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ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to assist readers in understanding the consolidated financial condition and results of operations of the Company and should be read in conjunction with our Consolidated Financial Statements and notes thereto included in this Annual Report on Form 10-K. Certain prior period amounts presented in this discussion and analysis have been reclassified to conform to current period classifications. These reclassifications did not have a material impact on the Company's consolidated balance sheets, statements of income or statement of consolidated cash flows.

Overview

The Company, headquartered in Harrisburg, Pennsylvania, is a one-bank holding company that has elected status as a financial holding company. The consolidated financial information presented herein reflects the Company and its wholly-owned subsidiary, the Bank. At December 31, 2025, the Company had total assets of $5.5 billion, total liabilities of $5.0 billion and total shareholders' equity of $591.5 million as reported in the consolidated balance sheets.

The Company acquired Codorus Valley and its wholly-owned bank subsidiary PeoplesBank, A Codorus Valley Company on July 1, 2024. The merger and acquisition method of accounting was used to account for the transaction with the Company as the acquirer. The Company recorded the assets and liabilities of Codorus Valley at their respective fair values as of July 1, 2024. The transaction was valued at $233.4 million and expanded the Bank’s footprint into the York, Pennsylvania market while increasing its market penetration in its existing markets.

The Company incurred merger-related expenses of $2.6 million for the year ended December 31, 2025. For the year ended December 31, 2024, the Company incurred merger-related expenses of $22.7 million, a provision for non-PCD loans of $15.5 million, expenses for the retirement of an executive of $4.8 million and a provision for legal settlement of $478 thousand. The merger-related and other non-recurring expenses are included in non-interest expenses in the consolidated statements of income under Part II, Item 8, "Financial Statements and Supplemental Data."

Critical Accounting Estimates

The Company’s accounting and reporting policies are in accordance with GAAP and follow accounting and reporting guidelines prescribed by bank regulatory authorities and general practices within the financial services industry in which it operates. Our financial position and results of operations are affected by management's application of accounting policies, including estimates, and assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. The most significant accounting policies followed by the Company are presented in Note 1, Summary of Significant Accounting Policies, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data." These estimates, assumptions, and judgments are based on information available as of the balance sheet date and through the date the financial statements are filed with the SEC. In applying those accounting policies, the Company's management is required to exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized. Certain of the critical accounting estimates are more dependent on such judgment and, in some cases, may contribute to volatility in our reported financial performance should the assumptions and estimates used change over time due to changes in circumstances. The more critical accounting estimates include accounting for credit losses, income tax methodologies and accounting for business combinations.

Business Combinations

The Company accounts for its mergers and acquisitions using the acquisition method of accounting under the provisions of FASB ASC Topic 805 ("ASC 805"), Business Combinations. Under ASC 805, the assets acquired, including identified intangible assets such as core deposit intangibles and customer relationship intangibles, and liabilities assumed in a business combination are recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combination are expensed as incurred. The excess of the merger consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.

The valuations are based upon management’s assumptions of future growth rates, future attrition, discount rates and other relevant factors, which involves a significant level of estimation and uncertainty. In addition, management engaged independent third-party specialists to assist in the development of the fair values of the acquired assets and assumed liabilities. The preliminary estimates of fair values may be adjusted for a period of time subsequent to the acquisition date if new information is obtained about facts and circumstances that existed as of the merger date that, if known, would have affected the measurement of the amounts recognized as of that date. Adjustments would be recorded to goodwill during the current reporting period.

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Examples of the impacted acquired loans and assumed liabilities includes loans, deposits, identifiable intangible assets, borrowings and certain other assets and liabilities.

For acquired loans at the merger date, management evaluated and classified loans based upon whether the loans had experienced a more-than-insignificant amount of credit deteriorating since origination. To determine the fair value of the loans, significant estimates and assumptions were applied, including projected cash flows, discount rates, repayment speeds, credit loss severity rates, default rates and realizable collateral values. At acquisition, the allowance on PCD loans is booked directly to the ACL using the Company’s existing ACL methodology, but there is no initial impact to net income. Subsequent to acquisition, future changes in estimates of expected credit losses on PCD loans are recognized as provision expense (or reversal of provision expense). The ACL for non-PCD loans is recognized as a provision for credit losses in the same reporting period as the business acquisition, using the Company’s existing ACL methodology.

These critical accounting estimates are discussed in detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025. Significant accounting policies and any changes in accounting principles and effects of new accounting pronouncements are discussed in Note 1, Summary of Significant Accounting Policies, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data," in our Annual Report on Form 10-K for the year ended December 31, 2025.

Accounting for Credit Losses - Loans

The ACL represents the amount that, in management’s judgment, appropriately reflects credit losses inherent in the loan portfolio at the balance sheet date. A provision for credit losses is recorded to adjust the level of the ACL as determined by management. In accordance with ASU 2016-13, the CECL methodology requires an organization to measure all expected credit losses over the contractual term for financial assets measured at amortized cost based on historical credit loss experience, current conditions, and reasonable and supportable forecasts.

Determining the ACL inherently involves a high degree of subjectivity and requires the Company to make significant estimates of current credit risks and trends, all of which may undergo material changes, including expected probabilities of default, expected loss given default, the timing of expected future cash flows including the impact from unexpected changes in prepayment speeds, estimated losses based on historical credit loss experience and forecasted economic conditions. To the extent actual results differ from management's estimates, additional provisions for credit losses may be required that could adversely impact results of operations and regulatory capital in future periods.

The ACL is maintained at a level considered appropriate to absorb credit losses over the expected life of the loan. The ACL for expected credit losses is determined based on a quantitative assessment of two categories of loans: collectively evaluated loans and individually evaluated loans. In addition, the ACL also includes a qualitative component, which adjusts the CECL model results for risk factors that are not considered within the CECL model, but are relevant in assessing the expected credit losses within the loan classes.

The ACL on loans is measured on a collective basis when similar risk characteristics exist within the Company's loan segments between commercial and consumer. Each of these loan segments are broken down into multiple loan classes, which are characterized by loan type, collateral type, risk attributions and the manner in which management monitors the performance of the borrower. The risks associated with lending activities differ and are subject to the impact of changes in interest rates, market conditions, the collateral securing the loans, and general economic conditions.

The ACL for loans collectively evaluated is measured using a lifetime expected loss rate model that considers historical loss performance and past events in addition to forecasts of future economic conditions. Based on management's analysis, adjustments may be applied for additional factors impacting the risk of loss in the loan portfolio beyond the quantitatively calculated reserve on collectively evaluated loans. As the quantitative reserve calculation incorporates historical conditions, management may consider if an additional or reduced reserve is warranted and make adjustments through qualitative risk factors based on current and expected conditions. Management uses the best available information to complete these evaluations; however, future adjustments to the ACL may be necessary if conditions significantly differ from the assumptions used in making the evaluations.

The ACL for loans collectively evaluated is measured using a lifetime expected loss rate model under the vendor's neutral scenario that considers historical loss performance and past events in addition to forecasts of future economic conditions. The Company elected to use the DCF methodology for the quantitative analysis for the majority of its loan segments, which applies the probability of default to future cash flows, using a loss driver model and loss given default factors, and then adjusts to the net present value to derive the required reserve. The probability of default estimates are derived through the application of reasonable and supportable economic forecasts to the regression models, which incorporates the Company's and peer loss-rate data, unemployment rate and GDP and can be obtained from the Federal Reserve Economic Database. The reasonable and supportable forecasts of the selected economic metrics are then input into the regression model to calculate an expected default

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rate. The expected default rates are then applied to expected loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The prepayment and curtailment assumptions adjust the contractual terms of the loan to arrive at the expected cash flows. The model incorporates an annualized prepayment rate and a twelve-month rate for curtailment based on a "statistical tendency to repay." Changes in the prepayment and curtailment speeds that vary from the current model inputs could result in inaccurate expected credit losses. The development and validation of credit models also included determining the length of the reasonable and supportable forecast and regression period and utilizing national peer group historical loss rates, which a four-quarter forecast period followed by a four-quarter straight-line reversion period were applied.

Management incorporates the national unemployment rate and GDP as the drivers of the quantitative portion of collectively evaluated reserves on loan classes reliant upon the DCF methodology, primarily as a result of high correlation coefficients identified in regression modeling, which represents a significant judgment in determining the ACL; however, changes in the macroeconomic forecast could significantly impact the calculated ACL. For the consumer loan segment, the quantitative reserve was calculated using the remaining life methodology where the average historical bank-specific and peer loss rates are applied to expected loan balances over an estimated remaining life of loans. The estimated remaining life is calculated using historical bank-specific loan attrition data.

See Note 1, Summary of Significant Accounting Policies, and Note 4, Loans and Allowance for Credit Losses, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplemental Data," for details on the ACL evaluation.

Accounting for Income Taxes

The Company is subject to federal and state income taxes in the jurisdictions in which it operates. Due to the complexity of the tax laws, management may make judgments in computing income tax expense, which are subject to varying interpretations by management and the taxing authorities, and could result in changes upon final determination. Income tax expense is based upon income before taxes, adjusted for the effect of certain tax-exempt income, non-deductible expenses and credits. Temporary differences may occur as a result of certain income and expense items being reported in different periods for financial reporting and tax purposes. Deferred taxes are calculated, using the applicable enacted marginal tax rate, based on the differences between the tax basis and carrying value of the asset or liability on the financial statement. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in income tax expense in the consolidated statements of income. Under FASB ASC 740, Income Taxes, the Company must apply a more likely than not probability threshold on its tax positions before a financial statement benefit is recognized. A valuation allowance would be recognized if any deferred tax assets were determined to be more likely than not unrecoverable. See Note 8, Income Taxes, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplemental Data," for details on our income tax expense and deferred tax assets and liabilities.

Readers of the Company's consolidated financial statements should be aware that the estimates and assumptions used may need to be updated in future financial presentations for changes in circumstances, business or economic conditions, in order to fairly represent the condition of the Company at that time.

Economic Climate, Inflation and Interest Rates

Preliminary real GDP increased at a rate of 1.4% on an annualized basis for the fourth quarter of 2025, which was a decrease from 2.3% during the fourth quarter of 2024. The increase during the fourth quarter of 2025 was primarily due to consumer spending despite consumer spending declining compared to the third quarter of 2025 and fourth quarter of 2024. Similarly, the rate during the fourth quarter of 2025 was impacted by the rise in investment, which includes business spending, housing and business inventories; however, the rate of increase had decelerated compared to the aforementioned comparative periods. Key contributors to investment presently are intellectual property and information processing equipment. An offsetting factor influencing the GDP rate was the federal government shutdown.

The personal consumption expenditures ("PCE") price index increased by 2.9% in the fourth quarter of 2025 compared to an increase of 2.4% for the fourth quarter of 2024. Excluding food and energy prices, the PCE price index increased by 2.7% in the fourth quarter of 2025 and in the fourth quarter of 2024.

The national unemployment rate was 4.3% in December 2025 compared to 3.8% in December 2024. Within the Company's geographic footprint, the unemployment rate in Pennsylvania was 3.7% in December 2025 compared to 4.2% in December 2024. The unemployment rate in Maryland increased from 2.7% in December 2024 to 4.2% in December 2025. Despite the increases in both states since December 2024, the unemployment rates in Pennsylvania and Maryland both remain

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below the national level. These state-wide unemployment rates are consistent with those experienced by the counties in which the Company operates branches and other corporate offices.

Following a 25 basis point increase in July 2023, the Federal Funds rate remained unchanged until September 2024, when the FOMC cut the Federal Funds rate by 50 basis points. The FOMC subsequently implemented additional rate cuts of 25 basis points in December 2024, September 2025, October 2025 and December 2025. These changes were based on the FOMC's assessment of inflation, the unemployment rate and jobs report.

At December 31, 2025, the 10-year Treasury bond yield was 4.14%, a decrease from 4.58% at December 31, 2024. Contributing factors for the decrease include recent FOMC rate cuts, cooling inflationary pressures, geopolitical tensions and economic uncertainties.

On July 4, 2025, H.R. 1, referred to as the One Big Beautiful Bill Act (the "Act"), was enacted into law. The Act includes tax reform provisions, including making permanent certain business tax provisions of the U.S. Tax Cuts and Jobs Act. The provisions of the Act did not have a material impact on our results of operations and financial condition for the year ended December 31, 2025.

The majority of the assets and liabilities of a financial institution are monetary in nature and, therefore, differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. However, inflation does have an impact on the Company, particularly with respect to the growth of total assets and noninterest expenses, which tend to rise during periods of general inflation. Risks also exist due to supply and demand imbalances, the interest rate environment, geopolitical tensions, uncertainty related to the impact of tariffs and the shutdown of the U.S. government, the scope and timing of changes to fiscal, regulatory and trade policies.

As the Company’s balance sheet consists primarily of financial instruments, interest income and interest expense are greatly influenced by the level of interest rates and the slope of the yield curve, as well as the mix of assets and funding. The Company has been able to grow its net interest income by $44.5 million from 2024 to 2025, which is attributed to the Merger that was completed on July 1, 2024 and continued success with the balance of loan growth and pricing of interest-earning assets and liabilities. Competition for quality lending opportunities and deposits remains intense, which, together with an inverted yield curve and changing economic environment, will continue to challenge the Company's ability to grow its net interest margin and to manage its overhead expenses.

Results of Operations

Summary

Net income totaled $80.9 million, $22.1 million and $35.7 million for 2025, 2024 and 2023, respectively. Diluted earnings per share totaled $4.18, $1.48 and $3.42 for 2025, 2024 and 2023, respectively. For the year ended December 31, 2025, the Company incurred merger-related expenses of $2.6 million, which were included in non-interest expenses of the consolidated statements of income. Excluding these non-recurring expenses, net income and diluted earnings per share totaled $82.9 million and $4.28, respectively, for the year ended December 31, 2025. Net income was $56.1 million and diluted earnings per share was $3.76 for the year ended December 31, 2024 excluding merger-related expenses of $22.7 million, a provision for non-PCD loans of $15.5 million, expenses for the retirement of an executive of $4.8 million and a provision for legal settlement of $478 thousand. Net income was $36.6 million and diluted earnings per share was $3.51 for the year ended December 31, 2023 excluding $1.1 million of merger-related expenses. The Company recorded a gain of $1.2 million from the sale of the Bank's Path Valley branch during the year ended December 31, 2023. See “Supplemental Reporting of Non-GAAP Measures.”

Net interest income totaled $199.8 million, $155.3 million and $104.9 million for 2025, 2024 and 2023, respectively. The increase in net interest income reflected the deployment of cash into higher yielding commercial loans and investment securities and the impact of the rising interest rates on interest-earning asset yields, partially offset by the impact of an increase in cost of funds and increases in interest-bearing liabilities. In addition, the increases in interest income during 2025 and 2024 reflect the impact of the Merger, including net accretion of purchase accounting marks on loans, investment securities, deposits and borrowings.

The provision for credit losses on loans totaled $126 thousand, $17.4 million and $1.7 million in 2025, 2024 and 2023, respectively. For the year ended December 31, 2024, the provision for credit losses increased primarily due to $15.5 million of reserves on acquired non-PCD loans as a result of the Merger. During the first quarter of 2023, the Company adopted the new accounting standard for CECL, which resulted in the change from the incurred loss model based on historical loss experience to the expected loss model, which reflects the projected credit losses over the expected life of financial assets and commitments.

Noninterest income totaled $52.3 million, $37.4 million and $25.7 million for 2025, 2024 and 2023, respectively. The increase of $14.9 million from 2024 to 2025 was primarily due to an increase in wealth management income of $5.3 million

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and increases in service charges and interchange income of $5.1 million, partially driven by the Merger, in addition to an increase of $1.5 million in income from life insurance policies and an increase of $1.3 million in swap fees. The remainder of the increase is across several line items and is due primarily to the Merger. The increase in noninterest income of $11.8 million from 2023 to 2024 was primarily due to an increase in wealth management income of $5.0 million and increases in service charges and interchange income of $3.4 million, partially driven by the Merger. The increase in 2024 compared to 2023 was partially offset by the gain of $1.2 million recorded to other income from the sale of the Path Valley branch for the year ended December 31, 2023.

Noninterest expenses totaled $149.4 million, $148.3 million and $83.8 million for 2025, 2024 and 2023, respectively. The increase of $1.1 million from 2024 to 2025 was due to increases across several line items due to the impact from the Merger, partially offset by the decrease of $20.1 million in merger-related expenses. The Company incurred merger-related expenses of $2.6 million for the year ended December 31, 2025. For the year ended December 31, 2024, the Company incurred merger-related expenses of $22.7 million, a provision for non-PCD loans of $15.5 million, expenses for the retirement of an executive of $4.8 million and a provision for legal settlement of $478 thousand, collectively the "non-recurring expenses". The increase of $64.5 million in non-interest expenses from 2023 to 2024 included $43.4 million in the aforementioned non-recurring expenses.

Income tax expense totaled $21.8 million, $5.8 million and $9.4 million for 2025, 2024 and 2023, or an effective tax rate of 21.2%, 20.7% and 20.8% respectively.

Net Interest Income

Net interest income is the primary component of the Company's net income. Interest-earning assets include loans, investment securities and interest-bearing bank balances. Interest-bearing liabilities include primarily deposits and borrowed funds.

Net interest income is affected by changes in interest rates, the volume of interest-earning assets and interest-bearing liabilities, and the composition of those assets and liabilities. “Net interest spread” and “net interest margin” are two common statistics related to changes in net interest income. Net interest spread represents the difference between the yields earned on interest-earning assets and the rates paid for interest-bearing liabilities. Net interest margin is the ratio of net interest income to average earning asset balances.

The FRB influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. Starting in March 2022, the FOMC increased the Federal Funds rate by 425 basis points during 2022 and 100 basis points during 2023 as an attempt to combat the impact of inflation, the rising consumer price index, supply chain disruptions, the state of the labor market and geopolitical tensions. Following a 25 basis point increase in July 2023, the Federal Funds rate remained unchanged until September 2024, when the FOMC cut the Federal Funds rate by 50 basis points. The FOMC subsequently implemented additional rate cuts of 25 basis points in December 2024, September 2025, October 2025 and December 2025. These changes were based on the FOMC's assessment of inflation, the unemployment rate and jobs report.

Core deposits are deposits that are stable, lower cost and generally reprice more slowly than other deposits when interest rates change. Core deposits, which exclude certificates of deposit, are typically funds of local clients who also have a borrowing or other relationship with the Bank. The Company is primarily funded by core deposits, including noninterest-bearing demand deposits, which have historically served as a foundational, low-cost source of funds. In addition to the impact of the interest rate environment, the competition for deposits also increased in the latter part of 2022 and continued throughout 2025 with clients utilizing their funds at a higher frequency and additional liquidity was needed to meet the demands of our clients. During that timeframe, clients shifted their deposits to higher-yielding products within the Bank, including time deposits with promotional offerings of up to 18-month terms. From late 2024 to 2025, there has been reduction of these higher yielding promotional balances due to maturities.

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The following table presents net interest income, net interest spread and net interest margin on a taxable-equivalent basis for 2025, 2024 and 2023. Taxable-equivalent adjustments are the result of increasing income from tax-exempt loans and investment securities by an amount equal to the taxes that would be paid if the income were fully taxable based on a 21% federal corporate tax rate for 2025, 2024 and 2023, reflecting our statutory tax rates for those years.

Assets

Liabilities and Shareholders’ Equity

Taxable-equivalent net interest margin 4.04 % 3.92 % 3.80 %

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NOTES TO ANALYSIS OF NET INTEREST INCOME:

(2) Average balance of investment securities is computed at fair value.

(3) Average balances include nonaccrual loans.

The following table presents changes in net interest income on a taxable-equivalent basis between years by rate and volume components:

AverageVolume AverageRate Total AverageVolume AverageRate Total

Interest Income

Interest Expense

2025 versus 2024

Net interest income increased by $44.5 million from $155.3 million in 2024 to $199.8 million in 2025. Interest income on loans increased by $46.3 million, from $210.3 million in 2024 to $256.6 million in 2025. Interest income on investment securities increased by $10.3 million, from $30.9 million in 2024 to $41.2 million in 2025. Total interest expense increased by $10.3 million from $93.7 million in 2024 to $103.9 million in 2025. Interest expense on deposits increased by $8.1 million from $84.2 million in 2024 to $92.3 million in 2025, and interest expense on borrowed funds increased by $2.2 million from $9.4 million in 2024 to $11.6 million in 2025.

Net interest income on a taxable-equivalent basis increased by $45.1 million from $156.9 million in 2024 to $202.0 million in 2025. The Company’s net interest spread increased by ten basis points from 3.36% in 2024 to 3.46% in 2025 primarily due to a decrease in cost of funds.

Taxable-equivalent net interest margin increased by 12 basis points to 4.04% in 2025 from 3.92% in 2024. Net interest income benefited from a decrease of 24 basis points in the cost of interest-bearing liabilities from 2.91% in 2024 to 2.67% in 2025, reflecting the impact of deposit rate reductions over that time period and the runoff of higher rate time deposits and money market balances, partially offset by the impact of the accelerated amortization of remaining debt issuance costs from the

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redemption of subordinated notes. During 2025 and 2024, amortization expense of the debt issuance costs totaled $335 thousand and $81 thousand, respectively. The taxable-equivalent yield on interest-earning assets decreased by 13 basis points to 6.13% in 2025 from 6.26% in 2024, which was primarily due to the decline in the Fed Funds rate since late 2024.

The yield on loans decreased by 15 basis points to 6.53% in 2025 from 6.68% in 2024 primarily due to the decline in market interest rates. Taxable-equivalent interest income earned on loans increased by $46.5 million from $211.0 million in 2024 to $257.5 million in 2025 primarily due to an increase in the average balances, which was partially attributed to the acquired loans from the Merger, and from the accretion recognized on fair value marks to loans.

Average loans increased by $795.3 million from $3.2 billion during 2024 to $3.9 billion during 2025. The average balance of commercial loans increased by $613.3 million from $2.5 billion during 2024 to $3.1 billion during 2025. Average residential mortgage loans increased by $118.1 million from $367.4 million for 2024 to $485.5 million for 2025. Average home equity loans increased by $47.8 million from $247.4 million for 2024 to $295.2 million for 2025. Average installment and other consumer loans increased by $16.1 million from $27.2 million for 2024 to $43.3 million for 2025.

Accretion of purchase accounting adjustments on loans included in interest income was $21.5 million during 2025 compared to $15.2 million in 2024. Accelerated accretion totaled $5.2 million during 2025 compared to $5.4 million during 2024. Prepayment income on commercial loans increased from $1.1 million during 2024 to $1.5 million during 2025. The recognition of interest income previously applied to principal of $1.6 million from the payoff of a commercial real estate loan on nonaccrual status contributed four basis points to the Company's net interest margin during 2024.

Interest income on investment securities on a tax-equivalent basis increased by $10.8 million to $42.6 million for 2025 from $31.8 million for 2024, with the taxable equivalent yield increasing from 4.60% for 2024 to 4.66% for 2025. The increase of six basis points reflects the increase in average balances and the increase in accretion of the discount recorded on investment securities assumed from the Merger, partially offset by a decline in the market interest rates. Average investment securities increased by $223.2 million from $690.2 million in 2024 to $913.4 million during 2025 due to the investment securities assumed from the Merger and purchases during 2025. Investment security purchases totaled $272.3 million, partially offset by sales of $83.8 million during 2025. Accretion on acquired investment securities was $3.2 million in 2025 compared to $1.5 million in 2024.

Interest income on federal funds sold and interest-bearing bank balances on a tax-equivalent basis decreased by $1.8 million to $5.9 million for 2025 from $7.8 million for 2024. The average balance of federal funds sold and interest-bearing bank balances decreased by $14.6 million from $150.5 million for 2024 to $135.9 million for 2025, which was impacted by the decrease in deposits. The FOMC cut the Federal Funds rate by 75 basis points since September 2025.

Interest expense increased by $10.3 million to $103.9 million in 2025 from $93.7 million in 2024; however, the cost of interest-bearing liabilities decreased by 24 basis points from 2.91% in 2024 to 2.67% in 2025, reflecting the impact of deposit rate reductions implemented during 2025 and runoff of higher rate time deposits and money market balances, partially offset by the accelerated amortization of the remaining debt issuance costs from the redemption of subordinated notes. Average interest-bearing liabilities increased by $678.3 million from $3.2 billion in 2024 to $3.9 billion during 2025 primarily due to the impact of the Merger.

Interest expense on deposits increased by $8.1 million from $84.2 million in 2024 to $92.3 million in 2025. The average balance of interest-bearing deposits increased by $622.9 million from $3.0 billion in 2024 to $3.7 billion in 2025. Average interest-bearing demand and money market deposits increased by $387.7 million to $2.5 billion in 2025 compared to $2.1 billion in 2024. Average time deposits increased by $191.1 million to $923.5 million in 2025 from $732.4 million in 2024, which resulted in increased interest expense on time deposits of $8.5 million. Average savings deposits increased by $44.1 million to $267.3 million in 2025 from $223.2 million in 2024. The average cost of time deposits decreased by 60 basis points from 4.44% in 2024 to 3.84% in 2025 due to continued run-off in higher yielding promotional balances and replacement at lower rates. Amortization expense of fair value marks on acquired time deposits was $913 thousand in 2025 compared to $2.1 million in 2024.

Interest expense on borrowings increased by $2.1 million to $11.6 million in 2025 from $9.4 million in 2024 despite the cost of borrowings decreasing by five basis points from 4.08% in 2024 to 4.03% in 2025. Average borrowings increased by $55.4 million from $188.7 million in 2024 to $244.1 million in 2025, which included an increase of $35.8 million in average FHLB advances and other borrowings and an increase of $10.4 million in average subordinated notes and trust preferred debt. The increase in FHLB advances was due to utilization of long-term advances and overnight borrowings 2025 as lending and investing activities increased. The average balance in subordinated notes and trust preferred debt is due to the assumption of subordinated debt of $31.0 million and trust preferred debt of $10.3 million from the Merger, partially offset by the impact from the redemption of Orrstown's subordinated notes on September 30, 2025. During 2025 and 2024, amortization expense of the debt issuance costs totaled $335 thousand and $81 thousand, respectively.

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The subordinated notes assumed from the Merger had a fixed rate of interest equal to 4.50% until December 30, 2025. After that term, the variable rate of interest is equal to the three-month CME term SOFR rate plus 4.04%, which was 8.06% at December 31, 2025. The trust preferred debt has a variable rate of three-month CME term SOFR rate plus a spread adjustment and margin. For 2025 and 2024, the average cost of the trust preferred debt, excluding the fair value mark, was 6.24% and 7.08%, respectively. Amortization of fair value marks on acquired borrowings was $607 thousand and $294 thousand in 2025 and 2024, respectively.

2024 versus 2023

Interest income on loans increased by $83.7 million, from $126.6 million in 2023 to $210.3 million in 2024, and interest income on investment securities increased by $9.4 million, from $21.5 million in 2023 to $30.9 million in 2024. Total interest expense increased by $48.7 million from $45.0 million in 2023 to $93.7 million in 2024. Interest expense on deposits increased by $46.7 million from $37.5 million in 2023 to $84.2 million in 2024, and interest expense on borrowed funds increased by $1.9 million to $7.5 million in 2023 to $9.4 million in 2024.

Net interest income on a taxable-equivalent basis increased by $50.4 million, or 48%, from $104.9 million in 2023 to $155.3 million in 2024. The Company’s net interest spread decreased by three basis points from 3.39% in 2023 to 3.36% in 2024 primarily due to an increase in cost of funds.

Taxable-equivalent net interest margin increased by twelve basis points to 3.92% in 2024 from 3.80% in 2023. The recognition of interest income previously applied to principal of $1.6 million from the payoff of a commercial real estate loan on nonaccrual status contributed four basis points to the Company's net interest margin during the year ended December 31, 2024. The taxable-equivalent yield on interest-earning assets increased by 86 basis points to 6.26% in 2024 from 5.40% in 2023, due primarily to the accretion recognized on fair value marks to loans and securities assumed in the Merger. The increase in yield was more than offset by an increase of 89 basis points in the cost of interest-bearing liabilities from 2.02% in 2023 to 2.91% in 2024 due primarily to increased funding costs on deposits from higher market interest rates and competitive pressures, an increase in the interest rate on Orrstown Financial Services, Inc.'s subordinated notes, which converted from a fixed rate to a floating rate on December 30, 2023, and the assumption of subordinated notes and trust preferred debt from the Merger.

Average loans increased by $910.9 million from $2.2 billion during 2023 to $3.2 billion during 2024. Average investment securities increased by $169.7 million from $520.5 million in 2023 to $690.2 million during 2024. Average interest-bearing liabilities increased by $990.0 million from $2.2 billion in 2023 to $3.2 billion during 2024.

The yield on loans increased by 100 basis points to 6.68% in 2024 from 5.68% in 2023. Taxable-equivalent interest income earned on loans increased by $83.9 million from $127.1 million in 2023 to $211.0 million in 2024 primarily due to an increase in the average balances, which was attributed to the acquired loans from the Merger and from the impact of the interest rate environment.

The average balance of commercial loans increased by $725.2 million from $1.8 billion during 2023 to $2.5 billion during 2024. Average residential mortgage loans increased by $120.7 million from $246.7 million for 2023 to $367.4 million for 2024. Average home equity loans increased by $57.8 million from $189.6 million for 2023 to $247.4 million for 2024. Average installment and other consumer loans increased by $7.2 million from $20.0 million for 2023 to $27.2 million for 2024.

Accretion of purchase accounting adjustments included in interest income was $15.2 million during 2024 compared to $748 thousand in 2023. The increase in accretion was due to the recognition of fair value marks from the Merger. Accelerated accretion totaled $5.4 million during 2024 compared to $269 thousand during 2023. Prepayment income on commercial loans increased from $826 thousand during 2023 to $1.1 million during 2024.

Interest income on investment securities on a tax-equivalent basis increased by $9.4 million to $31.8 million for 2024 from $22.4 million for 2023, with the taxable equivalent yield increasing by 29 basis points from 4.31% for 2023 to 4.60% for 2024. This increase reflects the impact from the higher interest rates as well as the accretion of discounts recorded on investment securities assumed from the Merger. Average investment securities increased by $169.7 million from $520.5 million in 2023 to $690.2 million during 2024 due primarily to the Merger.

Interest income on federal funds sold and interest-bearing bank balances on a tax-equivalent basis increased by $6.0 million to $7.8 million for 2024 from $1.8 million for 2023. The average balance of federal funds sold and interest-bearing bank balances increased by $109.6 million from $40.9 million for 2023 to $150.5 million for 2024. The Federal Funds rate had remained unchanged from the prior rate increase of 25 basis points in July 2023 until the FOMC cut the Federal Funds rate by 50 basis points in September 2024 and 25 basis points in December 2024.

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Interest expense on deposits increased by $46.7 million from $37.5 million in 2023 to $84.2 million in 2024 as the cost of borrowings increased by 95 basis points from 1.82% in 2023 to 2.77% in 2024 as funding costs increased due to higher market interest rates and competitive pressures on deposit pricing. The average balance of interest-bearing deposits increased by $971.1 million from $2.1 billion in 2023 to $3.0 billion in 2024. Average time deposits increased by $394.3 million in 2024, which resulted in increased interest expense on time deposits of $11.6 million. The cost of time deposits increased by 149 basis points from 2.95% in 2023 to 4.44% in 2024 as clients sought higher-yielding products during the rising interest rate environment, including the Bank's promotional offerings for time deposits with terms up to 18-months. Amortization expense of fair value marks on acquired time deposits was $2.1 million for the year ended December 31, 2024. The increase in deposit balances was primarily due to the Merger.

Interest expense on borrowings increased by $1.9 million to $9.4 million in 2024 from $7.5 million in 2023 despite the cost of borrowings decreasing by 24 basis points from 4.32% in 2023 to 4.08% in 2024. Average borrowings increased by $18.8 million from $169.9 million in 2023 to $188.7 million in 2024, which included $50.4 million in average subordinated notes and trust preferred debt for the year ended December 31, 2024, an increase of $18.3 million, from $32.1 million for the year ended December 31, 2023. This increase is due to the assumption of subordinated debt of $31.0 million and trust preferred debt of $10.3 million from the Merger. The interest rate increased on Orrstown Financial Services, Inc.'s outstanding subordinated notes of $32.5 million, which converted from a fixed rate of 6.00% to a floating rate of 8.78% on December 30, 2023. The interest rate on the Company's subordinated notes at December 31, 2024 was 8.03%. The subordinated notes assumed from the Merger had a fixed rate of interest equal to 4.50% until December 30, 2025. The trust preferred debt issuances have a variable rate of three-month CME term SOFR, plus a spread adjustment and margin. Amortization expense of fair value marks on acquired borrowings was $294 thousand for the year ended December 31, 2024.

Provision for Credit Losses

The ACL to total loan ratio was 1.19%, 1.24% and 1.25% at December 31, 2025, 2024 and 2023, respectively. The Company recorded a provision for credit losses on loans of $126 thousand, $17.4 million and $1.7 million in 2025, 2024 and 2023, respectively. The recoveries of credit losses on unfunded commitments of $100 thousand, $862 thousand and zero were recorded for the years ended December 31, 2025, 2024 and 2023, respectively.

In 2025, the provision for credit losses was based on the increase in loans, primarily within commercial real estate loans, which was offset by decreases in the qualitative factors. During the first quarter of 2025, a qualitative factor was added at a minor level for Other External Factors for all loan classes due to the uncertainty created within the global and domestic markets from changes in U.S. economic policy, including the recently implemented tariffs. During the second quarter of 2025, this qualitative factor was removed for all loan classes as the impact from the changes in U.S. economic policy was then reflected in the macroeconomic conditions within quantitative ACL model. In addition, the Economic Conditions qualitative factor was added at a minor level and the Delinquency and Classified Loan Trends qualitative factor was added at a moderate level for the residential senior liens loan class and the Delinquency and Classified Loan Trends qualitative factor was added at a moderate level for the home equity loan class. The adjustment to the Economic Conditions qualitative factor was based on the prepayment speeds slowing in part due to market interest rates cuts, and the adjustment to Delinquency and Classified Loan Trends was based on recent delinquency volume and downgrades within the aforementioned loan classes. There were no changes to the qualitative factors during the third quarter of 2025. During the fourth quarter of 2025, a qualitative factor was added at a minor level for Delinquency and Classified Loan Trends for the acquisition and development loan class due to the delinquency level and downgrades in risk rating. In addition, the qualitative factor for Concentrations of Credit and Changes in Credit Concentrations was reduced from a moderate to minor level for the non-owner occupied commercial real estate loan class as the concentration level as the percentage of total risk-based capital reduced below the federal banking agencies' guidance level of 300%.

In 2024, the provision for credit losses increased primarily due to $15.5 million of reserves on acquired non-PCD loans, which was partially offset by a reversal of the provision for credit losses for off-balance sheet credit exposures of $862 thousand. The remaining provision expense recorded for the year ended December 31, 2024 was due to commercial loan growth, partially offset by changes to qualitative factors during 2024; specifically, the Economic Conditions qualitative factor was reduced and the Other External Factors qualitative factor is no longer assigned to the impacted loan segments. These changes were based on improved economic factors, as well as concerns subsiding from the prior year about liquidity conditions within the banking industry. The Economic Conditions qualitative factor for the residential mortgage loan segment was removed and there was a decrease in the Collateral Valuation Trends qualitative factor from a moderate to low level in the ACL model for the residential mortgage and installment and other loan segments. These changes were based on the stabilization in real estate collateral valuation, housing demand and overall portfolio performance.

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On January 1, 2023, the Company adopted the new accounting standard, referred to as CECL, which transitioned from the incurred loss model based on historical loss experience and economic and market conditions to the expected loss model. The CECL standard reflects expected credit losses over the expected life of the financial assets and commitments, primarily based on the DCF methodology for the majority of the loan segments, which applies the probability of default and loss given default factors to future cash flows, and adjusts to the net present value to derive the required reserve. Macroeconomic conditions are incorporated into the model for unemployment and gross domestic product, in addition to model assumptions for discount rate and prepayment and curtailment speeds. In 2023, the provision for credit losses was driven primarily by increases in commercial loans, excluding SBA PPP loan forgiveness activity, of $118.3 million, in addition to the overall increase in expected loss rates under CECL. During 2023, the Delinquency and Classified Loan Trends qualitative factor was increased for the commercial & industrial and owner-occupied commercial real estate loan classes, which was based on a trend of increases in loans downgraded to the special mention or classified risk rating. All other qualitative factors were unchanged from levels at adoption of CECL.

Net charge-offs totaled $1.1 million in 2025, $3.3 million in 2024 and $581 thousand in 2023. Nonaccrual loans were 0.70% of gross loans at December 31, 2025, compared with 0.61% at December 31, 2024 and 1.11% at December 31, 2023. See further discussion in the “Asset Quality” and “Credit Risk Management” sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Noninterest Income

The following table compares noninterest income for 2025, 2024 and 2023.

2025 versus 2024

Noninterest income increased by $14.9 million from 2024 to 2025. The primary driver of the overall increase was the impact of the Merger, which was effective on July 1, 2024. The following were other significant factors in the increase:

•Swap fee income increased by $1.3 million due to higher swap volume.

•In addition to the impact from the Merger, wealth management income, which includes trust and investment management income and brokerage income, increased due to improvement in market performance.

•The increase of $1.5 million in income from life insurance was primarily due to additional policies acquired in the Merger, in addition to death benefits totaling $141 thousand received on a policy during the third quarter of 2025.

•In 2025, there were net gains of $117 thousand from the sales of GSE residential MBS and CMO securities, which combined totaled $78.8 million, and U.S. Treasury securities with principal balances totaling $5.0 million, respectively, and gains of $49 thousand from mark-to-market activity on an equity security. During 2024, there was a gain of $181 thousand from a security redemption and net gains of $68 thousand from mark-to-market activity on an equity security.

•Other line items within noninterest income showed fluctuations attributable to normal business operations and the impact of the Merger.

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2024 versus 2023

Noninterest income increased by $11.7 million from 2023 to 2024. The primary driver of the overall increase was the impact of the Merger. The following were significant factors in the net increase:

•Wealth management income increased by $5.0 million due to strong market performance and growth in managed assets, both organically and through the acquisition of two registered investment advisory firms since September 2023 with total assets under management of $151 million. From the Merger, the Company generated an additional $3.2 million in wealth management income.

•Swap fee income increased by $637 thousand as swap fee income will fluctuate based on market conditions and client demand.

•Mortgage banking income increased by $1.2 million. Mortgage loans sold totaled $45.8 million in 2024, which included a $7.2 million portfolio sold to another institution, compared to $23.8 million during 2023.

•Other income decreased by $204 thousand due primarily to a gain of $1.2 million from the sale of the Bank's Path Valley branch during 2023, partially offset by $408 thousand of solar tax credit income recognized in 2024.

•The gain on investment securities in 2024 was due to a $4.6 million security redemption, resulting in a gain of $181 thousand and the mark-to-market activity on an equity security. During 2023, the Company sold three U.S. Treasury securities with a principal balance of $19.9 million for a nominal gain and six securities issued by state and political subdivisions with a principal balance of $2.2 million for a net loss of $44 thousand.

•Other line items within noninterest income showed fluctuations attributable to normal business operations and the impact of the Merger.

Noninterest Expenses

The following table compares noninterest expenses for 2025, 2024 and 2023.

$ Change % Change

2025 versus 2024

Noninterest expenses increased by $1.1 million from 2024 to 2025. The following were other significant factors in the net increase:

•Data processing expense decreased by $1.8 million due to the reduction in core system costs following a system conversion in the fourth quarter of 2024.

•Professional services expense increased by $3.4 million due to higher utilization of consultants and other third-party service providers during 2025 to enhance daily functions and operational processes throughout the organization following the Merger and system conversions.

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•Directors' compensation expense increased by $439 thousand due to the addition of one non-employee and new restricted stock awards granted during 2025. Prior grants awarded to the directors vested on the Merger date and the accelerated amortization of the restricted stock awards were included in merger-related expenses in 2024.

•Expenses associated with taxes other than income increased by $1.9 million based on the increase in estimated state shares tax expense after the Merger.

•Intangible asset amortization expense increased by $4.0 million due to the amortization recognized on the core deposit intangible and wealth customer relationship intangible established from the Merger.

•The provision for legal settlement declined because, in 2024, the Company agreed to settle a litigation matter for $478 thousand.

•Merger-related expenses decreased by $20.1 million. The Merger costs incurred during 2025 included software conversion costs and professional fees, including external audit, associated with the conversion. The Company did not incur merger-related expenses during the third and fourth quarters of 2025.

•Restructuring expense of $91 thousand in 2025 was related to the closure of six branch locations during the fourth quarter of 2024.

•Other operating expenses increased by $2.1 million partially due to an increase in credit valuation adjustments on derivatives of $539 thousand. The remaining change is attributed to the impact of the Merger and normal business operations, which included increases of $484 thousand in insurance expenses, $362 thousand in postage charges and $184 thousand in telecommunication expenses.

•Other line items within noninterest expense showed fluctuations attributable to normal business operations and the impact of the Merger.

2024 versus 2023

Noninterest expenses increased by $64.5 million from 2023 to 2024. The primary driver of the overall increase was the impact of the Merger. The following were significant factors in the net increase:

•Merger-related expenses increased by $21.6 million, which primarily included employee separation costs, vendor contract terminations and professional fees incurred in connection with the Merger.

•Salaries and employee benefits expense includes a $4.8 million charge associated with the retirement of an executive.

•Data processing expense increased by $1.2 million due to the use of two core processing systems. The system conversion process was completed in November 2024.

•Intangible asset amortization increased by $4.8 million due to the amortization expense recognized on the core deposit intangible and customer relationship intangible recorded as a result of the Merger.

•The Company agreed to settle a litigation matter, which resulted in a provision for legal settlement of $478 thousand in the fourth quarter of 2024.

•Restructuring expense of $296 thousand was recorded due to the closure of six branch locations during the fourth quarter of 2024.

•Other line items within noninterest expense showed fluctuations attributable to normal business operations and the impact of the Merger.

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Income tax expense totaled $21.8 million, $5.8 million and $9.4 million for 2025, 2024 and 2023, respectively. The effective tax rate for 2025 was 21.2% compared with 20.7% for 2024 and 20.8% for 2023. The Company’s effective tax rate is greater than the 21% federal statutory rate at December 31, 2025 primarily due to the disallowed portion of interest expense against earnings in association with the Bank's tax-exempt investments under the Tax Equity and Fiscal Responsibility Act of 1982 and an increase in non-deductible expenses. This increase in the effective tax rate was partially offset by the benefit of tax-exempt income, including interest earned on tax-exempt loans and securities and income from life insurance policies and tax credits. For 2024 and 2023, the effective tax rate is less than the 21% federal statutory rate due to tax-exempt income, including interest earned on tax-exempt loans and investment securities and income from life insurance policies and tax credits. The rate in 2025 was impacted by an increase in certain non-deductible expenses and a marginal increase in tax-exempt interest income compared to the significant increase in pre-tax income, so the relative benefit of deductions to taxable income decreased year-over-year. The rate in 2024 was impacted by non-deductible merger-related expenses, which were greater than in 2023. With the rising interest rates, each year was impacted by the portion of interest expense disallowed as a deduction against earnings under the TEFRA and an increase in state taxes as a result of a greater percentage of taxable income earned in a state with a state income tax.

Note 8, Income Taxes, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data," includes a reconciliation of our federal statutory tax rate to the Company's effective tax rate, which is a meaningful comparison between years and measures income tax expense as a percentage of pretax income.

Financial Condition

Management devotes substantial time to overseeing the investment in and costs to fund loans and investment securities through deposits and borrowings as well as the formulation and adherence to policies directed toward enhancing profitability and managing the risks associated with these investments.

Investment Securities

The Company utilizes investment securities to manage interest rate risk and liquidity, enhance income through interest and dividend income and collateralize certain deposits and borrowings.

The Company has established investment policies and an asset management policy to assist in administering its investment portfolio. Decisions to purchase or sell these securities are based on economic conditions and management’s strategy to respond to changes in interest rates, liquidity, pledges to secure deposits and repurchase agreements and other factors while trying to maximize return on the investments. The Company may segregate its investment security portfolio into three categories: “securities held-to-maturity,” “trading securities” and “securities available-for-sale.” At December 31, 2025, 2024 and 2023, management classified the entire investment securities portfolio as AFS, which is accounted for at current market value with non-credit losses and gains reported in OCI, net of income taxes.

The Company's investment securities portfolio includes debt investments that are subject to varying degrees of credit and market risks, which arise from general market conditions, and factors impacting specific industries, as well as news that may impact specific issues. Management monitors its debt securities, using various indicators in determining whether unrealized losses on debt securities are credit-related and require an ACL. These indicators include the amount of time the security has been in an unrealized loss position, the cause and extent of the unrealized loss and the credit quality of the issuer and underlying assets. In addition, management assesses whether it is likely the Company will have to sell the investment security prior to recovery, or it expects to be able to hold the investment security until the price recovers. The Company determined that the declines in market value were due to increases in interest rates and market movements, and not due to credit factors. The Company does not intend to sell these securities with unrealized losses and it is more likely than not that the Company will not be required to sell them before recovery of their amortized cost basis, which may be maturity. Therefore, the Company has concluded that the unrealized losses on the AFS securities did not require an ACL at December 31, 2025, 2024 and 2023.

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The following table summarizes the fair value of AFS securities at December 31, 2025, 2024 and 2023.

At December 31, 2025, AFS securities totaled $952.7 million, an increase of $123.0 million from $829.7 million at December 31, 2024. During 2025, the Company purchased $272.3 million in investment securities, which included $239.8 million of agency MBS and CMO securities, $31.4 million of non-agency CMOs and $1.1 million of securities issued by state and political subdivisions. This increase was partially offset by paydowns of $84.1 million and sales of $83.8 million, which included $78.8 million of GSE residential MBS and CMO securities and $5.0 million of U.S. Treasury securities. The purchase and sale activity during the period was to redeploy funds into higher yielding assets based on market opportunities as well as to manage balance sheet positioning.

The balance of investment securities included net unrealized losses of $19.4 million at December 31, 2025 compared to net unrealized losses of $35.2 million at December 31, 2024. The decrease of $15.8 million in net unrealized losses was primarily due to lower market rates compared to December 31, 2024. The overall duration of the Company's investment securities portfolio was 4.6 years at December 31, 2025 compared to 4.1 years at December 31, 2024. The Company has sufficient access to liquidity such that management does not believe it would be necessary to sell any of its investment securities at a loss to offset any unexpected deposit outflows. Management believes the structure of the Company's investment security portfolio is appropriately aligned with the rest of the balance sheet to protect against volatile interest rate environments, to provide a source of liquidity and to generate steady earnings.

At December 31, 2024, AFS securities totaled $829.7 million, an increase of $316.2 million, from $513.5 million at December 31, 2023. Pursuant to the Merger, the Company acquired AFS securities with a fair value totaling $327.1 million. To align with the Company's investment strategy and to achieve higher yielding results, $162.7 million of the acquired AFS securities were sold, which included $91.5 million of MBS and CMO's, $27.1 million of corporate debt securities, $24.4 million of securities issued by state and political subdivisions and $19.7 million of securities issued by U.S. government agencies. The sales resulted in no gain or loss as the securities were sold at book value due to the proximity of the sales to the closing date of the Merger. Most of the proceeds from the sales of the acquired AFS securities were reinvested. During 2024, the Company purchased investment securities totaling $227.1 million, which included $224.8 million of agency MBS and CMO securities, $1.5 million of non-agency CMO securities and $788 thousand of investment securities issued by state and political subdivisions. In addition, calls of non-agency CMO securities totaled $18.0 million and there were paydowns of $58.2 million. The balance of investment securities included net unrealized losses of $35.2 million at December 31, 2024 compared to net unrealized losses of $35.6 million at December 31, 2023 for a decrease of $361 thousand. This decrease in net unrealized losses was primarily due to lower treasury rates and narrower credit spreads compared to December 31, 2023.

The following table shows the maturities of investment securities at book value at December 31, 2025, and weighted average yields of such investment securities. Yields are shown on a tax equivalent basis, assuming a 21% federal income tax rate.

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U.S. Treasury securities

Yield — % 1.07 % — % — % 1.07 %

Average maturity (years) — 2.3 — — 2.3

U. S. Government Agencies

Yield — % — % 5.71 % — % 5.71 %

Average maturity (years) — — 6.0 — 6.0

States and political subdivisions

GSE residential mortgage-backed securities

Average maturity (years) — — 6.7 23.3 23.2

GSE commercial mortgage-backed securities

GSE residential CMOs

Average maturity (years) — — 9.4 30.8 30.6

Non-agency CMOs

Average maturity (years) — 3.9 — 30.6 27.2

Asset-backed

Yield — % — % — % 5.20 % 5.20 %

Average maturity (years) — — — 19.4 19.4

Corporate debt

Yield — % 5.38 % — % — % 5.38 %

Average maturity (years) — 2.3 — — 2.3

Other

Book value $ — $ — $ — $ 243 $ 243

Yield — % — % — % — % — %

Average maturity (years) — — — — —

Total

The average maturity is based on the contractual terms of the debt or mortgage-backed securities and does not factor in required repayments or anticipated prepayments. At December 31, 2025, the weighted average estimated life is 27 years for mortgage-backed and CMO securities, and 19 years for asset-backed securities, based on current interest rates and anticipated prepayment speeds. The overall duration of the Company's investment security portfolio is 4.6 years and 4.1 years at December 31, 2025 and 2024, respectively, which is reflective of the duration of the Company's investment security purchases in the latter part of 2025.

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The following table summarizes the credit ratings and collateral associated with the Company's AFS investment securities portfolio, excluding equity securities, at December 31, 2025:

Student Loan ABS — 3,109 3,119 29 — — — — — 100 Seasoned Student Loans

Small Business Administration — 3,330 3,399 — 100 — — — SBA Guarantee (4)

(1) 97% guaranteed by U.S. government

(2) PACE acronym represents Property Assessed Clean Energy loans

(3) Non-agency reverse mortgages with current structural credit enhancements

(4) Guaranteed by U.S. government or U.S government agencies

Loan Portfolio

The Company offers a variety of products to meet the credit needs of its borrowers, principally commercial real estate loans, commercial and industrial loans, retail loans secured by residential properties, and to a lesser extent, installment loans. No loans are extended to non-domestic borrowers or governments.

Generally, the Bank is permitted under applicable law to make loans to single borrowers (including certain related persons and entities) in aggregate amounts of up to 15% of the sum of total capital and excess ACL not included in Tier 2 capital. The Company's policy has established an internal lending limit of $25.0 million to one borrower or a group of borrowers, except for commercial real estate loans, which the Company reduced the internal lending limit to $15.0 million on a per project basis. Credit exposure may be aggregated if loans are under common control or ownership or with common guarantors, for which the internal lending limit is $50.0 million, but not permitted to exceed the regulatory lending limit. These amounts are below the Bank's regulatory lending limit of $86.3 million at December 31, 2025. No borrower had an outstanding exposure exceeding the Bank's legal lending limit at year-end.

The risks associated with lending activities differ among loan segments and classes and are subject to the impact of changes in interest rates, market conditions of collateral securing the loans and general economic conditions. Any of these factors may adversely impact a borrower’s ability to repay loans and also impact the associated collateral. A further discussion on the Company's loan segments and classes, the related risks, ACL and FDM are included in Note 1, Summary of Significant Accounting Policies, and Note 4, Loans and Allowance for Credit Losses, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data."

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The following table presents the loan portfolio, excluding residential LHFS, by segments and classes at December 31 of each of the years set forth below.

Commercial real estate:

Acquisition and development:

Residential mortgage:

Other - term 22,906 — — — —

Total loans increased by $89.5 million to $4.0 billion at December 31, 2025 from $3.9 billion at December 31, 2024. Residential mortgages increased by $59.3 million and commercial loans increased by $30.3 million from December 31, 2024 to December 31, 2025. The increase in residential mortgages included $6.3 million in CRA-related mortgages during the year ended December 31, 2025. The Company purchased property assessed clean energy ("PACE") loans during the second quarter of 2025, which has a balance of $22.9 million at December 31, 2025.

The loan portfolio at December 31, 2024 increased by $1.6 billion to $3.9 billion from $2.3 billion at December 31, 2023. The increase is due to $1.6 billion in loans acquired in the Merger and continued portfolio growth in the commercial loan segment and residential mortgage segment during 2024. During December 2024, the Company sold acquired loans from the Merger with an unpaid principal balance totaling $6.0 million, inclusive of loans on nonaccrual status totaling $2.6 million. The Company recorded charge offs related to the loan sale of $595 thousand, but also recognized accretion of $1.1 million on the associated loan marks in interest income.

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In addition to monitoring the loan portfolio by loan class as noted above, the Company also monitors concentrations by segment. The Bank’s lending policy reports segment concentrations that exceed 20% of the Bank’s total risk-based capital ("RBC"). The following segments met this criterion at December 31, 2025:

Balance % of Total Loans % of Total RBC

Hotels & Motels (including Bed & Breakfast) 185,520 4.6 31.5

Management regularly analyzes the commercial real estate portfolio, which includes the review of occupancy, cash flows, expenses and expiring leases, as well as the location of the real estate. At December 31, 2025, the Company had $344.1 million in loans related to office space. Management believes that the office space portfolio is well-diversified and includes only limited exposure to properties located in major metropolitan markets. The Company does not have any material exposure to office space in the District of Columbia area. In addition, the Company does not have any material exposure to government contractors.

The following table presents expected maturities of loan classes by fixed rate or adjustable-rate categories at December 31, 2025:

Due In

Commercial real estate:

Owner occupied

Non-owner occupied

Multi-family

Non-owner occupied residential

(continued)

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Due In

Acquisition and development:

1-4 family residential construction

Commercial and land development

Agricultural

Commercial and industrial

Municipal

Residential mortgage:

First lien

Home equity - term

Home equity - lines of credit

(continued)

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Due In

Other - term

Adjustable and floating rate — — — — — — %

Installment and other loans

The final maturity is used in the determination of maturity of acquisition and development loans that convert from construction-to-permanent status. Variable rate loans shown above include fixed-to-floating interest rate loans that contractually will adjust with prime or another variable rate index after the interest lock period.

Asset Quality

Risk Elements

The Company’s loan portfolio is subject to varying degrees of credit risk. Credit risk is managed through the Company's underwriting standards, on-going credit reviews, and monitoring of asset quality measures. Additionally, loan portfolio diversification, which limits exposure to a single industry or borrower, and collateral requirements also mitigate the Company's risk of credit loss.

The loan portfolio consists principally of loans to borrowers in south central Pennsylvania and the greater Baltimore, Maryland region. As the majority of loans are concentrated in these geographic regions, a substantial portion of the borrowers' ability to honor their obligations may be affected by the level of economic activity in the market areas.

Nonperforming assets include nonaccrual loans and foreclosed real estate. In addition, loan modifications to borrowers experiencing financial difficulty and loans past due 90 days or more and still accruing are also deemed to be risk assets. For all loan classes, the accrual of interest income on loans, including individually evaluated loans, ceases when principal or interest is past due 90 days or more and collateral is inadequate to cover principal and interest or immediately if, in the opinion of management, full collection is unlikely. Interest will continue to accrue on loans past due 90 days or more if the collateral is adequate to cover principal and interest, and the loan is in the process of collection. Interest accrued, but not collected, as of the date of placement on nonaccrual status, is generally reversed and charged against interest income, unless fully collateralized. Subsequent payments received are either applied to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the ultimate collectability of principal. Loans are returned to accrual status, for all loan classes, when all the principal and interest amounts contractually due are brought current, the loans have performed in accordance with the contractual terms of the note for a reasonable period of time, generally six months, and the ultimate collectability of the total contractual principal and interest is reasonably assured. Past due status is based on contract terms of the loan.

In accordance with ASU 2022-02, the Company is required to evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty and if the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan, which the Company refers to these loans as "financial difficulty modifications" or "FDMs."

Prior to the adoption of ASU 2022-02, loans were classified as TDRs if a concession was granted for legal or economic reasons related to a borrower’s financial difficulties. Concessions granted under a TDR typically involved a temporary deferral of scheduled loan payments, an extension of a loan’s stated maturity date, temporary reduction in interest rates, or below market rates. If a modification occurred while the loan is on accruing status, it would continue to accrue interest under the modified terms. Nonaccrual TDRs were restored to accrual status if scheduled principal and interest payments, under the modified terms, were current for six months after modification, and the borrower continues to demonstrate its ability to meet the modified terms. TDRs were evaluated individually for impairment if they have been restructured during the most recent calendar year, or if they are not performing according to their modified terms.

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The following table presents the Company’s risk elements and relevant asset quality ratios at December 31 of each of the years set forth below:

OREO — 138 — — —

Asset quality ratios:

Total nonperforming assets to total assets 0.51 % 0.45 % 0.83 % 0.70 % 0.23 %

Total risk assets to total loans and OREO 0.75 % 0.76 % 1.11 % 1.01 % 0.43 %

(1) Includes zero, zero, zero, $307 thousand and $214 thousand, respectively, of PCI loans at December 31, 2025, 2024, 2023, 2022 and 2021 in accordance with ASU 310-30. Upon adoption of the CECL standard on January 1, 2023, PCD loans were evaluated on an individual loan level and reported on an individual loan basis under ASU 310-20, Nonrefundable Fees and Other Assets. As of December 31, 2021, there was one loan for $891 thousand, which was in the process of collection and guaranteed by the SBA, and was subsequently collected during the first quarter of 2022.

Nonperforming assets include nonaccrual loans and foreclosed real estate. Risk assets, which include nonperforming assets, FDMs still accruing and loans past due 90 days or more and still accruing, totaled $30.3 million at December 31, 2025, an increase of $537 thousand from $29.8 million at December 31, 2024. Nonaccrual loans increased by $3.9 million from $24.1 million at December 31, 2024 to $28.0 million at December 31, 2025. The increase in nonaccrual loans was due to additions to nonaccrual status of $17.7 million of loans primarily consisting of $11.9 million in commercial loans, $3.5 million in residential mortgages and $2.3 million in consumer loans. This increase was partially offset by repayments totaling $12.0 million and gross charge offs of $1.8 million.

At December 31, 2025, the Company had loan modifications meeting the FDM criteria under ASU 2022-02 totaling $6.3 million compared to $9.3 million at December 31, 2024. The FDM balance included $5.5 million in new loan modifications during 2025, partially offset by a partial charge-off of $132 thousand and the remaining change in FDM due to repayments. There were $5.0 million in FDM loans in nonaccrual status at December 31, 2025, including one relationship totaling $4.6 million, compared to $4.6 million at December 31, 2024.

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The following table presents the amortized cost basis of nonaccrual loans, according to loan class, with and without reserves on individually evaluated loans at December 31, 2025 and 2024. At December 31, 2025, there was a specific reserve of $2 thousand on nonaccrual loans, excluding the ACL recorded on acquired PCD loans from the Merger, compared to $7 thousand at December 31, 2024.

Commercial real estate:

Acquisition and development:

1-4 family residential construction — — — — — — — —

Municipal — — — — — — — —

Residential mortgage:

Other - term — — — 346 — — — —

Installment and other loans 2 — 2 5 15 10 25 —

The following table presents our exposure to relationships that are individually evaluated and the partial charge-offs taken to date and specific reserves established on those relationships at December 31, 2025 and 2024:

# ofRelationships RecordedInvestment PartialCharge-offsto Date SpecificReserves

The Company takes partial charge-offs on collateral-dependent loans when carrying value exceeds estimated fair value, as determined by the most recent appraisal adjusted for current (within the quarter) conditions, less costs to dispose. Specific reserves remain in place if updated appraisals are pending, and represent management’s estimate of potential loss.

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Internal loan reviews are completed annually on all commercial relationships with a committed loan balance in excess of $2.0 million, which includes confirmation of risk rating by an independent credit officer. In addition, all commercial relationships greater than $500 thousand rated special mention, substandard, doubtful or loss are reviewed quarterly and corresponding risk ratings are reaffirmed by the Company's Problem Loan Committee, with subsequent reporting to the Management ERM Committee and the Board ERM Committee.

In its individually evaluated loan analysis, the Company determines the extent of any full or partial charge-offs that may be required, or any reserves that may be needed. The determination of the Company’s charge-offs or specific reserve include an evaluation of the outstanding loan balance and the related collateral securing the credit. Through a combination of collateral securing the loans and partial charge-offs taken to date, the Company believes that it has adequately provided for the potential losses that it may incur on these relationships at December 31, 2025. However, over time, additional information may result in increased reserve allocations or, alternatively, it may be deemed that the reserve allocations exceed those that are needed.

Credit Risk Management

Allowance for Credit Losses

The Company maintains the ACL at a level deemed adequate by management for expected credit losses. As disclosed in Note 1, Summary of Significant Accounting Policies, and Note 4, Loans and Allowance for Credit Losses, on January 1, 2023 the Company implemented CECL and increased the ACL with a cumulative-effect adjustment to the ACL of $2.4 million. In addition, the Company recorded a cumulative-effect adjustment to the ACL for off-balance sheet exposures of $100 thousand. The Company’s ACL is calculated quarterly, with any adjustment recorded to the provision for credit losses in the consolidated statement of income. A comprehensive analysis of the ACL is performed by the Company on a quarterly basis. Management evaluates the adequacy of the ACL utilizing a defined methodology to determine if it properly addresses the current and expected risks in the loan portfolio, which considers the performance of borrowers and specific evaluation of individually evaluated loans, including historical loss experiences, trends in delinquencies, nonperforming loans and other risk assets, and the qualitative factors. Risk factors are continuously reviewed and adjusted, as needed, by management when conditions support a change. Management believes its approach properly addresses relevant accounting and bank regulatory guidance for loans both collectively and individually evaluated. The results of the comprehensive analysis, including recommended changes, are governed by the Company's Reserve Adequacy Committee and subsequently presented to the Enterprise Risk Management Committee.

The ACL is evaluated based on a review of the collectability of loans in light of historical experience; the nature and volume of the loan portfolio; adverse situations that may affect a borrower’s ability to repay; estimated value of any underlying collateral; and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. A description of the methodology for establishing the allowance and provision for credit losses and related procedures in establishing the appropriate level of reserve is included in Note 4, Loans and Allowance for Credit Losses, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data."

The Special Mention classification is intended to be a temporary classification reflective of loans that have potential weaknesses that may, if not monitored or corrected, weaken the asset or inadequately protect the Company’s position at some future date. Special mention loans represent an elevated risk, but their weakness does not yet justify a more severe, or classified, rating. These loans require inquiry by lenders on the cause of the potential weakness and, once analyzed, the loan classification may be downgraded to Substandard or, alternatively, could be upgraded to Pass.

Special mention loans increased by $16.6 million from $91.7 million at December 31, 2024 to $108.3 million at December 31, 2025 primarily due to net downgrades of $57.3 million. This increase was partially offset by repayments of $40.7 million. Classified loans totaled $58.4 million at December 31, 2025, or 1.5% of total loans outstanding, compared to $88.6 million, or 2.3% of total loans outstanding, at December 31, 2024.

Non-IEL substandard loans are performing loans, which have characteristics that cause management concern over the ability of the borrower to perform under present loan repayment terms and which may result in the reporting of these loans as nonperforming, or individually evaluated, loans in the future. Generally, management feels that substandard loans that are currently performing and not considered individually evaluated result in some doubt as to the borrower’s ability to continue to perform under the terms of the loan, and represent potential problem loans. Non-IEL substandard loans totaled $30.2 million at December 31, 2025, a decrease of $34.2 million compared to $64.4 million at December 31, 2024 due primarily to repayments of $23.4 million and net upgrades of $10.8 million. The Substandard-IEL category increased by $3.9 million from $24.3 million at December 31, 2024 to $28.2 million at December 31, 2025 due to net downgrades of $7.1 million, partially offset by charge-offs of $1.7 million and the remaining amount due to repayments.

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The following table summarizes asset quality ratios for years ended December 31, 2025, 2024, 2023, 2022 and 2021.

The following table details net charge-offs (recoveries) to average loans outstanding, excluding LHFS, by loan category for the years ended December 31, 2025, 2024 and 2023:

Commercial real estate:

Net charge-offs (recoveries) $ 321 $ 606 $ (98)

Net charge-offs (recoveries)/average loans 0.01 % 0.03 % (0.01) %

Acquisition and development:

Net recoveries (2) (16) (5)

Net recoveries/average loans — % (0.01) % — %

Agricultural

Net charge-offs 31 37 —

Net charge-offs/average loans 0.02 % 0.05 % — %

Commercial and industrial:

Net charge-offs/average loans 0.03 % 0.64 % 0.19 %

Municipal:

Net charge-offs (recoveries) — — —

Net charge-offs (recoveries)/average loans — % — % — %

Residential mortgage:

Net (recoveries) charge-offs (29) (15) (95)

Net (recoveries) charge-offs /average loans — % — % (0.02) %

Installment and other loans:

Net charge-offs/average loans 3.82 % 0.94 % 1.19 %

Total loans:

Net charge-offs/average loans 0.03 % 0.11 % 0.03 %

The ACL totaled $47.7 million at December 31, 2025, a $1.0 million decrease from $48.7 million at December 31, 2024, resulting primarily from net charge-offs of $1.1 million for 2025. At December 31, 2025, the ACL as a percentage of the total loan portfolio was 1.19% compared to 1.24% at December 31, 2024 and 1.25% at December 31, 2023. The Company recorded a provision for credit losses on loans of $126 thousand, $17.4 million and $1.7 million in 2025, 2024 and 2023, respectively.

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For the years ended December 31, 2025 and 2024, gross recoveries of $1.4 million and $725 thousand, respectively, were credited to the ACL. These recoveries on previously charged-off relationships are the result of successful loan monitoring and workout solutions. Recoveries received will be used to replenish the ACL. Recoveries favorably impact historical charge-off factors, and contribute to changes in the quantitative and qualitative factors used in our allowance adequacy analysis. However, as the loan portfolio continues to grow, future provisions for credit losses may result.

The Company takes partial charge-offs on collateral-dependent loans when carrying value exceeds estimated fair value, as determined by the most recent appraisal adjusted for current (within the quarter) conditions, less costs to dispose. Specific reserves remain in place if updated appraisals are pending, and represent management’s estimate of potential loss. In addition to the reserve allocations on individually evaluated loans noted above, 27 loans, with aggregate outstanding principal balances of $4.4 million, have had cumulative partial charge-offs to the ACL totaling $1.5 million at December 31, 2025. As updated appraisals were received on collateral-dependent loans, partial charge-offs were taken to the extent the loans’ principal balance exceeded their fair value.

The following table shows the allocation of the ACL by loan class, as well as the percent of each loan class in relation to the total loan balance at December 31, 2025, 2024, and 2023 and the allocation of the ALL by loan class, as well as the percent of each loan class in relation to the total loan balance at December 31, 2022 and 2021.

Commercial real estate:

Acquisition and development:

Residential mortgage:

Home equity - term 62 — % 56 — % 23 — % 32 — % 31 — %

Other - term — 1 % — — % — — % — — % — — %

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The information presented in the table below is not required for periods subsequent to the adoption of CECL. The following table summarizes the ALL allocation for loans individually and collectively evaluated for impairment by loan segment at December 31, 2022. Accruing PCI loans are excluded from loans individually evaluated for impairment.

Commercial Consumer

Loans allocated by:

Allowance for credit losses allocated by:

Individually evaluated for impairment $ — $ — $ — $ — $ — $ 28 $ — $ 28 $ — $ 28

Management believes the allocation of the ACL among the various loan classes adequately reflects the life expected credit losses in each loan class and is based on the methodology outlined in Note 1, Summary of Significant Accounting Policies, and Note 4, Loans and Allowance for Credit Losses, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data." Management re-evaluates and makes enhancements to its reserve methodology to better reflect the risks inherent in the different segments of the portfolio, particularly in light of increased charge-offs, with noticeable differences between the different loan classes. Management believes these enhancements to the ACL methodology improve the accuracy of quantifying the expected credit losses inherent in the portfolio. Management charges actual loan losses to the reserve and bases the provision for credit losses on its overall analysis.

Management believes the Company’s ACL is adequate based on currently available information. Future adjustments to the ACL and enhancements to the methodology may be necessary due to changes in economic conditions, regulatory guidance, or management’s assumptions as to future delinquencies or loss rates.

Deposits

Total deposits decreased by $94.3 million to $4.5 billion at December 31, 2025 from $4.6 billion at December 31, 2024. Time deposits and non-interest bearing demand deposits decreased by $90.9 million and $23.3 million, respectively, partially offset by an increase in interest bearing demand deposits and money market and savings deposits of $14.2 million and $5.6 million, respectively, from December 31, 2024 to December 31, 2025. The Bank has experienced some reductions in higher yielding promotional balances, which was the primary driver of the declines in time deposit accounts. The decreases in the other categories were consistent with normal seasonal activity.

Total deposits grew by $2.1 billion to $4.6 billion at December 31, 2024 from $2.6 billion at December 31, 2023, which included $1.9 billion in deposits assumed from the Merger. During 2024, time deposits increased by $586.4 million from $406.5 million at December 31, 2023 to $992.9 million at December 31, 2024, which included $536.0 million of time deposits assumed in the Merger. The remaining increase is due to the success of promotional offerings of up to 18-month terms.

Management evaluates its utilization of brokered deposits, taking into consideration the Bank's policies and the interest rate curve and balances this funding source with its funding needs based on growth initiatives. The Company anticipates that loan growth will be funded through deposit generation by offering competitive rates, as well as utilization of FHLB borrowings. Brokered money market deposit balances were $45.2 million and $8.1 million at December 31, 2025 and 2024, respectively. Brokered time deposits totaled $50.6 million and zero at December 31, 2025 and 2024, respectively.

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The following table presents average deposits for years ended December 31, 2025, 2024 and 2023.

The Company had time deposits that met or exceeded the FDIC insurance limit of $250,000 of $147.8 million and $170.1 million at December 31, 2025 and 2024, respectively. At December 31, 2025, the scheduled maturities of time deposits that met or exceeded the FDIC insurance limit or otherwise uninsured were as follows:

Three months or less $ 25,457

Over three months through six months 50,807

Over six months through one year 68,292

Borrowings

In addition to deposits, the Company uses borrowing sources to meet liquidity needs and for temporary funding. Sources of short-term borrowings include the FHLB of Pittsburgh, federal funds purchased and the FRB discount window. Short-term borrowings also may include securities sold under agreements to repurchase with deposit clients, in which a client sweeps a portion of a deposit balance into a repurchase agreement, which is a secured borrowing with a pool of securities pledged against the balance.

The Company also utilizes long-term debt, consisting principally of FHLB fixed and amortizing advances, to fund its balance sheet with original maturities greater than one year. Prior to entering into long-term borrowings, the Company evaluates its funding needs, interest rate movements, the cost of options, and the availability of attractive structures.

On September 30, 2025, the Company redeemed its $32.5 million outstanding 6.0% fixed-to-floating rate subordinated notes due December 30, 2028. At redemption, the variable interest rate of three-month CME term SOFR rate, plus a spread adjustment of 0.26161% and a margin of 3.16%, on the subordinated debt was 7.72%. During the year ended December 31, 2025 and 2024, amortization expense of the debt issuance costs totaled $335 thousand and $81 thousand, respectively.

FHLB advances and other borrowings increased by $159.3 million to $274.7 million at December 31, 2025 compared to $115.4 million at December 31, 2024. The increase was due to higher utilization of borrowings during 2025 as lending and investing activities increased and due to the subordinated note redemption. The Bank seeks to maintain sufficient liquidity to ensure client needs can be addressed in a timely basis.

The Company assumed Codorus Valley's unsecured subordinated notes that were issued in December 2020 in the amount of $31.0 million. The subordinated notes had a fixed rate of interest equal to 4.50% until December 30, 2025. After that date, the variable rate of interest is equal to the three-month CME term SOFR rate plus 4.04%, which was 8.06% at December 31, 2025.

The Company also assumed junior subordinated trust preferred debt of $10.3 million from the Merger. In June 2006, Codorus Valley formed CVB Statutory Trust No. II, a wholly-owned special purpose entity whose sole purpose was to facilitate a pooled trust preferred debt issuance of $7.2 million with a stated maturity of July 7, 2036 and a variable rate of three-month CME term SOFR rate, plus a spread adjustment of 0.26161% and a margin of 1.54% through maturity. In November 2004, Codorus Valley formed CVB Statutory Trust No. I to facilitate a pooled trust preferred debt issuance of $3.1 million with a stated maturity of December 15, 2034 and a variable rate of three-month CME term SOFR rate, plus a spread adjustment of 0.26161% and a margin of 2.02% through maturity. For the year ended December 31, 2025 and 2024, the cost of the trust preferred debt, excluding the fair value mark, was 6.24% and 7.08%, respectively.

For additional information about borrowings, refer to Note 13, Short-Term Borrowings, Note 14, Long-Term Debt, and Note 15, Subordinated Notes, to the Consolidated Financial Statements appearing in Part II, Item 8, "Financial Statements and Supplementary Data."

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Shareholders' Equity

Capital management in a regulated financial services industry must properly balance return on equity to its shareholders while maintaining sufficient levels of capital and related risk-based regulatory capital ratios to satisfy statutory regulatory requirements. The Company’s capital management strategies have been developed to provide attractive rates of returns to its shareholders, while remaining “well-capitalized” under applicable banking regulations.

Shareholders’ equity totaled $591.5 million at December 31, 2025, an increase of $74.9 million from $516.7 million at December 31, 2024. The increase in 2025 was primarily attributable to net income of $80.9 million, other comprehensive income of $11.1 million and the issuance of treasury shares for share-based compensation which increased shareholders' equity of $3.5 million, partially offset by dividends paid of $20.6 million.

For the year ended December 31, 2025, total comprehensive income was $92.0 million, an increase of $67.8 million from total comprehensive income of $24.2 million for the same period in 2024. This increase was primarily due to an increase in net income of $58.8 million and an increase in after-tax unrealized gains on AFS securities of $11.9 million, partially offset by an increase in after-tax unrealized losses on interest rate swaps designated as cash flow hedges of $2.2 million between the comparative periods. The increase in net unrealized gains on investment securities was primarily caused by a decline in market rates.

At December 31, 2025, book value per common share was $30.32 per share compared to $26.65 per share at December 31, 2024. Tangible book value per share increased from $21.19 per share at December 31, 2024 to $25.21 per share at December 31, 2025, primarily as a result of the increase in shareholders' equity from net income. See “Supplemental Reporting of Non-GAAP Measures.”

On June 20, 2025, the Board of Directors of the Company authorized a share repurchase program pursuant to which the Company could repurchase up to 500,000 shares of its outstanding common stock in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act, as amended. When and if appropriate, repurchases may be made in the open market or privately negotiated transactions, depending on market conditions, regulatory requirements and other corporate considerations, as determined by management. Share repurchases may not occur and may be discontinued at any time. For the year ended December 31, 2025, the Company repurchased 8,330 shares of its common stock. Common stock available for future repurchase totals 491,670 shares, or 2.5% of the Company's outstanding common stock at December 31, 2025.

The following table includes additional information for shareholders’ equity for the years ended December 31, 2025, 2024 and 2023.

Average equity to average assets ratio 10.08 % 9.08 % 8.11 %

Capital Adequacy and Regulatory Matters

Capital management in a regulated financial services industry must properly balance return on equity to its shareholders while maintaining sufficient levels of capital and related risk-based regulatory capital ratios to satisfy statutory regulatory requirements. The Company’s capital management strategies have been developed to provide attractive rates of returns to its shareholders, while remaining “well-capitalized” under applicable banking regulations.

The Parent Company and the Bank both have met all capital adequacy requirements to which they are subject at December 31, 2025 and 2024. At December 31, 2025 and 2024, the Parent Company and the Bank were considered well-capitalized under applicable banking regulations.

The Company routinely evaluates its capital levels in light of its risk profile to assess its capital needs. The Company and the Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. At December 31, 2025 and 2024, the Bank was considered well-capitalized under applicable banking regulations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting

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practices. Prompt corrective action provisions are not applicable to bank holding companies, including financial holding companies.

In addition to the minimum capital ratio requirement and minimum capital ratio to be well-capitalized presented in the tables in Note 17, we must maintain a capital conservation buffer as noted in Item 1 - Business under the topic Basel III Capital Rules. At December 31, 2025, the Parent Company's and the Bank's capital conservation buffer, based on the most restrictive capital ratio, was 5.3% and 5.3%, respectively, which are above the regulatory requirement of 2.50% at December 31, 2025.

Tables presenting the Parent Company’s and the Bank’s capital amounts and ratios at December 31, 2025 and 2024 are included in Note 17, Shareholders' Equity and Regulatory Capital, to the Consolidated Financial Statements appearing in Part II, Item 8, "Financial Statements and Supplementary Data."

Liquidity and Rate Sensitivity

Liquidity. The primary function of asset/liability management is to ensure adequate liquidity and manage the Company’s sensitivity to changing interest rates. Liquidity management involves the ability to meet the cash flow requirements of clients who may be either depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. The Company's primary sources of funds consist of deposit inflows, loan repayments, borrowings from the FHLB of Pittsburgh and maturities and prepayments of investment securities. While maturities and scheduled amortization of loans and investment securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

The Company regularly adjusts its investments in liquid assets based upon its assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and investment securities and the objectives of its asset/liability management policy. The Company's most liquid assets are cash and cash equivalents.

At December 31, 2025, cash and cash equivalents totaled $149.8 million compared with $248.9 million at December 31, 2024. The decrease of $99.1 million reflects the increase in the book value of investment securities of $107.2 million, the decrease in deposits of $94.3 million, the increase in loans of $89.5 million and the redemption of subordinated notes of $31.6 million, partially offset by an increase in FHLB advances and other borrowings and repurchase agreements of $158.0 million and net income of $80.9 million.

Unencumbered investment securities totaled $396.2 million at December 31, 2025 compared to $160.5 million at December 31, 2024. At December 31, 2025, the Company had $88.8 million of investment securities pledged at the FRB Discount Window with no associated borrowings outstanding compared to $15.9 million at December 31, 2024. The Company's maximum borrowing capacity from the FHLB of Pittsburgh was $2.0 billion, of which $275.0 million in advances and letters of credit were outstanding at December 31, 2025 compared to a maximum borrowing capacity of $1.9 billion and $116.6 million in advances and letters of credit outstanding at December 31, 2024. The increase was due to higher utilization of overnight borrowings during 2025 as lending and investing activities increased and also due to the subordinated note redemption.

The Company’s ability to borrow from the FHLB is dependent on having sufficient qualifying collateral, which generally consists of mortgage loans and mortgage-backed debt securities. In addition, the Company had $10.0 million in available unsecured lines of credit with one bank at December 31, 2025 compared to $20.0 million with two banks at December 31, 2024. The Bank regularly tests its various sources of funding to ensure accessibility.

At December 31, 2025, outstanding loan commitments totaled $1.5 billion, which included $350.7 million in undisbursed loans, $539.3 million in unused home equity lines of credit, $597.0 million in commercial lines of credit, and $37.2 million in letters of credit. Time deposits due within one year after December 31, 2025 totaled $807.2 million, or 89% of time deposits, which includes clients with longer-term time deposits nearing maturity and time deposits with promotional offers with terms of 18 months or less. If these maturing deposits do not remain with the Company, it may be required to seek other sources of funds, including other time deposits and lines of credit. The Company has the ability to attract and retain deposits by adjusting the interest rates it offers.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its shareholders and interest on its borrowings. The Company also has repurchased shares of its common stock. The Company’s primary source of income is dividends received from the Bank. Restrictions on the Bank’s ability to dividend funds to the Company are described in Note 17, Shareholders' Equity and Regulatory Capital, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data."

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Interest Rate Sensitivity. Interest rate sensitivity management requires the maintenance of an appropriate balance between interest sensitive assets and liabilities. Management, through its asset/liability management process, attempts to manage the level of repricing and maturity mismatch so that fluctuations in net interest income are maintained within policy limits in current and expected market conditions. For further discussion, see Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk."

Contractual Obligations

The Company enters into contractual obligations in the normal course of business to fund loan growth, for asset/liability management purposes, to meet required capital needs and for other corporate purposes. The following table presents significant fixed and determinable contractual obligations of principal by payment date at December 31, 2025.

Further discussion of the nature of each obligation is in the referenced Note to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data" referenced in the following table.

Payments Due

NoteReference Less than 1year 2-3 years 4-5 years More than5 years Total

The contractual obligations table above does not include off-balance sheet commitments to extend credit that are detailed in the following section. These commitments generally have fixed expiration dates and many will expire without being drawn upon. Therefore, the total commitment does not necessarily represent future cash requirements and is excluded from the contractual obligations table.

Off-Balance Sheet Arrangements

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its clients. These financial instruments include commitments to extend credit and standby letters of credit.

The following table details significant commitments at December 31, 2025:

Contract or NotionalAmount

Commitments to fund:

Home equity lines of credit $ 539,336

1-4 family residential construction loans 93,905

Commercial real estate, construction and land development loans 256,806

Commercial, industrial and other loans 597,023

Standby letters of credit 37,241

A discussion of the nature, business purpose, and guarantees that result from the Company’s off-balance sheet arrangements is included in Note 19, Financial Instruments with Off-Balance Sheet Risk, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data."

Recently Adopted and Recently Issued Accounting Standards

Recently adopted and recently issued accounting standards are described in Note 1, Summary of Significant Accounting Policies, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data."

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Supplemental Reporting of Non-GAAP Measures

Management believes providing certain “non-GAAP” information will assist investors in their understanding of the effect on recent financial results from non-recurring charges.

As a result of acquisitions, the Company had intangible assets consisting of goodwill and core deposit and other intangible assets totaling $107.7 million, $115.9 million and $21.1 million at December 31, 2025, 2024 and 2023, respectively.

The Company incurred merger-related expenses of $2.6 million for the year ended December 31, 2025. For the year ended December 31, 2024, the Company incurred merger-related expenses of $22.7 million, a provision for non-PCD loans of $15.5 million, expenses for the retirement of an executive of $4.8 million and a provision for legal settlement of $478 thousand. During the year ended December 31, 2023, the Company incurred merger-related expenses of $1.1 million.

Tangible book value per common share and the impact of the merger-related and other non-recurring expenses on net income and associated ratios, as used by the Company in this supplemental reporting presentation, are determined by methods other than in accordance with GAAP. While the Company's management believes this information is a useful supplement to the GAAP-based measures reported in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, readers are cautioned that this non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results and financial condition as reported under GAAP, nor are such measures necessarily comparable to non-GAAP performance measures that may be presented by other companies. This supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to be determined in accordance with GAAP.

The increase in tangible book value per share (non-GAAP) from December 31, 2024 to December 31, 2025 is primarily due to net income of $80.9 million, other comprehensive income of $11.1 million and the issuance of treasury shares for share-based compensation which increased shareholders' equity of $3.5 million, partially offset by dividends paid of $20.6 million. Other comprehensive income increased due to net unrealized gains on AFS securities, partially offset by net unrealized losses on interest rate swaps designated as hedging instruments.

The increase in tangible book value per share (non-GAAP) in 2024 compared to 2023 was primarily due to the goodwill and other intangibles from the Merger, partially offset by the increase in shareholders' equity from the common stock issued to acquire Codorus Valley of $233.4 million.

The following tables present the computation of each non-GAAP based measure shown together with its most directly comparable GAAP-based measure.

(Dollars, except per share amounts, and shares in thousands) 2025 2024 2023

Tangible book value per common share

Tangible book value per share (non-GAAP) $ 25.21 $ 21.19 $ 23.03

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Adjusted Net Income and Adjusted Diluted Earnings Per Share December 31,

(Dollars, except per share amounts, and shares in thousands) 2025 2024 2023

Plus: Executive retirement expenses — 4,793 —

Plus: Provision for credit losses on non-PCD loans — 15,504 —

Plus: Provision for legal settlement — 478 —

Diluted earnings per share, adjusted (non-GAAP) $ 4.28 $ 3.76 $ 3.51

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk comprises exposure to interest rate risk, foreign currency exchange rate risk, commodity price risk, and other relevant market rate or price risks. In the banking industry, a major risk exposure is changing interest rates. The primary objective of monitoring our interest rate sensitivity, or risk, is to provide management the tools necessary to manage the balance sheet to minimize adverse changes in net interest income as a result of changes in the direction and level of interest rates. FRB monetary control efforts, the effects of deregulation, economic uncertainty and legislative changes have been significant factors affecting the task of managing interest rate sensitivity positions in recent years.

Interest Rate Risk

Interest rate risk represents the potential impact of changes in market interest rates on the Bank’s net interest income over the short term and on the economic value of its balance sheet over the longer term. This risk arises primarily from differences in the timing and magnitude of repricing between interest‐earning assets and interest‐bearing liabilities, as well as from customer behaviors such as loan prepayments and deposit repricing sensitivity.

We attempt to manage the level of repricing and maturity mismatch through our asset/liability management process so that fluctuations in net interest income are maintained within policy limits across a range of market conditions, while satisfying liquidity and capital requirements. Management recognizes that assuming a measured level of interest rate risk is inherent to banking and necessary to support sustainable profitability. Accordingly, the Bank seeks to balance earnings stability with acceptable exposure to changes in market interest rates, rather than eliminate interest rate risk entirely. Thus, the goal of interest rate risk management is to evaluate the amount of reward for taking risk and adjusting both the size and composition of the balance sheet relative to the level of reward available for taking risk.

Management endeavors to control the exposure to changes in interest rates by understanding, reviewing and making decisions based on its risk position. The Bank manages its interest rate risk through a combination of balance sheet structure and selective use of funding and hedging instruments, including the composition and duration of the investment securities portfolio, the maturity structure of FHLB advances, interest rate swaps and brokered deposits. Additionally, pricing, promotion and product development activities are directed in an effort to emphasize the loan and deposit term or repricing characteristics that best meet current interest rate risk objectives.

We use simulation analysis to assess earnings at risk and net present value analysis to assess value at risk. These methods allow management to regularly monitor both the direction and magnitude of our interest rate risk exposure. These analyses require numerous assumptions including, but not limited to, changes in balance sheet mix, prepayment rates on loans and securities, cash flows and repricing of all financial instruments, changes in volumes and pricing, future shapes of the yield curve, relationship of market interest rates to each other (basis risk), credit spread and deposit sensitivity. Assumptions are based on management’s best estimates, but may not accurately reflect actual results under certain changes in interest rate due to the timing, magnitude and frequency of rate changes and changes in market conditions and management strategies, among other

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factors. However, the analyses are useful in quantifying risk and providing a relative gauge of our interest rate risk position over time.

Our asset/liability committee operates under management policies, approved by the Board of Directors, which define guidelines and limits on the level of risk. The committee meets regularly and reviews our interest rate risk position and monitors various liquidity ratios to ensure a satisfactory liquidity position. By utilizing our analyses, we can determine changes that may need to be made to the asset and liability mixes to mitigate the change in net interest income under various interest rate scenarios. Management continually evaluates the condition of the economy, the pattern of market interest rates and other economic data to inform the committee on the selection of investment securities. Regulatory authorities also monitor our interest rate risk position along with other liquidity ratios.

Net Interest Income Sensitivity

Simulation analysis evaluates the effect of upward and downward changes in market interest rates on future net interest income. The analysis involves changing the interest rates used in determining net interest income over the next twelve months. The resulting percentage change in net interest income in various rate scenarios is an indication of our short-term interest rate risk. The analysis assumes recent pricing trends in new loan and deposit volumes will continue while balances remain constant. Additional assumptions are applied to modify pricing under the various rate scenarios.

The simulation analysis results are presented in the table below. At December 31, 2025, the Bank is asset sensitive, meaning that, over the modeled twelve‐month horizon, changes in market interest rates are expected to affect interest‐earning assets more rapidly than interest‐bearing liabilities. As a result, increases in market interest rates are projected to have a favorable impact on net interest income, while decreases in rates are projected to reduce net interest income. Funding costs in the down‐rate scenarios are modeled to decline more slowly than in prior rate‐reduction cycles, reflecting competitive deposit pricing dynamics and continued reliance on market‐based funding sources. If funding costs were to reprice downward more rapidly than assumed, the negative impact on net interest income in declining rate scenarios would be mitigated. Should those costs come down faster than modeled, improved performance in the rates down scenarios would be expected.

Economic Value

Net present value analysis provides information on the risk inherent in the balance sheet that might not be considered in the simulation analysis due to the short time horizon used in that analysis. The net present value of the balance sheet incorporates the discounted present value of expected asset cash flows minus the discounted present value of expected liability cash flows. The analysis involves changing the interest rates used in determining the expected cash flows and in discounting the cash flows. The resulting percentage change in net present value in various rate scenarios is an indication of the longer-term repricing risk and options embedded in the balance sheet.

The results at December 31, 2025 and 2024 reflect the impact of the FOMC's interest rate changes in effect at the end of each period. Funding cost, the level of interest rates, infrastructure cost and repricing speed will continue to be factors in the results of the model. The behavior of the business and retail clients also varies across the rate scenarios, which is reflected in the results for both periods. To improve comparability across periods, the Bank strives to follow best practices related to the assumption setting and maintains the size and mix of the period end balance sheet; thus, the results do not reflect actions management may take through the normal course of business that would impact results.

Earnings at Risk Value at Risk

% Change in Net Interest Income % Change in Market Value

Further discussion related to the quantitative and qualitative disclosures about market risk is included under the heading of Liquidity and Rate Sensitivity in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.

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ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SUMMARY OF QUARTERLY FINANCIAL DATA

The following table presents unaudited quarterly results of operations for years ended December 31:

December September June March December September June March

Provision for legal settlement — — — — 478 — — —

Restructuring expenses — — — 91 39 257 — —

Per share information:

(a) Sum of the quarters may not equal the total year due to rounding.

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Index to Financial Statements and Supplementary Data

Page

Management’s Report on Internal Control over Financial Reporting 66

Consolidated Balance Sheets 70

Consolidated Statements of Income 71

Consolidated Statements of Comprehensive Income 73

Consolidated Statements of Changes in Shareholders’ Equity 74

Consolidated Statements of Cash Flows 75

Notes to Consolidated Financial Statements 77

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Management’s Report on Internal Control Over Financial Reporting

The management of Orrstown Financial Services, Inc., together with its consolidated subsidiaries (the "Company"), has the responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting. Management maintains a comprehensive system of internal control to provide reasonable assurance of the proper authorization of transactions, the safeguarding of assets and the reliability of the financial records. The system of internal control provides for appropriate division of responsibility and is documented by written policies and procedures that are communicated to employees. The Company maintains an internal auditing program, under the supervision of the Audit Committee of the Board of Directors, which independently assesses the effectiveness of the system of internal control and recommends possible improvements.

Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its internal control over financial reporting at December 31, 2025, using the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this evaluation, management has concluded that, at December 31, 2025, the Company’s internal control over financial reporting is effective based on the criteria established in Internal Control-Integrated Framework (2013).

Crowe LLP, an independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, as stated in their report dated March 12, 2026.

/s/ Thomas R. Quinn, Jr. /s/ Neelesh Kalani

Thomas R. Quinn, Jr. Neelesh Kalani

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors of Orrstown Financial Services, Inc.

Harrisburg, Pennsylvania

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Orrstown Financial Services, Inc. (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall

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presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses – Qualitative Risk Factors

The allowance for credit losses (the “ACL”) as described in Notes 1 and 4 of the consolidated financial statements is an accounting estimate of expected credit losses over the life of loans. The Company’s loan portfolio, measured at amortized cost, is required to be presented at the net amount expected to be collected. Estimates of expected credit losses for loans are based on historical experience, current conditions and reasonable and supportable forecasts over the life of the loans.

The Company measures expected credit losses based on loans collectively evaluated when similar risk characteristics exist primarily utilizing a discounted cash flow (“DCF”) model for the quantitative portion. Based on management's analysis, adjustments may be applied for additional factors impacting the risk of loss in the loan portfolio beyond the quantitatively calculated reserve calculated on collectively evaluated loans. As the quantitative reserve calculation incorporates historical conditions, management may consider an additional or reduced reserve is warranted through qualitative risk factors based on current and expected conditions.

We identified the auditing of the qualitative risk factors as a critical audit matter because of the significant auditor judgment applied and significant audit effort required to evaluate the subjective and complex judgments made by management related to the qualitative risk factors.

The primary procedures performed to address the critical audit matter included:

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•Testing the effectiveness of management's controls addressing the:

◦Evaluation of the relevance and reliability of data used in determination of the qualitative risk factors.

◦Evaluation of the reasonableness of the assumptions and judgments used in the determination of qualitative risk factors.

•Substantive testing included:

◦Evaluating the appropriateness of the Company's methodology applied in determining the qualitative risk factors.

◦Evaluating the reasonableness of management’s assumptions and judgments used in developing the qualitative framework and used in determining the qualitative risk factors.

◦Evaluating the relevance and reliability of data used by management in determining the qualitative risk factors.

◦Testing the mathematical application of the qualitative risk factors within the ACL model.

/s/ Crowe LLP

We have served as the Company's auditor since 2014.

Washington, D.C.

March 12, 2026

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Consolidated Balance Sheets

ORRSTOWN FINANCIAL SERVICES, INC.

December 31,

(Dollars in thousands, except per share amounts) 2025 2024

Assets

Restricted investments in bank stocks 26,717 20,232

Loans held for sale, at fair value 6,090 6,614

Less: Allowance for credit losses (47,681) (48,689)

Liabilities

Deposits:

Subordinated notes and trust preferred debt 37,122 68,680

Commitments and contingencies

Shareholders’ Equity

Accumulated other comprehensive loss (15,201) (26,316)

The Notes to Consolidated Financial Statements are an integral part of these statements.

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Consolidated Statements of Income

ORRSTOWN FINANCIAL SERVICES, INC.

Years Ended December 31,

(Dollars in thousands, except per share amounts) 2025 2024 2023

Interest income

Interest expense

Subordinated notes and trust preferred debt 4,892 4,285 2,017

Recovery of credit losses - unfunded loan commitments (100) (862) —

Noninterest income

Other service charges, commissions and fees 3,145 1,566 917

Investment securities gains (losses) 166 249 (47)

Noninterest expenses

(continued)

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Years Ended December 31,

Provision for legal settlement — 478 —

Restructuring expenses 91 296 —

Per share information:

The Notes to Consolidated Financial Statements are an integral part of these statements.

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Consolidated Statements of Comprehensive Income

ORRSTOWN FINANCIAL SERVICES, INC.

Years Ended December 31,

Other comprehensive income (loss), net of tax:

Net unrealized gains on securities available-for-sale 15,811 361 13,980

Reclassification adjustment for losses realized in net income — — —

Change in tax rate (51) 777 —

The Notes to Consolidated Financial Statements are an integral part of these statements.

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Consolidated Statements of Changes in Shareholders’ Equity

ORRSTOWN FINANCIAL SERVICES, INC.

Total other comprehensive income, net of taxes — — — 11,437 — 11,437

Cash dividends ($0.80 per share) — — (8,485) — — (8,485)

Share-based compensation plans:

Total other comprehensive income, net of taxes — — — 2,160 — 2,160

Share-based compensation plans:

Total other comprehensive income, net of taxes — — — 11,115 — 11,115

Share-based compensation plans:

The Notes to Consolidated Financial Statements are an integral part of these statements.

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Consolidated Statements of Cash Flows

ORRSTOWN FINANCIAL SERVICES, INC.

Years Ended December 31,

Cash flows from operating activities

Recovery of credit losses - unfunded loan commitments (100) (862) —

Gains on sales of loans originated for sale (1,287) (810) (283)

Fair value adjustment on loans held for sale 3 (131) 323

Net gain on disposal of OREO and premises held for sale (119) — (436)

Net loss on disposal of premises and equipment 19 381 252

Investment securities (gains) losses (166) (249) 47

Provision for legal settlement — 478 —

Net losses (gains) on derivatives 272 (276) 373

Premium on branch sale — — (1,102)