# EDGAR Filing Document

**Accession Number:** 0000723646
**File Stem:** 0000723646-26-000055
**Filing Date:** 2026-5
**Character Count:** 197884
**Document Hash:** 9e28bafed6be6d9684685157a7e5611f
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000723646-26-000055.hdr.sgml**: 20260511

**ACCESSION NUMBER**: 0000723646-26-000055

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 95

**CONFORMED PERIOD OF REPORT**: 20260331

**FILED AS OF DATE**: 20260511

**DATE AS OF CHANGE**: 20260511

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** FRANKLIN FINANCIAL SERVICES CORP /PA/
- **CENTRAL INDEX KEY:** 0000723646
- **STANDARD INDUSTRIAL CLASSIFICATION:** STATE COMMERCIAL BANKS [6022]
- **ORGANIZATION NAME:** 02 Finance
- **EIN:** 251440803
- **STATE OF INCORPORATION:** PA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38884
- **FILM NUMBER:** 26963327

**BUSINESS ADDRESS:**
- **STREET 1:** 20 S MAIN ST
- **STREET 2:** P O BOX 6010
- **CITY:** CHAMBERSBURG
- **STATE:** PA
- **ZIP:** 17201-0819
- **BUSINESS PHONE:** 7172646116

**MAIL ADDRESS:**
- **STREET 1:** 20 SOUTH MAIN ST
- **STREET 2:** PO BOX 6010
- **CITY:** CHAMBERSBURG
- **STATE:** PA
- **ZIP:** 17201-0819

?xml version='1.0' encoding='ASCII'? fraf-20260331x10q

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

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

**For the quarterly period ended March 31, 2026** 

or

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

For the transition period from__________ to___________

Commission file number 001-38884

**<u>FRANKLIN FINANCIAL SERVICES CORPORATION</u>**

(Exact name of registrant as specified in its charter)

    <br> <u><u>Pennsylvania</u></u> <u><u>25-1440803</u></u> <br> <u>(State or other jurisdiction of incorporation or organization) </u> <u>(I.R.S. Employer Identification No.)</u>

    <br> <u><u>1500 Nitterhouse Drive</u><u>,</u> <u>Chambersburg</u><u>,</u> <u>PA</u></u> <u><u>17201-0819</u></u> <br> <u>(Address of principal executive offices)</u> <u>(Zip Code)</u>

<u>(</u><u>717</u><u>)</u> <u>264-6116</u>

(Registrant's telephone number, including area code)

<u>Not Applicable</u>

(Former name, former address and former fiscal year, if changed since last report)

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

---

| | | |
|:---|:---|:---|
| <u>Title of class</u> | <u>Symbol</u> | <u>Name of exchange on which registered</u> |
| Common stock | FRAF | Nasdaq Capital Market |

---

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

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

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

###### Large accelerated filer ◻ Accelerated filer ⌧ Non-accelerated filer ◻ Smaller reporting company ⌧ Emerging growth company ◻
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ◻ No ⌧

There were 4,493,032 outstanding shares of the Registrant's common stock as of April 30, 2026.

------

**INDEX**

---

| | | |
|:---|:---|:---|
| **<u>Part I - FINANCIAL INFORMATION</u>** | **<u>Part I - FINANCIAL INFORMATION</u>** |  |
| [**<u>Item 1</u>**](#Balance_Sheet) | [**<u>Financial Statements</u>**](#Balance_Sheet) |  |
|  | [<u>Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025 (unaudited)</u>](#Balance_Sheet) | 1 |
|  | [<u>Consolidated Statements of Income for the Three Months ended</u>](#Income_Statement)<u>March 31, 2026 and 2025 (unaudited)</u> | 2 |
|  | [<u>Consolidated Statements of Comprehensive Income for the Three Months ended</u>](#Comprehensive_Income) | 3 |
|  | [<u>March 31, 2026 and 2025 (unaudited)</u>](#Comprehensive_Income) |  |
|  | [<u>Consolidated Statements of Changes in Shareholders' Equity for the Three Months</u>](#_Consolidated_Statements_of) | 3 |
|  | [<u>ended March 31, 2026 and 2025 (unaudited)</u>](#_Consolidated_Statements_of) |  |
|  | [<u>Consolidated Statements of Cash Flows for the Three Months ended March 31,</u>](#Cash_Flow) <u>2026</u>  | 4 |
|  | [<u>and 2025 (unaudited)</u>](#Cash_Flow) |  |
|  | [<u>Notes to Consolidated Financial Statements (unaudited)</u>](#NotesToConsolidated) | 5 |
| [**<u>Item 2</u>**](#MDandA) | [**<u>Management's Discussion and Analysis of</u>** **<u>Results of Operations and Financial Condition</u>**](#MDandA) | 29<br>|
| [**<u>Item 3</u>**](#Item3) | [**<u>Quantitative and Qualitative Disclosures about Market Risk</u>**](#Item3) | 45 |
| [**<u>Item 4</u>**](#Item4) | [**<u>Controls and Procedures</u>**](#Item4) | 45 |
| **<u>Part II - OTHER INFORMATION</u>**  | **<u>Part II - OTHER INFORMATION</u>**  |  |
| [**<u>Item 1</u>**](#Item1_LegalProceedings) | [**<u>Legal Proceedings</u>**](#Item1_LegalProceedings) | 46 |
| [**<u>Item 1A</u>**](#Item1A_RiskFactors) | [**<u>Risk Factors</u>**](#Item1A_RiskFactors) | 46 |
| [**<u>Item 2</u>**](#Item2_UnregisteredSalesOfEquity) | [**<u>Unregistered Sales of Equity Securities and Use of Proceeds</u>**](#Item2_UnregisteredSalesOfEquity) | 46 |
| [**<u>Item 3</u>**](#Item3_DefaultsUponSenior) | [**<u>Defaults Upon Senior Securities</u>**](#Item3_DefaultsUponSenior) | 46 |
| [**<u>Item 4</u>**](#Item4_MineSafety) | [**<u>Mine Safety Disclosures</u>**](#Item4_MineSafety) | 46 |
| [**<u>Item 5</u>**](#Item5_OtherInformation) | [**<u>Other Information</u>**](#Item5_OtherInformation) | 46 |
| [**<u>Item 6</u>**](#Item6_Exhibits) | [**<u>Exhibits</u>**](#Item6_Exhibits) | 47 |
| [**<u>SIGNATURE PAGE</u>**](#Signatures) | [**<u>SIGNATURE PAGE</u>**](#Signatures) | 48 |

---

------

**Part I FINANCIAL INFORMATION**

**<u>Item 1. Financial Statements</u>**

**Consolidated Balance Sheets**

---

| | | |
|:---|:---|:---|
| *(Dollars in thousands, except share and per share data)* | *(unaudited)* |  |
|  | **March 31,** | December 31, |
|  | **2026** | 2025 |
| **Assets** |  |  |
| &nbsp;&nbsp;Cash and due from banks  | $**23976**  | $22446  |
| &nbsp;&nbsp;Short-term interest-earning deposits in other banks | **186801**  | 105275  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total cash and cash equivalents | **210777**  | 127721  |
| &nbsp;&nbsp;Long-term interest-earning deposits in other banks | **750**  | 999  |
| &nbsp;&nbsp;Debt securities available for sale, at fair value | **436483**  | 454586  |
| &nbsp;&nbsp;Restricted stock | **8897**  | 8897  |
| &nbsp;&nbsp;Loans held for sale | **1850**  | 18929  |
| &nbsp;&nbsp;Loans | **1572426**  | 1561238  |
| &nbsp;&nbsp;Allowance for credit losses | **(20729)** | (20655) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net Loans | **1551697**  | 1540583  |
| &nbsp;&nbsp;Premises and equipment, net  | **26739**  | 27138  |
| &nbsp;&nbsp;Right of use asset | **4199**  | 3657  |
| &nbsp;&nbsp;Bank owned life insurance | **22384**  | 23207  |
| &nbsp;&nbsp;Goodwill | **9016**  | 9016  |
| &nbsp;&nbsp;Deferred tax asset, net | **8328**  | 7881  |
| &nbsp;&nbsp;Other assets | **16398**  | 16404  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total assets**  | $**2297518**  | $2239018  |
| **Liabilities** |  |  |
| &nbsp;&nbsp;Deposits |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Noninterest-bearing checking | $**331658**  | $310251  |
| &nbsp;&nbsp;&nbsp;&nbsp;Money management, savings, and interest checking | **1319494**  | 1301198  |
| &nbsp;&nbsp;&nbsp;&nbsp;Time  | **238558**  | 224323  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits  | **1889710**  | 1835772  |
| &nbsp;&nbsp;Federal Home Loan Bank advances | **200000**  | 200000  |
| &nbsp;&nbsp;Subordinate notes | **10850**  | 10845  |
| &nbsp;&nbsp;Lease liability | **4392**  | 3840  |
| &nbsp;&nbsp;Other liabilities  | **13822**  | 13319  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities**  | **2118774**  | 2063776  |
| **Commitments and contingent liabilities (see Note 16)** |  |  |
| **Shareholders' equity**  |  |  |
| &nbsp;&nbsp;Common stock, $1 par value per share,15,000,000 shares authorized with |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;4,710,972 shares issued and 4,493,002 shares outstanding at March 31, 2026 and |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;4,710,972 shares issued and 4,481,149 shares outstanding at December 31, 2025 | **4711**  | 4711  |
| &nbsp;&nbsp;Capital stock no par value, 5,000,000 shares authorized with no |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;shares issued and outstanding | **—** |  |
| &nbsp;&nbsp;Additional paid-in capital | **43776**  | 43932  |
| &nbsp;&nbsp;Retained earnings  | **160001**  | 154844  |
| &nbsp;&nbsp;Accumulated other comprehensive loss | **(23265)** | (21589) |
| &nbsp;&nbsp;Treasury stock, 217,970 shares at March 31, 2026 and 229,823 shares at |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;December 31, 2025, at cost | **(6479)** | (6656) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total shareholders' equity**  | **178744**  | 175242  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities and shareholders' equity**  | $**2297518**  | $2239018  |

---

*The accompanying notes are an integral part of these unaudited financial statements.* 

------

# **Consolidated** **Statements of Income** 

---

| | | |
|:---|:---|:---|
|  | For the Three Months Ended | For the Three Months Ended |
| *(Dollars in thousands, except per share data) (unaudited)* | March 31, | March 31, |
|  | **2026** | 2025 |
| **Interest income** |  |  |
| &nbsp;&nbsp;Loans, including fees | $**22567** | $19864 |
| &nbsp;&nbsp;Interest and dividends on investments:  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Taxable interest | **3616** | 4825 |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax exempt interest | **266** | 270 |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividend income | **202** | 191 |
| &nbsp;&nbsp;Interest-earning deposits in other banks | **1119** | 1908 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total interest income**  | **27770** | 27058 |
| **Interest expense** |  |  |
| &nbsp;&nbsp;Deposits  | **6887** | 9030 |
| &nbsp;&nbsp;FHLB overnight borrowings and advances | **2157** | 2158 |
| &nbsp;&nbsp;Subordinate notes | **205** | 264 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total interest expense**  | **9249** | 11452 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Net interest income**  | **18521** | 15606 |
| &nbsp;&nbsp;Provision for credit losses - loans | **202** | 750 |
| &nbsp;&nbsp;Provision for credit losses - unfunded commitments | **19** | 29 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total provision for credit losses** | **221** | 779 |
| &nbsp;&nbsp;**Net interest income after credit loss expense** | **18300** | 14827 |
| **Noninterest income** |  |  |
| &nbsp;&nbsp;Wealth management fees | **2306** | 2215 |
| &nbsp;&nbsp;Loan service charges | **238** | 209 |
| &nbsp;&nbsp;Gain on sale of loans | **318** | 109 |
| &nbsp;&nbsp;Deposit service charges and fees | **647** | 605 |
| &nbsp;&nbsp;Other service charges and fees | **482** | 483 |
| &nbsp;&nbsp;Debit card income | **618** | 558 |
| &nbsp;&nbsp;Increase in cash surrender value of life insurance | **132** | 115 |
| &nbsp;&nbsp;Change in fair value of equity securities | **—** | (7) |
| &nbsp;&nbsp;Other  | **619** | 275 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total noninterest income** | **5360** | 4562 |
| **Noninterest Expense** |  |  |
| &nbsp;&nbsp;Salaries  | **6237** | 6176 |
| &nbsp;&nbsp;Employee benefits | **2788** | 2330 |
| &nbsp;&nbsp;Net occupancy | **1241** | 1225 |
| &nbsp;&nbsp;Marketing and advertising | **426** | 433 |
| &nbsp;&nbsp;Legal and professional | **695** | 527 |
| &nbsp;&nbsp;Data processing  | **1540** | 1557 |
| &nbsp;&nbsp;Pennsylvania bank shares tax | **254** | 160 |
| &nbsp;&nbsp;FDIC Insurance | **483** | 545 |
| &nbsp;&nbsp;ATM/debit card processing | **377** | 340 |
| &nbsp;&nbsp;Telecommunications | **135** | 106 |
| &nbsp;&nbsp;Other  | **1177** | 1178 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total noninterest expense**  | **15353** | 14577 |
| &nbsp;&nbsp;Income before income taxes | **8307** | 4812 |
| &nbsp;&nbsp;Income tax expense | **1670** | 890 |
| **Net income** | $**6637** | $3922 |
| **Per share** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic earnings per share  | $**1.48** | $0.88 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted earnings per share  | $**1.48** | $0.88 |

---

*The accompanying notes are an integral part of these unaudited financial statements.* 

------

# **Consolidated** **Statements of Comprehensive Income (Loss)** 

---

| | | |
|:---|:---|:---|
|  | For the Three Months Ended | For the Three Months Ended |
|  | March 31, | March 31, |
| *(Dollars in thousands) (unaudited)* | **2026** | 2025 |
| **Net Income** | $**6637**  | $3922  |
| **Debt Securities:** |  |  |
| Unrealized gains (loss) arising during the period  | **(2020)** | 6523  |
| Reclassification adjustment for gains (loss) realized in income on fair value hedge (1) | **(101)** | (1900) |
| Net unrealized gains (loss) | **(2121)** | 4623  |
| Tax effect | **445**  | (971) |
| Net of tax amount | **(1676)** | 3652  |
| **Total Comprehensive Income (Loss)** | $**4961**  | $7574  |
| (1) Reclassified to interest income |  |  |

---

*The accompanying notes are an integral part of these unaudited financial statements.*

# **Consolidated Statements of Changes in Shareholders' Equity** 
**For the three months ended March 31, 2026 and 2025**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  | Accumulated |  |  |
|  |  |  | Additional |  | Other |  |  |
|  | Shares | Common | Paid-in | Retained | Comprehensive | Treasury |  |
| *(Dollars in thousands, except per share data) (unaudited)* | Outstanding | Stock | Capital | Earnings | Income (Loss) | Stock | Total |
| Balance at January 1, 2026 | **4481149** | $**4711**  | **43932**  | $**154844**  | $**(21589)** | $**(6656)** | $**175242**  |
| Net income |  | **—** | **—** | **6637**  | **—** | **—** | **6637**  |
| Other comprehensive gain |  | **—** | **—** | **—** | **(1676)** | **—** | **(1676)** |
| Cash dividends declared, $0.33 per share |  | **—** | **—** | **(1480)** | **—** | **—** | **(1480)** |
| Acquisition of treasury stock | **(9753)** | **—** | **52**  | **—** | **—** | **(457)** | **(405)** |
| Treasury shares issued under dividend reinvestment plan | **5064** | **—** | **115**  | **—** | **—** | **149**  | **264**  |
| Stock Compensation Plans: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Treasury shares issued | **16542** | **—** | **(479)** | **—** | **—** | **485**  | **6**  |
| &nbsp;&nbsp;&nbsp;&nbsp;Compensation expense |  | **—** | **156**  | **—** | **—** | **—** | **156**  |
| **Balance at March 31, 2026** | **4493002** | $**4711**  | $**43776**  | $**160001**  | $**(23265)** | $**(6479)** | $**178744**  |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| Balance at January 1, 2025 | **4427362** | $**4711**  | $**43791**  | $**139463**  | $**(35508)** | $**(7741)** | $**144716**  |
| Net income |  | **—** | **—** | **3922**  | **—** | **—** | **3922**  |
| Other comprehensive gain |  | **—** | **—** | **—** | **3652**  | **—** | **3652**  |
| Cash dividends declared, $0.32 per share |  | **—** | **—** | **(1418)** | **—** | **—** | **(1418)** |
| Acquisition of treasury stock | **(3922)** | **—** | **—** | **—** | **—** | **(142)** | **(142)** |
| Treasury shares issued under dividend reinvestment plan | **12352** | **—** | **107**  | **—** | **—** | **337**  | **444**  |
| Stock Compensation Plans: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Treasury shares issued | **18590** | **—** | **(485)** | **—** | **—** | **508**  | **23**  |
| &nbsp;&nbsp;&nbsp;&nbsp;Compensation expense |  | **—** | **194**  | **—** | **—** | **—** | **194**  |
| **Balance at March 31, 2025** | **4454382** | $**4711**  | $**43607**  | $**141967**  | $**(31856)** | $**(7038)** | $**151391**  |

---

*The accompanying notes are an integral part of these unaudited financial statements.*

------

# **Consolidated Statements** **of Cash Flows** 

---

| | | |
|:---|:---|:---|
|  | Three Months Ended<br>‎March 31, | Three Months Ended<br>‎March 31, |
|  | **2026** | 2025 |
| *(Dollars in thousands) (unaudited)* |  |  |
| **Cash flows from operating activities** |  |  |
| &nbsp;&nbsp;Net income | $**6637**  | $3922  |
| &nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | **513**  | 537  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net amortization of loans and investment securities | **112**  | 71  |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of subordinate debt issuance costs | **5**  | 11  |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | **221**  | 779  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on sale of equity securities | **—** | 7  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans originated for sale | **(11103)** | (6986) |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of loans | **28500**  | 7774  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of loans held for sale | **(318)** | (109) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of premise | **(33)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Increase in cash surrender value of life insurance | **(132)** | (115) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain from claims on life insurance policies | **(351)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock based compensation | **156**  | 194  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (decrease) increase in other assets | **(567)** | 1607  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net increase in other liabilities | **455**  | 1131  |
| **Net cash provided by operating activities** | **24095**  | 8823  |
| **Cash flows from investing activities** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net decrease in long-term interest-earning deposits in other banks | **249**  | 250  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from maturities, calls and pay-downs of securities available for sale | **17214**  | 19643  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchase of investment securities available for sale | **(1203)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Decrease in restricted stock | **—** | 10  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net increase in loans | **(11642)** | (58135) |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from surrender of life insurance policies | **1306**  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of equity securities | **—** | 161  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of premises | **830**  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures | **(116)** | (246) |
| **Net cash provided by (used in) investing activities** | **6638**  | (38317) |
| **Cash flows from financing activities** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net increase in demand deposits, interest-bearing checking, and savings accounts | **39703**  | 56305  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net increase (decrease) in time deposits | **14235**  | (4375) |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividends paid | **(1480)** | (1418) |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchase of Treasury shares | **(405)** | (142) |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash received from option exercises | **6**  | 23  |
| &nbsp;&nbsp;&nbsp;&nbsp;Treasury shares issued under dividend reinvestment plan | **264**  | 444  |
| **Net cash provided by financing activities** | **52323**  | 50837  |
| **Increase in cash and cash equivalents** | **83056**  | 21343  |
| **Cash and cash equivalents at the beginning of the period** | **127721**  | 203613  |
| **Cash and cash equivalents at the end of the period** | $**210777**  | $224956  |
| **Supplemental Disclosures of Cash Flow Information** |  |  |
| **Cash paid during the period for:** |  |  |
| Interest on deposits and other borrowed funds | $**9303**  | $12146  |
| **Noncash Activities** |  |  |
| Lease liabilities arising from obtaining right-of-use assets | **692**  | 131  |

---

*The accompanying notes are an integral part of these unaudited financial statements.*

------

# **FRANKLIN FINANCIAL SERVICES CORPORATION and SUBSIDIARIES** 
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**Note 1. Basis** **of Presentation**

The consolidated financial statements include the accounts of Franklin Financial Services Corporation (the Corporation), and its wholly owned subsidiaries, Farmers and Merchants Trust Company of Chambersburg (the Bank) and Franklin Future Fund Inc. Farmers and Merchants Trust Company of Chambersburg is a commercial bank that has one wholly owned subsidiary, Franklin Financial Properties Corp. Franklin Financial Properties Corp. holds real estate assets that are leased by the Bank. Franklin Future Fund Inc. is a non-bank investment company. The activities of the non-bank subsidiary are not significant to the consolidated totals. All significant intercompany transactions and account balances have been eliminated.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations, and cash flows as of March 31, 2026, and for all other periods presented have been made.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation's 2025 Annual Report on Form 10-K. The consolidated results of operations for the three months ended March 31, 2026 are not necessarily indicative of the operating results for the full year. Management has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

The consolidated balance sheet at December 31, 2025 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete consolidated financial statements.

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks and cash items with original maturities less than 90 days.

Earnings per share are computed based on the weighted average number of shares outstanding during each period end. A reconciliation of the weighted average shares outstanding used to calculate basic earnings per share and diluted earnings per share follows:

---

| | | |
|:---|:---|:---|
|  | For the Three Months Ended | For the Three Months Ended |
|  | March 31, | March 31, |
| *(Dollars and shares in thousands, except per share data)* | **2026** | 2025 |
| Weighted average shares outstanding (basic) | **4474** | 4436 |
| Impact of common stock equivalents | **12** | 15 |
| Weighted average shares outstanding (diluted) | **4486** | 4451 |
| Anti-dilutive options excluded from calculation | **—** |  |
| Net income | $**6637** | $3922 |
| Basic earnings per share | $**1.48** | $0.88 |
| Diluted earnings per share | $**1.48** | $0.88 |

---

‎

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# **Note 2. Recent Accounting Pronouncements** 
**Recently adopted accounting standards**

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| | |
|:---|:---|
| &nbsp;&nbsp;**ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures** | &nbsp;&nbsp;**ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures** |
| &nbsp;&nbsp;Description | &nbsp;&nbsp;This ASU is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation table and income taxes paid to be disaggregated by jurisdiction. It also includes certain amendments to improve the effectiveness of income tax disclosures. |
| &nbsp;&nbsp;Effective Date | &nbsp;&nbsp;Effective for annual periods beginning after December 15, 2024. |
| &nbsp;&nbsp;Effect on the Consolidated Financial Statements | &nbsp;&nbsp;The Corporation adopted the ASU retrospectively in 2025. The adoption of this standard resulted in additional disclosures in the Corporation's Consolidated Financial Statements, but it did not materially impact the Corporation's results of operations. |
| **Recently issued but not yet effective accounting standards** | **Recently issued but not yet effective accounting standards** |
| &nbsp;&nbsp;**ASU 2024-03, Income Statement Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expense** | &nbsp;&nbsp;**ASU 2024-03, Income Statement Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expense** |
| &nbsp;&nbsp;Description | &nbsp;&nbsp;This ASU will change the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses (for example, employee compensation, depreciation, and amortization) in expense captions. |
| &nbsp;&nbsp;Effective Date | &nbsp;&nbsp;Fiscal years beginning after December 31, 2026 and interim periods within fiscal years beginning after December 31, 2027. Early adoption is permitted. |
| &nbsp;&nbsp;Effect on the Consolidated Financial Statements | &nbsp;&nbsp;The ASU is not expected to have an impact on the Corporation's financial statements. |
| &nbsp;&nbsp;**ASU 2025-08, Financial Instruments - Credit Losses (Topic 326) Purchased Loans** | &nbsp;&nbsp;**ASU 2025-08, Financial Instruments - Credit Losses (Topic 326) Purchased Loans** |
| &nbsp;&nbsp;Description | &nbsp;&nbsp;This ASU amends the guidance on the accounting for certain purchased loans. The new guidance makes significant changes to the accounting for certain acquired seasoned loans subject to the current expected credit loss model. |
| &nbsp;&nbsp;Effective Date | &nbsp;&nbsp;Effective beginning January 1, 2027. Early adoption is permitted. |
| &nbsp;&nbsp;Effect on the Consolidated Financial Statements | &nbsp;&nbsp;The ASU is not expected to have a significant impact on the Corporation's financial statements. |

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**Note 3. Accumulated Other Comprehensive Income (Loss)**

The components of accumulated other comprehensive income (loss), net of income tax effects, included in shareholders' equity, are as follows:

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| | | |
|:---|:---|:---|
|  | **March 31,** | December 31, |
| *(Dollars in thousands)* | **2026** | 2025 |
| Net unrealized (losses) gains on debt securities | $(28838) | $(26717) |
| Tax effect | 6057 | 5611 |
| Net of tax amount | $(22782) | $(21106) |
| Accumulated pension adjustment | $(611) | $(611) |
| Tax effect | 128 | 128 |
| Net of tax amount | $(483) | $(483) |
| Total accumulated other comprehensive (loss) income | $(23265) | $(21589) |

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 **‎** 

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**Note 4. Investments**

*Available for Sale (AFS) Securities*

The amortized cost and estimated fair value of AFS securities as of March 31, 2026 and December 31, 2025 are as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* |  | **Gross** | **Gross** |  |
|  | **Amortized** | **unrealized** | **unrealized** | **Fair** |
| **March 31, 2026** | **cost** | **gains** | **losses** | **Value** |
| U.S. Treasury | $**35802** | $**—** | $**(2713)** | $**33089** |
| Municipal | **153992** | **—** | **(17185)** | **136807** |
| Corporate | **11690** | **—** | **(765)** | **10925** |
| Agency MBS & CMO | **133388** | **122** | **(6276)** | **127234** |
| Non-Agency MBS & CMO | **104004** | **295** | **(2069)** | **102230** |
| Asset-backed | **26445** | **95** | **(342)** | **26198** |
| Total | $**465321** | $**512** | $**(29350)** | $**436483** |

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| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* |  | Gross | Gross |  |
|  | Amortized | unrealized | unrealized | Fair |
| December 31, 2025 | cost | gains | losses | value |
| U.S. Treasury | $35880 | $— | $(2617) | $33263 |
| Municipal | 154301 |  | (16462) | 137839 |
| Corporate | 15536 |  | (861) | 14675 |
| Agency MBS & CMO | 135308 | 136 | (5584) | 129860 |
| Non-Agency MBS & CMO | 112860 | 477 | (1669) | 111668 |
| Asset-backed | 27519 | 78 | (316) | 27281 |
| Total | $481404 | $691 | $(27509) | $454586 |

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At March 31, 2026 and December 31, 2025, the fair value of debt securities pledged to secure public deposits, trust deposits, FHLB borrowing commitments and Federal Reserve Bank discount window availability totaled $343.4 million and $353.5 million, respectively. The Bank has no investment in a single obligor that exceeds 10% of shareholders' equity, except for securities issued by the U.S. Treasury and U.S. government sponsored entities.

The amortized cost and estimated fair value of debt securities at March 31, 2026, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because of prepayment or call options embedded in the securities. Securities not due at a single maturity date are presented separately.

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| | | |
|:---|:---|:---|
| *(Dollars in thousands)* | **Amortized<br>‎cost** | **Fair<br>‎value** |
| Due in one year or less | $994 | $991 |
| Due after one year through five years | 58130 | 54364 |
| Due after five years through ten years | 84780 | 74365 |
| Due after ten years | 57580 | 51101 |
|  | 201484 | 180821 |
| MBS, CMO & ABS | 263837 | 255662 |
| Total | $465321 | $436483 |

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<u>Credit Impairment</u>:

The debt securities portfolio contained 464 securities in an unrealized loss position having a fair value of $393.9 million, with $29.4 million in unrealized losses at March 31, 2026, an increase of $1.8 million from the prior year-end.

AFS securities in an unrealized loss position are evaluated for credit impairment at least quarterly. For these securities, the Bank considers: (1) the extent to which the fair value is less than amortized cost; (2) adverse conditions specifically related to the security, industry or geographic area; (3) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; (4) failure of the issuer of the security to make scheduled interest or principal payments; and (5) any changes to the rating of the security by a rating agency. In addition, the Bank

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considers whether it intends to sell these securities or whether it will be forced to sell these securities before the earlier of amortized cost recovery or maturity. The Bank does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost. The unrealized losses identified on debt securities and subject to evaluation at March 31, 2026 and December 31, 2025, were determined not to be attributable to credit related factors; therefore, the Bank does not have an allowance for credit loss for these investments.

The following table summarizes debt securities in the AFS portfolio in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category, length of time that individual securities have been in continuous unrealized loss position and the number of securities in each category as of March 31, 2026 and December 31, 2025:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** |
|  | **Less than 12 months** | **Less than 12 months** | **Less than 12 months** | **12 months or more** | **12 months or more** | **12 months or more** | **Total** | **Total** | **Total** |
|  | **Fair** | **Unrealized** |  | **Fair** | **Unrealized** |  | **Fair** | **Unrealized** |  |
| *(Dollars in thousands)* | **Value** | **Losses** | **Count** | **Value** | **Losses** | **Count** | **Value** | **Losses** | **Count** |
| U.S. Treasury | $**—** | $**—** | **—** | $**33089**  | $**(2713)** | **13**  | $**33089**  | $**(2713)** | **13**  |
| Municipal | **880**  | **(124)** | **2**  | **135927**  | **(17061)** | **164**  | **136807**  | **(17185)** | **166**  |
| Corporate | **991**  | **(2)** | **1**  | **9934**  | **(763)** | **20**  | **10925**  | **(765)** | **21**  |
| Agency MBS & CMO | **35483**  | **(710)** | **23**  | **80663**  | **(5566)** | **157**  | **116146**  | **(6276)** | **180**  |
| Non-Agency MBS & CMO | **54212**  | **(776)** | **16**  | **25433**  | **(1293)** | **32**  | **79645**  | **(2069)** | **48**  |
| Asset-backed | **2447**  | **(13)** | **4**  | **14858**  | **(329)** | **32**  | **17305**  | **(342)** | **36**  |
| Total unrealized losses | $**94013**  | $**(1625)** | **46**  | $**299904**  | $**(27725)** | **418**  | $**393917**  | $**(29350)** | **464**  |

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, 2025 | December 31, 2025 | December 31, 2025 | December 31, 2025 | December 31, 2025 | December 31, 2025 | December 31, 2025 | December 31, 2025 | December 31, 2025 |
|  | Less than 12 months | Less than 12 months | Less than 12 months | 12 months or more | 12 months or more | 12 months or more | Total | Total | Total |
|  | Fair | Unrealized |  | Fair | Unrealized |  | Fair | Unrealized |  |
| *(Dollars in thousands)* | Value | Losses | Count | Value | Losses | Count | Value | Losses | Count |
| U.S. Treasury | $— | $— |  | $33263  | $(2617) | 13  | $33263  | $(2617) | 13  |
| Municipal | 1683  | (192) | 4  | 136156  | (16270) | 162  | 137839  | (16462) | 166  |
| Corporate | 986  | (6) | 1  | 13389  | (855) | 26  | 14375  | (861) | 27  |
| Agency MBS & CMO | 776  | (2) | 10  | 118183  | (5582) | 170  | 118959  | (5584) | 180  |
| Non-Agency MBS & CMO | 1870  | (3) | 3  | 74365  | (1666) | 40  | 76235  | (1669) | 43  |
| Asset-backed | 2768  | (18) | 5  | 15538  | (298) | 32  | 18306  | (316) | 37  |
| Total unrealized losses | $8083  | $(221) | 23  | $390894  | $(27288) | 443  | $398977  | $(27509) | 466  |

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**Note 5. Loans**

The Bank reports its loan portfolio based on the primary collateral of the loan. It further classifies these loans by the primary purpose, either consumer or commercial. The Bank's mortgage loans include long-term loans to individuals and businesses secured by mortgages on the borrower's real property. Construction loans are made to finance the purchase of land and the construction of residential and commercial buildings thereon and are secured by mortgages on real estate. Commercial loans are made to businesses of various sizes for a variety of purposes including construction, property, plant and equipment, and working capital. Commercial loans also include loans to government municipalities. Commercial lending is concentrated in the Bank's primary market but also includes purchased loan participations. Consumer loans are comprised of installment, home equity and unsecured personal lines of credit.

Each class of loans involves a different kind of risk. However, risk factors such as changes in interest rates, general economic conditions and changes in collateral values are common across all classes. The risk of each loan class is presented below.

*Residential Real Estate 1-4 family*

The largest risk in residential real estate loans to retail customers is the borrower's inability to repay the loan due to the loss of the primary source of income. The Bank attempts to mitigate this risk through prudent underwriting standards including employment history, current financial condition and credit history. These loans are generally owner occupied and serve as the borrower's primary residence. The Bank usually holds a first lien position on these properties but may hold a

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second lien position in some home equity loans or lines of credit. Commercial purpose loans, secured by residential real estate, are usually dependent upon repayment from the rental income or other business purposes. These loans are generally non-owner occupied. In addition to the real estate collateral, these loans may have personal guarantees or UCC filings on other business assets. If a payment default occurs on a 1-4 family residential real estate loan, the collateral serves as a source of repayment but may be subject to a change in value due to economic conditions.

*Residential Real Estate Construction*

This class includes loans to individuals for construction of a primary residence and to contractors and developers to improve real estate and construct residential properties. Construction loans to individuals generally bear the same risk as 1-4 family residential loans. Additional risks may include cost overruns, delays in construction or contractor problems.

Loans to contractors are primarily dependent on the sale of finished homes for repayment. Risks associated with these loans include the borrower's character and capacity to complete a home, the effect of economic conditions on the valuation of homes, cost overruns, delays in construction or contractor problems. In addition to real estate collateral, these loans may have personal guarantees or UCC filings on other business assets, depending on the financial strength and experience of the contractor. Real estate construction loans are monitored on a regular basis by either an independent third party or the responsible loan officer, depending on the size and complexity of the project. This monitoring process includes at a minimum, the submission of invoices or American Institute of Architects (AIA) documents detailing the cost incurred by the borrower, on-site inspections, and an authorizing signature for disbursement of funds.

*Commercial Real Estate*

Commercial real estate loans may be secured by various types of commercial property including apartment buildings, retail space, office buildings, warehouses, hotels and motels, manufacturing facilities, agricultural land and may have personal guarantees or UCC filings on other business assets, depending on the financial strength of the borrower. Also included in this segment are loans for the construction of commercial real estate buildings and residential site development. Construction loans may incur additional risks such as cost overruns, delays in construction, or contractor problems. Residential site development loans are primarily dependent on the sale of improved lots for repayment. Construction loans are monitored on a regular basis by either an independent third party or the responsible loan officer, depending on the size and complexity of the project. This monitoring process includes at a minimum, the submission of invoices or AIA documents detailing the cost incurred by the borrower, on-site inspections, and an authorizing signature for disbursement of funds.

Commercial real estate loans present a higher level of risk than residential real estate loans. Repayment of these loans is normally dependent on cash-flow generated by the operation of a business that utilizes the real estate. The successful operation of the business, and therefore repayment ability, may be affected by general economic conditions outside of the control of the operator. On most commercial real estate loans ongoing monitoring of cash flow and other financial performance indicators is completed annually through financial statement analysis. In addition, the value of the collateral may be negatively affected by economic conditions and may be insufficient to repay the loan in the event of default. In the event of foreclosure, commercial real estate may be more difficult to liquidate than residential real estate.

*Commercial* 

Commercial loans are made for various business purposes to finance equipment, inventory, accounts receivables, and operating liquidity. These loans are generally secured by business assets or equipment, non-real estate collateral and/or personal guarantees.

Commercial loans present a higher level of credit risk than other loans because repayment ability is usually dependent on cash-flow from a business operation that can be affected by general economic conditions. On most commercial loans ongoing monitoring of cash flow and other financial performance indicators occur at least annually through financial statement analysis. In the event of a default, collateral for these loans may be more difficult to liquidate, and the valuation of the collateral may decline more quickly than loans secured by other types of collateral.

Loans to governmental municipalities are also included in the Commercial class. These loans include general obligation notes, indicating that the loan is secured by the "full faith and credit" of the municipal government thereby pledging its taxing authority, and revenue backed loans to a municipal authority secured by revenue from a specific source. These loans generally present less risk than other Commercial & Industrial (C&I) loans.

*Consumer*

These loans are made for a variety of reasons to consumers and include term loans and personal lines of credit. The loans may be secured or unsecured. Repayment is primarily dependent on the income of the borrower and to a lesser extent the sale of collateral. The underwriting of these loans is based on the consumer's ability and willingness to repay and is

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determined by the borrower's employment history, current financial condition and credit history. Collateral for these loans, if any, usually depreciates quickly and therefore, may not be adequate to repay the loan if it is repossessed. Therefore, the overall health of the economy, including unemployment rates and wages, will have an effect on the credit quality in this loan class.

A summary of outstanding loans, by class, at the end of the reporting periods is as follows:

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| | | |
|:---|:---|:---|
|  | **March 31,** | December 31, |
| *(Dollars in thousands)* | **2026** | 2025 |
| Residential real estate 1-4 family |  |  |
| &nbsp;&nbsp;Consumer first liens | $**225743** | $213440 |
| &nbsp;&nbsp;Commercial first lien | **62678** | 63457 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total first liens | **288421** | 276897 |
| &nbsp;&nbsp;Consumer junior liens and lines of credit | **86183** | 84650 |
| &nbsp;&nbsp;Commercial junior liens and lines of credit | **7207** | 6839 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total junior liens and lines of credit | **93390** | 91489 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total residential real estate 1-4 family | **381811** | 368386 |
| Residential real estate - construction |  |  |
| &nbsp;&nbsp;Consumer | **32428** | 29609 |
| &nbsp;&nbsp;Commercial | **24385** | 24516 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total residential real estate construction | **56813** | 54125 |
| Commercial real estate | **909067** | 903571 |
| Commercial | **214007** | 225499 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total commercial | **1123074** | 1129070 |
| Consumer | **10728** | 9657 |
|  | **1572426** | 1561238 |
| Less: Allowance for credit losses | **(20729)** | (20655) |
| Net Loans | $**1551697** | $1540583 |
| Included in the loan balances are the following: |  |  |
| Net unamortized deferred loan costs | $**1984** | $1766 |
| Loans pledged as collateral for borrowings and commitments from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;FHLB | $**875311** | $863693 |
| &nbsp;&nbsp;&nbsp;&nbsp;Federal Reserve Bank | **189997** | 193640 |
|  | $**1065308** | $1057333 |

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**Note 6. Loan Quality and Allowance for Credit Losses**

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, and current economic trends, among other factors. Management utilizes a risk rating scale ranging from 1-Prime to 9-Loss to evaluate loan quality. This risk rating scale is used primarily for commercial purpose loans. Consumer purpose loans are identified as either performing or nonperforming based on the payment status of the loans. Nonperforming consumer loans are loans that are nonaccrual or 90 days or more past due and still accruing. The Bank uses the following definitions for risk ratings:

<u>Pass (1-5):</u> Loans are considered pass credits with lower or average risk and are not otherwise classified.

<u>Other Assets Especially Mentioned (OAEM) (6):</u> Loans classified as OAEM have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the borrower's credit position at some future date.

<u>Substandard (7):</u> Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that

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jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

<u>Doubtful (8):</u> Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

<u>Loss (9):</u> Loans classified as Loss are considered uncollectable and the loan will be charged-off in the period it is deemed uncollectable.

Loans that do not share risk characteristics with pooled loans are evaluated on an individual basis. Loans evaluated individually are not included in the pool evaluation, this includes collateral dependent loans. Loans are considered Collateral Dependent when management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the sale of the collateral, the expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for any discounts and selling costs as appropriate.

Management monitors loan performance on a monthly basis and performs a quarterly evaluation of the adequacy of the Allowance for Credit Loss for loans (ACL). The Bank begins enhanced monitoring of all loans rated 6–OAEM or worse and obtains a new appraisal or asset valuation for any loans placed on nonaccrual or rated 7-Substandard or worse. Management, at its discretion, may determine that additional adjustments to the appraisal or valuation are required. Valuation adjustments will be made as necessary based on factors, including, but not limited to: the economy, deferred maintenance, industry, type of property/equipment, age of the appraisal, etc. and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and deducted from the valuation in order to determine the net realizable value to the Bank. When determining the ACL, certain factors involved in the evaluation are inherently subjective and require material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows. Management monitors the adequacy of the ACL on an ongoing basis and reports its adequacy quarterly to the Enterprise Risk Management Committee of the Board of Directors.

As of March 31, 2026, the Bank had outstanding loans to a related party of a Bank Director who is considered an "insider" under Regulation O. The Bank Director serves on the Board of Directors of the related party. The loans are currently classified as Substandard (rated 7) on the Bank's internal credit risk rating system, indicating potential weaknesses that warrant management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans. As of March 31, 2026, the outstanding balance of the loans was $4.2 million, and were not past due or on nonaccrual status.

‎

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The following table presents loans by year of origination and internally assigned risk ratings:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* |  |  |  |  |  |  | Revolving | Revolving |  |
|  | Term Loans | Term Loans | Term Loans | Term Loans | Term Loans | Term Loans | Loans  | Loans  |  |
|  | Amortized Cost Basis by Origination Year | Amortized Cost Basis by Origination Year | Amortized Cost Basis by Origination Year | Amortized Cost Basis by Origination Year | Amortized Cost Basis by Origination Year | Amortized Cost Basis by Origination Year | Amortized | Converted |  |
| **As of March 31, 2026** | **2026** | 2025 | 2024 | 2023 | 2022 | Prior | Cost Basis | to Term | Total |
| **Residential real estate 1-4 family:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Commercial:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass (1-5) | $3349  | $6554  | $4585  | $14150  | $6193  | $28828  | $5904  | $— | $69563  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OAEM (6) |  |  |  |  |  |  | 95  |  | 95  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard (7) |  |  |  |  |  | 227  |  |  | 227  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful (8) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Commercial | 3349  | 6554  | 4585  | 14150  | 6193  | 29055  | 5999  |  | 69885  |
| &nbsp;&nbsp;**Consumer:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performing | 9149  | 42000  | 46710  | 57334  | 27549  | 43833  | 69901  | 15429  | 311905  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonperforming |  |  |  |  |  | 1  | 20  |  | 21  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Consumer | 9149  | 42000  | 46710  | 57334  | 27549  | 43834  | 69921  | 15429  | 311926  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $12498  | $48554  | $51295  | $71484  | $33742  | $72889  | $75920  | $15429  | $381811  |
| &nbsp;&nbsp;Current period gross charge-offs | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| **Residential real estate construction:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Commercial:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass (1-5) | $411  | $3132  | $16615  | $1663  | $138  | $2426  | $— | $— | $24385  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OAEM (6) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard (7) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful (8) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Commercial | 411  | 3132  | 16615  | 1663  | 138  | 2426  |  |  | 24385  |
| &nbsp;&nbsp;**Consumer:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performing | 1478  | 26111  | 4839  |  |  |  |  |  | 32428  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonperforming |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Consumer | 1478  | 26111  | 4839  |  |  |  |  |  | 32428  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total**  | $1889  | $29243  | $21454  | $1663  | $138  | $2426  | $— | $— | $56813  |
| &nbsp;&nbsp;Current period gross charge-offs | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| **Commercial real estate:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass (1-5) | $24860  | $132458  | 130702  | 199953  | $96418  | $267093  | $12668  | $— | $864152  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OAEM (6) |  |  |  | 12878  | 916  | 6768  | 15  |  | 20577  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard (7) |  |  | 233  | 21911  | 234  | 1960  |  |  | 24338  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful (8) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $24860  | $132458  | $130935  | $234742  | $97568  | $275821  | $12683  | $— | $909067  |
| &nbsp;&nbsp;Current period gross charge-offs | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| **Commercial:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass (1-5) | $3255  | $17635  | $20217  | $10021  | $17917  | $96375  | $41139  | $— | $206559  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OAEM (6) |  |  |  | 8  | 344  | 1277  | 200  |  | 1829  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard (7) |  |  | 399  |  | 732  |  | 4488  |  | 5619  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful (8) |  |  |  |  |  |  |  |  |  |
| **Total** | $3255  | $17635  | $20616  | $10029  | $18993  | $97652  | $45827  | $— | $214007  |
| &nbsp;&nbsp;Current period gross charge-offs | $(1) | $— | $(55) | $— | $(1) | $— | $(290) | $— | $(347) |
| **Consumer:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performing | 605  | 1431  | 1009  | 594  | 165  | 1468  | 5439  |  | 10711  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonperforming |  |  |  | 17  |  |  |  |  | 17  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $605  | $1431  | $1009  | $611  | $165  | $1468  | $5439  | $— | $10728  |
| &nbsp;&nbsp;Current period gross charge-offs | $(16) | $— | $— | $— | $— | $(3) | $(22) | $— | $(41) |

---

‎

------

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* |  |  |  |  |  |  | Revolving | Revolving |  |
|  | Term Loans | Term Loans | Term Loans | Term Loans | Term Loans | Term Loans | Loans  | Loans  |  |
|  | Amortized Cost Basis by Origination Year | Amortized Cost Basis by Origination Year | Amortized Cost Basis by Origination Year | Amortized Cost Basis by Origination Year | Amortized Cost Basis by Origination Year | Amortized Cost Basis by Origination Year | Amortized | Converted |  |
| **As of December 31, 2025** | **2025** | 2024 | 2023 | 2022 | 2020 | Prior | Cost Basis | to Term | Total |
| **Residential real estate 1-4 family:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Commercial:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass (1-5) | $6601  | $4914  | $14483  | $6381  | $8982  | $23381  | $5237  | $— | $69979  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OAEM (6) |  |  |  |  |  |  | 95  |  | 95  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard (7) |  |  |  |  |  | 222  |  |  | 222  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful (8) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Commercial | 6601  | 4914  | 14483  | 6381  | 8982  | 23603  | 5332  |  | 70296  |
| &nbsp;&nbsp;**Consumer:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performing | 35726  | 45927  | 60145  | 27930  | 13385  | 31675  | 67410  | 15872  | 298070  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonperforming |  |  |  |  |  |  | 20  |  | 20  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Consumer | 35726  | 45927  | 60145  | 27930  | 13385  | 31675  | 67430  | 15872  | 298090  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $42327  | $50841  | $74628  | $34311  | $22367  | $55278  | $72762  | $15872  | $368386  |
| &nbsp;&nbsp;Current period gross charge-offs | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| **Residential real estate construction:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Commercial:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass (1-5) | $4228  | $16503  | $1204  | $— | $1093  | $1488  | $— | $— | $24516  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OAEM (6) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard (7) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful (8) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Commercial | 4228  | 16503  | 1204  |  | 1093  | 1488  |  |  | 24516  |
| &nbsp;&nbsp;**Consumer:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performing | 24744  | 4865  |  |  |  |  |  |  | 29609  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonperforming |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Consumer | 24744  | 4865  |  |  |  |  |  |  | 29609  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total**  | $28972  | $21368  | $1204  | $— | $1093  | $1488  | $— | $— | $54125  |
| &nbsp;&nbsp;Current period gross charge-offs | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| **Commercial real estate:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass (1-5) | $137253  | $126702  | $206916  | $96083  | $84154  | $189407  | $12236  | $— | $852751  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OAEM (6) |  |  | 12956  | 448  | 689  | 11924  |  |  | 26017  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard (7) |  | 544  | 22040  | 239  |  | 1980  |  |  | 24803  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful (8) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $137253  | $127246  | $241912  | $96770  | $84843  | $203311  | $12236  | $— | $903571  |
| &nbsp;&nbsp;Current period gross charge-offs | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| **Commercial:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass (1-5) | $17563  | $23890  | $11979  | $19675  | $33813  | $65515  | $45425  | $— | $217860  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OAEM (6) |  |  | 8  | 359  | 1323  |  | 198  |  | 1888  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard (7) |  | 553  |  | 583  |  |  | 4615  |  | 5751  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful (8) |  |  |  |  |  |  |  |  |  |
| **Total** | $17563  | $24443  | $11987  | $20617  | $35136  | $65515  | $50238  | $— | $225499  |
| &nbsp;&nbsp;Current period gross charge-offs | $(9) | $— | $(17) | $— | $(2) | $(8) | $— | $— | $(36) |
| **Consumer:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performing | 1853  | 1145  | 709  | 201  | 1499  |  | 4245  |  | 9652  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonperforming |  |  |  |  |  |  | 5  |  | 5  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $1853  | $1145  | $709  | $201  | $1499  | $— | $4250  | $— | $9657  |
| &nbsp;&nbsp;Current period gross charge-offs | $(71) | $(6) | $(18) | $(3) | $(1) | $(2) | $(30) | $— | $(131) |

---

‎

------

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more and still accruing as of the date presented:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | December 31, 2025 | December 31, 2025 | December 31, 2025 |
| *(Dollars in thousands)* | **Nonaccrual and Loans past due 90 Days or more** | **Nonaccrual and Loans past due 90 Days or more** | **Nonaccrual and Loans past due 90 Days or more** | Nonaccrual and Loans past due 90 Days or more | Nonaccrual and Loans past due 90 Days or more | Nonaccrual and Loans past due 90 Days or more |
|  |  |  | **Loans past due** |  |  | Loans past due |
|  | **Nonaccrual** | **Nonaccrual** | **90 Days or more** | Nonaccrual | Nonaccrual | 90 Days or more |
|  | **Without ACL** | **With ACL** | **Still Accruing** | Without ACL | With ACL | Still Accruing |
| **March 31, 2026** |  |  |  |  |  |  |
| **Residential Real Estate 1-4 Family** |  |  |  |  |  |  |
| &nbsp;&nbsp;**First liens** | $**51**  | $**—** | $**1**  | $— | $— | $— |
| &nbsp;&nbsp;**Junior liens and lines of credit** | **20**  | **—** | **—** | 20  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | **71**  | **—** | **1**  | 20  |  |  |
| **Residential real estate - construction** | **—** | **—** | **—** |  |  |  |
| **Commercial real estate** | **713**  | **7027**  | **—** | 1029  | 7119  |  |
| **Commercial** | **49**  | **621**  | **—** | 55  | 290  |  |
| **Consumer** | **—** | **—** | **17**  |  |  | 5  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $**833**  | $**7648**  | $**18**  | $1104  | $7409  | $5  |

---

At March 31, 2026, the Bank had $7.9 million of loans considered to be collateral dependent. These loans are comprised of a commercial real estate construction loan totaling $7.0 million for a mixed-use project, a commercial real estate loan totaling $233 thousand and three commercial loans to a single borrower, secured by business assets, totaling $621 thousand. At December 31, 2025, collateral dependent loans totaled $7.1 million for a commercial real estate construction loan for a mixed-use project. As of March 31, 2026, the Bank had established a $1.0 million specific reserve for the commercial real estate construction loan and a $557 thousand specific reserve for the three commercial loans as of March 31, 2026.

At March 31, 2026 and December 31, 2025, the Bank had $0 of residential properties in the process of foreclosure.

The following table presents the aging of payments of the loan portfolio:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* | **Loans Past Due** | **Loans Past Due** | **Loans Past Due** | **Total** |  | **Total** |
|  | **30-59 Days** | **60-89 Days** | **90 Days+** | **Past Due** | **Current** | **Loans** |
| **March 31, 2026** |  |  |  |  |  |  |
| **Residential Real Estate 1-4 Family** |  |  |  |  |  |  |
| &nbsp;&nbsp;**First liens** | $**164**  | $**28**  | $**43**  | $**235**  | $**288186**  | $**288421**  |
| &nbsp;&nbsp;**Junior liens and lines of credit** | **216**  | **—** | **20**  | **236**  | **93154**  | **93390**  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | **380**  | **28**  | **63**  | **471**  | **381340**  | **381811**  |
| **Residential real estate - construction** | **—** | **—** | **—** | **—** | **56813**  | **56813**  |
| **Commercial real estate** | **7456**  | **—** | **713**  | **8169**  | **900898**  | **909067**  |
| **Commercial** | **—** | **621**  | **49**  | **670**  | **213337**  | **214007**  |
| **Consumer** | **26**  | **2**  | **17**  | **45**  | **10683**  | **10728**  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $**7862**  | $**651**  | $**842**  | $**9355**  | $**1563071**  | $**1572426**  |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | Loans Past Due | Loans Past Due | Loans Past Due | Total |  | Total |
|  | 30-59 Days | 60-89 Days | 90 Days+ | Past Due | Current | Loans |
| December 31, 2025 |  |  |  |  |  |  |
| Residential Real Estate 1-4 Family |  |  |  |  |  |  |
| &nbsp;&nbsp;First liens | $145  | $855  | $— | $1000  | $275897  | $276897  |
| &nbsp;&nbsp;Junior liens and lines of credit | 333  | 160  | 20  | 513  | 90976  | 91489  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 478  | 1015  | 20  | 1513  | 366873  | 368386  |
| Residential real estate - construction |  |  |  |  | 54125  | 54125  |
| Commercial real estate | 542  |  | 1029  | 1571  | 902000  | 903571  |
| Commercial | 500  | 1  | 345  | 846  | 224653  | 225499  |
| Consumer | 55  | 19  | 5  | 79  | 9578  | 9657  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $1575  | $1035  | $1399  | $4009  | $1557229  | $1561238  |

---

------

The following table presents, by class, the activity in the Allowance for Credit Losses (ACL) for the periods shown:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Residential Real Estate 1-4 Family** | **Residential Real Estate 1-4 Family** | **Residential Real Estate 1-4 Family** |  |  |  |  |
|  | **First** | **Junior Liens &** |  | **Commercial** |  |  |  |
| *(Dollars in thousands)* | **Liens** | **Lines of Credit** | **Construction** | **Real Estate** | **Commercial** | **Consumer** | **Total** |
| **ACL at December 31, 2025** | $**1665**  | $**500**  | $**652**  | $**14042**  | $**3641**  | $**155**  | $**20655**  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Charge-offs** | **—** | **—** | **—** | **—** | **(347)** | **(41)** | **(388)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Recoveries** | **—** | **—** | **67**  | **—** | **179**  | **14**  | **260**  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Provision** | **68**  | **10**  | **(27)** | **538**  | **(436)** | **49**  | **202**  |
| **ACL at March 31, 2026** | $**1733**  | $**510**  | $**692**  | $**14580**  | $**3037**  | $**177**  | $**20729**  |
| ACL at December 31, 2024 | $1497  | $461  | $376  | $12004  | $3182  | $133  | $17653  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Charge-offs |  |  |  |  | (3) | (18) | (21) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recoveries |  |  | 3  |  | 54  | 5  | 62  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision | 32  | 9  | 76  | 476  | 161  | (4) | 750  |
| ACL at March 31, 2025 | $1529  | $470  | $455  | $12480  | $3394  | $116  | $18444  |

---

As of March 31, 2026 and December 31, 2025 there were no modifications made to borrowers experiencing financial difficulty. During the three months ended March 31, 2026 and 2025, there were no loans to borrowers experiencing financial difficulty that had a payment default and were modified in the twelve months prior to that default. Default is determined at 90 or more days past due, upon charge-off, or upon foreclosure.

**Note 7. Leases**

The Corporation leases various assets in the course of its operations that are subject to recognition on the balance sheet. The Corporation considers all of its leases to be operating leases and it has no finance leases. The leased assets may include equipment, and buildings and land (collectively real estate). The equipment leases are shorter term than the real estate leases, and generally have a fixed payment over a defined term without renewal options. Certain equipment leases have purchase options and it was determined the option was not reasonably certain to be exercised. The real estate leases are longer-term and may contain renewal options after the initial term, but none of the real estate leases contain a purchase option. The renewal options on real estate leases were reviewed and if it was determined the option was reasonably certain to be renewed, the option term was considered in the determination of the lease liability. There is only one real estate lease with a variable payment based on an index included in the lease liability. None of the leases contain any restrictive covenants and there are no significant leases that have not yet commenced. The discount rate used to determine the lease liability is based on the Bank's fully secured borrowing rate from the Federal Home Loan Bank for a term similar to the lease term. Operating lease expense is included in net occupancy expense in the consolidated statements of income.

Lease costs:

The components of total lease cost were as follows:

---

| | | |
|:---|:---|:---|
|  | Three Months Ended<br>‎March 31, | Three Months Ended<br>‎March 31, |
| *(Dollars in thousands)* | **2026** | 2025 |
| Operating lease cost | $**186** | $179 |
| Short-term lease cost | **4** | 4 |
| Variable lease cost  | **43** | 40 |
| Total lease cost | $**233** | $223 |

---

‎

------

Supplemental Lease Information:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Three Months Ended<br>‎March 31, | Three Months Ended<br>‎March 31, | Three Months Ended<br>‎March 31, | Three Months Ended<br>‎March 31, |
| *(Dollars in thousands)* | **2026** | **2026** | 2025 | 2025 |
| Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |
| Operating cash flows from operating leases | **$** | **180** | $| 178 |
| Weighted-average remaining lease term (years) |  | **10.3** |  | 11.3 |
| Weighted-average discount rate |  | **3.65%** |  | 3.52% |

---

Lease Obligations:

Future undiscounted lease payments for operating leases with initial terms of one year or more as of March 31, 2026, are as follows:

---

| | |
|:---|:---|
| *(Dollars in thousands)* |  |
| 2026 | $**547** |
| 2027 | **597** |
| 2028 | **549** |
| 2029 | **545** |
| 2030 | **526** |
| 2031 and beyond | **2545** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Undiscounted cash flow | **5309** |
| Imputed Interest | **(917)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total lease liability | $**4392** |

---

**Note 8. Other Real Estate Owned**

The Bank had no other real estate owned at March 31, 2026 and December 31, 2025.

**Note 9. Derivatives**

The Corporation is exposed to certain risks arising from both its business operations and economic conditions. The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities.

Fair Value Hedges – The Corporation entered into certain interest rate swap contracts designated as fair value portfolio layer hedges of certain available-for-sale investment securities. The Corporation makes a fixed payment and receives a variable payment over the life of the contracts. The hedges were determined to be effective during all periods presented and are expected to be effective during the remaining term of the contracts. On March 16, 2026, the Corporation terminated the interest rate swap contracts and recognized $69 thousand of interest income on investments, and no cash collateral was posted as of March 31, 2026.

Derivatives Not Designated as Hedges – These derivatives result from participations in interest rate swaps provided by external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Corporation's assets or liabilities. Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain lenders which participate in loans.

‎

------

The table below presents the fair value of the Corporation's derivative financial instruments as well as their classification on the Balance Sheet.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* | **As of March 31, 2026** | **As of March 31, 2026** | **As of March 31, 2026** | As of December 31, 2025 | As of December 31, 2025 | As of December 31, 2025 |
|  | Notional amount | Balance Sheet Location | Fair Value | Notional amount | Balance Sheet Location | Fair Value |
| Derivatives designated as hedging instruments |  |  |  |  |  |  |
| Interest rate swaps | $**-** | **-** | $**—** | $100344  | Other Assets | $124  |
| Total derivatives designated as hedging instruments |  |  | $**—** |  |  | $124  |
| Derivatives not designated as hedging instruments |  |  |  |  |  |  |
| Other Contracts | $**5799** | Other Liabilities | $**—** | $5853  | Other Liabilities | $— |
| Total derivatives not designated as hedging instruments |  |  | $**—** |  |  | $— |

---

The table below presents the effect of the Corporation's derivative financial instruments that are designated as hedging instruments on the Income Statement.

---

| | | | |
|:---|:---|:---|:---|
| **Effect of Derivatives Designated as Hedging Instruments on the Statement of Financial Performance** | **Effect of Derivatives Designated as Hedging Instruments on the Statement of Financial Performance** | **Effect of Derivatives Designated as Hedging Instruments on the Statement of Financial Performance** | **Effect of Derivatives Designated as Hedging Instruments on the Statement of Financial Performance** |
| Derivatives Designated as Hedging Instruments under Subtopic 815-20 | Location of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivatives | Amount of Gain or (Loss) Recognized in Income on Derivatives |
|  |  | Three Months Ended | Three Months Ended |
| *(Dollars in thousands)* |  | March 31, | March 31, |
|  |  | **2026** | 2025 |
| Interest rate swaps | Investment income | $**53** | $199 |

---

The table below presents the effect of the Corporation's derivative financial instruments that are not designated as hedging instruments on the Income Statement.

---

| | | | |
|:---|:---|:---|:---|
| **Effect of Derivatives Not Designated as Hedging Instruments on the Statement of Financial Performance** | **Effect of Derivatives Not Designated as Hedging Instruments on the Statement of Financial Performance** | **Effect of Derivatives Not Designated as Hedging Instruments on the Statement of Financial Performance** | **Effect of Derivatives Not Designated as Hedging Instruments on the Statement of Financial Performance** |
| Derivatives Not Designated as Hedging Instruments under Subtopic 815-20 | Location of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivatives | Amount of Gain or (Loss) Recognized in Income on Derivatives |
|  |  | Three Months Ended | Three Months Ended |
| *(Dollars in thousands)* |  | March 31, | March 31, |
|  |  | **2026** | 2025 |
| Other Contracts | Other income | $**-** | $- |

---

The table below presents the carrying amount of the derivative financial instruments for the periods shown:

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| | | |
|:---|:---|:---|
|  | Carrying amount of the hedged items | Carrying amount of the hedged items |
| *(Dollars in thousands)* | As of March 31, | As of March 31, |
|  | **2026** | 2025 |
| Investment securities, AFS (1) | $**-** | $110364 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1)The amounts represent the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedge period.

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**Note 10. Pension**

The components of pension expense for the periods presented are as follows:

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| | | |
|:---|:---|:---|
|  | Three Months Ended | Three Months Ended |
|  | March 31, | March 31, |
| *(Dollars in thousands)* | **2026** | 2025 |
| Components of net periodic cost: |  |  |
| Service cost | $**45** | $53 |
| Interest cost | **192** | 200 |
| Expected return on plan assets | **(229)** | (208) |
| Recognized net actuarial loss | **35** | 20 |
| Total pension expense | $**43** | $65 |

---

The service cost component of pension expense is recorded in the salaries line and all other cost components are recorded in the other expense line of the Consolidated Statements of Income.

# **Note 11. Fair Value Measurements and Fair Values of Financial Instruments** 
Management uses its best judgment in estimating the fair value of the Corporation's financial instruments; however, Management uses its best judgment in estimating the fair value of the Corporation's financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Corporation could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective period-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end. The Corporation uses the exit price notion to measure the fair value of financial instruments.

FASB ASC Topic 820, "Financial Instruments", requires disclosure of the fair value of financial assets and liabilities, including those financial assets and liabilities that are not measured and reported at fair value on a recurring and nonrecurring basis. The Corporation does not report any nonfinancial assets at fair value. FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

*Level 1*: Valuation is based on unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

*Level 2*: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. There may be substantial differences in the assumptions used for securities within the same level. For example, prices for U.S. Agency securities have fewer assumptions and are closer to level 1 valuations than the private label mortgage-backed securities that require more assumptions and are closer to level 3 valuations.

*Level 3*: Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Corporation's assumptions regarding what market participants would assume when pricing a financial instrument.

An asset's or liability's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following information regarding the fair value of the Corporation's financial instruments should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation's assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation's disclosures and those of other companies may not be meaningful.

The following methods and assumptions were used to estimate the fair values of the Corporation's financial instruments

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<u>Investment securities</u>: Fair values of investment securities available-for-sale were primarily measured using information from a first-party pricing service. This service provides pricing information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data from market research publications. Level 2 investment securities are primarily comprised of debt securities issued by states and municipalities, corporations, mortgage-backed securities issued by government agencies, and government-sponsored enterprises. Fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models. Investment securities are measured at fair value on a recurring basis.

<u>Collateral Dependent Loans</u>: The fair value of collateral dependent loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals conducted by an independent, licensed appraiser, less cost to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach (Level 2). If the appraiser makes an adjustment to account for differences between the comparable sales and income data available for similar loans, or if management adjusts the appraised value, then the fair value is considered Level 3. Non-real estate collateral may be valued using an appraisal, net book value per the borrower's financial statements, or aging reports, adjusted or discounted based on management's historical knowledge, changes in market conditions from the time of the valuation, and management's expertise and knowledge of the client and client's business, resulting in a Level 3 fair value classification. Collateral dependent loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy. No partial charge-offs on these loans were taken in the first three months of 2026. Collateral dependent loans are measured at fair value on a nonrecurring basis.

<u>Derivatives</u>: The fair value of derivatives are based on valuation methods using observable market data as of the measurement date (Level 2). The fair value of derivatives are determined using quantitative models using multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates and other factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources including, brokers, market transactions and third-party pricing services. The fair value represents an estimate of the amount the Corporation would receive or pay to terminate the derivative contract.

<u>Other Real Estate Owned</u>: Assets acquired through or instead of loan foreclosure are initially recorded at the lower of cost or the fair value less costs to sell when acquired. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach with data from comparable properties (Level 2). If the appraiser makes an adjustment to account for differences between the comparable sales and income data available for similar loans, or if management adjusts the appraised value, then the fair value is considered Level 3. In connection with the measurement and initial recognition of other real estate owned, losses are recognized through the allowance for loan losses. Subsequent charge-offs are recognized as an expense. Other real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

 **‎** 

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**Fair Value Measurements**

The following table presents assets measured at fair value and the basis of measurement used for the periods presented:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* | **Fair Value at March 31, 2026** | **Fair Value at March 31, 2026** | **Fair Value at March 31, 2026** | **Fair Value at March 31, 2026** | **Fair Value at March 31, 2026** |
| **Assets** | **Basis** | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Available for sale: |  |  |  |  |  |
| U.S. Treasury |  | **33089**  | **—** | **—** | **33089**  |
| Municipal |  | **—** | **136807**  | **—** | **136807**  |
| Corporate |  | **—** | **10925**  | **—** | **10925**  |
| Agency MBS & CMO |  | **—** | **127234**  | **—** | **127234**  |
| Non-Agency MBS & CMO |  | **—** | **102230**  | **—** | **102230**  |
| Asset-backed |  | **—** | **26198**  | **—** | **26198**  |
| &nbsp;&nbsp;Total available for sale | **Recurring** | $**33089**  | $**403394**  | $**—** | $**436483**  |
| Collateral dependent loans (1) | Nonrecurring |  |  | 6389  | 6389  |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* | Fair Value at December 31, 2025 | Fair Value at December 31, 2025 | Fair Value at December 31, 2025 | Fair Value at December 31, 2025 | Fair Value at December 31, 2025 |
| **Assets** | Basis | Level 1 | Level 2 | Level 3 | Total |
| Available for sale: |  |  |  |  |  |
| U.S. Treasury |  | 33263  |  |  | 33263  |
| Municipal |  |  | 137839  |  | 137839  |
| Corporate |  |  | 14675  |  | 14675  |
| Agency MBS & CMO |  |  | 129860  |  | 129860  |
| Non-Agency MBS & CMO |  |  | 111668  |  | 111668  |
| Asset-backed |  |  | 27281  |  | 27281  |
| &nbsp;&nbsp;Total available for sale | Recurring | $33263  | $421323  | $— | $454586  |
| Collateral dependent loans (1) | Nonrecurring |  |  | 6227  | 6227  |
| Derivatives | Recurring |  | 124  |  | 124  |

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&nbsp;&nbsp;&nbsp;&nbsp;(1)Collateral dependent loans with a specific reserve are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on customized discounting criteria.

For financial assets and liabilities measured at fair value on a recurring basis, there were no transfers of financial assets or liabilities between Level 1 and Level 2 during the period ending March 31, 2026.

‎

------

The following table presents additional quantitative information about Level 3 assets measured at fair value on a nonrecurring basis for the periods shown.

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* |  |  |  | Range |
| March 31, 2026 | Fair Value | Valuation Technique | Unobservable Input | (Weighted Average) |
| Collateral Dependent | $6022 | Appraisal | Appraisal adjustment on |  |
|  |  |  | Real estate assets | 20% |
|  |  |  | Cost to sell | 10% |
| Collateral Dependent | $63 | Financial Statement | Valuation of |  |
|  |  |  | Business assets | 25%-100% (93%) |
|  |  |  | Cost to sell | 10% |
| Collateral Dependent | $304 | Appraisal | Appraisal adjustment on |  |
|  |  |  | Real estate assets | 0% |
|  |  |  | Cost to sell | 8% |
|  |  |  |  | Range |
| December 31, 2025 | Fair Value | Valuation Technique | Unobservable Input | (Weighted Average) |
| Collateral Dependent | $6227 | Appraisal | Appraisal adjustment on |  |
|  |  |  | Real estate assets | 20% |
|  |  |  | Cost to sell | 10% |
| Collateral Dependent (1) | $- | Appraisal | Valuation of |  |
|  |  |  | Business assets | 100% |
|  |  |  | Cost to sell | 0% |

---

‎

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The carrying amounts and estimated fair value of financial instruments not carried at fair value are as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** |
|  | **Carrying** | **Fair**  |  |  |  |
| *(Dollars in thousands)* | **Amount** | **Value** | **Level 1** | **Level 2** | **Level 3** |
| Financial assets, carried at cost:  |  |  |  |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $**210777** | $**210777** | $**210777** | $**—** | $**—** |
| &nbsp;&nbsp;Long-term interest-earning deposits in other banks | **750** | **750** | **750** | **—** | **—** |
| &nbsp;&nbsp;Loans held for sale | **1850** | **1879** | **—** | **1879** | **—** |
| &nbsp;&nbsp;Net loans | **1551697** | **1542373** | **—** | **—** | **1542373** |
| &nbsp;&nbsp;Accrued interest receivable | **7708** | **7708** | **—** | **—** | **7708** |
| Financial liabilities: |  |  |  |  |  |
| &nbsp;&nbsp;Deposits | $**1889710** | $**1889764** | $**—** | $**1889764** | $**—** |
| &nbsp;&nbsp;FHLB advances | **200000** | **200963** | **—** | **200963** | **—** |
| &nbsp;&nbsp;Subordinate notes | **10850** | **9532** | **—** | **9532** | **—** |
| &nbsp;&nbsp;Accrued interest payable | **3798** | **3798** | **—** | **3798** | **—** |
|  | December 31, 2025 | December 31, 2025 | December 31, 2025 | December 31, 2025 | December 31, 2025 |
|  | Carrying | Fair |  |  |  |
| *(Dollars in thousands)* | Amount | Value | Level 1 | Level 2 | Level 3 |
| Financial assets, carried at cost:  |  |  |  |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $127721 | $127721 | $127721 | $— | $— |
| &nbsp;&nbsp;Long-term interest-earning deposits in other banks | 999 | 999 | 999 |  |  |
| &nbsp;&nbsp;Loans held for sale | 18929 | 19161 |  | 19161 |  |
| &nbsp;&nbsp;Net loans | 1540583 | 1537281 |  |  | 1537281 |
| &nbsp;&nbsp;Accrued interest receivable | 8084 | 8084 |  |  | 8084 |
| Financial liabilities: |  |  |  |  |  |
| &nbsp;&nbsp;Deposits | $1835772 | $1835884 | $— | $1835884 | $— |
| &nbsp;&nbsp;FHLB Advances | 200000 | 201732 |  | 201732 |  |
| &nbsp;&nbsp;Subordinate notes | 10845 | 9532 |  | 9532 |  |
| &nbsp;&nbsp;Accrued interest payable | 3852 | 3852 |  | 3852 |  |

---

 **‎** 

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**Note 12. Deposits**

---

| | | |
|:---|:---|:---|
|  | **March 31,** | December 31, |
| *(Dollars in thousands)* | **2026** | 2025 |
| Noninterest-bearing checking | $**331658** | $310251 |
| Interest-bearing checking | **419207** | 431843 |
| Money management | **801650** | 771231 |
| Savings | **98637** | 98124 |
| &nbsp;&nbsp;Total interest-bearing checking and savings | **1319494** | 1301198 |
| Time deposits | **216501** | 202266 |
| Time - brokered deposits | **22057** | 22057 |
| &nbsp;&nbsp;Total time deposits | **238558** | 224323 |
| &nbsp;&nbsp;Total deposits | $**1889710** | $1835772 |
| Overdrawn deposit accounts reclassified as loans | $**144** | $178 |

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Time deposits greater than $250,000 at March 31, 2026 and December 31, 2025 were $58.9 million and $55.9 million, respectively.

**Note 13. Borrowings**

On March 31, 2026, the Bank had $200.0 million in total borrowings from the Federal Home Loan Bank of Pittsburgh (FHLB), compared to $200.0 million on December 31, 2025. The borrowings have a rate of 4.32% and are due January 12, 2027.

On March 31, 2026, the Corporation had $11.0 million of unsecured subordinated debt notes payable of which $6.0 million mature on September 1, 2030 and $5.0 million mature on September 1, 2035. The notes are recorded on the consolidated balance sheet net of remaining debt issuance costs totaling $150 thousand which is being amortized on a pro-rata basis, based on the maturity date of the notes, on an effective interest method. The subordinated notes totaling $6.0 million have a variable interest rate of 90-day Average Secured Overnight Financing Rate (SOFR) plus 4.93% and resets quarterly. The subordinated notes totaling $5.0 million have a fixed interest rate of 5.25% through June 29, 2030, then convert to a variable rate of 90-day SOFR plus 4.92% for the applicable interest periods through maturity. The Corporation may, at its option, redeem the notes at par, in whole or in part, at any time 5-years prior to the maturity. The notes are structured to qualify as Tier 2 Capital for the Corporation and there are no debt covenants on the notes.

**Note 14. Capital Ratios**

Capital adequacy for the Bank is currently defined by regulatory agencies through the use of several minimum required ratios. The capital ratios to be considered "well capitalized" are shown in the table below. In addition, a capital conservation buffer of 2.5% is applicable to all of the capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement. The Bank's capital conservation buffer at March 31, 2026 was 5.64% compared to the regulatory buffer of 2.5%. Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions and is in addition to the minimum required capital requirements. As of March 31, 2026, the Bank was "well capitalized."

In 2019, the Community Bank Leverage Ratio (CBLR) was approved by federal banking agencies as an optional capital measure available to Qualifying Community Banking Organizations (QCBO). If a bank qualifies as a QCBO and maintains a CBLR of 9% or greater, the bank would be considered "well-capitalized" for regulatory capital purposes and exempt from complying with the risk-based capital rule described above. The CBLR rule took effect January 1, 2020 and banks could opt-in through an election in the first quarter 2020 regulatory filing. The Bank met the criteria of a QCBO but did not opt-in to the CBLR.

The consolidated asset limit on small bank holding companies is $3.0 billion and a company with assets under that limit is not subject to the consolidated capital rules but may file reports that include capital amounts and ratios. The Corporation has elected to file those reports.

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The following table summarizes the regulatory capital requirements and results as of March 31, 2026 and December 31, 2025 for the Corporation and the Bank:

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| | | | | |
|:---|:---|:---|:---|:---|
|  |  |  | **Regulatory Ratios** | **Regulatory Ratios** |
|  |  |  | **Adequately** | **Well** |
|  | **March 31,** | December 31, | **Capitalized** | **Capitalized** |
| *(Dollars in thousands)* | **2026** | 2025 | **Minimum** | **Minimum** |
| Common Equity Tier 1 Risk-based Capital Ratio (1) |  |  |  |  |
| Franklin Financial Services Corporation | **11.81%** | 11.45% | N/A | N/A |
| Farmers & Merchants Trust Company | **12.39%** | 12.02% | 4.50% | 6.50% |
| Tier 1 Risk-based Capital Ratio (2) |  |  |  |  |
| Franklin Financial Services Corporation | **11.81%** | 11.45% | N/A | N/A |
| Farmers & Merchants Trust Company | **12.39%** | 12.02% | 6.00% | 8.00% |
| Total Risk-based Capital Ratio (3) |  |  |  |  |
| Franklin Financial Services Corporation | **13.66%** | 13.27% | N/A | N/A |
| Farmers & Merchants Trust Company | **13.64%** | 13.27% | 8.00% | 10.00% |
| Tier 1 Leverage Ratio (4) |  |  |  |  |
| Franklin Financial Services Corporation | **8.57%** | 8.17% | N/A | N/A |
| Farmers & Merchants Trust Company | **8.99%** | 8.57% | 4.00% | 5.00% |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Common equity Tier 1 capital / total risk-weighted assets

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Tier 1 capital / total risk-weighted assets

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)Total risk-based capital / total risk-weighted assets

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)Tier 1 capital / average quarterly assets

**Note 15. Revenue Recognition**

All of the Corporation's revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income as presented in its consolidated statements of income. Revenue generating activities that fall within the scope of ASC 606 are described as follows:

*Wealth Management Fees* – these represent fees from wealth management (assets under management), fees from the management and settlement of estates and commissions from the sale of investment and insurance products. Asset management fees are generally assessed based on a tiered fee schedule, based on the value of assets under management, and are recognized monthly when the service obligation is completed. Fees for estate management services are based on the estimated fair value of the estate. These fees are generally recognized monthly over an 18-month period that Management has determined to represent the average time to fulfill the performance obligations of the contract. Management has the discretion to adjust this time period as needed based upon the nature and complexity of an individual estate. Commissions from the sale of investment and insurance products are recognized upon the completion of the transaction.

‎

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The following table presents Wealth Management Fees for the three and nine months ended March 31, 2026 and 2025:

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| | | |
|:---|:---|:---|
|  | For the Three Months Ended | For the Three Months Ended |
| *(Dollars in thousands)* | March 31, | March 31, |
| **Wealth Management Fees** | **2026** | 2025 |
| Asset Management Fees | $**2185** | $1996 |
| Estate Management Fees | **66** | 136 |
| Commissions | **55** | 83 |
| &nbsp;&nbsp;Total  | $**2306** | $2215 |

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*Loan Service Charges* – these represent fees on loans for services or charges that occur after the loan has been booked, for example, late payment fees. These also include fees for mortgages settled for first-party mortgage companies. All of these fees are transactional in nature and are recognized upon completion of the transaction which represents the performance obligation.

*Deposit Service Charges and Fees* – these represent fees from deposit customers for transaction based, account maintenance, and overdraft services. Transaction based fees include, but are not limited to, stop payment fees and overdraft fees. These fees are recognized at the time of the transaction when the performance obligation has been fulfilled. Account maintenance fees and account analysis fees are earned over the course of a month, representing the period of the performance obligation, and are recognized monthly.

*Debit Card Income* – this represents interchange fees from cardholder transactions conducted through the card payment network. Cardholders use the debit card to conduct point-of-sale transactions that produce interchange fees. The fees are transaction based and the fee is recognized with the processing of the transaction. These fees are reported net of cardholder rewards.

*Other Service Charges and Fees* – these are comprised primarily of merchant card fees, credit card fees, ATM surcharges and interchange fees and wire transfer fees. Merchant card fees represent fees the Bank earns from a first party for enrolling a customer in the processor's program. Credit card fees represent a fee earned by the Bank for a successful referral to a card-issuing company. ATM surcharges and interchange fees are the result of Bank customers conducting ATM transactions that generate fee income and are processed through multiple card networks. All of these fees are transaction based and are recognized at the time of the transaction.

*Gains/Losses on the Sale of Other Real Estate* – these are recognized when control of the property transfers to the buyer.

*Contract Balances*

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity's obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company's noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into longer-term revenue contracts with customers, and therefore, does not experience significant contract balances.

*Contract Acquisition Costs*

The Corporation expenses all contract acquisition costs as costs are incurred.

**1Note 16. Commitments and Contingencies**

In the normal course of business, the Bank is a party to financial instruments that are not reflected in the accompanying financial statements and are commonly referred to as off-balance-sheet instruments. These financial instruments are entered into primarily to meet the financing needs of the Bank's customers and include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk not recognized in the consolidated balance sheet.

The Corporation's exposure to credit loss in the event of nonperformance by other parties to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments.

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The Bank had the following outstanding commitments for the periods presented:

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| | | |
|:---|:---|:---|
|  | **March 31,** | December 31, |
| *(Dollars in thousands)* | **2026** | 2025 |
| Financial instruments whose contract amounts represent credit risk |  |  |
| Commercial commitments to extend credit  | $**300729** | $300228 |
| Consumer commitments to extend credit (secured)  | **147130** | 153183 |
| Consumer commitments to extend credit (unsecured)  | **7840** | 7083 |
|  | $**455699** | $460494 |
| Standby letters of credit  | $**28323** | $29880 |
| ACL - Unfunded Commitments (1) | $**1918** | $1899 |
| (1) Reported in Other Liabilities on the Consolidated Balance Sheets |  |  |

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Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses with the exception of home equity lines and personal lines of credit and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank, is based on Management's credit evaluation of the counterparty. Collateral for most commercial commitments varies but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties. Collateral for secured consumer commitments consists of liens on residential real estate.

Standby letters of credit are instruments issued by the Bank, which guarantee the beneficiary payment by the Bank in the event of default by the Bank's customer in the nonperformance of an obligation or service. Most standby letters of credit are extended for one-year periods. Generally, the credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral supporting those commitments for which collateral is deemed necessary primarily in the form of certificates of deposit and liens on real estate. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.

Most of the Bank's business activity is with customers located within its primary market and does not involve any significant concentrations of credit to any one entity or industry.

**Legal Proceedings**

The nature of the Corporation's business generates a certain amount of litigation.

The Corporation establishes accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable, and the amount of the loss can be reasonably estimated. When the Corporation is able to do so, it also determines estimates of possible losses, whether in excess of any accrued liability or where there is no accrued liability.

These assessments are based on the analysis of currently available information and are subject to significant judgment and a variety of assumptions and uncertainties. As new information is obtained, the Corporation may change its assessments and, as a result, take or adjust the amounts of its accruals and change its estimates of possible losses or ranges of possible losses. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts that may be accrued or included in estimates of possible losses or ranges of possible losses may not represent the actual loss to the Corporation from any legal proceeding. Its exposure and ultimate losses may be higher, possibly significantly higher, than amounts it may accrue or amounts it may estimate.

‎

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In management's opinion, the Corporation does not anticipate, at the present time, that the ultimate aggregate liability, if any, arising out of all litigation to which the Corporation is a party at this time will have a material adverse effect on its financial position. The Corporation cannot now determine, however, whether or not any claim asserted against it will have a material adverse effect on its results of operations in any future reporting period, which will depend on, among other things, the amount of loss resulting from the claim and the amount of income otherwise reported for the reporting period. Thus, at March 31, 2026, the Corporation is unable to provide an evaluation of the likelihood of an unfavorable outcome or an estimate of the amount or range of potential loss with respect to such other matters and, accordingly, have not yet established any specific accrual for such other matters.

**Note 17. Segment Reporting**

The Corporation's reportable segments are determined by the President and Chief Operating Officer of the Bank, who is the designated chief operating decision maker (CODM), based upon information provided about the Corporation's products and services offered primarily between community banking and wealth management segments. The segments are also distinguished by the level of information provided to the CODM, who uses such information to review the performance of various components of the business, which are then aggregated if operating performance, products/services, and customer are similar. The CODM evaluates the financial performance of the Corporation's business segments by evaluating revenue streams, significant expenses, and budget to actual results to assess the performance of the segments and to determine allocation of resources. This evaluation is also used to assess the performance of each segment to evaluate compensation of certain employees.

Segment pretax profit or loss is used to assess the performance of the community banking segment by monitoring net interest income, fee income and noninterest expense. In this segment, interest income on loans and securities, and banking service fees are the primary source of revenue. Interest expense, the provision for credit losses, and salaries and benefits are the primary expenses.

Segment pretax profit or loss is used to assess the performance of the wealth management segment by monitoring fee income and operating expense, and by assets under management. In this segment, fees from assets under management are the primary source of revenue, while salaries and benefits are the primary expense.

‎

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** |
|  | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** |
|  | **Reportable Segments** | **Reportable Segments** |  |  |
| *(Dollars in thousands)* | **Community Banking** | **Wealth** | **Other (1)** | **Consolidated Total** |
| Interest and dividend Income | $**27770** | $**—** | $**—** | $**27770** |
| Noninterest income | **3054** | **2306** | **—** | **5360** |
| &nbsp;&nbsp;&nbsp;&nbsp;Total consolidated revenue |  |  |  | **33130** |
| Interest expense | **9044** | **—** | **205** | **9249** |
| Provision for credit losses | **221** | **—** | **—** | **221** |
| Salaries and benefit expense | **8052** | **973** | **—** | **9025** |
| Other noninterest expense (2) | **5448** | **308**  | **572**  | **6328** |
| &nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | **8059** | **1025**  | **(777)** | **8307** |
| Income tax expense | **1833** | **—** | **(163)** | **1670** |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income | $**6226** | $**1025** | $**(614)** | $**6637** |
| Total assets for reportable segments | $**2295698** | $**1600** | **220** | $**2297518** |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Includes parent company expense not allocated to a reportable segment and is provided to reconcile to the consolidated totals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Includes all noninterest expense items reported on the Consolidated Statement of Income, excluding salaries and benefit expense for the Community Banking Segment. Includes professional fees, data processing services, other miscellaneous expense and overhead allocations for the Wealth Segment.

‎

------

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | For the Three Months Ended | For the Three Months Ended | For the Three Months Ended | For the Three Months Ended |
|  | March 31, 2025 | March 31, 2025 | March 31, 2025 | March 31, 2025 |
|  | Reportable Segments | Reportable Segments |  |  |
| *(Dollars in thousands)* | Community Banking | Wealth | Other (1) | Consolidated Total |
| Interest and dividend Income | $27058 | $— | $— | $27058 |
| Noninterest income | 2354 | 2215 | (7) | 4562 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total consolidated revenue |  |  |  | 31620 |
| Interest expense | 11188 |  | 264 | 11452 |
| Provision for credit losses | 779 |  |  | 779 |
| Salaries and benefit expense | 7484 | 1022 |  | 8506 |
| Other noninterest expense (2) | 5228 | 275  | 568  | 6071 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | 4733 | 918  | (839) | 4812 |
| Income tax expense | 1116 |  | (226) | 890 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income | $3617 | $918 | $(613) | $3922 |
| Total assets for reportable segments | $2255857 | $1497 | 124 | $2257478 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Includes parent company expense not allocated to a reportable segment and is provided to reconcile to the consolidated totals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Includes all noninterest expense items reported on the Consolidated Statement of Income, excluding salaries and benefit expense for the Community Banking Segment. Includes professional fees, data processing services, other miscellaneous expense and overhead allocations for the Wealth Segment.

**Note 18. Reclassifications**

Certain prior period amounts may have been reclassified to conform to the current year presentation. Such reclassifications did not affect prior year net income or shareholders' equity.

**Note 19. Subsequent Events**

Subsequent to March 31, 2026, the previously discussed $7.0 million nonaccrual CRE construction loan matured. The Bank is actively working with the borrower to evaluate options and develop an appropriate workout or modification plan.

‎

------

**<u>Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition</u>**

**Management's Discussion and Analysis of Results of Operations and Financial Condition**

**For the Three Months Ended March 31, 2026 and 2025**

**<u>Forward Looking Statements</u>**

Certain statements appearing herein which are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements refer to a future period or periods, reflecting management's current views as to likely future developments, and use words such as "may," "will," "expect," "believe," "estimate," "anticipate," or similar terms. Because forward-looking statements involve certain risks, uncertainties and other factors over which the Corporation has no direct control, actual results could differ materially from those contemplated in such statements. These factors include (but are not limited to) the following: general economic conditions, changes in the rates of inflation and the effects of inflation, changes in interest rates, disruption in the financial services industry caused by bank failures and uncertainties involving various banks, changes in the Corporation's cost of funds, changes in government monetary policy, changes in government regulation and taxation of financial institutions, changes in technology, the intensification of competition within the Corporation's market area, and other similar factors.

We caution readers not to place undue reliance on these forward-looking statements. They only reflect management's analysis as of this date. The Corporation does not revise or update these forward-looking statements to reflect events or changed circumstances.

**<u>Critical Accounting Policies</u>**

Management has identified critical accounting policies for the Corporation. These policies are particularly sensitive,

requiring significant judgements, estimates and assumptions to be made by Management.

There were no changes to the critical accounting policies disclosed in the 2025 Annual Report on Form 10-K in regards to application or related judgments and estimates used as of March 31, 2026. Please refer to Item 7 of the Corporation's 2025 Annual Report on Form 10-K for a more detailed disclosure of the critical accounting policies.

**<u>Results of Operations</u>**

Summary

A summary of operating results for Franklin Financial Services Corporation for the three months ended March 31, 2026 are as follows:

Net income: $6.6 million ($1.48 per diluted share) for the first quarter of 2026. This is an increase of $594 thousand (9.8%) compared to $6.0 million ($1.35 per diluted share) for the fourth quarter of 2025 and an increase of $2.7 million (69.2%) compared to $3.9 million ($0.88 per diluted share) for the first quarter of 2025.

Wealth Management: $2.3 million in fees for the first quarter of 2026, an increase of 4.1% from $2.2 million in the first quarter of 2025. Assets under management were $1.417 billion on March 31, 2026.

Asset Growth: $2.298 billion in total assets on March 31, 2026, an increase of 2.6% from $2.239 billion at year-end 2025.

Loan Growth: Net loans totaled $1.552 billion on March 31, 2026, an increase of 0.7% from $1.541 billion on December 31, 2025.

Deposit Growth: Total deposits of $1.890 billion, an increase of 2.9% from $1.836 billion on December 31, 2025.

Quarterly Performance Metrics: Return on Average Assets (ROA) of 1.20%, Return on Average Equity (ROE) of 15.13%, and Net Interest Margin (NIM) of 3.53%, on an annualized basis for the first quarter of 2026, compared to an ROA of 0.72%, ROE of 10.80% and NIM of 3.05% for the first quarter of 2025.

On April 9, 2026, the Board of Directors declared $0.34 per share regular quarterly cash dividend for the second quarter of 2026 to be paid on May 27, 2026, to shareholders of record at the close of business on May 1, 2026. This dividend represents a 3.0% increase over the second quarter 2025 dividend.

‎

------

Key performance ratios as of, or for the periods ended as shown:

---

| | | | |
|:---|:---|:---|:---|
|  | Three Months Ended | Three Months Ended | Twelve Months Ended |
|  | **March 31,** | March 31, | December 31, |
| *(Dollars in thousands, except per share) (Unaudited)* | **2026** | 2025 | 2025 |
| **Balance Sheet Highlights** |  |  |  |
| Total assets | $**2297518**  | $2257478  | $2239018  |
| Debt securities available for sale | **436483**  | 495487  | 454586  |
| Loans, net | **1551697**  | 1437747  | 1540583  |
| Deposits | **1889710**  | 1867577  | 1835772  |
| Other borrowings | **200000**  | 200000  | 200000  |
| Shareholders' equity | **178744**  | 151391  | 175242  |
| **Summary of Operations** |  |  |  |
| Interest income | $**27770**  | $27058  | $114371  |
| Interest expense | **9249**  | 11452  | 44725  |
| &nbsp;&nbsp;Net interest income | **18521**  | 15606  | 69646  |
| Provision for credit losses - loans | **202**  | 750  | 3030  |
| Provision for (reversal of) credit losses - unfunded commitments | **19**  | 29  | (131) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total provision for credit losses | **221**  | 779  | 2899  |
| &nbsp;&nbsp;Net interest income after provision for credit losses | **18300**  | 14827  | 66747  |
| Noninterest income | **5360**  | 4562  | 19176  |
| Noninterest expense | **15353**  | 14577  | 59656  |
| Income before income taxes  | **8307**  | 4812  | 26267  |
| Federal income tax expense | **1670**  | 890  | 5041  |
| &nbsp;&nbsp;Net income | $**6637**  | $3922  | $21226  |
| **Performance Measurements** |  |  |  |
| Return on average assets\* | **1.20%** | 0.72% | 0.94% |
| Return on average equity\* | **15.13%** | 10.80% | 13.55% |
| Return on average tangible equity (1)\* | **15.72%** | 11.35% | 14.38% |
| Efficiency ratio (1) | **63.64%** | 71.36% | 66.48% |
| Net interest margin\* | **3.53%** | 3.05% | 3.25% |
| **Shareholders' Value (per common share)** |  |  |  |
| Diluted earnings per share | $**1.48** | $0.88 | $4.74 |
| Basic earnings per share  | **1.48** | 0.88 | 4.76 |
| Regular cash dividends declared | **0.33** | 0.32 | 1.31 |
| Book value | **39.78** | 33.99 | 39.11 |
| Tangible book value (1) | **37.78** | 31.97 | 37.10 |
| Market value | **51.08** | 35.45 | 50.20 |
| Market value/book value ratio | **128.40%** | 104.30% | 128.36% |
| Market value/tangible book value ratio | **135.22%** | 110.90% | 135.33% |
| Price/earnings multiple (year-to-date)\* | **8.63** | 10.07 | 10.59 |
| Dividend yield (year-to-date)\* | **2.58%** | 3.61% | 2.63% |
| Dividend payout ratio (year-to-date) | **22.30%** | 36.16% | 27.54% |
| **Safety and Soundness** |  |  |  |
| Average equity/average assets | **7.94%** | 6.69% | 6.92% |
| Risk-based capital ratio (Total) | **13.66%** | 13.30% | 13.27% |
| Leverage ratio (Tier 1) | **8.57%** | 7.82% | 8.17% |
| Common equity ratio (Tier 1) | **11.81%** | 10.86% | 11.45% |
| Nonperforming loans / gross loans | **0.54%** | 0.02% | 0.55% |
| Nonperforming assets/total assets | **0.37%** | 0.01% | 0.38% |
| Allowance for credit losses as a % of loans | **1.32%** | 1.27% | 1.32% |
| Net loans (charged-off) recovered / average loans\* | **-0.03%** | 0.01% | 0.00% |
| **Assets under Management** |  |  |  |
| Trust assets under management (fair value) | $**1271068**  | $1183180  | $1273421  |
| Held at third-party brokers (fair value) | **145477**  | 139918  | 147880  |
|  | $**1416545**  | $1323098  | $1421301  |

---

*\*Year-to-date annualized*

*(1) See the section titled "GAAP versus Non-GAAP Presentation" that follows.*

------

**GAAP versus non-GAAP Presentations** – The Corporation supplements its traditional GAAP measurements with certain non-GAAP measurements to evaluate its performance and to eliminate the effect of intangible assets. By eliminating intangible assets (Goodwill), the Corporation believes it presents a measurement that is comparable to companies that have no intangible assets or to companies that have eliminated intangible assets in similar calculations. However, not all companies may use the same calculation method for each measurement. The non-GAAP measurements are not intended to be used as a substitute for the related GAAP measurements. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. In the event of such a disclosure or release, the Securities and Exchange Commission's Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. The following table shows the calculation of the non-GAAP measurements as of, or for the three months ended March 31, 2026 and 2025 and the year ended December 31, 2025.

---

| | | | |
|:---|:---|:---|:---|
| (Dollars in thousands, except per share) |  |  |  |
|  | **March 31, 2026** | March 31, 2025 | December 31, 2025 |
| **Return on Tangible Equity (non-GAAP)** |  |  |  |
| Net income | $**6637** | $3922 | $21226 |
| Average shareholders' equity | **177868** | 147256 | 156638 |
| Less average intangible assets  | **(9016)** | (9016) | (9016) |
| Average tangible equity (non-GAAP) | **168852** | 138240 | 147622 |
| &nbsp;&nbsp;&nbsp;&nbsp;Return on average tangible equity (non-GAAP)\* | **15.72%** | 11.35% | 14.38% |
| **Tangible Book Value (per share) (non-GAAP)** |  |  |  |
| Shareholders' equity | $**178744** | $151391 | $175242 |
| Less intangible assets | **(9016)** | (9016) | (9016) |
| Tangible book value (non-GAAP) | **169728** | 142375 | 166226 |
| Shares outstanding (in thousands) | **4493** | 4454 | 4481 |
| &nbsp;&nbsp;&nbsp;&nbsp;Tangible book value per share (non-GAAP) | $**37.78** | $31.97 | $37.10 |
| **Efficiency Ratio** |  |  |  |
| Noninterest expense | $**15353** | $14577 | $59656 |
| Net interest income  | **18521** | 15606 | 69646 |
| Plus tax equivalent adjustment to net interest income | **245** | 251 | 904 |
| Plus noninterest income, net of securities transactions | **5360** | 4569 | 19183 |
| Total revenue | **24126** | 20426 | 89733 |
| &nbsp;&nbsp;&nbsp;&nbsp;Efficiency ratio (Noninterest expense/total revenue) | **63.64%** | 71.36% | 66.48% |
| \* Year-to-date annualized |  |  |  |

---

## **Net Interest Income** 
The largest source of the Corporation's earnings is net interest income, which is defined as the difference between income on interest-earning assets and the expense of interest-bearing liabilities supporting those assets. Principal categories of interest-earning assets are loans and securities, while deposits, short-term borrowings and long-term debt are the principal categories of interest-bearing liabilities. Demand deposits enhance net interest income because they are noninterest-bearing deposits. For the purpose of this discussion, balance sheet items refer to the average balance for the year and net interest income is adjusted to a fully taxable-equivalent basis. This tax-equivalent adjustment facilitates performance comparisons between taxable and tax-free assets by increasing the tax-free income by an amount equivalent to the Federal income taxes that would have been paid if this income were taxable at the Corporation's 21% Federal statutory rate.

##  ***Comparison of the three months ended March 31, 2026 to the three months ended March 31, 2025:*** 
Tax equivalent net interest income increased $2.9 million to $18.8 million in the first quarter of 2026 compared to $15.9 million for the same period in 2025. Tax equivalent net interest income increased $1.9 million from balance sheet volume changes and $1.0 million from interest rate changes.

------

The following table presents average balances, tax-equivalent (T/E) interest income, and yields earned or rates paid on the assets or liabilities. Loans are classified by type of collateral and residential loans include commercial purpose loans and nonaccrual loans are included in the average loan balance used to calculate the yield. All nontaxable interest income has been adjusted to a tax-equivalent basis using a tax rate of 21%.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
|  | **2026** | **2026** | **2026** | 2025 | 2025 | 2025 |
|  | **Average** | **Income or** | **Average** | Average | Income or | Average |
| *(Dollars in thousands)* | **balance** | **expense** | **yield/rate** | balance | expense | yield/rate |
| Interest-earning assets: |  |  |  |  |  |  |
| &nbsp;&nbsp;Deposits in other banks | $**122564**  | $**1119**  | **3.70%** | $173573  | $1908  | 4.46% |
| &nbsp;&nbsp;Investment securities: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Taxable securities | **398522**  | **3616**  | **3.68%** | 453587  | 4825  | 4.31% |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax-exempt securities | **50735**  | **334**  | **2.67%** | 50370  | 336  | 2.70% |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted stock | **8897**  | **202**  | **9.08%** | 8770  | 191  | 8.71% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investment securities | **458154**  | **4152**  | **3.68%** | 512727  | 5352  | 4.23% |
| &nbsp;&nbsp;Gross loans: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Residential real estate 1-4 family: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;First liens | **295401**  | **4196**  | **5.76%** | 244487  | 3290  | 5.46% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Junior liens and lines of credit | **92920**  | **1279**  | **5.58%** | 83128  | 1215  | 5.93% |
| &nbsp;&nbsp;&nbsp;&nbsp;Residential real estate - construction | **56987**  | **907**  | **6.45%** | 34623  | 568  | 6.65% |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial real estate | **909027**  | **13329**  | **5.95%** | 816450  | 11710  | 5.82% |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial  | **208117**  | **2827**  | **5.51%** | 234946  | 3090  | 5.33% |
| &nbsp;&nbsp;&nbsp;&nbsp;Consumer | **10006**  | **206**  | **8.35%** | 7940  | 176  | 8.99% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total gross loans | **1572458**  | **22744**  | **5.87%** | 1421574  | 20049  | 5.72% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-earning assets | **2153176**  | $**28015**  | **5.28%** | 2107874  | $27309  | 5.25% |
| &nbsp;&nbsp;&nbsp;&nbsp;Noninterest-earning assets | **86246**  |  |  | 92224  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $**2239422**  |  |  | $2200098  |  |  |
| Interest-bearing liabilities: |  |  |  |  |  |  |
| &nbsp;&nbsp;Deposits: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest checking | $**419722**  | $**578**  | **0.56%** | $404451  | $591  | 0.59% |
| &nbsp;&nbsp;&nbsp;&nbsp;Money management | **771367**  | **4180**  | **2.20%** | 728959  | 4892  | 2.72% |
| &nbsp;&nbsp;&nbsp;&nbsp;Savings | **98034**  | **20**  | **0.08%** | 97051  | 40  | 0.17% |
| &nbsp;&nbsp;&nbsp;&nbsp;Time | **212035**  | **1875**  | **3.59%** | 220461  | 2331  | 4.29% |
| &nbsp;&nbsp;&nbsp;&nbsp;Time - brokered | **22057**  | **234**  | **4.30%** | 87057  | 1176  | 5.48% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing deposits | **1523215**  | **6887**  | **1.83%** | 1537979  | 9030  | 2.38% |
| &nbsp;&nbsp;Subordinate notes | **10847**  | **205**  | **7.56%** | 19703  | 264  | 5.36% |
| &nbsp;&nbsp;Federal Home Loan Bank borrowings | **200000**  | **2157**  | **4.31%** | 200000  | 2158  | 4.32% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing liabilities | **1734062**  | **9249**  | **2.16%** | 1757682  | 11452  | 2.64% |
| Noninterest checking | **309458**  |  |  | 277558  |  |  |
| Other liabilities | **18034**  |  |  | 17602  |  |  |
| Shareholders' equity | **177868**  |  |  | 147256  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $**2239422**  |  |  | $2200098  |  |  |
| T/E net interest income/Net interest margin |  | **18766**  | **3.53%** |  | 15857  | 3.05% |
| Tax equivalent adjustment |  | **(245)** |  |  | (251) |  |
| Net interest income |  | $**18521**  |  |  | $15606  |  |
| Net Interest Spread |  |  | **3.12%** |  |  | 2.61% |
| Cost of Funds |  |  | **1.84%** |  |  | 2.28% |
| Cost of Deposits |  |  | **1.52%** |  |  | 2.02% |

---

------

## **Provision for Credit Losses** 
For the first quarter of 2026, the provision for credit losses on loans was $202 thousand compared to $750 thousand for the first quarter of 2025. The decrease is due primarily to a change in management's reassessment of the municipal loans portfolio and qualitative factor decreases for municipal loans, which was partially offset by an increase of $671 thousand for specific reserves on two collateral dependent loans. The ACL ratio for loans was 1.32% on March 31, 2026 and on December 31, 2025.

The provision for unfunded commitments was $19 thousand compared to $29 thousand for the same period in 2025. The ACL for unfunded commitments was $1.9 million on March 31, 2026 and December 31, 2025, respectfully. For more information refer to the Loan Quality and Allowance for Credit Losses discussion in the Financial Condition section.

**Noninterest Income** 

For the first quarter of 2026, noninterest income, before securities transactions, increased $791 thousand compared to the same period in 2025. Wealth Management fees increased, primarily because of growth in assets under management, the gain on sale of loans increased due to a one-time sale of mortgages and other income increased from gains from bank owned life insurance claims.

The following table presents a comparison of noninterest income for the three months ended March 31, 2026 and 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | For the Three Months Ended | For the Three Months Ended |  |  |
|  | March 31, | March 31, | Change | Change |
| *(Dollars in thousands)* | **2026** | 2025 | Amount | % |
| **Noninterest Income** |  |  |  |  |
| Wealth management fees | $**2306** | $2215 | $91 | 4.1 |
| Loan service charges | **238** | 209 | 29 | 13.9 |
| Gain on sale of loans | **318** | 109 | 209 | 191.7 |
| Deposit service charges and fees | **647** | 605 | 42 | 6.9 |
| Other service charges and fees | **482** | 483 | (1) | (0.2) |
| Debit card income | **618** | 558 | 60 | 10.8 |
| Increase in cash surrender value of life insurance | **132** | 115 | 17 | 14.8 |
| Other | **619** | 275 | 344 | 125.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Noninterest income before securities transactions | **5360** | 4569 | 791 | 17.3 |
| Change in fair value of equity securities | **—** | (7) | 7 | (100.0) |
| &nbsp;&nbsp;**Total noninterest income** | $**5360** | $4562 | $798 | 17.5 |

---

**Noninterest Expense**

Noninterest expense for the first quarter of 2026 increased $776 thousand compared to the same period in 2025. Employee benefits increased $458 thousand primarily in health insurance ($252 thousand), and payroll taxes and benefits ($253 thousand) from the timing of an incentive compensation payout. The 2026 payout occurred in the first quarter of 2026 while the 2025 payout occurred in the second quarter of 2025. Legal and professional fees increased primarily in audit and consulting fees.

------

The following table presents a comparison of noninterest expense for the three months ended March 31, 2026 and 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | For the Three Months Ended | For the Three Months Ended |  |  |
| *(Dollars in thousands)* | March 31, | March 31, | Change | Change |
| **Noninterest Expense** | **2026** | 2025 | Amount | % |
| &nbsp;&nbsp;Salaries | $**6237** | $6176 | $61 | 1.0 |
| &nbsp;&nbsp;Employee benefits | **2788** | 2330 | 458 | 19.7 |
| &nbsp;&nbsp;Net occupancy | **1241** | 1225 | 16 | 1.3 |
| &nbsp;&nbsp;Marketing and advertising | **426** | 433 | (7) | (1.6) |
| &nbsp;&nbsp;Legal and professional | **695** | 527 | 168 | 31.9 |
| &nbsp;&nbsp;Data processing | **1540** | 1557 | (17) | (1.1) |
| &nbsp;&nbsp;Pennsylvania bank shares tax | **254** | 160 | 94 | 58.8 |
| &nbsp;&nbsp;FDIC insurance | **483** | 545 | (62) | (11.4) |
| &nbsp;&nbsp;ATM/debit card processing | **377** | 340 | 37 | 10.9 |
| &nbsp;&nbsp;Telecommunications | **135** | 106 | 29 | 27.4 |
| &nbsp;&nbsp;Other | **1177** | 1178 | (1) | (0.1) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total noninterest expense** | $**15353** | $14577 | $776 | 5.3 |

---

## **Provision for Income Taxes** 
For the first quarter of 2026, total income tax was $1.7 million, comprised of $1.4 million in Federal income tax and $229 thousand in state income taxes. Income tax for the first quarter increased by $780 thousand compared to the first quarter of 2025, due to higher pre-tax income in 2026. The effective tax rate for the first quarter of 2026 was 20.1% compared to 18.5% for the same period in 2025. The federal statutory tax rate is 21% for 2026 and 2025.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA makes permanent certain provisions from the Tax Cuts and Jobs Act and modifies other tax provisions. These provisions have various effective dates. We continue to evaluate the impact of the new legislation but do not expect it to have a material impact on the Corporation's financial statements.

<u>Financial Condition</u>

***Cash and Cash Equivalents:***

Cash and cash equivalents totaled $210.8 million on March 31, 2026, an increase of $83.1 million from the prior year-end balance of $127.7 million. Short-term interest-earning deposits are held primarily at the Federal Reserve ($183.1 million).

***Investment Securities:***

<u>Available for Sale (AFS) Securities:</u> At March 31, 2026, the AFS securities portfolio had an amortized cost of $465.3 million, a decrease of $16.1 million from the prior year-end, and a fair value of $436.5 million, a decrease of $18.1 million from the prior year-end. During the first three months of 2026, the portfolio returned $17.2 million of principal and $1.2 million was purchased. The Bank did not sell any investments in the first three months of 2026. The AFS portfolio had a net unrealized loss of $28.8 million at March 31, 2026 compared to a net unrealized loss of $26.8 million at the prior year-end. The AFS portfolio averaged $449.3 million with a tax equivalized yield of 3.57% for the three months ended March 31, 2026. This compares to an average of $504.0 million and a tax-equivalized yield of 4.15% for the same period in 2025.

The AFS portfolio holdings are classified by type of security issuer. U.S. Agency mortgage-backed and collateralized mortgage obligations are issued by a U.S. Government Agency or a government sponsored entity and securitized by pools of residential and commercial mortgages. Municipal securities are issued by state and local government entities and consist of taxable and tax-exempt securities. Many municipal securities have credit enhancements in the form of private bond insurance or other credit support. Corporate securities are mostly subordinated notes issued by community banks with the remainder consisting of four trust preferred securities. Non-Agency mortgage-backed and collateralized mortgage obligation securities are issued by private entities and securitized by residential and commercial mortgages. Many of these securities benefit from credit enhancements in the form of subordinated tranches and overcollateralization. Asset-backed securities are issued by or insured by a U.S. Government Agency and securitized by loan pools other than mortgages.

<u>Restricted Stock at Cost:</u> The Bank held $8.9 million of restricted stock at March 31, 2026 and at December 31, 2025. Except for $30 thousand, this investment represents stock in Federal Home Loan Bank of Pittsburgh (the FHLB). The Bank

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is required to hold this stock to be a member of FHLB and it is carried at cost of $100 per share. The level of FHLB stock held is determined by FHLB and is comprised of a minimum membership amount plus a variable activity amount. FHLB stock is evaluated for impairment primarily based on an assessment of the ultimate recoverability of its cost. As a government sponsored entity, FHLB has the ability to raise funding through the U.S. Treasury that can be used to support its operations. There is no public market for FHLB stock and the benefits of FHLB membership (e.g., liquidity and low-cost funding) add value to the stock beyond purely financial measures. Management intends to remain a member of the FHLB and believes that it will be able to fully recover the cost basis of this investment.

See Note 4 of the accompanying financial statements for additional information on Investment Securities.

***Loans:***

The following table presents a summary of loans outstanding, by class as of:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **March 31,** | December 31, | Change | Change |
| *(Dollars in thousands)* | **2026** | 2025 | Amount | % |
| Residential real estate 1-4 family |  |  |  |  |
| &nbsp;&nbsp;Consumer first liens | $**225743** | $213440 | $12303 | 5.8 |
| &nbsp;&nbsp;Commercial first lien | **62678** | 63457 | (779) | (1.2) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total first liens | **288421** | 276897 | 11524 | 4.2 |
| &nbsp;&nbsp;Consumer junior liens and lines of credit | **86183** | 84650 | 1533 | 1.8 |
| &nbsp;&nbsp;Commercial junior liens and lines of credit | **7207** | 6839 | 368 | 5.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total junior liens and lines of credit | **93390** | 91489 | 1901 | 2.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total residential real estate 1-4 family | **381811** | 368386 | 13425 | 3.6 |
| Residential real estate - construction |  |  |  |  |
| &nbsp;&nbsp;Consumer | **32428** | 29609 | 2819 | 9.5 |
| &nbsp;&nbsp;Commercial | **24385** | 24516 | (131) | (0.5) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total residential real estate construction | **56813** | 54125 | 2688 | 5.0 |
| Commercial real estate | **909067** | 903571 | 5496 | 0.6 |
| Commercial | **214007** | 225499 | (11492) | (5.1) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total commercial | **1123074** | 1129070 | (5996) | (0.5) |
| Consumer | **10728** | 9657 | 1071 | 11.1 |
|  | **1572426** | 1561238 | 11188 | 0.7 |
| Less: Allowance for credit losses | **(20729)** | (20655) | (74) | 0.4 |
| Net Loans | $**1551697** | $1540583 | $11114 | 0.7 |

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<u>Residential real estate:</u> This category is comprised of consumer purpose loans secured by residential real estate and to a lesser extent, commercial purpose loans secured by residential real estate. The consumer purpose category represents traditional residential mortgage loans and home equity products (primarily junior liens and lines of credit). Commercial purpose loans in this category represent loans made for various business needs but are secured with residential real estate. In addition to the real estate collateral, it is possible that additional security is provided by personal guarantees or UCC filings. These loans are underwritten as commercial loans and are not originated to be sold.

Total residential real estate loans increased by $13.4 million over the prior year-end, primarily in consumer first lien loans. For the first three months of 2026, the Bank originated $25.6 million in mortgages, including $11.1 million for sale through the secondary market compared to $23.0 million of total originations for the same period in 2025. The Bank does not originate or hold any loans that would be considered sub-prime or Alt-A and does not generally originate mortgages outside of its primary market area.

<u>Residential real estate construction:</u> This category contains loans for the vertical construction of 1-4 family residential properties. The largest component of this category ($32.4 million) represents loans for individuals to construct personal residences, while loans to residential real estate developers totaled $24.4 million at March 31, 2026. The Bank's exposure to residential construction loans is concentrated primarily in south central Pennsylvania. All real estate construction loans are underwritten in the same manner, regardless of the use of an interest reserve.

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<u>Commercial real estate (CRE):</u> This category includes commercial, industrial, farm and agricultural loans and land development loans, where real estate serves as the primary collateral for the loans. Total commercial real estate loans increased to $909.1 million at March 31, 2026 from $903.6 million at the end of the prior year. Included in commercial real estate are approximately $725 million of nonowner occupied loans located primarily in the Bank's market area of south-central Pennsylvania. The Bank's CRE concentration ratio is 344.7% of risk-based capital at March 31, 2026 compared to 349.9% at December 31, 2025.

The following table presents the largest non-owner occupied CRE by collateral:

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| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* |  |  |  |  |
| **Commercial Real Estate (CRE)** | **March 31, 2026** | **% of CRE** | December 31, 2025 | % of CRE |
| &nbsp;&nbsp;Apartments | $**157102**  | **17%** | $163356  | 18% |
| &nbsp;&nbsp;Hotels & motels | **103847**  | **11%** | 102194  | 11% |
| &nbsp;&nbsp;Shopping centers | **95832**  | **11%** | 87933  | 10% |
| &nbsp;&nbsp;Office | **68931**  | **8%** | 68241  | 8% |
| &nbsp;&nbsp;Land development | **93736**  | **10%** | 88884  | 10% |

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Included in CRE are real estate construction loans totaling $208.2 million. At March 31, 2026, the Bank had $84.0 million in real estate construction loans funded with an interest reserve and capitalized $734 thousand of interest in the first three months of 2026 from these reserves on active projects for commercial construction. Real estate construction loans are monitored on a regular basis by either an independent first-party inspector or the assigned loan officer depending on loan amount or complexity of the project. This monitoring process includes at a minimum, the submission of invoices and AIA documents (depending on the complexity of the project) detailing costs incurred by the borrower, on-site inspections, and a signature by the assigned loan officer for disbursement of funds.

<u>Commercial:</u> This category includes commercial, industrial, farm, agricultural, and municipal loans. Commercial loans decreased $11.5 million to $214.0 million at March 31, 2026, compared to $225.5 million at the end of the prior year. On March 31, 2026, the Bank had $97.9 million in tax-free loans compared to $102.0 million at December 31, 2025.

The following table presents the largest sectors by industry in the commercial category:

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| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* |  |  |  |  |
| **Commercial** | **March 31, 2026** | **% of Commercial** | December 31, 2025 | % of Commercial |
| &nbsp;&nbsp;Public administration | $**37856**  | **18%** | $40095  | 18% |
| &nbsp;&nbsp;Utilities | **35435**  | **17%** | 35621  | 16% |
| &nbsp;&nbsp;Real estate, rental & leasing | **16465**  | **8%** | 19049  | 8% |
| &nbsp;&nbsp;Arts, Entertainment & Recreation | **16540**  | **8%** | 15459  | 7% |
| &nbsp;&nbsp;Manufacturing | **15861**  | **7%** | 19930  | 9% |

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<u>Participations:</u> The Bank may supplement its own commercial loan production by purchasing loan participations. These participations are primarily located in south-central Pennsylvania. On March 31, 2026, the outstanding commercial participations were $97.2 million, or 8.0%, of commercial purpose loans and 6.2% of total gross loans compared to $100.8 million at December 31, 2025, or 8.2%, of commercial purpose loans and 6.5% of total gross loans. The Bank's total exposure (including outstanding balances and unfunded commitments) to purchased participations is $125.7 million, compared to $129.3 million at December 31, 2025. The commercial loan participations are comprised of $26.5 million of commercial loans and $70.7 million of CRE loans, reported in the respective loan class.

<u>Consumer loans:</u> This category had a balance of $10.7 million at March 31, 2026, compared to $9.7 million at prior year-end and is comprised primarily of installment loans and personal lines of credit.

***Loan Quality***:

Management monitors loan performance on a monthly basis and performs a quarterly evaluation of the adequacy of the Allowance for Credit Loss for loans (ACL). The Bank begins enhanced monitoring of all loans rated 6–Other Assets Especially Mentioned or worse and obtains a new appraisal or asset valuation for any loans placed on nonaccrual and rated 7 - Substandard or worse. Management, at its discretion, may determine that additional adjustments to the appraisal or valuation are required. Valuation adjustments will be made as necessary based on factors, including, but not limited to: the economy, deferred maintenance, industry, type of property/equipment, age of the appraisal, etc. and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and

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deducted from the valuation in order to determine the net realizable value to the Bank. When determining the ACL, certain factors involved in the evaluation are inherently subjective and require material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows. Management monitors the adequacy of the ACL on an ongoing basis and reports its adequacy quarterly to the Board Enterprise Risk Management Committee of the Board of Directors. Management believes the ACL at March 31, 2026 is adequate based on currently available information.

Watch list loans (loans rated 6, 7, or 8) exhibit financial weaknesses that increase the potential risk of default or loss to the Bank. However, inclusion on the watch list, does not by itself, mean a loss is certain. The watch list totaled $52.7 million on March 31, 2026 compared to $58.8 million at December 31, 2025. The watch list includes both performing and nonperforming loans. Included in the watchlist total are $8.5 million of nonaccrual loans as of March 31, 2026 and December 31, 2025. The credit composition of the watch list, by primary collateral is shown in Note 6 of the accompanying financial statements.

Delinquent loans are a result of borrowers' cash flow and/or alternative sources of cash being insufficient to repay loans. The Bank's likelihood of collateral liquidation to repay the loans becomes more probable the further behind a borrower falls, particularly when loans reach 90 days or more past due. Management monitors the performance status of loans by the use of an aging report. The aging report can provide an early indicator of loans that may become severely delinquent and possibly result in a loss to the Bank. See Note 6 in the accompanying financial statements for a table that presents the aging of payments in the loan portfolio.

Nonaccruing loans generally represent Management's determination that the borrower will be unable to repay the loan in accordance with its contractual terms and that collateral liquidation may or may not fully repay both interest and principal. It is the Bank's policy to evaluate the probable collectability of principal and interest due under terms of loan contracts for all loans 90-days or more past due, nonaccrual loans, or individually evaluated loans. Further, it is the Bank's policy to discontinue accruing interest on loans that are not adequately secured and in the process of collection. Upon determination of nonaccrual status, the Bank subtracts any current year accrued and unpaid interest from its income, and any prior year accrued and unpaid interest from the allowance for credit losses. Management continually monitors the status of nonperforming loans, the value of any collateral and potential of risk of loss. Nonaccrual loans are rated no better than 7-Substandard.

The Bank's Loan Management Committee reviews these loans and risk ratings on a quarterly basis in order to proactively identify and manage problem loans. In addition, a committee meets monthly to discuss possible workout strategies for all credits rated 7-Substandard or worse. Management also tracks other commercial loan risk measurements including high loan to value loans, concentrations, participations and policy exceptions and reports these to the Board Enterprise Risk Management Committee of the Board of Directors. The Bank also uses an external loan review consultant to assist with internal loan review with a goal of reviewing up to 80% of commercial loans each year. The FDIC defines certain supervisory loan-to-value lending limits. The Bank's internal loan–to-value limits are all equal to or have a lower loan-to-value limit than the supervisory limits. However, in certain instances, the Bank may make a loan that exceeds the supervisory loan-to-value limit. On March 31, 2026, the Bank had loans of $15.6 million (7.0% of risk-based capital) that exceeded the supervisory limit, compared to 7.4% at year-end 2025.

Loan quality, as measured by nonaccrual loans, totaled $8.5 million on March 31, 2026 and December 31, 2025 and the nonperforming loans to gross loans ratio was 0.54% at March 31, 2026 compared to 0.55% on December 31, 2025. Loans past due 90-days or more, but still accruing, totaled $17 thousand on March 31, 2026. The nonaccrual loans are comprised primarily of commercial real estate (CRE) loans totaling $7.7 million between four different loans to unrelated borrowers, and one commercial (C&I) loan for $621 thousand. The largest of the four nonaccrual CRE loans is for a $7.0 million construction loan on a mixed-use commercial project which was past due in the 30-59 day aging bucket as of March 31, 2026. The Bank is in continual communication with the developer regarding the funding required to complete the project, the source of funds, as well as other options available to the Bank to protect its interest. The Bank is currently working with the developer on a plan to jointly fund the completion of enclosing the property to protect the collateral. A discounted "as-is" appraisal was received in the first quarter of 2026 and as a result the Bank increased its specific reserve to $1.0 million on March 31, 2026, from $892 thousand on December 31, 2025. As of March 31, 2026, the Bank created a specific reserve of $557 thousand for the previously mentioned nonaccrual C&I loan, based on the valuation of business assets held as collateral.

In addition to monitoring nonaccrual loans, the Bank also closely monitors loans to borrowers experiencing financial difficulty when, based on current information and events, it is probable that the Bank will be unable to collect all interest and principal payments due according to the originally contracted terms of the loan agreement.

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Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. As of March 31, 2026 and December 31, 2025, there were no modifications made to borrowers experiencing financial difficulty.

As of March 31, 2026, the Bank had outstanding loans to a related party of a Bank Director who is considered an "insider" under Regulation O. The Bank Director serves on the Board of Directors of the related party. The loans were originated in the ordinary course of business and were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with non-affiliated persons.

The loans are currently classified as Substandard (rated 7) on the Bank's internal credit risk rating system, indicating potential weaknesses that warrant management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans. As of March 31, 2026, the outstanding balance of the loans was $4.2 million, and were not past due or on nonaccrual status.

The loans were approved in accordance with the Bank's policies and procedures for related party transactions and insider lending, including board-level review and compliance with Regulation O. Management continues to monitor the credit quality of the loans and does not believe they pose a material risk to the Corporation's financial condition.

No preferential terms were granted, and the Bank believes the transaction does not impair the independence or objectivity of the Director involved.

***Allowance for Credit Losses:***

**Allowance for Credit Losses** – Loans

The ACL for loans is established through provisions for credit losses charged against income. Loans deemed to be uncollectible are charged against the ACL, and subsequent recoveries, if any, are credited to the ACL.

The ACL for loans is an estimate of the losses expected to be realized over the life of the loan portfolio. The ACL is determined for two distinct categories of loans: 1) loans evaluated individually for expected credit losses (specific reserve), and 2) loans evaluated collectively for expected credit losses (pooled reserve). Management's periodic evaluation of the adequacy of the ACL for loans is based on the Bank's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic forecasts and conditions, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews, borrowers' actual or perceived financial and managerial strengths, and other relevant factors. This evaluation is inherently subjective, as it requires material assumptions and estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on loans evaluated individually.

Loans evaluated individually for credit losses are primarily commercial purpose loans that do not share similar characteristics with those loans evaluated in the pool. These loans may exhibit performance characteristics where it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. All commercial purpose loans greater than $250 thousand and rated Substandard (7), Doubtful (8) or on nonaccrual status may be considered for individual evaluation. Impairment is measured on a loan-by-loan basis by one of the following methods: the fair value of the collateral if the loan is collateral dependent, the present value of expected future cash flows discounted at the loan's effective interest rate or the loan's obtainable market price. Commercial purpose loans with a balance less than $250 thousand, and consumer purpose loans are not evaluated individually for a specific reserve but are included in the pooled reserve calculation. Loans that are evaluated for a specific reserve, but not needing a specific reserve are not included in the pooled reserve calculation.

The Corporation has elected to exclude accrued interest receivable from the measurement of the ACL. When a loan is placed on nonaccrual status, any outstanding current accrued interest is reversed against income and prior year accrued interest is deducted from the ACL.

The Corporation has also elected the practical expedient to estimate expected credit losses based on the collateral's fair value less cost to sell. A loan is considered collateral-dependent when the repayment is expected to be provided primarily through the sale or operation of the collateral.

The pooled reserve represents the ACL for pools of homogenous loans, not evaluated individually. The pooled reserve is calculated using a quantitative and qualitative component for the loan pools.

The following inputs are used to calculate the quantitative component for the loan pool:

Segregating loans into homogeneous pools by the FRB Call Code which is primarily a collateral-based and secondarily a purpose-based segmentation.

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The average remaining life of each pool is calculated using the weighted average remaining maturity method (WARM). The WARM method produces an estimated remaining balance by pool, by year, until maturity.

A historical credit loss rate is calculated for each pool, using the average historical loss, by FRB Call Code, for a peer group of Pennsylvania community banks over the last eight quarters. The loss rate is calculated over a historical period the Bank believes best represents a period that will be the most similar and relevant to the next four quarters.

The historical credit loss rate is applied to each WARM bucket through the next four quarter period.

At the end of the four-quarter period, the credit loss rate applied to each WARM bucket reverts to the peer group historical loss rate for the respective pool.

Collectively these estimated losses represent the quantitative component of the pooled reserve.

The qualitative component for the pool utilizes a risk matrix comprised of eight risk factors and assigns a risk level to each factor. The risk factors give consideration to changes in: lending policy, procedures and practice; economic conditions; nature and volume of loans; experience of lending team; volume of past due loans; quality of the loan review system; concentrations of credit; and other external factors. The risk factors are weighted to reflect Management's estimate of how the factor affects potential losses. The risk levels within each factor are measured in basis points and range from minimal risk to very high risk and are determined independently for commercial loans, residential mortgage loans and consumer loans.

The ACL for pooled loans is the sum of the quantitative and qualitative loss estimates. At March 31, 2026, the pooled loan reserve was $19.9 million and approximately 69% of the pooled reserve was from the qualitative component. On March 31, 2026 the Bank had a specific reserve of $1.0 million on one commercial real estate construction loan and a specific reserve of $557 thousand for three commercial loans to a single borrower compared to $1.2 million specific reserves as of December 31, 2025.

During the first quarter of 2026, the Bank reassessed the reserve on municipal loans within the commercial loan pool. This reassessment was supported by data showing these loans have a significantly lower loss history and a determination that reasonable and supportable qualitative loss factors are significantly less than other loans within the commercial pool. This resulted in a reversal of approximately $726 thousand in ACL for municipal loans within the commercial loan class.

**Allowance for Credit Losses** – Unfunded Commitments

The ACL for unfunded commitments is recorded in other liabilities on the consolidated balance sheet. The ACL represents management's estimate of expected losses from unfunded commitments and is determined by estimating future usage of the commitments, based on historical usage. The estimated loss is calculated in a manner similar to that used for the ACL for loans, previously described. The ACL is increased or decreased through the provision for credit losses. The ACL for unfunded commitments was $1.9 million and $1.9 million on March 31, 2026 and December 31, 2025, respectively.

‎

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The following table shows the allocation of the ACL and other loan performance ratios, by class, as of March 31, 2026 and December 31, 2025:

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| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* | **Residential Real Estate 1-4 Family** | **Residential Real Estate 1-4 Family** | **Residential Real Estate 1-4 Family** | **Residential Real Estate 1-4 Family** | **Residential Real Estate 1-4 Family** | **Residential Real Estate 1-4 Family** |  |  |  |  |  |  |  |  |
|  |  |  | **Junior Liens &** | **Junior Liens &** |  |  | **Commercial** | **Commercial** |  |  |  |  |  |  |
|  | **First Liens** | **First Liens** | **Lines of Credit** | **Lines of Credit** | **Construction** | **Construction** | **Real Estate** | **Real Estate** | **Commercial** | **Commercial** | **Consumer** | **Consumer** | **Total** | **Total** |
| **2026** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Loans at March 31, 2026 | $| 288421  | $| 93390  | $| 56813  | $| 909067  | $| 214007  | $| 10728  | $| 1572426  |
| Average Loans through March 31, 2026 |  | 295401  |  | 92920  |  | 56987  |  | 909027  |  | 208117  |  | 10006  |  | 1572458  |
| Nonaccrual Loans at March 31, 2026 |  | 51  |  | 20  |  |  |  | 7740  |  | 670  |  |  |  | 8481  |
| Allowance for Credit Loss at March 31, 2026 |  | 1733  |  | 510  |  | 692  |  | 14580  |  | 3037  |  | 177  |  | 20729  |
| YTD Net (Charge-offs)/Recoveries at March 31, 2026 |  |  |  |  |  | 67  |  |  |  | (168) |  | (27) |  | (128) |
| Loans/Total Gross Loans at March 31, 2026 |  | 18% |  | 6% |  | 4% |  | 58% |  | 14% |  | 0% |  | 100% |
| Nonaccrual Loans/Total Gross Loans at March 31, 2026 |  | 0.02% |  | 0.02% |  | 0.00% |  | 0.85% |  | 0.31% |  | 0.00% |  | 0.54% |
| Allowance for Credit Loss/Gross Loans at March 31, 2026 |  | 0.60% |  | 0.55% |  | 1.22% |  | 1.60% |  | 1.42% |  | 1.65% |  | 1.32% |
| Net (Charge-offs) Recoveries/Average Loans at March 31, 2026\* |  | 0.00% |  | 0.00% |  | 0.47% |  | 0.00% |  | -0.32% |  | -1.08% |  | -0.03% |
| Allowance for Credit Loss/Nonaccrual Loans at March 31, 2026 |  |  |  |  |  |  |  |  |  |  |  |  |  | 244.42% |

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| 2025 |  |  |  |  |  |  |  |
| Loans at December 31, 2025 | $276897  | $91489  | $54125  | $903571  | $225499  | $9657  | $1561238  |
| Average Loans for 2025 | 263557  | 87410  | 45862  | 865233  | 234148  | 8531  | 1504741  |
| Nonaccrual Loans at December 31, 2025 |  | 20  |  | 8148  | 345  |  | 8513  |
| Allowance for Credit Losses at December 31, 2025 | 1665  | 500  | 652  | 14042  | 3641  | 155  | 20655  |
| Net Recoveries/(Charge-offs) for 2025 |  |  | 11  | 1  | 57  | (97) | (28) |
| Loans/Total Gross Loans at December 31, 2025 | 18% | 6% | 3% | 58% | 14% | 1% | 100% |
| Nonaccrual Loans/Total Gross Loans at December 31, 2025 | 0.00% | 0.02% | 0.00% | 0.90% | 0.15% | 0.00% | 0.55% |
| Allowance for Credit Loss/Gross Loans at December 31, 2025 | 0.60% | 0.55% | 1.20% | 1.55% | 1.61% | 1.61% | 1.32% |
| Net Recoveries(Charge-offs)/Average Loans for 2025 | 0.00% | 0.00% | 0.02% | 0.00% | 0.02% | -1.14% | 0.00% |
| Allowance for Credit Loss/Nonaccrual Loans at December 31, 2025 |  |  |  |  |  |  | 242.63% |
| \*Annualized |  |  |  |  |  |  |  |

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***Deposits:***

Total deposits increased $53.9 million during the first three months of 2026 to $1.890 billion. Noninterest checking increased $21.4 million to $331.7 million (17.6% of total deposits), primarily in municipal and small business accounts. Interest-bearing checking decreased by $12.6 million, primarily in retail deposits, while the Bank's money management product increased $30.4 million across all sectors. Time deposits increased $14.2 million.

As of March 31, 2026, the Bank had deposits of $309.5 million placed in a reciprocal deposit program ($125.9 million in interest-bearing checking and $183.7 million in money management) and $39.9 million in a reciprocal time deposit program included in time deposits. These programs allow the Bank to offer full FDIC coverage to large depositors, but with the convenience to the customer of only having to deal with one bank. The Bank solicits these deposits from within its market and it believes they present no greater risk than any other local deposit. Only reciprocal deposits that exceed 20% of liabilities are considered brokered deposits for regulatory reporting purposes. At March 31, 2026, the Bank's reciprocal deposits were 16.6% of the Bank's total liabilities compared to 17.0% at the previous year-end.

The Bank estimates that approximately 89% of its deposits are FDIC insured or collateralized as of March 31, 2026, compared to 87% at December 31, 2025.

‎

------

The following table presents a summary of deposits for the periods ended:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **March 31,** | December 31, | Change | Change |
| *(Dollars in thousands)* | **2026** | 2025 | Amount | % |
| Noninterest-bearing checking | $**331658** | $310251 | $21407 | 6.9 |
| Interest-bearing checking | **419207** | 431843 | (12636) | (2.9) |
| Money management | **801650** | 771231 | 30419 | 3.9 |
| Savings | **98637** | 98124 | 513 | 0.5 |
| &nbsp;&nbsp;Total interest-bearing checking and savings | **1319494** | 1301198 | 18296 | 1.4 |
| Time deposits | **216501** | 202266 | 14235 | 7.0 |
| Time - brokered deposits | **22057** | 22057 |  |  |
| &nbsp;&nbsp;Total time deposits | **238558** | 224323 | 14235 | 6.3 |
| &nbsp;&nbsp;Total deposits | $**1889710** | $1835772 | $53938 | 2.9 |
| Overdrawn deposit accounts reclassified as loans | $**144** | $178 |  |  |

---

***Borrowings:***

At March 31, 2026, the Bank had $200.0 million in total borrowings from the Federal Home Loan Bank of Pittsburgh (FHLB). The borrowings are comprised of $200.0 million in long-term borrowings with a rate of 4.32%, due January 12, 2027.

At March 31, 2026, the Corporation had $11.0 million of unsecured subordinated debt notes remaining outstanding of which $6.0 million mature on September 1, 2030 and $5.0 million mature on September 1, 2035. The notes are recorded on the consolidated balance sheet net of remaining debt issuance costs totaling $150 thousand which is being amortized on a pro-rata basis, based on the maturity date of the notes, on an effective interest method. The subordinated notes totaling $6.0 million have a variable interest rate of 90-day Average Secured Overnight Financing Rate (SOFR) plus 4.93% and resets quarterly. The subordinated notes totaling $5.0 million have a fixed interest rate of 5.25% through June 29, 2030, then convert to a variable rate of 90-day SOFR plus 4.92% for the applicable interest periods through maturity. The Corporation may, at its option, redeem the notes at par, in whole or in part, at any time 5-years prior to the maturity. The notes are structured to qualify as Tier 2 Capital for the Corporation and there are no debt covenants on the notes.

***Shareholders' Equity:***

Total shareholders' equity increased $3.5 million to $178.7 million as of March 31, 2026 from December 31, 2025. Retained earnings increased $5.2 million in 2026, with net income of $6.6 million partially offset by cash dividends of $1.5 million. Accumulated other comprehensive loss (AOCL) increased $1.7 million since year-end 2025. The Corporation's Dividend Reinvestment Plan (DRIP) added $17 thousand in new capital from optional cash contributions and $247 thousand from the reinvestment of quarterly dividends. The Corporation's dividend payout ratio was 22.30% for the first three months of 2026 compared to 36.16% for the same period in 2025.

As part of its quarterly dividend decision, the Corporation considers, among other factors, current and future income projections, dividend yield, payout ratio, current and future capital ratios, reserves and allocations. For the first quarter of 2026, the Corporation paid a $0.33 per share dividend, compared to $0.33 paid in the fourth quarter of 2025. On April 9, 2026, the Board of Directors declared a $0.34 per share regular quarterly dividend for the second quarter of 2026, which will be paid on May 27, 2026. This represents a 3.0% increase over the second quarter 2025 dividend.

In December 2025, the Board of Directors authorized a repurchase plan for the repurchase of up to 150,000 shares of the Corporation's $1.00 par value common stock at market prices in open market or privately negotiated transactions over a one-year period. During the first three months of 2026, 5,000 shares were purchased to fund the quarterly dividend reinvestment plan.

Capital adequacy for the Bank is currently defined by regulatory agencies through the use of several minimum required ratios. The capital ratios to be considered "well capitalized" are shown in the table below. In addition, a capital conservation buffer of 2.5% is applicable to all of the capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement. The Bank's capital conservation buffer at March 31, 2026 was 5.64% compared to the regulatory buffer of 2.5%. Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions and is in addition to the minimum required capital requirements. As of March 31, 2026, the Bank was "well capitalized."

------

In 2019, the Community Bank Leverage Ratio (CBLR) was approved by federal banking agencies as an optional capital measure available to Qualifying Community Banking Organizations (QCBO). If a bank qualifies as a QCBO and maintains a CBLR of 9% or greater, the bank would be considered "well-capitalized" for regulatory capital purposes and exempt from complying with the risk-based capital rule described above. The CBLR rule took effect January 1, 2020 and banks could opt-in through an election in the first quarter 2020 regulatory filing. The Bank met the criteria of a QCBO but did not opt-in to the CBLR.

The consolidated asset limit on small bank holding companies is $3.0 billion and a company with assets under that limit is not subject to the consolidated capital rules but may file reports that include capital amounts and ratios. The Corporation has elected to file those reports.

The following table summarizes the regulatory capital requirements and results as of March 31, 2026 and December 31, 2025 for the Corporation and the Bank:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |  |  | **Regulatory Ratios** | **Regulatory Ratios** |
|  |  |  | **Adequately** | **Well** |
|  | **March 31,** | December 31, | **Capitalized** | **Capitalized** |
| *(Dollars in thousands)* | **2026** | 2025 | **Minimum** | **Minimum** |
| Common Equity Tier 1 Risk-based Capital Ratio (1) |  |  |  |  |
| Franklin Financial Services Corporation | **11.81%** | 11.45% | N/A | N/A |
| Farmers & Merchants Trust Company | **12.39%** | 12.02% | 4.50% | 6.50% |
| Tier 1 Risk-based Capital Ratio (2) |  |  |  |  |
| Franklin Financial Services Corporation | **11.81%** | 11.45% | N/A | N/A |
| Farmers & Merchants Trust Company | **12.39%** | 12.02% | 6.00% | 8.00% |
| Total Risk-based Capital Ratio (3) |  |  |  |  |
| Franklin Financial Services Corporation | **13.66%** | 13.27% | N/A | N/A |
| Farmers & Merchants Trust Company | **13.64%** | 13.27% | 8.00% | 10.00% |
| Tier 1 Leverage Ratio (4) |  |  |  |  |
| Franklin Financial Services Corporation | **8.57%** | 8.17% | N/A | N/A |
| Farmers & Merchants Trust Company | **8.99%** | 8.57% | 4.00% | 5.00% |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Common equity Tier 1 capital / total risk-weighted assets

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Tier 1 capital / total risk-weighted assets

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)Total risk-based capital / total risk-weighted assets

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)Tier 1 capital / average quarterly assets

**Economy** 

The Corporation's primary market area includes Franklin, Fulton, Cumberland, Huntingdon, and Dauphin Counties, PA, and Washington County, MD. This area is diverse in demographic and economic composition. County populations range from a low of approximately 15,000 in Fulton County to over 289,000 in Dauphin County. The market area has a diverse economic base and local industries include warehousing, truck and rail shipping centers, light and heavy manufacturers, health care, higher education institutions, farming and agriculture, and a varied service sector. The market area provides easy access to the major metropolitan markets on the east coast via trucking and rail transportation. Because of this, warehousing and distribution companies continue to find the area attractive. The local economy is not overly dependent on any one industry or business and Management believes that the Bank's primary market area continues to be well suited for growth.

**Impact of Inflation** 

The impact of inflation upon financial institutions such as the Corporation differs from its effect upon other commercial enterprises. Unlike many companies, the assets and liabilities of the Corporation are financial in nature. As such, interest rates and changes in interest rates may have a more significant effect on the Corporation's financial results than on other types of industries. Because of this, the Corporation watches the actions of the Federal Reserve Open Market Committee (FOMC) as it makes decisions about interest rate changes and how such changes affect market rates and the Corporation. Although inflation (and inflation expectations) may affect the interest rate environment, it is not possible to measure with any precision the effect of inflation on the Corporation.

------

**Liquidity** 

The Corporation must meet the financial needs of the customers that it serves, while providing a satisfactory return on the shareholders' investment. In order to accomplish this, the Corporation must maintain sufficient liquidity in order to respond quickly to the changing level of funds required for both loan and deposit activity. The goal of liquidity management is to meet the ongoing cash flow requirements of depositors who want to withdraw funds and of borrowers who request loan disbursements. The Bank regularly reviews its liquidity position by measuring its projected net cash flows (in and out) at a 30 and 90-day interval. The Bank stresses the measurements by assuming a level of deposit out-flows that have not historically been realized. In addition to this forecast, other funding sources are reviewed as a method to provide emergency funding if necessary. The objective of this measurement is to identify the amount of cash that could be raised quickly without the need to liquidate assets. The Bank also stresses its liquidity position utilizing different longer-term scenarios. The varying degrees of stress create pressure on deposit flows in its local market, reduce access to wholesale funding and limit access of funds available through brokered deposit channels. In addition to stressing cash flow, specific liquidity risk indicators are monitored to help identify risk areas. This analysis helps identify and quantify the potential cash surplus/deficit over a variety of time horizons to ensure the Bank has adequate funding resources. Assumptions used for liquidity stress testing are subjective. Should an evolving liquidity situation or business cycle present new data, potential assumption changes will be considered. The Bank believes it can meet all anticipated liquidity demands.

Historically, the Corporation has satisfied its liquidity needs from earnings, repayment of loans and amortizing investment securities, maturing investment securities, loan sales, deposit growth and its ability to access existing lines of credit. All investment securities are classified as available for sale; therefore, marketable securities that are unencumbered ($87.3 million fair value) are an additional source of readily available liquidity, either by selling the security or, more preferably, to provide collateral for additional borrowing. The Bank also has access to other wholesale funding via the brokered CD market.

The FHLB system has always been a major funding source for the Bank. There are no current indicators that lead the Bank to believe the FHLB would discontinue its lending function or restrict the Bank's ability to borrow. If either of these events would occur, it would have a negative effect on the Bank, and it is unlikely that the Bank could replace the level of FHLB funding in a short time. The Bank has also established credit at the Federal Reserve Discount Window and unsecured lines of credit at correspondent banks.

The following table shows the Bank's available liquidity from borrowing sources at March 31, 2026.

---

| | | | |
|:---|:---|:---|:---|
| *(Dollars in thousands)* |  |  |  |
| Liquidity Source | Capacity | Outstanding | Available |
| Federal Home Loan Bank | $738627 | $200000 | $538627 |
| Federal Reserve Bank Discount Window | 129114 |  | 129114 |
| Correspondent Banks | 76000 |  | 76000 |
| Total | $943741 | $200000 | $743741 |

---

 **‎** 

------

**Off Balance Sheet Commitments**

The Corporation's financial statements do not reflect various commitments that are made in the normal course of business, which may involve some liquidity risk. These commitments consist mainly of unfunded loans and letters of credit made under the same standards as on-balance sheet instruments. Because these instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk to the Corporation.

---

| | | |
|:---|:---|:---|
|  | **March 31,** | December 31, |
| *(Dollars in thousands)* | **2026** | 2025 |
| Financial instruments whose contract amounts represent credit risk |  |  |
| Commercial commitments to extend credit  | $**300729** | $300228 |
| Consumer commitments to extend credit (secured)  | **147130** | 153183 |
| Consumer commitments to extend credit (unsecured)  | **7840** | 7083 |
|  | $**455699** | $460494 |
| Standby letters of credit  | $**28323** | $29880 |
| ACL - Unfunded Commitments (1) | $**1918** | $1899 |
| (1) Reported in Other Liabilities on the Consolidated Balance Sheets |  |  |

---

The Corporation has entered into various contractual obligations to make future payments. These obligations include time deposits, long-term debt, operating leases, deferred compensation and pension payments. These amounts have not changed materially, except as reported, from those reported in the Corporation's 2025 Annual Report on Form 10-K.

Management believes that any amounts actually drawn upon can be funded in the normal course of operations. The Corporation has no investment in or financial relationship with any unconsolidated entities that are reasonably likely to have a material effect on liquidity.

##  **<u>Item 3. Quantitative and Qualitative</u>**  **<u>Disclosures about</u> <u>Market Risk</u>** 
There were no material changes in the Corporation's exposure to market risk during the three months ended March 31, 2026. For more information on market risk refer to the Corporation's 2025 Annual Report on Form 10-K.

**<u>Item 4. Controls and Pr</u>** **<u>ocedures</u>**

**Evaluation of Controls and Procedures**

The Corporation carried out an evaluation, under the supervision and with the participation of the Corporation's management, including the Corporation's Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Corporation's Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2026, the Corporation's disclosure controls and procedures are effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in the Corporation's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. There were no changes in the Corporation's internal control over financial reporting during the quarterly period ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

The management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. The Corporation's internal control system is 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.

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.

‎

------

**Part II – OTHER INFORMATION**

**Item 1.** **<u>Legal Proceedings</u>** 

The nature of the Corporation's business generates a certain amount of litigation in the ordinary course of business.

In management's opinion, there are no legal proceedings pending to which the Corporation is a party or to which its property is subject which, if determined adversely to the Corporation, would be material to the Corporation's financial condition or results of operations. No material proceedings are pending or are known to be threatened or contemplated against us by any governmental authorities.

**Item 1A.** **<u>Risk Factors</u>** 

There were no material changes in the Corporation's risk factors during the three months ended March 31, 2026, except as described below. For more information, refer to the Corporation's 2025 Annual Report on Form 10-K.

**Item 2.** **<u>Unregistered Sales of Equity Securities and Use of Proceeds</u>**

In December 2025, the Board of Directors approved an open market repurchase plan to repurchase 150,000 shares of the Corporation's $1.00 par value common stock at market prices in open market or privately negotiated transactions during 2026. There were no shares repurchased under the approved plan and 150,000 shares remain to be repurchased. During the first three months of 2026, 5,000 shares were purchased, outside of the plan, to fund the quarterly dividend reinvestment plan.

**Item 3. <u>Defaults</u>** **<u>Upon Senior Securities</u>**

None

**Item 4. <u>Mine Safety</u>** **<u>Disclosures</u>**

Not Applicable

**Item 5. <u>Other In</u>** **<u>formation</u>**

None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarter ended March 31, 2026.

 **‎** 

------

**Item 6. <u>Exhibits</u>** 

Exhibits

---

| | |
|:---|:---|
| 3.1 | [<u>Amended and Restated Articles of Incorporation of the Corporation (Filed as Exhibit 3.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and incorporated herein by reference).</u>](http://www.sec.gov/Archives/edgar/data/723646/000072364620000068/fraf-20200630xex3_1.htm) |
| 3.2 | [<u>Bylaws of the Corporation. (Filed on Form 8-K, as Exhibit 99.2 with the commission on January 20, 2026 and incorporated herein by reference)</u>](http://www.sec.gov/ix?doc=/Archives/edgar/data/0000723646/000072364626000005/fraf-20260120x8k.htm)<u>.</u> |
| 31.1 | [<u>Rule 13a – 14(a)/15d-14(a) Certifications – Principal Executive Officer</u>](fraf-20260331xex31_1.htm) |
| 31.2 | [<u>Rule 13a – 14(a)/15d-14(a) Certifications – Principal Financial Officer</u>](fraf-20260331xex31_2.htm) |
| 32.1 | [<u>Section 1350 Certifications – Principal Executive Officer</u>](fraf-20260331xex32_1.htm) |
| 32.2 | [<u>Section 1350 Certifications – Principal Financial Officer</u>](fraf-20260331xex32_2.htm) |
| 101 | Interactive Data File (XBRL) |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are imbedded in the XBRL document) |

---

‎

------

FRANKLIN FINANCIAL SERVICES CORPORATION

and SUBSIDIARIES

<u>SIGNATURES</u>

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Franklin Financial Services Corporation

---

| | |
|:---|:---|
| May 11, 2026 | /s/ Craig W. Best |
|  | Craig W. Best |
|  | Chief Executive Officer  |
|  | (Principal Executive Officer**)**<br>|
| May 11, 2026 | /s/ Mark R. Hollar |
|  | Mark R. Hollar |
|  | Treasurer and Chief Financial Officer |
|  | (Principal Financial and Accounting Officer) |

---

## Exhibit 31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certifications

I, Craig W. Best, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this quarterly report on Form 10-Q of Franklin Financial Services Corporation;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting and

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

------

Date: May 11, 2026

------

<u>/s/</u> <u>Craig W. Best</u>

Craig W. Best

Chief Executive Officer

------

## Exhibit 31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certifications

I, Mark R. Hollar, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this quarterly report on Form 10-Q of Franklin Financial Services Corporation;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting and

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

------

Date: May 11, 2026

------

<u>/s/ Mark R. Hollar</u>

Mark R. Hollar

Treasurer and Chief Financial Officer

------

## Exhibit 32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes–Oxley Act of 2002

In connection with the Quarterly Report of Franklin Financial Services Corporation (the "Corporation") on Form 10-Q, for the period ending March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Craig W. Best, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

<u>/s/</u> <u>Craig W. Best</u>

Craig W. Best

Chief Executive Officer

#### May 1 1 , 202 6

------

## Exhibit 32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Sections 1350,

As Adopted Pursuant to Section 906 of the Sarbanes–Oxley Act of 2002

In connection with the Quarterly Report of Franklin Financial Services Corporation (the "Corporation") on Form 10-Q for the period ending March 31, 2026 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark R. Hollar, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

<u>/s/ Mark R. Hollar</u>

Mark R. Hollar

Chief Financial Officer

#### May 1 1, 202 6

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