58			40,827	97.73
Total allowance for credit losses	$	39,007	100.00	%	$	41,776	100.00	%


	December 31, 2025						December 31, 2024
(Dollars in thousands)	Quantitative		Qualitative		Total		Quantitative		Qualitative		Total
Commercial and Industrial	$	3,244	$	2,388	$	5,632	$	3,689	$	1,990	$	5,679
Municipal		503		910		1,413		461		611		1,072
Commercial real estate		8,993		10,554		19,547		7,918		13,696		21,614
Residential real estate		542		4,343		4,885		606		4,318		4,924
Consumer		1,434		325		1,759		1,946		594		2,540
Equipment financing		1,138		3,301		4,439		930		4,068		4,998
Total	$	15,854	$	21,821	$	37,675	$	15,550	$	25,277	$	40,827

Sources of Funds

Our primary source of funds is the cash flow provided by our financing activities, mainly deposit gathering. Other sources of funds are provided by investing activities, including principal and interest payments on loans and investment securities, and operating activities, primarily net income. We offer a variety of deposit accounts with a range of interest rates and terms, including, among others: money market accounts; interest bearing checking products; savings accounts; certificates of deposit; individual retirement accounts, and non-interest-bearing demand deposit products. These deposits are primarily obtained from areas surrounding our community banking offices. We rely primarily on marketing, product innovation, technology, service and long-standing relationships with customers to attract and retain these deposits. Other deposit related services include remote deposit capture; automatic clearing house transactions; cash management services; automated teller machines; point of sale transactions; safe deposit boxes; night depository services; direct deposit, online banking and official check services. We have occasionally used policy approved brokers to generate wholesale deposits to supplement our deposit base.

Borrowings

Borrowings may be used to supplement our supply of lendable funds and to meet deposit withdrawal requirements. Borrowings from the FHLB of Pittsburgh typically are collateralized by a portion of our real estate loans. In addition to the FHLB, we have borrowing facilities with the Federal Reserve Bank and correspondent banks.

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The Bank is a member of the FHLB of Pittsburgh. The FHLB functions as a central bank providing credit for the Bank and other member financial institutions. As a member, the Bank is required to own capital stock in the FHLB and is authorized to apply for borrowings on the security of certain of its real estate loans, provided certain standards related to creditworthiness have been met. At December 31, 2025, our maximum borrowing capacity with the FHLB was $1.7 billion, of which $159.2 million was outstanding in borrowings including accrued interest payable, and $498.8 million in irrevocable standby letters of credit.

To further supplement our borrowing capacity, we also maintain a borrower-in-custody of collateral arrangement at the Federal Reserve that enables us to pledge certain loans, not being used as collateral at the FHLB, as collateral for borrowings at the Federal Reserve. At December 31, 2025, our borrowing capacity at the Federal Reserve related to this program was $349.0 million and there were no amounts outstanding. For additional information, see Note 12 “Short-term borrowings” and Note 13 “Long-term debt”. The table below presents additional sources of liquidity as of December 31, 2025.


							Total Available
At December 31, 2025		Total Available			Outstanding		for Future Liquidity
FHLB Advances	$	1,692,839		$	658,587	$	1,034,252
Federal Reserve - Discount Window		348,996					348,996
Correspondent bank lines of credit		27,000					27,000
Other sources of liquidity:
Brokered deposits		790,587			152,221		638,366
Unencumbered securities		221,170					221,170
Total sources of liquidity	$	3,080,592		$	810,808	$	2,269,784

Trust, Wealth Management and Brokerage Services

Our trust department offers a broad range of fiduciary and investment services, including investment services, investment management, IRA trustee services, estate administration, living trusts, trustee under will, guardianships, life insurance trusts, custodial services / IRA custodial services, corporate trusts, and pension and profit-sharing plans. At December 31, 2025, the Bank had $468.5 million in trust assets under management.

We provide a comprehensive array of wealth management products and services to individuals, small businesses and nonprofit entities. These products and services include investment portfolio management; estate planning; annuities; business succession planning; insurances; retirement plan services; education funding strategies, and tax planning, among others.

We have a third-party marketing agreement with a broker-dealer that allows us to offer a full range of securities, brokerage services and annuity sales to our customers. Through this relationship, our clients have access to a wide array of financial and wealth management strategies, including services such as professional money management, retirement and education planning, and investment products including stocks, bonds, mutual funds, annuities and insurance products. Our trust, wealth management and brokerage services are offered throughout our retail branch system.

Cash Management and Treasury Services

We offer a suite of cash management and treasury services to support the operational needs of businesses throughout our markets. These services include ACH collections and payments, remote and mobile deposit capture, lockbox services, wire transfers, payroll and direct deposit ACH, online bill pay, interbank transfers, merchant services, and cash flow optimization tools such as investment sweeps, line-of-credit sweeps, and zero balance and target balance accounts.

We also provide the Peoples Security Bank & Trust Visa® Business Purchasing Card (PCard), fraud prevention services including Payee Positive Pay and ACH Positive Pay, and vault services in conjunction with armored courier arrangements for secure cash handling and daily deposit credit.

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Competition

The banking and financial services industries are highly competitive. We compete with commercial banks, thrift institutions, credit unions, and internet-based financial institutions and financial technology (“FinTech”) companies, many of which are substantially larger in terms of assets and available resources. Certain of these institutions have significantly higher lending limits than we do and may provide various services for their customers that we presently do not. In addition, we compete for deposits from mutual funds and security brokers, and online banks, while consumer discount, online lenders, mortgage and insurance companies compete for various types of loans. Credit unions, finance companies and mortgage companies enjoy certain competitive advantages over us, as they are not subject to the same regulatory restrictions and taxations as commercial banks. Principal methods of competing for bank products, permitted nonbanking services and financial activities include price, nature of product, quality of service and convenience of location.

In our market area, we expect continued competition from these financial institutions in the foreseeable future. With the continued acceptance of internet/digital banking including online account opening by our customers and consumers generally, competition for deposits has increased from institutions operating outside of our market area.

We believe that our most significant competitive advantage originates from our business philosophy which includes offering direct access to senior management and other officers and providing friendly, informed and courteous service, local and timely decision making, flexible and reasonable operating procedures and consistently applied credit policies. In addition, our success has been, and will continue to be, a result of our emphasis on community involvement and customer relationships. Consolidation within the financial services industry, and particularly in our market area, could provide community banks like us opportunities to increase market share.

Supervision and Regulation

We are extensively regulated under federal and state laws. Generally, these laws and regulations are intended to protect the Bank’s customers and depositors, not shareholders. The following is a summary of certain provisions of law that are material to us and that affect the regulation of bank holding companies and banks but it is not a complete description of all laws and regulations, or all aspects of those laws and regulations that affect us. This discussion is qualified in its entirety by reference to applicable laws and regulations. Changes in laws and regulations may have a material effect on our business and prospects.

Peoples is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended, and is subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System, referred to as the “Federal Reserve Board” or the “FRB.” We are required to file annual and quarterly reports with the FRB and to provide the FRB with such additional information as the FRB may require. The FRB also conducts examinations of Peoples.

With certain limited exceptions, we are required to obtain prior approval from the FRB before acquiring direct or indirect ownership or control of more than 5 percent of any voting securities or substantially all of the assets of a bank or bank holding company, or before merging or consolidating with another bank holding company. Additionally, with certain exceptions, any person or entity proposing to acquire control through direct or indirect ownership of 25 percent or more of our voting securities is required to give 60 days’ written notice of the acquisition to the FRB, which may prohibit the transaction, and to publish notice to the public.

The Bank is regulated by the Pennsylvania Department of Banking and Securities and the FDIC. The Department of Banking may prohibit an institution over which it has supervisory authority from engaging in activities or investments that it believes constitute unsafe or unsound banking practices. Federal banking regulators have extensive enforcement authority over the institutions they regulate to prohibit or correct activities that violate law, regulation or a regulatory agreement or which are deemed to constitute unsafe or unsound practices.

Enforcement actions may include:

●

the appointment of a conservator or receiver;

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●

the issuance of a cease and desist order;

●

the termination of deposit insurance, the imposition of civil money penalties on the institution, its directors, officers, employees and institution affiliated parties;

●

the issuance of directives to increase capital;

●

the issuance of formal and informal agreements and orders;

●

the removal of or restrictions on directors, officers, employees and institution-affiliated parties; and

●

the enforcement of any such mechanisms through restraining orders or any other court actions.

We are subject to certain restrictions on extensions of credit to executive officers, directors, principal shareholders or any related interests of such persons which generally require that such credit extensions be made on substantially the same terms as are available to unaffiliated persons dealing with us, not involve more than the normal risk of repayment, and require approval of the Bank’s board of directors for certain transactions with affiliated persons. Other laws tie the maximum amount that may be loaned to any one customer and its related interests, whether the customer is an affiliated or nonaffiliated person, to our capital levels. Other laws restrict or prohibit certain transactions between the Bank and its affiliates.

Limitations on Dividends and Other Payments

Our ability to pay dividends largely depends upon the receipt of dividends from the Bank. Both federal and state laws impose restrictions on our ability and the ability of the Bank to pay dividends. Under such restrictions, the Bank may only declare and pay dividends out of accumulated net earnings (including accumulated net earnings acquired as a result of a merger within seven years). Further, the Bank may not declare or pay any dividends if the payment of the dividend reduces the Bank’s surplus below 100 percent of its capital stock. Pennsylvania law requires the Bank to annually set aside as surplus a sum equal to not less than 10 percent of its net earnings if the surplus does not equal at least 100 percent of its capital stock. In addition to these specific restrictions, bank regulatory agencies can prohibit proposed dividends by a financial institution that would otherwise be permitted under applicable regulations if the regulator determines that the proposed dividend would constitute an unsafe or unsound practice.

Permitted Non-Banking Activities

If a bank holding company and its subsidiary bank are each determined by the FRB to be well capitalized and well managed then they may engage in certain nonbanking activities closely related to banking or managing or controlling banks by providing notice to the FRB after commencing the activities. Such a bank holding company proposing to engage in permissible nonbanking activities, through a new enterprise or through the acquisition of an existing company, must provide prior notice to the FRB. For transactions that do not qualify for the post or expedited prior notice procedures, a bank holding company must file a notice for prior FRB approval. Subsidiary banks of a bank holding company are subject to certain quantitative and qualitative restrictions on extensions of credit to the bank holding company or its subsidiaries, and on the use of their securities as collateral for loans to any borrower. These regulations and restrictions may limit our ability to obtain funds from the Bank for our cash needs, including funds for the payment of dividends, interest and operating expenses. Further, subject to certain exceptions, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services.

A bank holding company is required to act as a source of financial strength to its subsidiary banks and to make capital injections into a troubled subsidiary bank, and the FRB may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank when required. A required capital injection may be called for at a time when the holding company does not have the resources to provide it.

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Certain Transactions by Insured Banks with their Affiliates

There are statutory restrictions related to the extent bank holding companies and their non-bank subsidiaries may borrow, obtain credit from or otherwise engage in “covered transactions” with their insured depository institution (i.e., banking) subsidiaries. In general, an “affiliate” of a bank includes the bank’s parent holding company and any subsidiary of the parent holding company. However, an “affiliate” does not generally include the bank’s operating subsidiaries. A bank (and its subsidiaries) may not lend money to, or engage in other covered transactions with, its non-bank affiliates if the aggregate amount of covered transactions outstanding involving the bank, plus the proposed transaction, exceeds the following limits: (a) in the case of any one such affiliate, the aggregate amount of covered transactions of the bank and its subsidiaries cannot exceed 10 percent of the bank’s capital stock and surplus; and (b) in the case of all affiliates, the aggregate amount of covered transactions of the bank and its subsidiaries cannot exceed 20 percent of the bank’s capital stock and surplus. “Covered transactions” are defined to include a loan or extension of credit to an affiliate, a purchase of or investment in securities issued by an affiliate, a purchase of assets from an affiliate, the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any person or company, the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate, securities borrowing or lending transactions with an affiliate that creates a credit exposure to such affiliate, or a derivatives transaction with an affiliate that creates a credit exposure to such affiliate. Certain covered transactions are also subject to collateral security requirements.

Covered transactions as well as other types of transactions between a bank and a bank holding company must be on market terms, which means that the transaction must be conducted on terms and under circumstances that are substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with or involving nonaffiliates or, in the absence of comparable transactions, that in good faith would be offered to or would apply to nonaffiliates. Moreover, certain amendments to the Bank Holding Company Act of 1956 provide that, to further competition, a bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property of any kind, or furnishing of any service.

Pennsylvania Law

As a Pennsylvania incorporated bank holding company, Peoples is subject to various restrictions on its activities as set forth in Pennsylvania law. This is in addition to those restrictions set forth in federal law. Under Pennsylvania law, a bank holding company that desires to acquire a bank or bank holding company that has its principal place of business in Pennsylvania must obtain permission from the Department of Banking to do so.

Prompt Corrective Action

The federal banking agencies have broad powers under current federal law to take prompt corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institution in question is “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” These terms are defined under uniform regulations issued by each of the federal banking agencies regulating these institutions. An insured depository institution which is less than adequately capitalized must adopt an acceptable capital restoration plan, is subject to increased regulatory oversight and is increasingly restricted in the scope of its permissible activities.

The Bank was “well capitalized” based on its actual capital position at December 31, 2025. However, an institution may be deemed by the regulators to be in a capitalization category that is lower than is indicated by its actual capital position if, among other things, it receives an unsatisfactory examination rating with respect to asset quality, management, earnings or liquidity.

A depository institution is generally prohibited from making any capital distributions including payment of a cash dividend or paying any management fees to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to growth limitations and are required to submit capital restoration plans. If a depository institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” Significantly undercapitalized depository institutions may be subject to a number of other

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requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and stop accepting deposits from correspondent banks. Critically undercapitalized institutions are subject to the appointment of a receiver or conservator; generally, within 90 days of the date such institution is determined to be critically undercapitalized.

Risk-Based Capital Requirements

The federal banking regulators have adopted certain risk-based capital guidelines to assist in assessing capital adequacy of a banking organization’s operations for both transactions reported on the balance sheet as assets and transactions, such as letters of credit, and recourse agreements, which are recorded as off-balance sheet items. Under these guidelines, nominal dollar amounts of assets and credit-equivalent amounts of off-balance sheet items are multiplied by one of several risk adjustment percentages, which range from 0 percent for assets with low credit risk, such as certain U.S. Treasury securities, to 150 percent for assets with relatively high credit risk, such as business loans.

A banking organization’s risk-based capital ratios are obtained by dividing its qualifying capital by its total risk-adjusted assets. The regulators measure risk-adjusted assets, which include off-balance-sheet items, against both total qualifying capital, Common Equity Tier 1 capital, and Tier 1 capital.

●

“Common Equity Tier 1 Capital” includes common equity and minority interest in equity accounts of consolidated subsidiaries, less goodwill and other intangibles, subject to certain exceptions, and retained earnings.

●

“Tier 1,” or core capital, includes common equity, non-cumulative preferred stock and minority interest in equity accounts of consolidated subsidiaries, less goodwill and other intangibles, subject to certain exceptions.

●

“Tier 2,” or supplementary capital, includes, among other things, limited life preferred stock, hybrid capital instruments, mandatory convertible securities, qualifying subordinated debt, and the allowance for credit losses, subject to certain limitations and less restricted deductions. The inclusion of elements of Tier 2 capital is subject to certain other requirements and limitations of the federal banking agencies.

Current rules, which implemented the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act, call for the following capital requirements:

●

A minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5 percent;

●

A minimum ratio of tier 1 capital to risk-weighted assets of 6.0 percent;

●

A minimum ratio of total capital to risk-weighted assets of 8.0 percent; and

●

A minimum leverage ratio of 4.0 percent.

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The FRB applies consolidated capital requirements to bank holding companies that are no less stringent than those currently applied to depository institutions.

The Company and the Bank’s actual capital ratios at December 31, 2025, and the minimum ratios required for capital adequacy purposes and to be well capitalized under the prompt corrective action provisions are as follows:


	December 31, 2025
									Minimum to be Well
									Capitalized under
					Minimum For Capital				Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions
(Dollars in thousands, except percents)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Common equity Tier 1 capital to risk-weighted assets:
Company	$	440,852	11.03	%	$	179,784	4.50	%		NA	NA
Bank		520,587	13.06			179,427	4.50		$	259,172	6.50	%
Tier 1 capital to risk-weighted assets:
Company		450,852	11.28			239,712	6.00			NA	NA
Bank		520,587	13.06			239,236	6.00			318,981	8.00
Total capital to risk-weighted assets:
Company		571,887	14.31			319,617	8.00			NA	NA
Bank		558,435	14.01			318,981	8.00			398,726	10.00
Tier 1 capital to average assets:
Company		450,852	8.84			204,039	4.00			NA	NA
Bank		520,587	10.22			203,726	4.00			254,658	5.00
NA = not applicable

In addition, the current rules provide for a conservation buffer of 2.5 percent for common equity Tier 1 capital to risk-weighted assets, Tier 1 capital to risk-weighted assets, and total risk-based capital to risk-weighted assets, thereby increasing the required capital ratios for each measure. If a banking organization fails to hold capital above the minimum capital ratios and the capital conservation buffer, it will be subject to certain restrictions on capital distributions and discretionary bonus payments.

Mortgage servicing assets (“MSAs”) and certain deferred tax assets (“DTAs”) are subject to stricter limitations than those applicable to other assets under the capital rules.

Failure to meet applicable capital guidelines could subject a banking organization to a variety of enforcement actions including:

●

limitations on its ability to pay dividends; or

●

the issuance by the applicable regulatory authority of a capital directive to increase capital, and in the case of depository institutions, the termination of deposit insurance by the FDIC, among other measures applicable to undercapitalized institutions.

In addition, future changes in regulations or practices could further reduce the amount of capital recognized for purposes of capital adequacy. Such a change could affect the ability of the Bank to grow and could restrict the amount of profits, if any, available for the payment of dividends to Peoples.

A qualifying community banking organization (defined to have, among other things, total consolidated assets of less than $10 billion) that has made an election to use the community bank leverage ratio framework will be considered to have met the minimum capital requirements, the capital ratio requirements, and any other capital or leverage requirements to which the qualifying community banking organization would be subject, if it has a leverage ratio of greater than 9 percent. In November 2025, the federal banking regulators issued a proposal that would lower the leverage ratio for

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purposes of the community bank leverage ratio framework from 9.0 percent to 8.0 percent. As of December 31, 2025, the Bank has not elected to use the community bank leverage ratio framework.

Interest Rate Risk

Regulatory agencies include, in their evaluations of a bank’s capital adequacy, an assessment of the bank’s interest rate risk exposure. The standards for measuring the adequacy and effectiveness of a banking organization’s interest rate risk management includes a measurement of board of directors and senior management oversight, and a determination of whether a banking organization’s procedures for comprehensive risk management are appropriate to the circumstances of the specific banking organization.

As part of our interest rate management strategy, we utilize interest rate risk models to measure and monitor interest rate risk. Additionally, we use interest rate derivatives to add stability to interest income and interest expense, and to manage exposure to interest rate movements. We employ an independent consultant to provide a quarterly assessment of our interest rate risk. Finally, regulatory agencies, as part of the scope of their periodic examinations, evaluate our interest rate risk.

Community Reinvestment Act (“CRA”)

The Community Reinvestment Act of 1977 is designed to create a system for bank regulatory agencies to evaluate a depository institution’s record in meeting the credit needs of its community, including low and moderate-income neighborhoods. The CRA regulations establish performance-based standards for use in examining for compliance. The Bank had its last CRA compliance examination in 2024 and received a “satisfactory” rating. If the Bank receives a rating from the Federal Reserve of less than “satisfactory” under the CRA, restrictions on operating activities would be imposed and certain new activities could not be undertaken.

Anti-Money Laundering

The USA Patriot Act of 2001 (the “Patriot Act”) contains anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering. The federal Bank Secrecy Act (the “BSA”) also requires financial institutions to, among other things, create a system of controls designed to prevent money laundering and the financing of terrorism, and imposes recordkeeping and reporting requirements. The Patriot Act enhanced regulations under the BSA to facilitate information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering and requires financial institutions to establish anti-money laundering programs. Regulations adopted under the BSA impose on financial institutions customer due diligence requirements, and the federal banking agencies expect that customer due diligence programs will be integrated within a financial institution’s broader BSA and anti-money laundering compliance program. The Office of Foreign Assets Control (“OFAC”), a division of the U.S. Department of the Treasury, is responsible for helping to ensure that domestic entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress.

Deposit Insurance

Each of the Bank’s depository accounts is insured by the FDIC against loss to the depositor to the maximum extent permitted by applicable law, and federal law and regulatory policy impose a number of obligations and restrictions on the Company and the Bank to reduce potential loss exposure to depositors and to the FDIC Deposit Insurance Fund (“DIF”). The basic limit on FDIC deposit insurance coverage is $250,000 per depositor. Under the FDIA, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations as an insured institution, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC, subject to administrative and potential judicial hearing and review processes. The FDIC may also suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance if the institution has no tangible capital. If deposit insurance is terminated, the

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deposits at the institution at the time of termination, less subsequent withdrawals, shall continue to be insured for a period from six months to two years, as determined by the FDIC. Management is aware of no existing circumstances that could result in termination of the Bank’s deposit insurance.

The DIF is funded by assessments on banks and other depository institutions calculated based on average consolidated total assets minus average tangible equity (defined as Tier 1 capital). As required by the Dodd-Frank Act, the FDIC has adopted a large-bank pricing assessment scheme, set a target “designated reserve ratio” (described in more detail below) of 2 percent for the DIF and, in lieu of dividends, provides for a lower assessment rate schedule when the reserve ratio reaches 2 percent and 2.5 percent. An institution's assessment rate is based on a statistical analysis of financial ratios that estimates the likelihood of failure over a three-year period, which considers the institution’s weighted average CAMELS composite rating, and is subject to further adjustments including those related to levels of unsecured debt and brokered deposits. At December 31, 2025, total base assessment rates for institutions that have been insured for at least five years range from 2.5 to 32 basis points applying to banks with less than $10 billion in assets.

Incentive Compensation

The Dodd-Frank Act requires the federal banking agencies and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities with at least $1 billion in total consolidated assets, that encourage inappropriate risks by providing an executive officer, employee, director, or principal stockholder with excessive compensation, fees, or benefits that could lead to material financial loss to the entity.

In 2016, the SEC and the federal banking regulators proposed rules to prohibit covered financial institutions (including bank holding companies and banks) from, among other things, establishing or maintaining incentive-based compensation arrangements that encourage inappropriate risk taking by providing covered persons (consisting of senior executive officers and significant risk takers, as defined in the rules) with excessive compensation, fees or benefits that could lead to material financial loss to the financial institution. In May 2024, the FDIC and three other federal bank regulatory agencies re-proposed the regulatory text of the 2016 proposed rules and requested comment on specific alternatives, given the passage of time since the 2016 proposed rule was issued, as well as additional supervisory experience, changes in industry practice, and other developments. The SEC and the Federal Reserve did not join in such re-proposal. This proposed rulemaking was not yet adopted by all agencies and has not been published in the Federal Register. In March 2025, the FDIC announced that it was withdrawing the authority previously approved by the FDIC board of directors to publish a proposed rule on incentive-based compensation arrangements.

Limits on Interstate Acquisitions and Mergers

Bank holding companies are precluded from engaging in an interstate acquisition–the acquisition of a bank outside its home state–unless the bank holding company is both well capitalized and well managed. Furthermore, a bank may not engage in an interstate merger with another bank headquartered in another state unless the surviving institution is well capitalized and well managed.

Limits on Interchange Fees

The Electronic Fund Transfer Act, among other things, gives the Federal Reserve the authority to establish rules regarding the interchange, or “swipe”, fees, that a card issuer may receive or change with respect to an electronic debit transaction to ensure that interchange transactions fees are reasonable and proportional to the cost incurred by card issuers. Issuers with less than $10 billion in assets, like the Bank, are exempt from debit card interchange fee standards.

Consumer Protection

The Bank is subject to a number of federal and state consumer protection laws that extensively govern its relationship with its customers. These laws include, but are not limited to, the Truth-in-Lending Act (“TILA”), the Real Estate Settlement Procedures Act (“RESPA”), the Electronic Funds Transfer Act, the Equal Credit Opportunity Act (“ECOA”), the Home Ownership and Equity Protection Act (‘HOEPA”), the Fair Credit and Reporting Act, the Fair Debt Collection Practices Act and the Home Mortgage Disclosure Act (“HMDA”), and their respective state law counterparts. If we fail

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to comply with these laws and regulations, we may be subject to various penalties or enforcement actions. Failure to comply with consumer protection requirements may also result in delays in obtaining or failure to obtain any required bank regulatory approval for proposed merger or acquisition transactions.

The Consumer Financial Protection Bureau (“CFPB”) has broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws. The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets. Smaller institutions are subject to rules promulgated by the CFPB but continue to be examined and supervised by federal banking regulators for consumer compliance purposes. The CFPB has authority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial products. The CFPB establishes certain minimum standards for the origination of residential mortgages including a determination of the borrower’s ability to repay. However, the current leadership of the CFPB has indicated intentions to rescind or revise many regulations, as well as to narrow its enforcement and supervision. We cannot currently predict the nature and timing of future developments that may potentially impact CFPB rules, proposals, enforcement and supervision.

Mortgage Banking Regulations

In connection with making mortgage loans, the Bank is subject to rules and regulations that, among other things, establish standards for loan origination, prohibit discrimination, provide for inspections and appraisals of property, require credit reports on prospective borrowers, in some cases restrict certain loan features and fix maximum interest rates and fees, require the disclosure of certain basic information to mortgagors concerning credit and settlement costs, limit payment for settlement services to the reasonable value of the services rendered and require the maintenance and disclosure of information regarding the disposition of mortgage applications based on race, gender, geographical distribution and income level. The Bank’s mortgage origination activities are subject to the ECOA, HMDA, RESPA, and HOEPA, and the regulations promulgated under these acts, among other additional state and federal laws, regulations and rules.

Mortgage origination activities are also subject to Regulation Z, which implements the federal TILA. Certain provisions of Regulation Z require mortgage lenders to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms. Mortgage lenders are required to determine consumers’ ability to repay.

Alternatively, the mortgage lender can originate “qualified mortgages,” which are entitled to a presumption that the creditor making the loan satisfied the ability-to-repay requirements. In general, a “qualified mortgage” is a mortgage loan without negative amortization, interest-only payments, balloon payments, or terms exceeding 30 years. In addition, to be considered a qualified mortgage, the points and fees paid by a consumer cannot exceed 3 percent of the total loan amount. Loans which meet these criteria will be considered qualified mortgages, and as a result generally protect lenders from fines or litigation in the event of foreclosure. Qualified mortgages that are “higher-priced” (e.g. subprime loans) garner a rebuttable presumption of compliance with the ability-to-repay rules, while qualified mortgages that are not “higher-priced” (e.g. prime loans) are given a safe harbor of compliance.

Real Estate Lending Standards and Guidance

The federal regulatory agencies have adopted regulations setting forth standards for extensions of credit that are secured by real estate. Under these regulations, the Bank must adopt and maintain written policies establishing appropriate limits and standards for extensions of credit that are secured by real estate. These policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures and documentation, approval and reporting requirements.

The federal regulatory agencies have also jointly issued guidance on “Concentrations in Commercial Real Estate Lending,” which defines CRE loans as exposures secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income or the proceeds of the sale, refinancing, or permanent financing of the property. The guidance requires that appropriate processes be in place to identify, monitor and control

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risks associated with real estate lending concentrations. If a concentration is present, management must employ heightened risk management practices that address key elements, including board and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of increased capital levels as needed to support the level of CRE lending. The guidance states that the following metrics may indicate a concentration of CRE loans, but that these metrics are neither limits nor a safe harbor: (1) total reported loans for construction, land development, and other land represent 100% or more of total risk-based capital; or (2) total reported loans secured by multi-family properties, nonfarm non-residential properties (excluding those that are owner-occupied), and loans for construction, land development, and other land represent 300% or more of total risk-based capital and the bank’s CRE loan portfolio has increased 50% or more during the prior 36 months.

Federal Home Loan Bank of Pittsburgh (“FHLB”)

The Bank is a member of the Pittsburgh FHLB, which is one of eleven regional FHLBs that provide funding to their members for making housing loans as well as for affordable housing and community development loans. Each FHLB serves as a reserve, or central bank, for the members within its assigned region. Each FHLB makes loans to members in accordance with policies and procedures established by the Board of Directors of the FHLB. Each member bank must purchase and maintain stock in the FHLB.

Brokered Deposits

Section 29 of the Federal Deposit Insurance Act and FDIC regulations generally limit the ability of any bank to accept, renew or roll over any brokered deposit unless it is “well capitalized” or, with the FDIC’s approval, “adequately capitalized.” In December 2020, the FDIC issued rules establishing a new framework for certain provisions of the “deposit broker” definition and amended the FDIC’s interest rate methodology calculating rates and rate caps. The rules became effective on April 1, 2021, and, to date, there has been no material impact to either the Company or the Bank from the rules.

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Confidentiality and Customer Information

We are subject to various laws and regulations that address the privacy of nonpublic personal financial information of consumers. The Gramm-Leach-Bliley Act and certain regulations issued thereunder protect against the transfer and use by financial institutions of consumer nonpublic personal information. A financial institution must provide to its customers, at the beginning of the customer relationship and annually thereafter, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal financial information. These privacy provisions generally prohibit a financial institution from providing a customer’s personal financial information to unaffiliated third parties unless the institution discloses to the customer that the information may be so provided and the customer is given the opportunity to opt out of such disclosure. Certain exceptions may apply to the requirement to deliver an annual privacy notice based on how a financial institution limits sharing of nonpublic personal information and whether the institution’s disclosure practices or policies have changed in certain ways since the last privacy notice that was delivered.

Cybersecurity

The federal banking regulators have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of a financial institution’s board of directors. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial products and services. The federal banking agencies expect financial institutions to establish lines of defense and ensure that their risk management processes also address the risk posed by compromised customer credentials and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and maintenance of the institution’s operations after a cybersecurity incident. In addition, all federal and state banking regulators continue to increase focus on cybersecurity programs and risks as part of regular supervisory exams.

Federal rules require a banking organization to notify their primary federal regulator of any significant computer-security incident as soon as possible and no later than 36 hours after the banking organization determines that a computer-security incident may pose a threat to the stability of the U.S. financial system. Notification is required for incidents that have materially affected—or are reasonably likely to materially affect—the viability of a banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. In addition, the rule requires a bank service provider to notify affected customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect its customers for four or more hours.

Rulemaking is also ongoing for the Cyber Incident Reporting for Critical Infrastructure Act (“CIRCIA”), adopted in 2022, that will require, among other things, covered entities to report significant cyber incidents, including ransomware attacks, to the Cybersecurity and Infrastructure Security Agency (“CISA”) within 72 hours from the time the covered entity reasonably believes the incident occurred (and within 24 hours of making a ransom payment as a result of a ransomware attack). On February 13, 2026, CISA announced a series of town hall meetings to allow external stakeholders a limited opportunity to provide input on the scope and burden of the proposed rulemaking. Final rules under CIRCIA are expected to be completed in 2026.

In addition, laws in all 50 U.S. states require businesses to provide notice under certain circumstances to individuals whose personal information has been disclosed because of a data breach. Moreover, Congress has considered, and is currently considering, various proposals for more comprehensive data privacy and cybersecurity legislation, to which the Company and/or the Bank may be subject if passed.

For more information on our cybersecurity practices, see Item 1C. “Cybersecurity.”

Future Legislation

Proposed legislation is introduced in almost every legislative session that would affect the regulation of the banking industry. We cannot predict if any such legislation will be adopted or if adopted how it would affect our business. History has demonstrated that new legislation or change to existing laws or regulations usually results in greater

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compliance burden and therefore generally increases the cost of doing business. In addition to laws and regulations, regulatory agencies may issue policy statements, interpretive letters, and similar written guidance applicable to us. A change in applicable laws, regulations or regulatory guidance, in the manner in which laws, regulations and regulatory guidance are interpreted by regulatory agencies or courts, or in the supervisory environment generally, may have a material impact on our business, operations and earnings.

Availability of Securities Filings

The Company is subject to the periodic and other reporting requirements of the Exchange Act, including the filing of annual, quarterly, and other reports, and amendments to those reports, with the SEC. The SEC maintains an internet site that contains reports, proxy and information statements, and other information that we file electronically with the SEC, which is available at http://www.sec.gov. We also maintain an internet website at www.psbt.com, where we make available free of charge through the “Investor Relations” link on our internet website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our internet website and the information contained therein are not incorporated into this Form 10-K. In addition, copies of our annual report will be made available, free of charge, upon written request.

Item 1A.

Risk Factors.

In addition to the other information set forth in this report, one should carefully consider the factors discussed below, which could materially affect our business, financial condition or future results. The risks described below are not the only risks that we face but are designed to highlight what we believe are the material factors to consider when evaluating our business and expectations. References to past events and risks are provided as examples only and are not intended to be a complete listing or representation as to whether any such risk factor presented has occurred in the past or likelihood of it occurring in the future. Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may materially adversely affect our business, financial condition and/or operating results.

Risks Related to Interest Rates

Changes in interest rates could adversely impact our financial condition and results of operations.

The Company’s profitability depends to a large extent on its net interest income, which is the difference between the interest income paid on its loans and investments and the interest the Company pays to third parties such as its depositors, lenders and debtholders. Consequently, changes in interest rates impact profits and the fair values of certain assets and liabilities. Models that the Company uses to forecast and plan for the impact of rising and falling interest rates may fail to consider the impact of competition and other conditions affecting loans, deposits and cash flow assumptions. Volatility in interest rates affects the Company’s earnings, and depending on the extent of such volatility, the Company’s operating results and financial position could be materially impacted.

Interest rate increases often result in larger payment requirements for our borrowers, which increase the risk of potential default. At the same time, the marketability of collateral securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. In late 2024, the policy of the Federal Open Market Committee (“FOMC”) shifted and the FOMC began lowering rates. The Federal Funds target rate generally remained stable for the first eight months of 2025 and then the FOMC resumed its accommodative posture by reducing rates and bringing the Federal Funds target rate down to a range of 3.50% to 3.75% as of December 31, 2025. Contrarily, a declining interest rate environment may result in an increase in prepayments on loans as borrowers refinance their loans at lower rates. Under these circumstances, we are subject to reinvestment risk as we may have to redeploy such repayment proceeds into lower-yielding loans or investments, which could have a negative impact on our earnings. As of the date of this report, it is unclear whether interest rates will continue to decline in 2026.

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Increases in interest rates and economic conditions affecting consumer demand for housing can have a material impact on the volume of mortgage originations and refinancing, adversely affecting the profitability of the mortgage banking business. Interest rate risk can also result from variances between the dollar amounts of repricing or maturing assets and liabilities and from variances in the timing and rates at which the assets and liabilities reprice. The Company actively monitors and manages the balances of maturing and repricing assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurance that the Company will be able to avoid material adverse effects on net interest margin. Rising interest rates in prior periods have increased interest expense, with a commensurate negative effect on net interest income, but may not be expected to do so in future periods. In a rising rate environment, competition for cost-effective deposits increases, making it more costly for the Company to fund loan growth. Rapid and unexpected volatility in interest rates creates additional uncertainty and potential for adverse financial effects. Future changes in interest rates may materially adversely affect our financial condition and results of operations.

Changes in interest rates could affect our investment values and impact comprehensive income and stockholders’ equity.

At December 31, 2025, we had approximately $512.6 million of securities available for sale. These securities are carried at fair value on our consolidated balance sheets. Unrealized gains or losses on these securities, that is, the difference between the fair value and the amortized cost of these securities, are reflected in stockholders’ equity, net of deferred taxes. As of December 31, 2025, our available for sale securities had an unrealized loss, net of taxes, of approximately $29.1 million. The fair value of our available for sale securities is subject to change based on prevailing interest rates, which would not affect recorded earnings, but would increase or decrease comprehensive income and stockholders’ equity.

Our results of operations may be materially and adversely affected by impairment charges relating to our investment portfolio.

Numerous factors, including the lack of liquidity for re-sales of certain investment securities, the absence of reliable pricing information for investment securities, adverse changes in the business climate, adverse regulatory actions or unanticipated changes in the competitive environment, could have a negative effect on our investment portfolio in future periods. A security is considered impaired if its fair value is less than its amortized cost basis (excluding fair value hedge accounting adjustments from active portfolio layer method hedges).

Management periodically evaluates investments for impairment and utilizes criteria such as the magnitude of the decline, in addition to the reasons underlying the decline, to determine whether impairment is due to credit losses. If management concludes that it does not intend to sell an impaired security and it is not more likely than not required to sell an impaired security before recovery of its amortized cost basis (except for fair value hedge accounting adjustments from active portfolio layer method hedges), the Company will record the portion of the impairment related to credit losses (if any) in an ACL with an offsetting entry to net income. If an impairment charge is significant enough, it could affect our ability to pay dividends. Significant impairment charges could also negatively impact our regulatory capital ratios and result in us not being classified as “well-capitalized” for regulatory purposes.

Risks Related to Asset Quality

We are subject to credit risk in connection with our lending activities, and our financial condition and results of operations may be negatively impacted by economic conditions and other factors that adversely affect our borrowers.

Lending money is a significant part of the banking business and interest income on our loan portfolio is the principal component of our revenue. Our financial condition and results of operations are affected by the ability of our borrowers to repay their loans in a timely manner. Borrowers, however, do not always repay their loans. The risk of non-payment is assessed through our underwriting and loan review procedures based on several factors including credit risks of a particular borrower, changes in economic conditions, the duration of the loan and in the case of a collateralized loan, uncertainties as to the future value of the collateral and other factors. Despite our efforts, we do and will experience credit losses, and our financial condition and results of operations will be adversely affected. Our loans which were

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between 30- and 89- days delinquent on December 31, 2025, totaled $15.5 million. Our nonperforming assets were approximately $12.1 million on December 31, 2025. Our ACL was approximately $39.0 million on December 31, 2025.

At December 31, 2025, $602.3 million or 14.8 percent, of our loan portfolio consisted of residential mortgage loans and $2.3 billion or 56.9 percent, of our loan portfolio consisted of commercial real estate loans. In addition, $667.9 million or 16.4 percent of our loan portfolio consisted of taxable commercial loans and $202.3 million or 5.0 percent of non-taxable commercial loans. A majority of these loans are made to borrowers or secured by properties located in Eastern Pennsylvania, where our business activities are primarily concentrated. Deterioration in economic conditions in this market area, particularly in the industries on which this geographic area depends, or a general decline in economic conditions has previously adversely affected the quality of our loan portfolio (including the level of nonperforming assets, charge offs and provision for credit losses) and may adversely impact our loan quality in the future, as well as the demand for our products and services, and, accordingly, our results of operations. Future declines in real estate values in the region could also cause some of our mortgage and commercial real estate loans to be inadequately collateralized, which would expose us to a greater risk of loss if we sought to recover on defaulted loans by selling the real estate collateral.

We make commercial and industrial, construction, commercial real estate and equipment financing loans, which present greater risks than other types of loans.

As of December 31, 2025, approximately 77.5 percent of our loan portfolio consisted of commercial and industrial, construction, commercial real estate and equipment financing loans. These types of loans are generally viewed as having more risk of default than residential real estate loans or consumer loans. These types of loans are also typically larger than residential real estate loans and consumer loans. Because our loan portfolio contains a significant number of commercial and industrial, construction, and commercial real estate loans some of which have large balances, the deterioration of one or a few of these loans could cause a significant increase in nonperforming loans. An increase in nonperforming loans could result in a net loss of earnings from these loans, an increase in the provision for credit losses, and an increase in loan charge-offs, all of which could have a material adverse effect on our financial condition and results of operations.

Commercial real estate loans totaled $2.3 billion at December 31, 2025, or 56.9 percent of our loan portfolio. The commercial real estate market poses risks of loss to us because of the concentration of commercial real estate loans in our loan portfolio, and the lack of diversity in risk associated with such a concentration. Banking regulators give commercial real estate lending greater scrutiny, and banks with larger commercial real estate loan portfolios are expected by their regulators to implement improved underwriting, internal controls, risk management policies and portfolio stress-testing practices to manage risks associated with commercial real estate lending. If our banking regulators determine that our commercial real estate lending activities are particularly risky and are subject to heightened scrutiny, we may incur significant additional costs or be required to restrict certain of our commercial real estate lending activities. Additional losses or regulatory requirements related to our commercial real estate loan concentration could materially adversely affect our business, financial condition and results of operations.

At December 31, 2025, our portfolio included $169.0 million of equipment financing loans and leases. Our equipment finance activities expose us to a range of risks, including credit, operational, and collateral and/or residual value risks. Credit risk arises from the potential inability of borrowers to meet their payment obligations, which can be influenced by economic conditions, industry-specific downturns, or borrower-specific financial difficulties. Operational risks include the potential for errors in documentation, underwriting, or asset/collateral management processes, which could affect our ability to enforce contracts or recover equipment. Collateral and/or residual value risks stem from fluctuations in the value of financed equipment. The resale market for equipment may be limited, reducing our ability to mitigate losses in the event of default or at the end of lease term.

Our ACL may not be adequate to absorb actual credit losses, and we may be required to make further provisions for credit losses and charge off additional loans in the future, which could materially and adversely affect our business.

We attempt to maintain an ACL which is adequate to absorb losses inherent in our loan portfolio. If our ACL is inadequate, it may have a material adverse effect on our financial condition and results of operations.

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The determination of the ACL involves a high degree of subjectivity and judgment and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require us to increase our ACL. Increases in nonperforming loans have a significant impact on our ACL. Our ACL may not be adequate to absorb actual credit losses. If conditions in our regional real estate markets decline, we could experience increased delinquencies and credit losses, particularly with respect to real estate construction and land acquisition and development loans and one-to-four family residential mortgage loans. Moreover, if the economy slows, the negative impact to our market area could result in higher delinquencies and credit losses. As a result, we will continue to make provisions for credit losses and to charge off additional loans in the future, which could have a material adverse effect on our financial condition and results of operations.

In addition to our internal processes for determining our ACL, bank regulatory agencies periodically review our ACL and may require us to increase the provision for credit losses, to recognize further loan charge-offs, or to take other actions based on judgments that differ from those of our management. If loan charge-offs in future periods exceed the ACL, we will need to increase our ACL. Furthermore, growth in our loan portfolio would generally lead to an increase in the provision for credit losses. Provisions for credit losses will result in a decrease in net income and capital and may have a material adverse effect on our financial condition, and results of operations and cash flows.

Risks Related to Liquidity

Liquidity is essential to our business.

An inability to raise funds through deposits, borrowings, the sale of securities or loans and other sources would have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities or on the terms of which are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally. Although we have historically been able to replace maturing deposits and borrowings as necessary, we might not be able to replace such funds in the future if, among other things, the results of operations or financial condition of our lenders or market conditions were to change for us or our lenders.

Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of the Bank, which could lead to a loss of depositor confidence in turn leading to an increase in deposit withdrawals, particularly among those with uninsured deposits. Furthermore, as we and other banks experienced in 2023, the failure of other financial institutions may cause deposit outflows as customers (i) spread deposits among several different banks to maximize their amount of FDIC insurance, (ii) move deposits to larger banks (who may be considered “too big to fail”), or (iii) remove deposits from the banking system entirely. As of December 31, 2025, approximately 23.1 percent of our deposits were uninsured and uncollateralized. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations.

We rely substantially on deposits obtained from customers in our target markets to provide liquidity and support growth.

Our business strategies are based on access to funding from local customer deposits. Deposit levels may be affected by a number of factors, including interest rates paid by competitors, general interest rate levels, returns available to customers on alternative investments and general economic conditions that affect savings levels and the amount of liquidity in the economy, including government stimulus efforts in response to economic crises. If our deposit levels fall, we could lose a relatively low-cost source of funding and our interest expense would likely increase as we obtain alternative funding to replace lost deposits. If local customer deposits are not sufficient to fund our normal operations and growth, or if we lose a significant portion of our local customer deposits or a significant deposit relationship, we will look to outside sources, such as borrowings from the FHLB, which is a secured funding source, and our liquidity and/or profitability could be adversely impacted. Our ability to access borrowings from the FHLB will depend on the extent to which we can provide collateral to secure FHLB borrowings. We may also look to federal funds purchased and brokered deposits, although the use of brokered deposits may be limited or discouraged by our banking regulators. We may also seek to raise funds through the issuance of shares of our common stock, or other equity or equity-related securities, or debt securities

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including subordinated notes as additional sources of liquidity. If we are unable to access sufficient funding to support our business operations and growth strategies or if we are unable to access such funding on attractive terms, we may not be able to implement our business strategies which may negatively affect our financial performance.

Unrealized Losses in Our Securities Portfolio Could Affect Liquidity.

Changes in market interest rates affect the fair value of our securities. The fair value of our available for sale securities portfolio was below its amortized cost and accordingly was in an unrealized loss position at December 31, 2025. Unrealized losses related to available for sale securities are reflected in accumulated other comprehensive loss in our consolidated balance sheets and reduce the level of our book capital and tangible common equity. However, such unrealized losses do not affect our regulatory capital ratios. We actively monitor our available for sale securities portfolio. At the end of the fourth quarter of 2025, we completed a strategic repositioning of a portion of our available for sale securities portfolio. As part of the repositioning, we sold $78.6 million of lower-yielding, U.S. treasury bonds with a weighted average yield of 1.18% and realized an after-tax loss of approximately $1.8 million. The net proceeds of approximately $76.1 million from the sale were used to purchase higher-yielding investment securities that have been classified as available for sale including $38.2 million of U.S. agency mortgage-backed securities and $37.9 million of tax-exempt municipal bonds. The goal of the repositioning was to improve interest income and not for liquidity purposes. The purchased securities have a weighted average book yield of approximately 4.67%. We expect to recover the after-tax loss recorded on the sale within approximately ten months from the completion of the repositioning.

We will continue to monitor the securities portfolio. We do not currently anticipate the need to realize material losses from the sale of securities for liquidity purposes. Furthermore, we believe it is unlikely that we would be required to sell any such securities before recovery of their amortized cost bases, which may be at maturity. Nonetheless, our access to liquidity sources could be affected by unrealized losses if: (i) securities must be sold at a loss; (ii) tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses; or (iii) bank regulators impose restrictions on us that impact the level of interest rates we may pay on deposits or our ability to access brokered deposits. Additionally, significant unrealized losses could negatively impact market and/or customer perceptions of our company, which could lead to a loss of confidence and an increase in deposit withdrawals, particularly among customers with uninsured deposits.

The liquidity of our holding company depends on payments from the Bank, which are subject to restrictions.

We depend on dividends, distributions and other payments from the Bank to fund dividend payments to our shareholders, if any, and to fund all payments on obligations of our holding company. The Bank is subject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce the flow of funds from the Bank to us. Restrictions or regulatory actions of that kind could impede access to funds that we may need to make payments on our obligations or dividend payments, if any. In addition, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. Holders of our common stock are entitled to receive dividends if and when declared from time to time by our Board of Directors in its sole discretion out of funds legally available for that purpose.

Risks Related to Operations

The requirement to record certain assets and liabilities at fair value may adversely affect our financial results.

We report certain assets, including available for sale investment securities, at fair value. For assets that are reported at fair value we use quoted market prices or valuation models that utilize market data inputs to estimate fair value. Because we record these assets at their estimated fair value, we may incur losses even if the asset in question presents minimal credit risk. The level of interest rates can impact the estimated fair value of investment securities. Disruptions in the capital markets may require us to recognize impairments in future periods with respect to investment securities in our portfolio. The amount and timing of any impairment recognized will depend on the severity and duration of the decline in fair value of our investment securities and our estimation of the anticipated recovery period.

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Changes in the value of goodwill and intangible assets could reduce our earnings.

As of December 31, 2025, goodwill and intangible assets totaled $76.0 million and $27.7 million, respectively. We account for goodwill and other intangible assets in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which, in general, requires that goodwill not be amortized, but rather that it be tested for impairment at least annually at the reporting unit level using a two-step approach. Testing for impairment of goodwill and intangible assets is performed annually, or more frequently if market factors change, and involves the identification of reporting units and the estimation of fair values. The estimation of fair values involves a high degree of judgment and subjectivity in the assumptions used. A significant and sustained decline in the company’s common stock price from changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates or other external factors (such as global pandemics, political instability and conflict, or natural disasters) may necessitate taking charges in the future and could result in an impairment charge at a future date.

We need to continually attract and retain qualified personnel for our operations.

Our ability to provide high-quality customer service and to operate efficiently and profitably is dependent on our ability to attract and retain qualified individuals for key positions within the organization. We rely heavily on our executive officers and employees. The loss of certain executive officers or employees could have an adverse effect on us because, as a community bank, the executive officers and employees typically have more responsibility than would be typical at a larger financial institution with more employees. In addition, due to our size as a community bank, we have fewer management-level and other personnel who are in position to succeed to and assume the responsibilities of certain existing executive officers and employees. If we expand geographically or expand to provide non-banking services, current management may not have the necessary experience for successful operation in these new areas. There is no guarantee that management would be able to meet these new challenges or that we would be able to retain new officers or personnel with the appropriate background and expertise.

Our disclosure controls and procedures and our internal control over financial reporting may not achieve their intended objectives.

We maintain disclosure controls and procedures designed to ensure that we timely report information as specified in the rules and forms of the SEC. We also maintain a system of internal control over financial reporting. These controls may not achieve their intended objectives. Control processes that involve human diligence and compliance, such as our disclosure controls and procedures and internal control over financial reporting, are subject to lapses in judgment and breakdowns resulting from human failures. Controls can also be circumvented by collusion or improper management override. Because of such limitations, there are risks that material misstatements due to error or fraud may not be prevented or detected and that information may not be reported on a timely basis. If our controls are not effective, it could have a material adverse effect on our financial condition, results of operations, and market for our common stock, and could subject us to regulatory scrutiny.

We are subject to losses due to errors, omissions or fraud by our employees, clients, counterparties or other third parties.

We are exposed to many types of operational risk, including the risk of fraud by third parties, customers and employees, clerical recordkeeping errors, and transactional errors. Fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, social engineering, phishing and other dishonest acts. While our procedures are designed to follow customary, industry-specific security precautions and while we provide employees with ongoing training and regular communications and guidance to combat fraud, our efforts might not be successful in mitigating or reducing fraudulent attempts resulting in financial losses, increased litigation risk and reputational harm.

Our business also depends on our employees, as well as third-party service providers, to process a large number of increasingly complex transactions. We could be materially and adversely affected if employees, clients, counterparties, or other third parties caused an operational breakdown or failure, either from human error, fraudulent manipulation, or purposeful damage to any of our operations or systems.

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We are exposed to environmental liabilities with respect to real estate.

We currently operate 40 community banking offices, and own additional real estate. In addition, a significant portion of our loan portfolio is secured by real property. In the course of our business, we may foreclose, accept deeds in lieu of foreclosure, or otherwise acquire real estate, and in doing so could become subject to environmental liabilities with respect to these properties. We may become responsible to a governmental agency or third parties for property damage, personal injury, investigation and clean-up costs incurred by those parties in connection with environmental contamination or may be required to investigate or clean-up hazardous or toxic substances, or chemical releases at a property. The costs associated with environmental investigation or remediation activities could be substantial. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. Although we have policies and procedures to perform an environmental review before acquiring title to any real property, these may not be sufficient to detect all potential environmental hazards. If we were to become subject to significant environmental liabilities, it could materially and adversely affect us.

Our reliance on third-party vendors and service providers exposes us to certain operational, regulatory and reputational risks.

We depend on third-party service providers and vendors, with whom we have substantial and material ongoing business relationships, including for core banking services, credit and debit card services, branch capture services, internet banking services and other services complementary to our banking products. If these third-party relationships were to unexpectedly become impaired or cease, our operations could be interrupted. It may be difficult for us to replace some of our third-party vendors, particularly vendors providing our core banking, credit card and debit card services, in a timely manner and the replacement could be on terms that are less favorable to us. If an interruption were to continue for a significant period of time, or if a new vendor’s terms were less favorable to us, it could have a material adverse effect on our business, financial condition or results of operations. In addition, a third-party’s failure to provide the services we require could threaten our compliance with applicable laws and regulations or cause us to suffer economic and reputational harm that could have a material adverse effect on our business, financial condition or results of operations.

These third-party relationships are subject to demanding regulatory requirements and attention from our bank regulators. Banking regulations require us to perform due diligence concerning our third-party vendors, to monitor ongoing relationships, and to maintain operational control. We expect that our regulators will hold us responsible for deficiencies in any oversight or loss of control of our third-party relationships and in the performance of the parties with which we have these relationships. As a result, if our regulators conclude that we have not exercised adequate oversight and control over our third party vendors or other ongoing third party business relationships or that such third parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation, any of which could have a material adverse effect on our business, financial condition or results of operations.

Demand for the Company’s services is influenced by general economic and consumer trends beyond the Company’s control.

The Company’s business activities and earnings are affected by general business conditions in the United States and in the market area in which the Company operates. There can be no assurance that our business and corresponding financial performance will not be adversely affected by general economic or consumer trends or events. These conditions include short-term and long-term interest rates, inflation, unemployment levels, consumer confidence and spending, fluctuations in both debt and equity capital markets, recession and the strength of the economy in the United States generally and the Company’s market area. A favorable business environment is characterized by, among other factors, economic growth, efficient capital markets, low inflation, low unemployment, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; or increases in inflation or interest rates; or periods of inflation. Unfavorable conditions can be caused by a variety of factors that lead to uncertainty and volatility. Global economic markets have seen extensive volatility over the last several years owing to variety of factors, including high inflation, trade policies and tariffs, volatility in the capital

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markets, the failure of financial institutions, volatility in the housing market, interest and currency rate fluctuations, labor availability, supply chain disruptions, global pandemics and public health crises and the responses thereto, weather catastrophes and geopolitical instability, including shutdowns and threats of shutdowns of the U.S. federal government, growing tensions between the U.S. and other nations, the Russia-Ukraine war, conflict in the Middle East, including the recent U.S. initiative against Iran, and acts of terrorism. These events have created and may continue to create significant disruptions to the global economy, supply chains and financial and labor markets. If such conditions continue, recur or worsen, this may have a material adverse effect on the Company’s business, financial condition and results of operations. Furthermore, such economic conditions have produced downward pressure on share prices and on the availability of credit for financial institutions and corporations while also driving up interest rates, further complicating borrowing and lending activities.

Negative economic and consumer trends, such as those described above, and uncertainty about continued economic improvement could place financial pressure on households and lead consumers and businesses to alter their spending, borrowing and saving behaviors. In addition, events that affect household and/or corporate income could impair the ability of the Company’s borrowers to repay their loans in accordance with their terms and reduce demand for banking products and services.

Strong competition within our market area may limit our growth and profitability.

Competition in the banking and financial services industry is intense. We compete actively with other Pennsylvania, New Jersey and New York financial institutions, many larger than us, as well as with financial and non-financial institutions headquartered elsewhere. Commercial banks, savings banks, online banks, savings and loan associations, credit unions, and money market funds actively compete for deposits and loans. Such institutions, as well as consumer finance, insurance companies and brokerage firms, may be considered competitors with respect to one or more services they render. Many of the institutions with which we compete have substantially greater resources and lending limits and may offer certain services that we do not or cannot provide. Our profitability depends upon our ability to successfully compete in our market area.

Consumers may increasingly decide not to use banks to complete their financial transactions, which could have a material adverse impact on our financial condition and operations.

Technology and other changes are allowing Fin Tech companies and other parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds, general-purpose reloadable prepaid cards, or in other types of assets, including crypto currencies or other digital assets. Consumers can also complete transactions such as paying bills or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits. The loss of these revenue streams and the loss of deposits as a lower cost source of funds could have a material adverse effect on our financial condition and results of operations.

The soundness of other financial services institutions may adversely affect our credit risk.

We rely on other financial services institutions through trading, clearing, counterparty, and other relationships. Our reliance on other financial services institutions exposes us to credit risk in the event of default by these institutions or counterparties. These losses could adversely affect our results of operations and financial condition.

The development and use of Artificial Intelligence (“AI”) presents risks and challenges that may adversely impact our business.

We or our third-party vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI presents several potential risks and challenges to our business. The legal and regulatory environment relating to AI is uncertain and rapidly evolving in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI as well as intellectual property, privacy,

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consumer protection, employment, and other areas of laws impacted by the use of AI. These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance. AI models, particularly generative AI models, may produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful. In addition, the complexity of many AI models makes it difficult to understand why they are generating particular outputs. This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made. Further, we may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we may have limited visibility. Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.

Our financial performance may suffer if our information technology is unable to keep pace with growth or industry developments.

Effective and competitive delivery of our products and services increasingly depends upon information technology resources and processes, both those provided internally as well as those provided through third party vendors. In addition to better serving customers, the effective use of technology increases efficiency and enables us to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services to enhance customer convenience, as well as to create additional efficiencies in our operations. Many of our competitors have greater resources to invest in technological improvements. Additionally, as technology in the financial services industry changes and evolves, keeping pace becomes increasingly complex and expensive for us. There can be no assurance that we will be able to effectively implement new technology-driven products and services, which could reduce our ability to compete effectively.

A failure in or a breach of our information systems or infrastructure, including as a result of cybersecurity incidents, could disrupt our business, damage our reputation, and could have a material adverse effect on our business, financial condition and results of operations.

In the ordinary course of our business activities, including the ongoing maintenance of deposits, loan and other account relationships for our customers, receiving instructions and effecting transactions for those customers and other users of our products and services, we regularly collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and others. In addition to confidential information regarding our customers, employees and others, we, and in some cases a third party, compile, process, transmit and store proprietary, non-public information concerning our business, operations, plans and strategies.

Information security risks have significantly increased in recent years, and are likely to continue to do so, in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. We rely on digital technologies, computer and email systems, software, and networks to conduct secure processing, transmission and storage of confidential information. In addition, to access our products and services, our customers may use devices that are beyond our control systems. Our technologies, systems, and networks (including such third-party information technology platforms on which our business depends) and our customers’ devices have been subject to, and are likely to continue to be the target of, cybersecurity threats, computer viruses, malicious code, phishing attacks or information security breaches that could result in the unauthorized use, loss or destruction of our or our customers’ or third parties’ confidential information, or otherwise disrupt our or our customers’ or other third parties’ business operations.

In addition to cybersecurity incidents or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against large financial institutions, particularly denial of service attacks,

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that are designed to disrupt key business services, such as customer-facing web sites. We cannot anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources.

Although we use a variety of physical, procedural and technological safeguards to protect confidential information from mishandling, misuse or loss, these safeguards cannot provide assurance that mishandling, misuse or loss of the information will not occur, and that if mishandling, misuse or loss of the information did occur, those events will be promptly detected and addressed. A failure in or breach of our operational or information security systems, or those of a third-party service provider, because of cybersecurity incidents or information security breaches or otherwise could have a material adverse effect on our business, damage our reputation, increase our costs and/or cause significant losses. Furthermore, because some of our employees work remotely from their homes, there is an increased risk of disruption to our operations because our employees’ residential networks and infrastructure may not be as secure as our office environment. As information security risks and cyber threats continue to evolve, we will be required to expend substantial resources to further enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.

If information security is breached, despite the controls we and our third-party vendors have instituted, information can be lost or misappropriated, resulting in financial loss or costs to us or damages to others. These costs or losses could materially exceed the amount of insurance coverage, if any, which would adversely affect our earnings. In addition, our reputation could be damaged which could result in loss of customers, greater difficulty in attracting new customers, or an adverse effect on the value of our common stock.

Risks Related to Government Regulation

We operate in a highly regulated environment and may be adversely affected by changes in laws and regulations.

We are subject to extensive regulation, supervision and examination by certain state and federal agencies including the FDIC, the Federal Reserve Board and the Pennsylvania Department of Banking and Securities. The regulatory rules and regulations that govern our operations limit the activities in which we may engage or provide restrictions or prohibitions concerning corporate actions we could take, for example by prohibiting our engagement in certain non-bank activities, limiting our ability to pay dividends, and mandating that we maintain certain capital ratios. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on operations, the classification of assets and determination of the level of the ACL. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on us and our operations. There also are several federal and state statutes which regulate the obligation and liabilities of financial institutions pertaining to environmental issues. In addition to the potential for attachment of liability resulting from our own actions, we may be held liable under certain circumstances for the actions of our borrowers, or third parties, for environmental problems on properties that collateralize loans held by us. Further, the liability has the potential to far exceed the original amount of a loan.

Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies.

The policies of the Federal Reserve affect us significantly. The Federal Reserve regulates the supply of money and credit in the U.S. Its policies directly and indirectly influence the rate of interest earned on loans and paid on borrowings and interest-bearing deposits and can also affect the value of financial instruments we hold. Those policies determine to a significant extent our cost of funds for lending and investing. Changes in those policies are beyond our control and are difficult to predict. Federal Reserve policies can also affect our borrowers, potentially increasing the risk that they may fail to repay their loans. For example, a tightening of the money supply by the Federal Reserve could reduce borrower demand for our products and services or adversely affect the borrower’s earnings and ability to repay a loan, which could have an adverse effect on our financial condition and results of operations. Alternatively, an expansion of the money supply could make it easier for a borrower to obtain a loan from another financial institution at a lower interest rate, resulting in a payoff of that borrower’s higher rate loan with us, and which could have an adverse effect on our financial condition and results of operations.

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The regulations issued by the CFPB have increased and may continue to increase our costs of operations.

The CFPB has broad powers to supervise and enforce consumer protection laws and broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. Although the CFPB has jurisdiction over banks with $10 billion or greater in assets, rules, regulations and policies issued by the CFPB may also apply to the Company or its subsidiaries by virtue of the adoption of policies and practices by the Federal Reserve and the FDIC. Further, the CFPB may include its own examiners in regulatory examinations by the Company’s primary regulators. The limitations and restrictions imposed by the CFPB may produce significant material effects on our business, financial condition and results of operations. There is ongoing uncertainty as to the CFPB’s regulations and approach to enforcement and supervision, although the current leadership of the CFPB has indicated intentions to rescind or revise many regulations, as well as to narrow its enforcement and supervision. Federal law permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits state attorneys general to enforce compliance with both the state and federal laws and regulations.

Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.

We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these laws. For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on our ability to share nonpublic personal information about our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions) and (iii) requires that we develop, implement and maintain a written comprehensive information security program containing safeguards appropriate based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches. Various state and federal banking regulators and states have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach. Moreover, legislators and regulators in the United States may adopt or revise privacy, information security and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee information, and some of our current or planned business activities. This could also increase our costs of compliance and business operations and could reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal level, by the Federal Trade Commission, as well as at the state level.

Compliance with current or future privacy, data protection and information security laws (including those regarding security breach notification) affecting customer or employee data to which we are subject could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial conditions or results of operations. Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions, increased insurance cost and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations.

Our ability to make opportunistic acquisitions is subject to significant risks, including the risk that regulators will not provide the requisite approvals.

We may make opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses from time to time that we expect may further our business strategy. Any acquisition will be subject to regulatory approval, and there can be no assurance that we will be able to obtain such approval in a timely manner or at all. Even if we obtain regulatory approval, these acquisitions could involve numerous risks, including lower than expected performance or higher than expected costs, difficulties related to integration, diversion of management’s attention from other business activities, changes in relationships with customers, and the potential loss of key employees. In addition, we may not be successful in identifying acquisition candidates, integrating acquired institutions, or

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preventing deposit erosion or loan quality deterioration at acquired institutions. Competition for acquisitions can be highly competitive, and we may not be able to acquire other institutions on attractive terms. There can be no assurance that we will be successful in completing or will even pursue future acquisitions, or if such transactions are completed, that we will be successful in integrating acquired businesses into operations. Our ability to grow may be limited if we choose not to pursue or are unable to successfully make acquisitions in the future.

Acquisitions by us that use our stock as consideration would dilute our existing shareholders’ ownership and may cause us to become more susceptible to adverse market events. While there is no assurance that such transactions will occur, or that they will occur on terms favorable to us, future business acquisitions could be material to us, and the degree of success achieved in acquiring and integrating these businesses could have a material effect on the value of our common stock. In addition, these acquisitions could require us to expend substantial cash or other liquid assets or to incur debt, which could cause us to become more susceptible to economic downturns and competitive pressures.

Risks Related to Our Common Stock

Our ability to pay dividends or repurchase shares is subject to limitations.

Our ability to pay dividends on or repurchase shares of our stock depends upon our receipt of dividends from the Bank. Additionally, our ability to pay dividends is limited by Pennsylvania corporate law and by federal banking regulations. Under Pennsylvania law, we may not pay a dividend if, after payment, we could not pay our debts as they become due in the usual course of business or our total assets would be less than our total liabilities. The Federal Reserve Board has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve Board’s view that a bank holding company should pay cash dividends only to the extent that the company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the company’s capital needs, asset quality and overall financial condition.

As a state-chartered bank, the Bank is subject to regulatory restrictions on the payment and amounts of dividends under the Pennsylvania Banking Code. Further, the Bank’s ability to pay dividends is also subject to its profitability, financial condition, capital expenditures and other cash flow requirements. Under federal law and FDIC regulations, an insured bank may not pay dividends if doing so would make it undercapitalized within the meaning of the prompt corrective action law or if in default of its deposit insurance fund assessment. There is no assurance that the Bank will be able to pay dividends. Our failure to pay dividends could have a material adverse effect on the market price of our common stock.

Future issuances of our common stock could adversely affect the market price of our common stock and could be dilutive.

We may issue additional shares of common stock or securities that are convertible into or exchangeable for, or that represent the right to receive, shares of our common stock. Issuances of a substantial number of shares of our common stock, or the expectation that such issuances might occur, including in connection with acquisitions, could materially adversely affect the market price of the shares of our common stock and could be dilutive to shareholders. Any decision we make to issue common stock in the future will depend on market conditions and other factors, and we cannot predict or estimate the amount, timing, or nature of possible future issuances of our common stock. Accordingly, our shareholders bear the risk that future issuances of our securities will reduce the market price of the common stock and dilute their stock holdings in the Company.

Our governing documents and Pennsylvania law contain provisions which may reduce the likelihood of a change in control transaction that may otherwise be available and attractive to shareholders.

Our articles of incorporation and bylaws contain certain anti-takeover provisions that may make it more difficult or expensive or may discourage a tender offer, change in control or takeover attempt that is opposed by our Board of Directors. In particular, the articles of incorporation and bylaws: classify our Board of Directors into three groups, so that shareholders elect only approximately one-third of the board each year; require our shareholders to give us advance notice to nominate candidates for election to the Board of Directors or to make shareholder proposals at a shareholders’

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meeting; and require the affirmative vote of the holders of at least 75 percent of our common stock to approve amendments to our bylaws or to approve certain business combinations that have not received the support of two-thirds of our Board of Directors. These provisions of our articles of incorporation and bylaws could discourage potential acquisition proposals and could delay or prevent a change in control, even though a majority of our shareholders may consider such proposals desirable. Such provisions could also make it more difficult for third parties to remove and replace the members of our Board of Directors. Moreover, these provisions could diminish the opportunities for shareholders to participate in certain tender offers, including tender offers at prices above the then-current market value of our common stock, and may also inhibit increases in the trading price of our common stock that could result from takeover attempts or speculation.

In addition, anti-takeover provisions in Pennsylvania law could make it more difficult for a third party to acquire control of us. These provisions could adversely affect the market price of our common stock and could reduce the amount that shareholders might receive if we are sold. For example, Pennsylvania law may restrict a third party’s ability to obtain control of Peoples and may prevent shareholders from receiving a premium for their shares of our common stock. Pennsylvania law also provides that our shareholders are not entitled by statute to propose amendments to our articles of incorporation.

Item 1B.

Unresolved Staff Comments.

None.

Item 1C.

Cybersecurity.

Cybersecurity Risk Management and Strategy

The current threat environment from phishing emails to cyber-attacks has created an urgent need for increased awareness on cyber and information security. Peoples and the Bank take a risk-based approach to managing these threats. The Bank’s leadership team and its Board of Directors engage in the management of this risk by participating in the information security and cybersecurity strategy and review process.

Cyber and information security programs are designed around industry best practices. Compliance with these best practices along with federal and state regulatory requirements are examined annually by the Department of Banking and the FDIC and we regularly engage third-party external auditors and consultants to assess our compliance.

Our cyber defense strategy includes continuous monitoring, integrated risk assessment, identification of vulnerabilities and human risk factors, and employee awareness. Cybersecurity exercises with other financial services companies and government agencies help prepare the Bank for cybersecurity threats and incidents. Incident response scenarios and business continuity exercises test the organizations preparedness for disaster events. The organization also utilizes several national and global third-party advisors to ensure the appropriateness of the Bank’s security posture, effective operation of the cybersecurity discipline and proper assessment of risk.

Third-Party Risk Management

The Bank has an established third-party information security risk management program that reviews and assesses third parties prior to engagement and throughout the third-party relationship. This program requires periodic risk assessments to be conducted throughout the term of the engagement. Third parties and their employees are required to adhere to

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information security standards and best practices. The Bank includes in its contracts with third parties that third parties maintain confidentiality, security provisions and business continuity practices.

Education and Awareness

Bank employees are required to complete training on customer information protection at least annually. They receive monthly training and testing on phishing emails and other timely information security topics. They are also required to abide by the Bank’s Code of Business Conduct and Ethics Policy. Annual review and acknowledgement of the employee’s information security responsibilities are required. Information security tips are provided on the Bank’s website for all customers to review. We provide additional information security advantages to our customers using our online banking systems and encourage the Bank’s digitally active business customers to take advantage of the cybersecurity and phishing training provided free of charge by the Bank.

Material Effects of Cybersecurity Threats

While cybersecurity risks have the potential to materially affect the Company's business, financial condition, and results of operations, the Company does not believe that risks from cybersecurity threats or attacks have, to date, materially affected the Company, including its business strategy, results of operations or financial condition. However, the sophistication of cybersecurity threats continues to increase, and the Company’s cybersecurity risk management and strategy may be insufficient or may not be successful in protecting against all cybersecurity incidents. Accordingly, no matter how well designed or implemented the Company’s controls are, it will not be able to anticipate all cybersecurity breaches, and it may not be able to implement effective preventive measures against such security breaches in a timely manner. For more information on how cybersecurity risk may materially affect the Company’s business strategy, results of operations or financial condition, please refer to Item 1A Risk Factors.

Cybersecurity Governance

Board of Director Oversight

Our Board of Directors has ultimate oversight of cybersecurity risk. The Board of Directors is assisted by the Information Technology Committee of the Bank’s Board of Directors (“IT Committee”) which regularly provides reports to the Board of Directors. The IT Committee is comprised of members with experience in managing cybersecurity risks. The IT Committee receives regular updates on cybersecurity risks and incidents and the cybersecurity program through direct interaction with the Chief Information Officer (“CIO”), and the Chief Risk Officer (“CRO”) through quarterly meetings. Cybersecurity reviews are completed at least twice annually and provided to the Board of Directors Audit Committee. Additionally, awareness and training on cybersecurity topics is provided to the whole Board on an annual basis.

Management’s Role

The CRO and the CIO along with the Information Security Officer are responsible for implementing and maintaining the Company's cybersecurity risk management program. The Information Security Department is led by the Information Security Officer, who reports directly to the CRO. The Chief Risk Officer and the Chief Information Officer report directly to the IT Committee and the Board. The Company’s CIO has over 30 years of experience in technology and cybersecurity, which includes 26 years in the financial services industry. The Information Security Officer has over 20 years in the financial services industry with the last 16 years as a Risk Analyst and then Information Security.

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The Company’s Information Security department measures and reports on the quality of information and cyber risk management across all functions. Information security risk is reported by both the Information Security and Enterprise Risk departments through monthly management metric reporting working groups and multiple layers of quarterly risk committees to achieve an appropriate flow of information risk reporting to the Board. The risk committees include the Executive Risk Management Committee, the Management Information Technology Steering Committee and the IT Committee. In addition, we have an escalation process in place to inform senior management and the Board of Directors of any material cybersecurity issues.

Item 2.

Properties.

Our corporate headquarters is located at 30 E D Preate Drive Moosic, Pennsylvania, which houses executive offices, human resources and investor services divisions as well as other administrative and operational teams. An additional operations division is located at 82 Franklin Avenue, Hallstead, Pennsylvania.

We operate forty full-service community banking offices located within the Allegheny, Bucks, Lackawanna, Lancaster, Lebanon, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Susquehanna and Wyoming Counties of Pennsylvania, Middlesex County of New Jersey and Broome County of New York. Sixteen offices are leased and the balance are owned by the Bank.

We lease several remote ATM locations throughout our market area. Our community banking offices and ATM locations are monitored through a variety of means including cameras, alarms, and other monitoring and anti-tampering solutions.

We consider our properties to be suitable and adequate for our current and immediate future purposes.

Item 3.

Legal Proceedings.

Neither the Company nor any of its property is subject to any material legal proceedings. Management, after consultation with legal counsel, does not anticipate that the ultimate liability, if any, arising out of pending and threatened lawsuits will have a material effect on the operating results or financial position of the Company.

Item 4.

Mine Safety Disclosures.

Not applicable.

Part II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

As of March 2, 2026 there were approximately 9,767 holders of our common stock, $2.00 par value, including individual participants in security position listings. Our common stock trades on The Nasdaq Stock Market under the symbol “PFIS.”

Peoples has paid cash dividends since its incorporation in 1986. It is the present intention of the Board of Directors to continue to pay quarterly cash dividends; however, the payment of future dividends must necessarily depend upon earnings, financial position, appropriate restrictions under applicable laws and other factors relevant at the time our Board of Directors considers any declaration of dividends. The Board declared on January 30, 2026, a first quarter dividend of $0.6250 per share payable March 13, 2026. For information on dividend restrictions on the Company and the Bank, refer to Part I, Item 1 “Supervision and Regulation – Limitations on Dividends and Other Payments” to this report and refer to the consolidated financial statements and notes to these statements filed at Item 8 to this report and incorporated in their entirety by reference under this Item 5.

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During the quarter ended December 31, 2025, we did not issue or sell any shares of our Common Stock or other equity securities pursuant to unregistered transactions in reliance upon an exemption from the registration requirements of the Securities Act.

There were no repurchases of our common stock during the three months ended December 31, 2025.

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The following graph and table show the cumulative total return on the common stock of the Company over the last five years, compared with the cumulative total return of a broad stock market index (the Russell 2000 Index or “Russell 2000”), and the S&P U.S. BMI Banks Index. The cumulative total return on the stock or the index equals the total increase in value since December 31, 2020, assuming reinvestment of all dividends paid into the stock or the index. The graph and table were prepared assuming that $100 was invested on December 31, 2020, in the common stock and the securities included in the indexes.

Comparison of Five-Year Cumulative Total Returns

Performance Graph of

PEOPLES FINANCIAL SERVICES CORP


	Period Ending
Index	12/31/2020	12/31/2021	12/31/2022	12/31/2023	12/31/2024	12/31/2025
Peoples Financial Services Corp.	100.00	148.20	150.37	146.59	161.07	161.09
Russell 2000 Index	100.00	114.82	91.35	106.82	119.14	134.40
S&P U.S. BMI Banks Index	100.00	135.97	112.77	123.02	164.70	211.47

Source: S&P Global Market Intelligence

^©2026

The stock performance graph and related table set forth above shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that such information be treated as soliciting material or specifically incorporates it by reference into a filing under the Securities Act or the Exchange Act.

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Item 6.

Reserved.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis 2025 versus 2024

Management’s Discussion and Analysis appearing on the following pages should be read in conjunction with the Consolidated Financial Statements and Management’s Discussion and Analysis 2024 versus 2023 contained in this Item 7.

Critical Accounting Estimates:

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of consolidated financial statements in conformity with GAAP requires us to establish critical accounting policies and make accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during those reporting periods.

An accounting estimate requires assumptions about uncertain matters that could have a material effect on the consolidated financial statements if a different amount within a range of estimates were used or if estimates changed from period to period. Readers of this report should understand that estimates are made considering facts and circumstances at a point in time, and changes in those facts and circumstances could produce results that differ from when those estimates were made. Management is required to make subjective and/or complex judgments about matters that are inherently uncertain and could be subject to revision as new information becomes available. Critical estimates that are particularly susceptible to material change within future periods relate to the determination of ACL and impairment of goodwill. Actual amounts could differ from those estimates.

ACL

The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. Loans receivable are carried at amortized cost basis, which is comprised of the unpaid principal balance of the loan, unamortized deferred loan origination fees and costs and, if applicable, unamortized acquired premiums or discounts less any write-downs. The measurement of expected credit losses also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The methodology for determining the ACL is considered a critical accounting estimate by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL.

We monitor the adequacy of the allowance quarterly and adjust the allowance as necessary through normal operations. The allowance is established through a provision for credit losses that is charged against income. Management cannot ensure that charge-offs in future periods will not exceed the ACL or that additional increases in the ACL will not be required, resulting in an adverse impact on our financial condition and operating results.

The ACL decreased $2.8 million to $39.0 million at December 31, 2025, from $41.8 million at the end of 2024. During the year ended December 31, 2024, an additional allowance of $14.3 million related to acquired non-PCD loans associated with the merger with FNCB Bancorp, Inc, and updated economic assumptions, additional qualitative factors related to the equipment financing portfolio and risk rating migrations lead to higher model loss rates and a higher provision when excluding the impact of one-time merger items. The ACL is calculated using an advanced probability of default model which exhibits the highest sensitivity to delinquencies, nonperforming loans, net charge-offs, recovery rates and variables within the economic forecast. The economic forecast is based on many of the components utilized within the Dodd-Frank Act stress test (“DFAST”) base-case scenarios.

Also included in the ACL on loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative analysis described above. Qualitative factors that the

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Company considers include changes in lending policies and procedures, changes in management, changes in the quality of the loan review process, the existence of any concentrations of credit and other external factors. In addition to these factors, the Company also considers specialty lending and the unseasoned nature of the portfolio as qualitative factors in evaluating the equipment financing loan segment. Qualitative loss factors are applied to each portfolio segment with the amounts judgmentally determined by the relative risk to the adverse stress credit loss scenarios using regulatory stress testing scenarios.

At December 31, 2025, the pooled portion of the ACL consisted of $15.9 million in quantitative and $21.8 million in qualitative components as compared to $15.5 million and $25.3 million, respectively at December 31, 2024. The portion of the ACL related to loans that were individually evaluated was $1.3 million at December 31, 2025, and $1.0 million at December 31, 2024.

Goodwill

Goodwill is evaluated at least annually for impairment or more frequently if conditions indicate potential impairment exists. Any impairment losses arising from such testing are reported in the income statement in the current period as a separate line item within operations. Goodwill totaled $76.0 million at December 31, 2025. At December 31, 2025, we completed a qualitative goodwill impairment test to determine if it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the Company is less than its carrying value, including goodwill, as described by the GAAP methodology. Based on this analysis, we concluded it is more likely than not that the fair value of the Company, as of December 31, 2025, is higher than its carrying value, and, therefore, goodwill is not considered impaired and no further testing is required. Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such as pandemics, political instability and conflicts, or natural disasters) may occur from time to time, often with great unpredictability, and may materially impact the fair value of publicly traded financial institutions and could result in an impairment charge at a future date.

Review of Financial Position:

Total assets, loans and deposits were $5.3 billion, $4.1 billion and $4.4 billion, respectively, at December 31, 2025.

The loan portfolio consisted of $3.2 billion of business loans, including commercial, equipment financing, and commercial real estate loans, $713.5 million in retail loans, including residential mortgage and consumer loans, and $202.3 million in loans to municipal entities at December 31, 2025. Total investment securities were $587.2 million at December 31, 2025, including $512.6 million of investment securities classified as available for sale, $72.0 million classified as held to maturity, and $2.6 million in equity securities. Total deposits consisted of $954.5 million in noninterest-bearing deposits and $3.5 billion in interest-bearing deposits at December 31, 2025.

Stockholders’ equity equaled $519.8 million, or $52.01 per share, at December 31, 2025, an increase of $50.8 million, or $5.07 per share, from $469.0 million, or $46.94 per share, at December 31, 2024. The increase in equity was primarily due to net income of $59.2 million, coupled with a $16.0 million reduction in accumulated other comprehensive loss. Our equity to asset ratio was 9.86 percent at December 31, 2025, and 9.21 percent at December 31, 2024. Dividends declared for the year ended December 31, 2025, amounted to $2.47 per share representing 41.6 percent of net income and an increase of $0.41 per share, or 19.9 percent from $2.06 per share for the year ended December 31, 2024.

Nonperforming assets equaled $12.1 million or 0.23 percent of total assets at December 31, 2025, compared to $23.0 million or 0.45 percent at December 31, 2024. The ACL equaled $39.0 million or 0.96 percent of loans, net, at December 31, 2025, compared to $41.8 million or 1.05 percent at year-end 2024. Loans charged-off, net of recoveries equaled $2.9 million or 0.07 percent of average loans in 2025, compared to $1.1 million or 0.03 percent of average loans in 2024.

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Investment Portfolio:

Our investment portfolio provides a source of liquidity to meet expected loan demand and generates a reasonable return in order to increase our profitability. Additionally, we use the investment portfolio to meet pledging requirements and reduce income taxes. At December 31, 2025, our portfolio included short-term U.S. Treasury and government agency securities, which provide a source of liquidity; mortgage-backed securities issued by U.S. government-sponsored agencies, private collateralized mortgage obligations, asset backed securities and corporate bonds to provide income and intermediate-term, tax-exempt state and municipal obligations, which mitigate our tax burden.

Our investment portfolio is subject to various risk elements that may negatively impact our liquidity and profitability. The greatest risk element affecting our portfolio is market risk or interest rate risk (“IRR”). Understanding IRR, along with other inherent risks and their potential effects, is essential in effectively managing the investment portfolio.

Market risk or IRR relates to the inverse relationship between bond prices and market yields. It is defined as the risk that increases in general market interest rates will result in market value depreciation. A marked reduction in the value of the investment portfolio could subject us to liquidity strains and reduction in earnings if we are unable or unwilling to sell investments at a loss. Moreover, the inability to liquidate these investments could require us to seek alternative funding, which may further reduce profitability and expose us to greater risk in the future. In addition, since the majority of our investment portfolio is designated as available for sale and carried at estimated fair value, with net unrealized gains and losses reported as a separate component of stockholders’ equity, market value depreciation could negatively impact our capital position.

Our investment portfolio consists primarily of fixed-rate bonds. As a result, changes in the velocity and magnitude of market rates can significantly influence the fair value of our portfolio. Specifically, the parts of the yield curve most closely related to our investments include the 2-year and 10-year U.S. Treasury securities. The yield on the 2-year U.S. Treasury note affects the values of our U.S. Treasury and government agency securities, whereas the 10-year U.S. Treasury note influences the value of tax-exempt and taxable state and municipal obligations.

The net unrealized holding losses included in our available for sale investment portfolio were $29.2 million at December 31, 2025, compared to a loss of $49.0 million at December 31, 2024. We reported net unrealized holding losses, included as a separate component of stockholders’ equity of $22.8 million, net of income taxes of $6.4 million, at December 31, 2025, and an unrealized holding loss of $38.3 million, net of income taxes of $10.7 million, at December 31, 2024.

Increases in interest rates could negatively impact the market value of our investments and our capital position. In order to monitor the potential effects a rise in interest rates could have on the value of our investments, we perform stress test modeling on the portfolio. Stress tests conducted on our portfolio at December 31, 2025, indicated that should general market rates increase immediately by 100, 200 or 300 basis points, we would anticipate declines of 5.3 percent, 10.7 percent and 15.8 percent in the market value of our available for sale portfolio.

Investment securities decreased $19.7 million, to $587.2 million at December 31, 2025, from $606.9 million at December 31, 2024. At December 31, 2025, the investment portfolio consisted of $512.6 million of investment securities classified as available for sale, $2.6 million in equity investments carried at fair value, and $72.0 million classified as held to maturity. Securities purchased during 2025 totaled $168.5 million. In 2024, $421.9 of investments were acquired in our merger with FNCB Bancorp, Inc. Repayments of investment securities totaled $132.9 million in 2025 and $64.7 million in 2024.

We completed a strategic repositioning of a portion of our investment securities portfolio at the end of the fourth quarter of 2025. As part of the repositioning, we sold $78.6 million of lower-yielding, U.S. treasury bonds with a weighted average yield of 1.18% and realized an after-tax loss of approximately $1.8 million. The net proceeds of approximately $76.1 million from the sale were used to purchase higher-yielding investment securities that have been classified as AFS including $38.2 million of U.S. agency mortgage-backed securities and $37.9 million of tax-exempt municipal bonds. The purchased securities have a weighted average book yield of approximately 4.67%. We expect to recover the after-tax loss recorded on the sale within approximately ten months for the completion of the repositioning.

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As a result of the repositioning, U.S. treasury securities represented 5.3 percent of our total portfolio at year end 2025 compared to 27.7 percent at the end of 2024, while U.S. government agency and U.S. government sponsored enterprise residential and commercial mortgage-backed securities increased to 45.5 percent of the portfolio at year-end 2025 compared to 32.6 percent at year-end 2024. Tax-exempt municipal obligations increased as a percentage of the total portfolio to 23.3 percent at year-end 2025 from 12.7 percent at the end of 2024. Taxable municipals remained relatively flat at 10.5 percent at year-end 2025 from 11.4 percent at the end of 2024. The remaining portfolio, which is comprised of a combination of privately collateralized mortgage obligations, asset backed securities, corporate debt securities and negotiable certificates of deposit remained relatively flat at 15.4 percent of the portfolio at December 31, 2025, compared with 15.6 percent at December 31, 2024.

The average life of the investment portfolio increased to 7.5 years at December 31, 2025, from 5.6 years at year end 2024, reflecting the repositioning into municipal securities with longer average lives. Similarly, the effective duration of the investment portfolio increased to 5.3 years at December 31, 2025, from 4.8 years at December 31, 2024.

There were no impairment charges recognized for each of the three years ended December 31, 2025, 2024, and 2023. For additional information related to impairment charges refer to Note 3 entitled “Investment securities” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on form 10-K, which is incorporated in this item by reference.

Investment securities averaged $641.3 million and equaled 13.6 percent of average earning assets in 2025, compared to $617.2 million and 14.8 percent of average earning assets in 2024. The tax-equivalent yield on the investment portfolio increased 72 basis points to 3.15 percent in 2025 from 2.43 percent in 2024. The increase in the tax-equivalent yield is due to runoff of low yielding U.S. treasuries and the addition of higher yielding replacements.

At December 31, 2025, and 2024, there were no securities of any individual issuer, except for U.S. government agency mortgage-backed securities, that exceeded 10.0 percent of stockholders’ equity.

The maturity distribution based on the carrying value and weighted-average, tax-equivalent yield of the investment debt security portfolio at December 31, 2025, is summarized as follows. The weighted-average yield, based on amortized cost, has been computed for tax-exempt state and municipals on a tax-equivalent basis using the prevailing federal statutory tax rate of 21.0 percent. The distributions are based on contractual maturity. Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.


					After one but				After five but
(Dollars in thousands,	Within one year				within five years				within ten years				After ten years				Total
except percents)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
U.S. Treasury securities	$	12,937	1.49	%	$	18,061	1.19	%				%				%		30,998	1.32	%
State and municipals:
Taxable		4,649	3.45			21,260	2.08			27,115	2.23			8,598	2.23			61,622	2.27
Tax-exempt		969	3.26			10,155	1.95			23,266	1.94			101,539	3.93			135,929	3.43
Residential mortgage-backed securities:
U.S. government agencies														54,990	3.97			54,990	3.97
U.S. government-sponsored enterprises		3,978	1.68			1,527	3.21			1,629	2.77			201,890	3.47			209,024	3.43
Commercial mortgage-backed securities:
U.S. government-sponsored enterprises						1,770	3.02											1,770	3.02
Private collateralized mortgage obligations						158	8.31							48,326	5.61			48,484	5.62
Asset backed securities						6	4.66			5,674	5.61			10,587	4.97			16,267	5.19
Corporate debt securities						9,705	8.56			15,089	6.33							24,794	7.20
Negotiable certificates of deposit		732	4.91															732	4.91
Total	$	23,265	2.10	%	$	62,642	2.87	%	$	72,773	3.26	%	$	425,930	3.90	%	$	584,610	3.64	%

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Loan Portfolio:

Economic factors and how they affect loan demand are important to the Company and to the overall banking industry, as lending is a primary business activity. Loans are the most significant component of earning assets and they generate the greatest amount of revenue. Similar to the investment portfolio, there are risks inherent in the loan portfolio that must be understood and considered in managing the lending function. These risks include IRR, credit concentrations and fluctuations in demand. Changes in economic conditions and interest rates affect these risks which influence loan demand, the composition of the loan portfolio and profitability of the lending function.

Overall, total loans increased $73.4 million in 2025 to $4.1 billion at December 31, 2025, from $4.0 billion at December 31, 2024. The loan balances reflected increases in real estate loans, commercial and industrial loans, municipal loans and other consumer loans, partially offset by reductions in indirect automobile loans and equipment financing.

Real estate loans increased $70.9 million to $2.9 billion at December 31, 2025 from $2.8 billion at December 31, 2024. Residential real estate loans increased $50.9 million to $602.3 million at December 31, 2025 from $551.4 million at December 31, 2024, which reflected strong demand for and utilization of home equity lines of credit. Commercial real estate loans increased $20.0 million and were $2.3 billion at both December 31, 2025 and 2024.

Comparing December 31, 2025 and 2024, commercial and industrial loans increased $19.9 million, while municipal loans increased $14.4 million, Equipment financing originated through the Bank’s subsidiary, 1^stEquipment Finance, decreased $10.1 million to $169 thousand at December 31, 2025 from $179.1 million at December 31, 2024, as management tightened underwriting standards and focused on improving asset quality within this product line.

Consumer loans decreased $21.7 million to $111.2 million at December 31, 2025 from $132.9 million at December 31, 2024. The decrease in consumer loans was due to a reduction in demand for indirect automobile loans partially offset by an increase in other consumer loans.

The following table summarizes the Company’s loan portfolio at December 31, 2025, and December 31, 2024.


(Dollars in thousands)		December 31, 2025			December 31, 2024
Commercial and industrial		$	667,948		$	648,102
Municipal			202,303			187,918
Real estate
Commercial			2,314,110			2,294,113
Residential			602,309			551,383
Total			2,916,419			2,845,496
Consumer
Indirect auto			93,742			117,914
Consumer other			17,496			14,955
Total			111,238			132,869
Equipment financing			168,988			179,120
Total		$	4,066,896		$	3,993,505

Loans averaged $4.0 billion in 2025, compared to $3.5 billion in 2024. Taxable loans averaged $3.7 billion, while tax-exempt loans averaged $273.4 million in 2025. The loan portfolio continues to play the prominent role in our earning asset mix. As a percentage of earning assets, average loans equaled 84.9 percent in 2025, an increase from 83.1 percent in 2024.

The tax-equivalent yield on our loan portfolio increased 37 basis points to 5.99 percent in 2025 from 5.62 percent in 2024 due to higher yields on newer loan originations and loans assumed in the FNCB merger which included the impact of the accretion of purchase accounting marks. The yield on the loan portfolio may decrease as repayments on loans are replaced with new originations at current market rates and floating and adjustable-rate loans continue to reprice downward.

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The following table sets forth the contractual maturity of our loan portfolio by major loan category at December 31, 2025. The amounts shown represent outstanding principal balances. Loans having no stated maturity and overdrafts are reported as being due within one year. Balances do not include prepayments or scheduled principal payments.


		Within one			After one but			After five but			After
(Dollars in thousands)		year			within five years			within fifteen years			fifteen years			Total
Maturity schedule:
Commercial and industrial		$	398,907		$	218,860		$	43,879		$	6,302		$	667,948
Municipal			30,392			47,644			44,200			80,067			202,303
Real estate:
Commercial			476,796			1,245,914			505,902			85,498			2,314,110
Residential			127,533			291,247			154,614			28,915			602,309
Consumer			53,665			45,827			10,569			1,177			111,238
Equipment financing			69,336			97,875			646			1,131			168,988
Total		$	1,156,629		$	1,947,367		$	759,810		$	203,090		$	4,066,896

The following table sets forth the outstanding principal balance of loans at December 31, 2025 that have fixed interest rates or that have floating or adjustable interest rates by major loan category.



		Fixed			Floating or
(Dollars in thousands)		Rates			Adjustable Rates			Total
Commercial and industrial	$	215,006		$	452,942		$	667,948
Municipal		175,166			27,137			202,303
Real estate:
Commercial		819,661			1,494,449			2,314,110
Residential		319,222			283,087			602,309
Consumer		106,094			5,144			111,238
Equipment financing		168,988						168,988
Total	$	1,804,137		$	2,262,759		$	4,066,896

As previously mentioned, there are numerous risks inherent in the loan portfolio. We manage the portfolio by employing sound credit policies and utilizing various modeling techniques in order to limit the effects of such risks. In addition, we utilize private mortgage insurance (“PMI”), as well as guaranteed U.S Department of Agriculture, SBA and FHLB loan programs to mitigate credit risk in the loan portfolio.

In an attempt to limit IRR and improve liquidity, we continually examine the maturity distribution and interest rate sensitivity of the loan portfolio. Fixed-rate loans represented 44.4 percent of the loan portfolio at December 31, 2025, compared to floating or adjustable-rate loans at 55.6 percent.

Additionally, our secondary market mortgage banking program provides us with an additional source of liquidity and a means to limit our exposure to IRR. Through this program, we are able to competitively price conforming one-to-four family residential mortgage loans without taking on IRR which would result from retaining these long-term, low fixed-rate loans on our books. The loans originated are subsequently sold in the secondary market, with the sales price locked in at the time of commitment, thereby greatly reducing our exposure to IRR.

Loan concentrations are considered to exist when the total amount of loans to any one borrower, or a multiple number of borrowers engaged in similar business activities or having similar characteristics, exceeds 25.0 percent of capital outstanding in any one category. We provide deposit and loan products and other financial services to individual and corporate customers in our current market area. There are no significant concentrations of credit risk from any individual counterparty or groups of counterparties, except for geographic concentrations in our market area.

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Credit risk is the principal risk associated our outstanding loans, commitments to extend credit, lines of credit and standby letters of credits. Our involvement and exposure to credit loss in the event that the instruments are fully drawn upon and the customer defaults is represented by the contractual amounts of these instruments. In order to control credit risk associated with entering into commitments and issuing letters of credit, we employ the same credit quality and collateral policies in making commitments that we use in other lending activities. We evaluate each customer’s creditworthiness on a case-by-case basis, and if deemed necessary, obtain collateral. The amount and nature of the collateral obtained is based on our credit evaluation.

Asset Quality:

We are committed to developing and maintaining sound quality assets through our credit risk management policies and procedures. Credit risk is the risk to earnings or capital which arises from a borrower’s failure to meet the terms of their loan obligations. We manage credit risk by diversifying the loan portfolio and applying policies and procedures designed to foster sound lending practices. These policies include certain standards that assist lenders in making judgments regarding the character, capacity, cash flow, capital structure and collateral of the borrower.

To manage our exposure to credit risk and protect against general devaluations in real estate values, we have established maximum loan-to-value ratios for commercial mortgage loans not to exceed 80.0 percent of the appraised value. With regard to residential mortgages, customers with loan-to-value ratios in excess of 80.0 percent are generally required to obtain PMI. PMI is used to protect us from loss in the event loan-to-value ratios exceed 80.0 percent and the customer defaults on the loan. Appraisals are performed by an independent appraiser engaged by us, not the customer, who is either state certified or state licensed depending upon collateral type and loan amount.

With respect to lending procedures, lenders and our credit underwriters must determine the borrower’s ability to repay their loans based on prevailing and expected market conditions prior to requesting approval for the loan. The Bank’s Board of Directors establishes and reviews, at least annually, the lending authority for certain senior officers, loan underwriters and branch personnel. Credit approvals beyond the scope of these individual authority levels are forwarded to a loan committee. This committee, comprised of certain members of senior management, review credits to monitor the quality of the loan portfolio through careful analysis of credit applications, adherence to credit policies and the examination of outstanding loans and delinquencies. These procedures assist in the early detection and timely follow-up of problem loans.

Credit risk is also managed by monthly internal reviews of individual credit relationships in our loan portfolio by credit administration and the asset quality committee. These reviews aid us in identifying deteriorating financial conditions of borrowers and allows us the opportunity to assist customers in remedying these situations.

Nonperforming assets consist of nonperforming loans and foreclosed assets. Nonperforming loans include nonaccrual loans and accruing loans past due 90 days or more. For a discussion of our policy regarding nonperforming assets and the recognition of interest income on impaired loans, refer to the notes entitled, “Summary of significant accounting policies — Nonperforming assets,” and “Loans, net and allowance for credit losses” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K which are incorporated in this item by reference.

Information concerning nonperforming assets at December 31, 2025, and 2024 is summarized as follows. The table includes credits classified for regulatory purposes and all material credits that cause us to have serious doubts as to the borrower’s ability to comply with present loan repayment terms.

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(Dollars in thousands, except percents)		December 31, 2025			December 31, 2024
Nonaccrual loans	$	10,796		$	22,499
Accruing loans past due 90 days or more:		524			458
Total nonperforming loans		11,320			22,957
Foreclosed assets		750			27
Total nonperforming assets	$	12,070		$	22,984
Total loans held for investment	$	4,066,896		$	3,993,505
Allowance for credit losses		39,007			41,776
Allowance for credit losses as a percentage of loans held for investment		0.96	%		1.05	%
Allowance for credit losses as a percentage of nonaccrual loans		361.31	%		185.68	%
Allowance for credit losses as a percentage of nonperforming loans		344.58	%		181.97	%
Nonaccrual loans as a percentage of loans held for investment		0.27	%		0.56	%
Nonperforming loans as a percentage of loans, net		0.28	%		0.58	%
Nonperforming assets as a percentage of total assets		0.23	%		0.45	%

We experienced an improvement in our asset quality during 2025 as evidenced by a $10.9 million reduction in nonperforming assets to $12.1 million at December 31, 2025, from $23.0 million at December 31, 2024. Additionally, our nonperforming assets as a percentage of total assets decreased to 0.23 percent at December 31, 2025, from 0.45 percent at December 31, 2024, and our nonperforming loans as a percentage of loans, net decreased to 0.28 percent from 0.58 percent at December 31, 2024. The reduction in nonperforming assets was largely due to an $11.7 million decrease in nonaccrual loans following the resolution of several large commercial credit relationships.

At December 31, 2025, there was one foreclosed asset recorded at $750 thousand compared to one foreclosed property recorded at $27 thousand at December 31, 2024. The property that was outstanding at the end of 2024 was sold during 2025, and the Company acquired one commercial property with a recorded investment of $750 thousand through foreclosure. Loans past due ninety days and accruing increased $66 thousand and includes three residential mortgages and two commercial loans. For a further discussion of assets classified as nonperforming assets and potential problem loans, refer to Note 4, “Loans, net and the allowance for credit losses,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on form 10-K, which is incorporated in this item by reference.

Past due loans not satisfied through repossession, foreclosure or related actions are evaluated individually to determine if all or part of the outstanding balance should be charged against the ACL. Any subsequent recoveries are credited to the ACL. Net loans charged off increased $1.8 million to $2.9 million in 2025 from $1.1 million in 2024. The elevated charge-offs are due in part to a $0.8 million valuation adjustment related to a commercial property foreclosure. Net charge-offs, as a percentage of average loans outstanding, equaled 0.07 percent in 2025 and 0.03 percent in 2024.

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The following table presents average loans and loan loss experience for the years indicated.


	2025
(Dollars in thousands, except percents)		Average loans		Net Charge-offs (Recoveries)	Net Charge-offs (Recoveries) to Average Loans
Commercial and industrial⁽¹⁾	$	872,736	$	541	0.06	%
Real estate:
Commercial		2,254,737		266	0.01
Residential		573,812		6	0.00
Consumer		120,249		594	0.49
Equipment financing		176,759		1,460	0.83
Total	$	3,998,293	$	2,867	0.07	%


	2024
(Dollars in thousands, except percents)		Average loans		Net Charge-offs (Recoveries)	Net Charge-offs (Recoveries) to Average Loans
Commercial and industrial⁽¹⁾	$	747,174	$	(39)	(0.01)	%
Real estate:
Commercial		2,051,566		213	0.01
Residential		455,408		(16)	(0.00)
Consumer		111,736		414	0.37
Equipment financing		90,980		519	0.57
Total	$	3,456,864	$	1,091	0.03	%


	2023
(Dollars in thousands, except percents)		Average loans		Net Charge-offs (Recoveries)	Net Charge-offs (Recoveries) to Average Loans
Commercial and industrial⁽¹⁾	$	590,472	$	47	0.01	%
Real estate:
Commercial		1,803,695		2,597	0.14
Residential		349,219		(24)	(0.01)
Consumer		88,380		240	0.27
Total	$	2,831,766	$	2,860	0.10	%

(1) Information for municipal loans is included with amounts provided for commercial and industrial loans.

The ACL decreased $2.8 million to $39.0 million at December 31, 2025, from $41.8 million at the end of 2024. During the year ended December 31, 2025, net charge-offs were $2.9 million and the provision for credit losses totaled $98 thousand. The 2025 provision was due primarily to improvement in qualitative factors driven by a reduction in commercial real estate concentration levels and a seasoning of the equipment financing portfolio, while overall model loss rates were substantially unchanged. During the year ended December 31, 2024, $14.3 million was recorded to the provision for credit losses related to acquired non-PCD loans associated with the merger with FNCB Bancorp, Inc. In addition to the merger related provision, a provision of $4.8 million was recorded due to the impact of various factors such as updated economic assumptions as well as additional qualitative factors for the equipment financing portfolio, risk rating migration, additional charge-offs during the last six months of 2024, and higher delinquencies.

The ACL, as a percentage of loans, net of unearned income, was 0.96 percent at December 31, 2025, and 1.05 percent at December 31, 2024. The coverage ratio, the ACL, as a percentage of nonperforming loans, is an industry ratio used to test the ability of the allowance account to absorb potential losses arising from nonperforming loans. The coverage ratio was 344.6 percent at December 31, 2025, and 182.0 percent at December 31, 2024. We believe that our allowance was adequate to absorb probable credit losses at December 31, 2025.

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The allocation of the ACL at December 31, 2025, and 2024 is summarized as follows:


	December 31, 2025				December 31, 2024
(Dollars in thousands, except percents)	Amount		%		Amount		%
Individually evaluated:
Commercial and industrial	$	404	1.04	%	$	325	0.78	%
Municipal
Real Estate:
Commercial		451	1.16
Residential		78	0.20			190	0.45
Consumer
Equipment financing		399	1.02			434	1.04
Total individually evaluated		1,332	3.42			949	2.27
Pooled:
Commercial and industrial		5,632	14.44			5,679	13.59
Municipal		1,413	3.62			1,072	2.57
Real Estate:
Commercial		19,547	50.11			21,614	51.74
Residential		4,885	12.52			4,924	11.79
Consumer		1,759	4.51			2,540	6.08
Equipment financing		4,439	11.38			4,998	11.96
Total pooled		37,675	96.58			40,827	97.73
Total allowance for credit losses	$	39,007	100.00	%	$	41,776	100.00	%

The ACL account decreased $2.8 million to $39.0 million at December 31, 2025, compared to $41.8 million at December 31, 2024. The individually evaluated portion of the allowance for credit losses increased $0.3 million to $1.3 million at December 31, 2025, from $1.0 million at December 31, 2024, and the portion of the allowance for credit losses collectively evaluated decreased $3.1 million to $37.7 million at December 31, 2025, from $40.8 million at December 31, 2024.

Deposits:

Our deposit base is the primary source of funds to support our operations. We offer a variety of deposit products to meet the needs of our individual, commercial and municipal customers.

The following is a breakdown of the Company’s deposit portfolio at December 31, 2025, and December 31, 2024.


(Dollars in thousands)			December 31, 2025			December 31, 2024
Interest-bearing deposits:
Money market accounts		$	989,230		$	936,239
Interest-bearing demand and NOW accounts			1,285,767			1,238,853
Savings accounts			497,523			492,180
Time deposits less than $250			477,115			620,725
Time deposits $250 or more			229,949			184,039
Total interest-bearing deposits			3,479,584			3,472,036
Noninterest-bearing deposits			954,485			935,516
Total deposits		$	4,434,069		$	4,407,552

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Total deposits grew $26.5 million or 0.6 percent to $4.4 billion at the end of 2025, which primarily reflected cyclical deposit trends of larger commercial and municipal customers, partially offset by a reduction in brokered deposits. The growth in deposits comparing December 31, 2025 and 2024 was due to a $40.8 million increase in commercial deposits, a $17.8 million increase in retail deposits and a $72.1 million increase in municipal deposits. Partially offsetting these increases was a $104.2 million reduction in brokered deposits, as the Company sought to reduce these higher-costing deposits. Noninterest-bearing deposits increased $19.0 million or 2.0 percent while interest-bearing deposits increased $7.5 million or 0.2 percent in 2025.

At December 31, 2025, total brokered deposits were $152.2 million, or 3.4 percent of total deposits as compared to $256.4 million or 5.8 percent of total deposits at December 31, 2024. As part of strategic balance sheet management initiatives, the Company reduced its higher rate brokered CD portfolio by $104.2 million during 2025. The Company maintains a brokered deposit to total asset policy limit of 15.0 percent. At December 31, 2025, brokered deposits represented 2.9 percent of total assets.

Noninterest-bearing deposits represented 21.5 percent of total deposits while interest-bearing deposits accounted for 78.5 percent of total deposits at December 31, 2025. Comparatively, noninterest-bearing deposits and interest-bearing deposits represented 21.2 percent and 78.8 percent of total deposits at year end 2024. Interest bearing deposits are comprised of 20.3 percent time deposits and 79.7 percent non-maturing deposits, compared with 23.2 percent time and 76.8 percent non-maturing at year end 2024.

The average amount of, and the rate paid on, the major classifications of deposits for the past three years are summarized as follows:


	2025				2024				2023
	Average		Average		Average		Average		Average		Average
(Dollars in thousands, except percents)	Balance		Rate		Balance		Rate		Balance		Rate
Interest-bearing deposits:
Money market accounts	$	958,516	2.91	%	$	621,993	4.77	%	$	714,940	3.17	%
Interest bearing demand and NOW		1,205,926	2.08			1,261,095	1.88			779,977	2.00
Savings accounts		497,991	0.31			463,199	1.00			474,028	0.21
Time deposits		733,592	3.64			772,219	3.88			550,733	3.50
Total interest-bearing deposits		3,396,025	2.39	%		3,118,506	2.82	%		2,519,678	2.32	%
Noninterest-bearing deposits		898,043				714,824				698,749
Total deposits	$	4,294,068			$	3,833,330			$	3,218,427

Total deposits averaged $4.3 billion in 2025 and $3.8 billion in 2024, increasing $460.7 million or 12.0 percent comparing 2025 to 2024. Average noninterest-bearing deposits increased $183.2 million, while average interest-bearing accounts grew $277.5 million. Average interest-bearing non-maturing deposits, including demand deposits, money market and interest-bearing demand and NOW accounts, and savings accounts, increased $316.1 million while average total time deposits decreased $38.6 million when comparing 2025 and 2024. Deposit averages from 2023 to 2024 were primarily affected by the merger with FNCB Bancorp, Inc. on July 1, 2024, and its associated deposit product realignments. Additionally, average balances for 2024 reflect only six months of combined Company results following the July 1, 2024 merger.

Our cost of interest-bearing deposits decreased 43 basis points to 2.39 percent in 2025 compared to 2.82 percent in 2024. Specifically, the cost of money market accounts decreased 186 basis points to 2.91 percent from 4.77 percent and savings accounts decreased 69 basis points to 0.31 percent in 2025 from 1.00 percent in 2024, while interest-bearing demand and NOW accounts increased 20 basis points to 2.08 percent from 1.88 percent in the year ago period. Volatile deposits, time deposits of $100 thousand or more, averaged $362.3 million in 2025, an increase of $70.8 million or 24.3 percent from $291.5 million in 2024. Our average cost of these funds decreased 52 basis points to 3.55 percent in 2025, from 4.07 percent in 2024. This type of funding is susceptible to withdrawal by the depositor as they are particularly price sensitive and are therefore not considered to be a strong source of liquidity.

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At December 31, 2025, and 2024, the Company had $1.5 billion and $1.4 billion in uninsured deposits in excess of the FDIC insurance limit of $250,000.

At December 31, 2025, and 2024, the Company had $230.0 million and $184.0 million, respectively, in time deposits in excess of $250,000 maturing as disclosed in the table below. Brokered deposits in the amount of $152.2 million at December 31, 2025, and $256.5 million at December 31, 2024, are not included in time deposits more than $250,000.


(Dollars in thousands)		2025			2024
Within three months		$	88,646		$	70,276
After three months but within six months			101,852			59,377
After six months but within twelve months			32,747			42,404
After twelve months			6,704			11,982
Total		$	229,949		$	184,039

In addition to deposit gathering, we have a secondary source of liquidity through existing credit arrangements with the FHLB, FRB and other correspondents. At December 31, 2025, our maximum borrowing capacity with the FHLB was $1.7 billion of which $158.3 million was outstanding in borrowings and $498.8 million outstanding in the form of irrevocable standby letters of credit. Depending upon deposit activity and loan growth in 2026, we may utilize these credit arrangements. For a further discussion of our borrowings and their terms, refer to the notes entitled, “Short-term borrowings” and “Long-term debt,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Subordinated Debt:

On June 30, 2025, the Company redeemed $33.0 million aggregate principal amount of its 5.375% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “2020 Notes”) which were sold to accredited investors on June 1, 2020. The 2020 Notes qualified as Tier 2 capital for regulatory capital purposes. The 2020 Notes bore interest at a rate of 5.375% per year for the first five years and then floated based on a benchmark rate. The interest rate on the 2020 Notes adjusted to 9.08% on June 1, 2025.

On June 6, 2025, the Company entered into Subordinated Note Purchase Agreements (collectively, the “Subordinated Note Purchase Agreements”) with certain qualified institutional buyers and institutional accredited investors (collectively, the “Subordinated Note Purchasers”) pursuant to which the Company issued and sold $85.0 million in aggregate principal amount of its 7.75% Fixed-to-Floating Rate Subordinated Notes due 2035, (the “Subordinated Notes”) at a price equal to 100 percent of the principal amount. The Subordinated Note Purchase Agreements include customary representations, warranties, and covenants. The Subordinated Notes mature on June 15, 2035, and bear interest at an initial fixed annual rate of 7.75%, payable semi-annually in arrears, to but excluding June 15, 2030. From and including June 15, 2030, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an interest rate per annum initially equal to the then-current three-month SOFR plus 411 basis points, payable quarterly in arrears. The Company is entitled to redeem the Subordinated Notes, in whole or in part, any time on or after June 15, 2030, on any interest payment date, and to redeem the Subordinated Notes at any time in whole upon certain other events. Any redemption of the Subordinated Notes will be subject to prior regulatory approval to the extent required. The Subordinated Notes were issued under an Indenture, dated June 6, 2025 (the “Indenture”), by and between the Company and U.S. Bank Trust Company, National Association, as trustee. The Subordinated Notes are not subject to any sinking fund and are not convertible into or, other than with respect to the Exchange Notes, exchangeable for any other securities or assets of the Company or any of its subsidiaries. The Subordinated Notes are not subject to redemption at the option of the holders. The Subordinated Notes are unsecured, subordinated obligations of the Company only and are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Subordinated Notes rank junior in right to payment to the Company’s current and future senior indebtedness. The Subordinated Notes are intended to qualify as Tier 2 capital for regulatory capital purposes. In connection with the issuance and sales of the Subordinated Notes, the Company entered into registration rights agreements with the Subordinated Notes Purchasers, pursuant to which the Company exchanged most of the Subordinated Notes for subordinated notes that are registered under the Securities Act and have substantially the same terms as the Subordinated Notes.

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At December 31, 2025, subordinated debentures were $83.2 million, net of unamortized debt issuance costs of $1.8 million, and $33.0 million, net of no debt issuance costs, at December 31, 2024.

On July 1, 2024, the Company assumed $10.3 million of floating rate junior subordinated deferrable interest debentures due December 15, 2036 (“Debentures”) as a result of the FNCB merger at a fair market value of $8.0 million. The Debentures are held by First National Community Statutory Trust I, a Delaware statutory trust (the “Trust”). The Debentures and corresponding trust preferred securities (the “Trust Securities”) have a variable interest rate which resets quarterly to 3-month CME Term SOFR plus a spread adjustment of 0.26161% and a margin of 1.67%. The Debentures are unsecured and rank subordinate and junior in right to all indebtedness, liabilities and obligations of the Company. The Debentures represent the sole assets of the Trust. The Trust Securities may be prepaid at the election of the Company. The Company’s investment in the Trust is reflected on a deconsolidated basis. At December 31, 2025, the Debentures totaling $8.1 million, have been reflected in borrowed funds in the consolidated balance sheets under the caption “Junior Subordinated Debentures” and interest expense of $745 thousand on the Debentures is in its consolidated statements of income and comprehensive income.

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Liquidity:

Liquidity management is essential to our continuing operations as it gives us the ability to meet our financial obligations as they come due, as well as to take advantage of new business opportunities as they arise. Our financial obligations include, but are not limited to, the following:

●

Funding new and existing loan commitments;

●

Payment of deposits on demand or at their contractual maturity;

●

Repayment of borrowings as they mature;

●

Payment of lease obligations; and

●

Payment of operating expenses.

Our liquidity position is impacted by several factors which include, among others, loan origination volumes, loan and investment maturity structure and cash flows, demand for core deposits and certificate of deposit maturity structure and retention. We manage these liquidity risks daily, thus enabling us to monitor fluctuations in our position and to adapt our position according to market influence and balance sheet trends. We also forecast future liquidity needs and develop strategies to ensure adequate liquidity at all times.

Historically, core deposits have been our primary source of liquidity because of their stability and lower cost, in general, than other types of funding. Providing additional sources of funds are loan and investment payments and prepayments and the ability to sell both available for sale securities and mortgage loans held for sale. As a final source of liquidity, we have available borrowing arrangements with various financial intermediaries, including the FHLB. At December 31, 2025, our maximum borrowing capacity with the FHLB was $1.7 billion of which $658.6 million was outstanding in borrowings and letters of credit. We believe our liquidity is adequate to meet both present and future financial obligations and commitments on a timely basis.

We maintain a contingency funding plan to address liquidity in the event of a funding crisis. Examples of some of the causes of a liquidity crisis include, among others, natural disasters, pandemics, war, events causing reputational harm and severe and prolonged asset quality problems. The plan recognizes the need to provide alternative funding sources in times of crisis that go beyond our core deposit base. As a result, we have created a funding program that ensures the availability of various alternative wholesale funding sources that can be used whenever appropriate. Identified alternative funding sources include:

●

FHLB Pittsburgh liquidity contingency line of credit;

●

Federal Reserve discount window;

●

Internet certificates of deposit;

●

Brokered deposits;

●

Institutional Deposit Corporation deposits;

●

Repurchase agreements;

●

Correspondent bank lines of credit and

●

Federal funds purchased.

To further supplement our borrowing capacity, we also maintain a borrower-in-custody of collateral arrangement at the Federal Reserve that enables us to pledge certain loans, not being used as collateral at the FHLB, as collateral for borrowings at the Federal Reserve. At December 31, 2025, our borrowing capacity at the Federal Reserve related to this program was $339.4 million and there were no amounts outstanding. At December 31, 2025, eligible securities pledged at the FRB discount window totaled $9.6 million. For additional information, see Note 12 “Short-term borrowings”.

We employ a number of analytical techniques in assessing the adequacy of our liquidity position. One such technique is the use of ratio analysis to illustrate our reliance on noncore funds to fund our investments and loans maturing after 2025. At December 31, 2025, our noncore funds consisted of time deposits in denominations of $100 thousand or more, brokered deposits, short-term borrowings, and long-term and subordinated debt. Large denomination time deposits are particularly not considered to be a strong source of liquidity since they are very interest rate sensitive and are considered to be highly volatile. At December 31, 2025, our net noncore funding dependence ratio, the difference between noncore

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funds and short-term investments to long-term assets, was 11.2 percent. Our net short-term noncore funding dependence ratio, noncore funds maturing within one year, less short-term investments to long-term assets equaled 6.4 percent. Comparatively, our ratios equaled 12.7 percent and 6.6 percent at the end of 2024, which indicates decreased reliance on our noncore funds in 2025 with an improved ability to offset them with more liquid assets. Our basic liquidity surplus ratio, defined as liquid assets less short-term potentially volatile liabilities as a percentage of total assets, increased to 6.0 percent at December 31, 2025, from 5.8 percent at December 31, 2024, which primarily reflected a $133.1 million increase in cash and cash equivalents. We will continue to focus on increasing liquidity in the coming year through implementation of competitive deposit pricing strategies and monitoring of investment and loan cash flows.

The Consolidated Statements of Cash Flows present the change in cash and cash equivalents from operating, investing and financing activities. Cash and cash equivalents consist of cash on hand, cash items in the process of collection, noninterest-bearing and interest-bearing deposits with other banks and federal funds sold. Cash and cash equivalents increased $133.1 million for the year ended December 31, 2025, which reflected net cash increases from operating and financing activities, partially offset by net cash outflows related to investing activities. For the year ended December 31, 2024, cash and cash equivalents decreased $51.5 million.

Operating activities provided net cash of $54.3 million in 2025 and $34.7 million in 2024. Net income, adjusted for the effects of noncash expenses such as depreciation, amortization and accretion of tangible and intangible assets and investment securities, and the provision for credit losses, is the primary source of funds from operations.

Net cash provided by financing activities equaled $103.3 million in 2025. Net cash used in financing activities was $472.6 million in 2024. Deposit gathering, which is our predominant financing activity, increased in 2025 versus 2024 and resulted in a net cash inflow in 2025 of $25.8 million and an outflow of $299.8 million in 2024. Net short-term borrowing increased net cash by $16.8 million in 2025 and decreased cash by $131.4 million in 2024. Long term borrowings resulted in a net inflow of $35.3 million in 2025, and net outflow of $23.3 million in 2024. The issuance of new subordinated debt combined with the cancellation of the Company’s existing subordinated debt resulted in an increase of $50.0 million. Dividends paid also resulted in outflows of $24.6 million in 2025 versus $18.1 million in 2024.

Our primary investing activities involve transactions related to our investment and loan portfolios. Net cash used in investing activities totaled $24.4 million in 2025 and provided $386.3 million in 2024. Sales, maturities, calls and repayments of available for sale, held to maturity and equity investments provided $209.3 million in 2025 and $307.4 million in 2024, while purchases used $168.5 million in 2025 and $4.8 million in 2024. Net cash used in lending activities was $60.7 million in 2025 and provided $61.7 million in 2024. Investment activity during the year ended December 31, 2025, included management’s strategic partial repositioning of the portfolio from lower-yielding U.S. Treasury bonds to higher yielding U.S. agency mortgage-backed securities and tax-exempt municipal bonds. Our continued growth in our expansion markets coupled with our mature markets is expected to continue to produce loan demand throughout 2026. We expect to fund such demand through deposit gathering initiatives, more relationship lending with deposits, payments and prepayments on loans and investments and advances from the FHLB. However, we cannot predict the economic climate or the savings habits of consumers. Should economic conditions decline, deposit gathering may be negatively impacted. Regardless of economic conditions and stock market fluctuations, we believe that through constant monitoring and adherence to our liquidity plan, we will have the means to provide adequate cash to fund our normal operations in 2026.

Cash Requirements:

The Company has cash requirements for various financial obligations, including contractual obligations and commitments that require cash payments. The most significant contractual obligation, in both the under and over one-year time period, is for the Bank to repay time deposits. The Company anticipates meeting these obligations by using on-balance sheet liquidity and continuing to provide convenient depository and cash management services through its branch network, thereby replacing these contractual obligations with similar fund sources at rates that are competitive in our market. The Company may also use borrowings and brokered deposits to meet its obligations.

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Commitments to extend credit are the Company's most significant commitment in both the under and over one-year time periods. These commitments do not necessarily represent future cash requirements in that these commitments often expire without being drawn upon.

Capital Adequacy:

We believe a strong capital position is essential to our continued growth and profitability. We strive to maintain a relatively high level of capital to provide our depositors and stockholders with a margin of safety. In addition, a strong capital base allows us to take advantage of profitable opportunities, support future growth and provide protection against any unforeseen losses.

The Bank’s Asset Liability Committee (“ALCO”) reviews our capital position, generally, quarterly. As part of its review, the ALCO considers: (i) the current and expected capital requirements, including the maintenance of capital ratios in excess of minimum regulatory guidelines; (ii) potential changes in the market value of our securities due to interest rates changes and effect on capital; (iii) projected organic and inorganic asset growth; (iv) the anticipated level of net earnings and capital position, taking into account the projected asset/liability position and exposure to changes in interest rates; (v) significant deteriorations in asset quality; and (vi) the source and timing of additional funds to fulfill future capital requirements.

Based on the recent regulatory emphasis placed on banks to assure capital adequacy, our Board of Directors annually reviews and approves a capital plan. Among other specific objectives, this comprehensive plan: (i) attempts to ensure that we and the Bank remain well capitalized under the regulatory framework for prompt corrective action; (ii) evaluates our capital adequacy exposure through a comprehensive risk assessment; (iii) incorporates periodic stress testing in accordance with the Federal Reserve Board’s Supervisory Capital Assessment Program (“SCAP”); (iv) establishes event triggers and action plans to ensure capital adequacy; and (v) identifies realistic and readily available alternative sources for augmenting capital if higher capital levels are required.

Bank regulatory agencies consider capital to be a significant factor in ensuring the safety of a depositor’s accounts. These agencies have adopted minimum capital adequacy requirements that include mandatory and discretionary supervisory actions for noncompliance. The Company and the Bank’s risk-based capital ratios have consistently exceeded the minimum regulatory capital ratios required for adequately capitalized institutions. The Company’s ratio of Tier 1 capital to risk-weighted assets and off-balance sheet items was 11.28 percent and 10.41 percent at December 31, 2025, and 2024, respectively. The Company’s Total capital ratio was 14.31 percent and 12.34 percent at December 31, 2025, and 2024, respectively. The common equity Tier I capital to risk-weighted assets ratios for the Company were 11.03 percent at December 31, 2025, and 10.16 percent at December 31, 2024. The Company’s leverage ratio, which was 8.84 percent at December 31, 2025, and 7.97 percent at December 31, 2024, exceeded the minimum of 4.0 percent for capital adequacy purposes. The Bank reported Tier 1 capital, Total capital common equity Tier 1 and leverage ratios of 13.06 percent, 14.01 percent, 13.06 percent and 10.22 percent at December 31, 2025, and 10.95 percent, 12.04 percent, 10.95 percent and 8.37 percent at December 31, 2024. Based on the most recent notification from the FDIC, the Bank was categorized as well capitalized at December 31, 2025. There are no conditions or events since this notification that we believe have changed the Bank’s category. For a further discussion of these risk-based capital standards and supervisory actions for noncompliance, refer to the note entitled, “Regulatory matters,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated in this item by reference.

Stockholders’ equity was $519.8 million or $52.01 per share at December 31, 2025, and $469.0 million or $46.94 per share at December 31, 2024. The $50.8 million increase in capital surplus was due to net income in 2025 and by a $16.0 million decrease in accumulated other comprehensive loss (“AOCL”) at December 31, 2025, resulting from a reduction in the unrealized loss on available for sale securities, partially offset by dividends paid to shareholders.

We declared dividends of $2.47 per share in 2025, $2.06 per share in 2024, and $1.64 per share in 2023. The dividend payout ratio, dividends declared as a percentage of net income, equaled 41.6 percent in 2025, 212.9 percent in 2024 and 42.6 percent in 2023. Our Board of Directors intends to continue paying cash dividends in the future and has declared a cash dividend in the first quarter of 2026 of $0.6250 per share. Our ability to declare and pay dividends in the future is

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based on our operating results, financial and economic conditions, capital and growth objectives, dividend restrictions and other relevant factors. We rely on dividends received from our subsidiary, the Bank, for payment of dividends to stockholders. The Bank’s ability to pay dividends is subject to federal and state regulations. For a further discussion on our ability to declare and pay dividends in the future and dividend restrictions, refer to the note entitled, “Regulatory matters,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Since 2014, our Board of Directors has adopted various common stock repurchase plans whereby we were authorized to repurchase shares of our outstanding common stock through open market purchases. During 2025 and 2024, other than shares delivered by participants in the Company’s equity incentive plans to pay withholding tax liabilities incident to the vesting of restricted stock awards, there were no shares repurchased. We purchased and retired 131,686 shares for $5.9 million during 2023.

Review of Financial Performance:

Net income for the year ended December 31, 2025, totaled $59.2 million or $5.88 per diluted share compared to $8.5 million or $0.99 per diluted share for the comparable period of 2024. Net income for year ended December 31, 2025, increased $50.7 million when compared to the year ended December 31, 2024, primarily due to a full year of combined operations following the merger with FNCB Bancorp, Inc. on July 1, 2024, coupled with a reduction in the provision for credit losses. Additionally, net income in 2024 included $16.2 million of acquisition expenses and a $14.3 million provision for credit losses on non-PCD loans acquired in the merger.

Fully tax-equivalent (“FTE”) net interest income, a non-GAAP measure, for the twelve months ended December 31, increased $50.4 million to $168.7 million in 2025 from $118.4 million in 2024. The increase in FTE net interest income was primarily the result of higher levels of earning assets such as loans and investments and an additional $7.2 million from accretion of purchase accounting marks on acquired loans, combined with a reduction in funding costs that outweighed increases in their respective average balances. Non-interest expenses were $115.4 million for the year ended December 31, 2025, an increase of $8.7 million from $106.7 million for the year ended December 31, 2024, and non-interest income was $21.7 million for the year ended December 31, 2025, an increase of $3.4 million from $18.3 million for the year ended December 31, 2024. Both noninterest income and noninterest expenses were also influenced primarily by the merger with FNCB Bancorp, Inc. Notable increases to noninterest income were $2.8 million in services charges and other fees, $0.8 million in wealth management income, $0.5 million in bank owned life insurance cash surrender value and $0.4 million higher merchant services income, partially offset by a net loss on the sale of available for sale investment securities of $2.2 million resulting from the Company’s partial investment portfolio repositioning. Noninterest expenses saw increases of $10.6 million in salaries and employee benefits, $5.2 million in occupancy expenses and $3.0 million additional amortization of intangible assets. Partially offsetting increases to noninterest expenses was a decrease of $16.0 million in merger-related expenses.

Our productivity is measured by the efficiency ratio, a non-GAAP measure, defined as noninterest expense less amortization of intangible assets and acquisition related expenses divided by the total of tax-equivalent net interest income and noninterest income less gains and/or losses on debt security sales and gains on sale of assets. Our efficiency ratio improved to 56.5 percent in 2025 from 63.8 percent in 2024, as we continued to realize synergies from the merger with FNCB.

Non-GAAP Financial Measures:

The following are non-GAAP financial measures, which provide useful insight to the reader of the consolidated financial statements, but should be supplemental to GAAP used to prepare Peoples’ financial statements and should not be read in isolation or relied upon as a substitute for GAAP measures. In addition, Peoples’ non-GAAP measures may not be comparable to non-GAAP measures of other companies. The tax rate used to calculate the FTE adjustment was 21 percent for 2025, 2024, and 2023.

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The following table reconciles the non-GAAP financial measures of FTE net interest income for the years ended 2025, 2024 and 2023:


(Dollars in thousands)
Year Ended December 31		2025				2024		2023
Interest income (GAAP)		$	259,697			$	211,460	$	149,851
Adjustment to FTE			2,763				2,367		1,917
Interest income adjusted to FTE (non-GAAP)			262,460				213,827		151,768
Interest expense			93,735				95,471		63,097
Net interest income adjusted to FTE (non-GAAP)		$	168,725			$	118,356	$	88,671

The non-GAAP efficiency ratio is noninterest expenses, less amortization of intangible assets and acquisition related expenses, as a percentage of FTE net interest income plus noninterest income less gains and/or losses on debt security sales and gains on sale of assets. The following table reconciles the non-GAAP financial measures of the efficiency ratio to GAAP for the years ended 2025, 2024, and 2023:


(Dollars in thousands, except percents)
Year Ended December 31		2025				2024		2023
Efficiency ratio (non-GAAP):
Noninterest expense (GAAP)		$	115,357			$	106,726	$	67,820
Less: amortization of intangible assets expense			6,397				3,367		105
Less: acquisition related expenses			236				16,200		1,816
Noninterest expense adjusted (non-GAAP)			108,724				87,159		65,899

Net interest income (GAAP)			165,962				115,989		86,754
Plus: taxable equivalent adjustment			2,763				2,367		1,917
Noninterest income (GAAP)			21,727				18,336		14,133
Less: net gains on equity securities			168				132		(11)
Less: (Losses) gains on sale of available for sale securities			(2,241)
Less: net gains on sale of fixed assets			(74)				1

PEOPLES FINANCIAL SERVICES CORP. 10-K