[10-Q] Embassy Bancorp, Inc. Quarterly Earnings Report

Q: How did EMYB perform in Q3 2025?

Q3 net income was $3.793 million and EPS was $0.50 , up from $2.714 million and $0.36 in Q3 2024.

Q: What were EMYB’s assets and deposits as of September 30, 2025?

Total assets were $1.778 billion and total deposits were $1.621 billion .

Q: How did net interest income trend?

Net interest income was $10.851 million in Q3 2025 and $31.098 million for the nine months, both higher year over year.

Q: What is the status of unrealized losses in the securities portfolio?

Accumulated other comprehensive loss improved to $(41.532) million from $(50.635) million at year‑end.

Q: What were nonaccrual loans and credit reserves?

Nonaccrual loans were $496 thousand ; the allowance for credit losses was $11.941 million .

Q: Did EMYB announce any capital actions after quarter‑end?

Yes. A stock repurchase program of up to $5.0 million was authorized, effective October 31, 2025.

Q: How many common shares were outstanding?

Common shares outstanding were 7,646,114 as of November 7, 2025.

Filing Impact

(Moderate)

Filing Sentiment

(Neutral)

Form Type

10-Q

Rhea-AI Filing Summary

Embassy Bancorp, Inc. reported stronger results for the quarter ended September 30, 2025. Q3 net income was $3.793 million with EPS of $0.50, up from $2.714 million and $0.36 a year ago, as net interest income rose to $10.851 million. For the first nine months, net income reached $10.117 million and EPS was $1.32, compared with $7.742 million and $1.02 in 2024.

Total assets increased to $1.778 billion from $1.704 billion at year‑end, driven by higher securities available for sale of $334.314 million and loans net of $1.268 billion. Deposits were $1.621 billion, up from $1.553 billion. Accumulated other comprehensive loss improved to $(41.532) million from $(50.635) million as unrealized losses narrowed. Credit quality remained stable with nonaccrual loans at $496 thousand and an allowance for credit losses of $11.941 million. After quarter‑end, the company authorized a $5.0 million stock repurchase program, effective October 31, 2025.

Insights

Solid Q3 earnings, stable credit, and a modest buyback authorization.

Embassy Bancorp grew earnings as net interest income reached $10.851M in Q3 while deposit costs stayed elevated but manageable. Year-to-date net income of $10.117M reflects consistent margin performance and balance sheet growth to $1.778B in assets.

Unrealized losses in AFS securities improved, with accumulated other comprehensive loss at $(41.532M), aided by rate movements. Credit quality indicators were steady: nonaccruals of $496k and an allowance of $11.941M. Liquidity is supported by available FHLB capacity of approximately $703.7M.

The post‑period authorization of up to $5.0M in share repurchases adds capital deployment flexibility. Actual impact depends on execution and market conditions; subsequent disclosures will indicate activity under the program.

11/13/2025 - 02:46 PM

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025 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 000-53528


Embassy Bancorp, Inc.
(Exact name of registrant as specified in its charter)

Pennsylvania	26-3339011
(State of incorporation)	(I.R.S. Employer Identification No.)

One Hundred Gateway Drive, Suite 100 Bethlehem, PA	18017
(Address of principal executive offices)	(Zip Code)

(610) 882-8800
(Registrant’s Telephone Number)

Securities registered pursuant to Section 12(b) of the Act: None.

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 filing requirements for the past 90 days. Yes x 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 x 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 or the Exchange Act.) Yes ¨ No x

Indicate the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date:


COMMON STOCK
Number of shares outstanding as of November 7, 2025	($1.00 Par Value)	7,646,114
	(Title Class)	(Outstanding Shares)

Embassy Bancorp, Inc.

Table of Contents


Part I – Financial Information	3

Item 1 – Financial Statements
Consolidated Balance Sheets (Unaudited)	3
Consolidated Statements of Income (Unaudited)	4
Consolidated Statements of Comprehensive Income (Unaudited)	5
Consolidated Statements of Stockholders’ Equity (Unaudited)	6
Consolidated Statements of Cash Flows (Unaudited)	8
Notes to Consolidated Financial Statements (Unaudited)	9

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3 – Quantitative and Qualitative Disclosures About Market Risk	40

Item 4 – Controls and Procedures	41

Part II - Other Information	41

Item 1 - Legal Proceedings	41

Item 1A - Risk Factors	41

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3 - Defaults Upon Senior Securities	42

Item 4 – Mine Safety Disclosures	42

Item 5 - Other Information	42

Item 6 - Exhibits	43

Signatures	44

‎

Embassy Bancorp, Inc.

Part I – Financial Information

Item 1 – Financial Statements

Consolidated Balance Sheets (Current Period Unaudited)



	September 30,		December 31,
ASSETS	2025		2024

	(In Thousands, Except Share Data)
Cash and due from banks	$	17,394	$	16,399
Interest bearing demand deposits with banks		89,603		79,123
Federal funds sold		1,000		1,000
Cash and Cash Equivalents		107,997		96,522
Securities available for sale		334,314		280,828
Restricted investment in bank stock		1,051		1,663
Loans receivable, net of allowance for credit losses of $11,941 in 2025; $12,166 in 2024		1,268,139		1,256,256
Premises and equipment, net of accumulated depreciation		3,014		3,322
Bank owned life insurance		37,656		36,652
Accrued interest receivable		4,054		3,604
Other assets		21,834		25,573
Total Assets	$	1,778,059	$	1,704,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing	$	336,060	$	351,371
Interest bearing		1,284,503		1,201,588
Total Deposits		1,620,563		1,552,959
Securities sold under agreements to repurchase		12,116		4,895
Short-term borrowings		-		15,625
Accrued interest payable		7,068		7,812
Other liabilities		15,878		16,649
Total Liabilities		1,655,625		1,597,940
Stockholders' Equity:
Common stock, $1 par value; authorized 20,000,000 shares;
2025 issued 7,812,476 shares; outstanding 7,646,114 shares;
2024 issued 7,792,654 shares; outstanding 7,626,292 shares;		7,813		7,793
Surplus		29,185		28,802
Retained earnings		129,707		123,259
Accumulated other comprehensive loss		(41,532)		(50,635)
Treasury stock, at cost: 166,362 shares at September 30, 2025 and
December 31, 2024, respectively		(2,739)		(2,739)
Total Stockholders' Equity		122,434		106,480
Total Liabilities and Stockholders' Equity	$	1,778,059	$	1,704,420

See notes to consolidated financial statements (unaudited).

‎

Embassy Bancorp, Inc.

Consolidated Statements of Income (Unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,

	2025		2024		2025			2024

	(In Thousands, Except Per Share Data)
INTEREST INCOME
Loans, including fees	$	14,877	$	13,803	$	43,240	$	40,277
Securities, taxable		2,267		1,694		6,485		4,512
Securities, non-taxable		298		296		892		890
Short-term investments, including federal funds sold		813		1,129		2,302		2,459
Total Interest Income		18,255		16,922		52,919		48,138
INTEREST EXPENSE
Deposits		7,370		7,587		21,703		20,927
Securities sold under agreements to repurchase and federal
funds purchased		34		161		116		425
Short-term borrowings		-		4		2		9
Total Interest Expense		7,404		7,752		21,821		21,361
Net Interest Income		10,851		9,170		31,098		26,777
PROVISION (CREDIT) FOR CREDIT LOSSES		27		(30)		(104)		(385)
Net Interest Income after ‎ Provision (Credit) for Credit Losses		10,824		9,200		31,202		27,162
OTHER NON-INTEREST INCOME
Merchant and credit card processing fees		67		84		195		247
Debit card interchange fees		231		233		690		676
Other service fees		191		176		534		481
Bank owned life insurance		369		360		1,004		886
Gain on sale of other real estate owned		29		-		29		-
Total Other Non-Interest Income		887		853		2,452		2,290
OTHER NON-INTEREST EXPENSES
Salaries and employee benefits		3,766		3,671		11,181		10,598
Occupancy and equipment		1,061		1,001		3,186		3,053
Data processing		930		679		2,623		2,124
Advertising and promotion		215		235		657		625
Professional fees		259		283		827		814
FDIC insurance		208		204		599		582
Loan & real estate		74		59		238		175
Charitable contributions		224		208		761		725
Other		370		468		1,342		1,490
Total Other Non-Interest Expenses		7,107		6,808		21,414		20,186

Income Before Income Taxes		4,604		3,245		12,240		9,266
INCOME TAX EXPENSE		811		531		2,123		1,524
Net Income	$	3,793	$	2,714	$	10,117	$	7,742

BASIC EARNINGS PER SHARE	$	0.50	$	0.36	$	1.32	$	1.02

DILUTED EARNINGS PER SHARE	$	0.50	$	0.36	$	1.32	$	1.02

DIVIDENDS PER SHARE	$	-	$	-	$	0.48	$	0.42

See notes to consolidated financial statements (unaudited).
‎

Embassy Bancorp, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)



	Three Months Ended September 30,
	2025			2024

		(In Thousands)
Net Income	$		3,793	$		2,714
Change in Accumulated Other Comprehensive Loss:
Unrealized holding gain on securities available for sale		5,425			11,496
Less: reclassification adjustment for realized gains		-			-
		5,425			11,496
Income tax effect		(1,139)			(2,414)
Net unrealized gain		4,286			9,082
Other comprehensive income, net of tax			4,286			9,082
Comprehensive Income	$		8,079	$		11,796



	Nine Months Ended September 30,
	2025			2024

		(In Thousands)

Net Income	$		10,117	$		7,742
Change in Accumulated Other Comprehensive Loss:
Unrealized holding gain on securities available for sale		11,523			4,789
Less: reclassification adjustment for realized gains		-			-
		11,523			4,789
Income tax effect		(2,420)			(1,006)
Net unrealized gain		9,103			3,783
Other comprehensive income, net of tax			9,103			3,783
Comprehensive Income	$		19,220	$		11,525

See notes to consolidated financial statements (unaudited).

Embassy Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity (Unaudited)


	Nine Months Ended September 30, 2025
	Common Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total

	(In Thousands, Except Share Data)
BALANCE - DECEMBER 31, 2024	$	7,793	$	28,802	$	123,259	$	(50,635)	$	(2,739)	$	106,480
Net income		-		-		2,887		-		-		2,887
Other comprehensive income, net of tax		-		-		-		2,755		-		2,755
Common stock grants to directors, ‎16,845 shares		17		250		-		-		-		267
Compensation expense recognized on stock ‎grants, net of unearned compensation expense ‎of $223		-		32		-		-		-		32
Shares issued under employee stock purchase ‎plan, 1,005 shares		1		15		-		-		-		16
BALANCE - MARCH 31, 2025	$	7,811	$	29,099	$	126,146	$	(47,880)	$	(2,739)	$	112,437

Net income		-		-		3,437		-		-		3,437
Other comprehensive income, net of tax		-		-		-		2,062		-		2,062
Dividend declared, $0.48 per share		-		-		(3,669)		-		-		(3,669)
Compensation expense recognized on ‎stock grants, net of unearned compensation ‎expense of $196		-		27		-		-		-		27
Shares issued under employee stock purchase ‎plan, 1,107 shares		1		17		-		-		-		18
BALANCE - JUNE 30, 2025	$	7,812	$	29,143	$	125,914	$	(45,818)	$	(2,739)	$	114,312

Net income		-		-		3,793		-		-		3,793
Other comprehensive income, net of tax		-		-		-		4,286		-		4,286
Compensation expense recognized on ‎stock grants, net of unearned compensation ‎expense of $168		-		28		-		-		-		28
Shares issued under employee stock purchase ‎plan, 865 shares		1		14		-		-		-		15
BALANCE - SEPTEMBER 30, 2025	$	7,813	$	29,185	$	129,707	$	(41,532)	$	(2,739)	$	122,434

‎

Embassy Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity (Unaudited)


	Nine Months Ended September 30, 2024
	Common Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total

	(In Thousands, Except Share Data)
BALANCE - DECEMBER 31, 2023	$	7,758	$	28,246	$	116,018	$	(43,700)	$	(2,667)	$	105,655
Net income		-		-		2,536		-		-		2,536
Other comprehensive loss, net of tax		-		-		-		(4,758)		-		(4,758)
Common stock grants to directors, ‎18,843 shares		19		248		-		-		-		267
Compensation expense recognized on stock ‎grants, net of unearned compensation expense ‎of $265		-		67		-		-		-		67
Shares issued under employee stock purchase ‎plan, 1,393 shares		1		17		-		-		-		18
BALANCE - MARCH 31, 2024	$	7,778	$	28,578	$	118,554	$	(48,458)	$	(2,667)	$	103,785

Net income		-		-		2,492		-		-		2,492
Other comprehensive loss, net of tax		-		-		-		(541)		-		(541)
Dividend declared, $0.42 per share		-		-		(3,199)		-		-		(3,199)
Compensation expense recognized on ‎stock grants, net of unearned compensation ‎expense of $198		-		66		-		-		-		66
Shares issued under employee stock purchase ‎plan, 1,209 shares		2		15		-		-		-		17
BALANCE - JUNE 30, 2024	$	7,780	$	28,659	$	117,847	$	(48,999)	$	(2,667)	$	102,620

Net income		-		-		2,714		-		-		2,714
Other comprehensive income, net of tax		-		-		-		9,082		-		9,082
Compensation expense recognized on ‎stock grants, net of unearned compensation ‎expense of $136		-		62		-		-		-		62
Shares issued under employee stock purchase ‎plan, 1,035 shares		1		15		-		-		-		16
BALANCE - SEPTEMBER 30, 2024	$	7,781	$	28,736	$	120,561	$	(39,917)	$	(2,667)	$	114,494

See notes to consolidated financial statements (unaudited).

Embassy Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)



	Nine Months Ended September 30,
	2025		2024

	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	10,117	$	7,742
Adjustments to reconcile net income to net cash provided by operating activities:
Credit for credit losses		(104)		(385)
Amortization of deferred loan costs		283		234
Depreciation		803		810
Net accretion of investment security premiums and discounts		(834)		(526)
Stock compensation expense		354		462
Net realized gain on sale of other real estate owned		(29)		-
Income on bank owned life insurance		(1,004)		(886)
Increase in accrued interest receivable		(450)		(159)
Decrease in other assets		1,550		561
(Decrease) increase in accrued interest payable		(744)		282
Decrease in other liabilities		(993)		(357)
Net Cash Provided by Operating Activities		8,949		7,778
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale		(96,497)		(44,262)
Maturities, calls and principal repayments of securities available for sale		55,368		17,580
Net increase in loans		(12,033)		(4,795)
Net redemption of restricted investment in bank stock		612		545
Purchase of bank owned life insurance		-		(9,030)
Purchases of premises and equipment		(504)		(487)
Net Cash Used in Investing Activities		(53,054)		(40,449)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		67,604		58,942
Net increase in securities sold under agreements to repurchase		7,221		2,986
Decrease in short-term borrowings		(15,625)		(13,125)
Proceeds from Employee Stock Purchase Plan		49		51
Dividends paid		(3,669)		(3,199)
Net Cash Provided by Financing Activities		55,580		45,655
Net Increase in Cash and Cash Equivalents		11,475		12,984
CASH AND CASH EQUIVALENTS - BEGINNING		96,522		78,923
CASH AND CASH EQUIVALENTS - ENDING	$	107,997	$	91,907

SUPPLEMENTARY CASH FLOWS INFORMATION
Interest paid	$	22,565	$	21,079
Income taxes paid	$	2,020	$	1,841
Other real estate sold through bank financing	$	225	$	-
Other real estate acquired in settlement of loans	$	196	$	-


Non-cash Investing and Financing Activities:

Right of use assets obtained in exchange for new operating lease liabilities	$	222	$	1,131

See notes to consolidated financial statements (unaudited).

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1 – Basis of Presentation

Embassy Bancorp, Inc. (the “Company”) is a Pennsylvania corporation organized in 2008 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Company was formed for purposes of acquiring Embassy Bank For The Lehigh Valley (the “Bank”) in connection with the reorganization of the Bank into a bank holding company structure, which was consummated on November 11, 2008. Accordingly, the Company owns all of the capital stock of the Bank, giving the organization more flexibility in meeting its capital needs as the Company continues to grow. Embassy Holdings, LLC (the “LLC”) is a wholly-owned subsidiary of the Bank organized to engage in the holding of property acquired by the Bank in satisfaction of debts previously contracted. As such, the consolidated financial statements contained herein include the accounts of the Company, the Bank and the LLC. All significant intercompany transactions and balances have been eliminated.

The Bank, which is the Company’s principal operating subsidiary, was originally incorporated as a Pennsylvania bank on May 11, 2001 and opened its doors on November 6, 2001. It was formed by a group of local business persons and professionals with significant prior experience in community banking in the Lehigh Valley area of Pennsylvania, the Bank’s primary market area.

The accompanying unaudited financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“US GAAP”) for interim financial information and in accordance with instructions for Form 10-Q and Rule 10-01 of the Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

The consolidated financial statements presented in this report should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2024, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 17, 2025.

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q were issued. On October 27, 2025, the Company announced that it authorized the adoption of a stock repurchase program for up to $5.0 million of its outstanding common stock. The stock repurchase program became effective October 31, 2025. There has been no repurchases under the program through the date of the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

Certain amounts in the 2024 consolidated financial statements may have been reclassified to conform to 2025 presentation. These reclassifications had no effect on 2024 net income.

Note 2 - Summary of Significant Accounting Policies

The significant accounting policies of the Company as applied in the interim financial statements presented herein are substantially the same as those followed on an annual basis as presented in the Company’s Form 10-K for the year ended December 31, 2024.

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 3 – Securities Available For Sale

At September 30, 2025 and December 31, 2024, respectively, the amortized cost and fair values of securities available-for-sale were as follows:



			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(In Thousands)
September 30, 2025:
U.S. Treasury securities	$	75,348	$	588	$	(2)	$	75,934
U.S. Government agency obligations		19,059		80		(1)		19,138
Municipal bonds		72,607		40		(13,088)		59,559
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - residential		219,872		58		(40,247)		179,683
Total	$	386,886	$	766	$	(53,338)	$	334,314

December 31, 2024:
U.S. Treasury securities	$	34,777	$	10	$	(47)	$	34,740
U.S. Government agency obligations		12,499		3		(56)		12,446
Municipal bonds		72,669		13		(14,682)		58,000
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - commercial		508		-		(72)		436
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - residential		224,470		-		(49,264)		175,206
Total	$	344,923	$	26	$	(64,121)	$	280,828

The amortized cost and fair value of securities as of September 30, 2025, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without any penalties.



		Amortized		Fair
		Cost		Value

	(In Thousands)
September 30, 2025:
Due in one year or less	$	30,891	$	30,904
Due after one year through five years		66,129		66,732
Due after five years through ten years		9,489		8,927
Due after ten years		60,505		48,068
		167,014		154,631
U.S. Government Sponsored Enterprise (GSE) - Mortgage-backed securities - residential		219,872		179,683
Total	$	386,886	$	334,314

There were no sales of securities for the three and nine months ended September 30, 2025 and 2024.

Securities with a carrying value of $141.8 million and $152.4 million at September 30, 2025 and December 31, 2024, respectively, were subject to agreements to repurchase, pledged to secure public deposits, or pledged for other purposes required or permitted by law.

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table shows the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2025 and December 31, 2024:



		Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

September 30, 2025:	(In Thousands)
U.S. Treasury securities	$	10,017	$	(2)	$	-	$	-	$	10,017	$	(2)
U.S. Government agency obligations		7,503		(1)		-		-		7,503		(1)
Municipal bonds		9,167		(646)		47,769		(12,442)		56,936		(13,088)
U.S. Government Sponsored Enterprise
(GSE) - Mortgage -backed securities -
residential		-		-		172,295		(40,247)		172,295		(40,247)
Total Temporarily Impaired Securities	$	26,687	$	(649)	$	220,064	$	(52,689)	$	246,751	$	(53,338)
		.
December 31, 2024:
U.S. Treasury securities	$	-	$	-	$	9,946	$	(47)	$	9,946	$	(47)
U.S. Government agency obligations		5,009		(8)		2,437		(48)		7,446		(56)
Municipal bonds		13,433		(1,248)		43,888		(13,434)		57,321		(14,682)
U.S. Government Sponsored Enterprise
(GSE) - Mortgage -backed securities -
commercial		-		-		436		(72)		436		(72)
U.S. Government Sponsored Enterprise
(GSE) - Mortgage -backed securities -
residential		18		-		175,149		(49,264)		175,167		(49,264)
Total Temporarily Impaired Securities	$	18,460	$	(1,256)	$	231,856	$	(62,865)	$	250,316	$	(64,121)

The Company had one hundred eighty-eight (188) securities in an unrealized loss position at September 30, 2025 and one hundred ninety-seven (197) securities in an unrealized loss position at December 31, 2024. The Company reviews its investment portfolio on a quarterly basis for indications of impairment due to credit-related factors or noncredit-related factors. The Company does not intend to sell the securities and has the intent and ability to hold them for a period of time sufficient for recovery of their amortized cost basis without realizing losses on these securities. This review includes analyzing the extent to which the fair value has been lower than the cost, the market liquidity for the investment, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value. Management believes that the unrealized loss only represents temporary impairment of the securities, which are predominantly backed by the credit of government agencies, and are a result of the increased market interest rates since the time of purchase, and not the credit quality of the issuer. As such, no allowance for credit losses was required on securities available for sale in an unrealized loss position at September 30, 2025 and December 31, 2024.

Note 4 – Restricted Investment in Bank Stock

Restricted investments in bank stock consist of FHLBank of Pittsburgh (“FHLB”) stock and Atlantic Community Bankers Bank (“ACBB”) stock. The restricted stocks are carried at cost. Federal law requires a member institution of the FHLB to hold stock of its district FHLB according to a predetermined formula. The Bank had FHLB stock at a carrying value of $1.0 million and $1.6 million as of September 30, 2025 and December 31, 2024, respectively. The Bank had ACBB stock at a carrying value of $40 thousand at September 30, 2025 and December 31, 2024.

Management evaluates the FHLB and ACBB restricted stock for impairment. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the issuer as compared to the capital stock amount for the issuer and the length of

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

time this situation has persisted, (2) commitments by the issuer to make payments required by law or regulation and the level of such payments in relation to the operating performance of the issuer, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuer.

Based upon its evaluation of the foregoing criteria, management believes no impairment charge is necessary related to the FHLB or ACBB stock as of September 30, 2025.

Note 5 – Loans and Credit Quality

The following table presents the composition of loans receivable at September 30, 2025 and December 31, 2024, respectively:



	September 30, 2025			December 31, 2024
			Percentage of			Percentage of
	Balance		total Loans	Balance		total Loans

		(Dollars in Thousands)

Commercial real estate	$	550,530	43.04%	$	536,594	42.33%
Commercial construction		16,202	1.27%		22,556	1.78%
Commercial		31,672	2.48%		39,384	3.10%
Residential real estate		680,177	53.17%		668,725	52.75%
Consumer		567	0.04%		475	0.04%
Total loans		1,279,148	100.00%		1,267,734	100.00%
Unearned origination fees		932			688
Allowance for credit losses		(11,941)			(12,166)
Net Loans	$	1,268,139		$	1,256,256

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention (potential weakness), substandard (well defined weakness) and doubtful (full collection unlikely) within the Company's internal risk rating system as of September 30, 2025 by year of origination:


		2025		2024		2023		2022		2021		Prior		Revolving		Total

		(In Thousands)
Commercial
real estate
	Pass	$	40,712	$	51,924	$	57,669	$	138,191	$	50,454	$	206,492	$	4,523	$	549,965
	Special Mention		-		-		-		-		-		-		-		-
	Substandard		-		-		-		-		-		565		-		565
	Total		40,712		51,924		57,669		138,191		50,454		207,057		4,523		550,530

Commercial
construction
	Pass		263		1,750		6,835		7,035		-		27		-		15,910
	Special Mention		-		-		-		-		-		-		-		-
	Substandard		-		-		-		-		-		237		55		292
	Total		263		1,750		6,835		7,035		-		264		55		16,202

Commercial
	Pass		2,730		6,230		1,194		2,470		437		9,042		7,902		30,005
	Special Mention		-		152		-		246		188		46		1,035		1,667
	Substandard		-		-		-		-		-		-		-		-
	Total		2,730		6,382		1,194		2,716		625		9,088		8,937		31,672

Residential
real estate
	Pass		63,231		67,628		56,700		81,945		134,442		247,488		27,120		678,554
	Special Mention		-		-		-		-		-		400		-		400
	Substandard		-		-		59		129		591		444		-		1,223
	Total		63,231		67,628		56,759		82,074		135,033		248,332		27,120		680,177

Consumer
	Pass		107		78		37		38		2		-		305		567
	Special Mention		-		-		-		-		-		-		-		-
	Substandard		-		-		-		-		-		-		-		-
	Total		107		78		37		38		2		-		305		567
Total
Loans Receivable		$	107,043	$	127,762	$	122,494	$	230,054	$	186,114	$	464,741	$	40,940	$	1,279,148

The Company had gross charge-offs of $152 thousand during the nine months ended September 30, 2025. One (1) charge-off of $1 thousand was a consumer loan originated in 2022, one (1) charge-off of $15 thousand was a commercial loan originated in 2022, and one (1) charge-off of $136 thousand was a commercial real estate loan originated in 2021.

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)


		2024		2023		2022		2021		2020		Prior		Revolving		Total

		(In Thousands)
Commercial
real estate
	Pass	$	52,579	$	59,016	$	145,905	$	48,420	$	57,430	$	164,989	$	6,920	$	535,259
	Special Mention		-		-		-		136		-		-		-		136
	Substandard		-		-		-		-		-		1,199		-		1,199
	Total		52,579		59,016		145,905		48,556		57,430		166,188		6,920		536,594

Commercial
construction
	Pass		4,438		5,092		7,544		5,161		-		28		-		22,263
	Special Mention		-		-		-		-		-		-		-		-
	Substandard		-		-		-		-		-		238		55		293
	Total		4,438		5,092		7,544		5,161		-		266		55		22,556

Commercial
	Pass		7,407		1,501		3,290		606		2,534		11,507		9,309		36,154
	Special Mention		182		-		372		354		118		19		2,185		3,230
	Substandard		-		-		-		-		-		-		-		-
	Total		7,589		1,501		3,662		960		2,652		11,526		11,494		39,384

Residential
real estate
	Pass		77,507		64,392		87,315		143,578		128,226		144,049		22,419		667,486
	Special Mention		-		-		-		-		-		419		-		419
	Substandard		-		-		42		196		-		582		-		820
	Total		77,507		64,392		87,357		143,774		128,226		145,050		22,419		668,725

Consumer
	Pass		106		64		72		9		-		1		223		475
	Special Mention		-		-		-		-		-		-		-		-
	Substandard		-		-		-		-		-		-		-		-
	Total		106		64		72		9		-		1		223		475
Total
Loans Receivable		$	142,219	$	130,065	$	244,540	$	198,460	$	188,308	$	323,031	$	41,111	$	1,267,734

The Company had gross charge-offs of $11 thousand during the year ended December 31, 2024. One (1) charge-off of $5 thousand was a consumer loan originated in 2021 and one (1) charge-off of $6 thousand was a consumer loan originated in 2023.

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the carrying value and related allowance for credit losses of individually analyzed loans at September 30, 2025 and December 31, 2024, respectively:


	September 30, 2025						December 31, 2024
	Recorded Investment		Unpaid Principal Balance		Related Allowance for Credit Losses		Recorded Investment		Unpaid Principal Balance		Related Allowance for Credit Losses
	(In Thousands)
With no related allowance recorded:
Commercial real estate (1)	$	565	$	565			$	1,335	$	1,335
Commercial construction (1)		55		55				55		55
Commercial		-		-				-		-
Residential real estate (1)		914		917				959		963
Consumer		-		-				-		-
With an allowance recorded:
Commercial real estate	$	-	$	-	$	-	$	-	$	-	$	-
Commercial construction (1)		237		237		18		238		238		19
Commercial (2)		16		16		16		34		34		34
Residential real estate (1)		831		831		124		419		419		81
Consumer		-		-		-		-		-		-
Total:
Commercial real estate	$	565	$	565	$	-	$	1,335	$	1,335	$	-
Commercial construction		292		292		18		293		293		19
Commercial		16		16		16		34		34		34
Residential real estate		1,745		1,748		124		1,378		1,382		81
Consumer		-		-		-		-		-		-
	$	2,618	$	2,621	$	158	$	3,040	$	3,044	$	134

1.All loans are real estate collateral dependent.

2.All loans are non-collateral dependent loans.

The following table presents non-accrual loans by classes of the loan portfolio:



	September 30, 2025		December 31, 2024

	(In Thousands)
Commercial real estate	$	-	$	136
Commercial construction		-		-
Commercial		-		15
Residential real estate		496		344
Consumer		-		-
Total	$	496	$	495

As of September 30, 2025, there were five (5) loans in non-accrual status in the amount of $496 thousand. These loans are all collateral dependent non-accrual loans and did not have a required related allowance. There was interest income recognized of $1 thousand and $7 thousand for three and nine months ended September 30, 2025, respectively, on these non-accrual loans. As of December 31, 2024, there were five (5) loans in non-accrual status in the amount of $495 thousand, of which one (1) loan of $15 thousand, included in commercial loans above, is non-collateral dependent and required a related allowance of $15 thousand. The remaining collateral dependent nonaccrual loans did not have a required related allowance. As of September 30, 2024, there were seven (7) loans in non-accrual status in the amount of $1.2 million, of which one (1) loan of $15 thousand is non-collateral dependent and required a related allowance of $15 thousand. The remaining collateral dependent nonaccrual loans did not have a required related allowance. There was interest income of $7 thousand and $32 thousand recognized for the three and nine months ended September 30, 2024, respectively, on non-accrual loans.

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of September 30, 2025 and December 31, 2024, respectively:


					Greater								Loan
					than								Receivables >
	30-59 Days		60-89 Days		90 Days		Total				Total Loan		90 Days and
	Past Due		Past Due		Past Due		Past Due		Current		Receivables		Accruing

September 30, 2025	(In Thousands)
Commercial real estate	$	-	$	-	$	-	$	-	$	550,530	$	550,530	$	-
Commercial construction		-		-		-		-		16,202		16,202		-
Commercial		-		-		-		-		31,672		31,672		-
Residential real estate		734		430		59		1,223		678,954		680,177		-
Consumer		7		-		-		7		560		567		-
Total	$	741	$	430	$	59	$	1,230	$	1,277,918	$	1,279,148	$	-
December 31, 2024
Commercial real estate	$	-	$	-	$	136	$	136	$	536,458	$	536,594	$	-
Commercial construction		-		-		-		-		22,556		22,556		-
Commercial		-		-		15		15		39,369		39,384		-
Residential real estate		752		-		215		967		667,758		668,725		-
Consumer		-		-		-		-		475		475		-
Total	$	752	$	-	$	366	$	1,118	$	1,266,616	$	1,267,734	$	-

At September 30, 2025, the Company had no foreclosed assets and no mortgage loans collateralized by residential real estate in the process of foreclosure. At December 31, 2024, the Company had no foreclosed assets and had two (2) recorded investments in mortgage loans collateralized by residential real estate in the process of foreclosure in the amount of $216 thousand.

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following tables detail the activity in the allowance for credit losses for the three and nine months ended September 30, 2025 and September 30, 2024, respectively:


	Commercial Real Estate		Commercial Construction		Commercial		Residential Real Estate		Consumer		Total

Allowance for credit losses	(In Thousands)
Three Months Ending September 30, 2025
Beginning Balance - June 30, 2025	$	5,793	$	194	$	461	$	5,434	$	23	$	11,905
Charge-offs		-		-		-		-		-		-
Recoveries		-		-		-		-		-		-
Provisions (credits) on loans		26		(12)		(35)		61		(4)		36
Ending Balance - September 30, 2025	$	5,819	$	182	$	426	$	5,495	$	19	$	11,941

Nine Months Ending September 30, 2025
Beginning Balance - December 31, 2024	$	5,897	$	257	$	536	$	5,446	$	30	$	12,166
Charge-offs		(136)		-		(15)		-		(1)		(152)
Recoveries		-		-		-		-		-		-
Provisions (credits) on loans		58		(75)		(95)		49		(10)		(73)
Ending Balance - September 30, 2025	$	5,819	$	182	$	426	$	5,495	$	19	$	11,941

Allowance for credit losses
Three Months Ending September 30, 2024
Beginning Balance - June 30, 2024	$	6,017	$	227	$	525	$	5,438	$	39	$	12,246
Charge-offs		-		-		-		-		-		-
Recoveries		-		-		-		-		-		-
Provisions (credits) on loans		(22)		6		(9)		(9)		(6)		(40)
Ending Balance - September 30, 2024	$	5,995	$	233	$	516	$	5,429	$	33	$	12,206

Nine Months Ending September 30, 2024
Beginning Balance - December 31, 2023	$	6,108	$	195	$	920	$	5,224	$	14	$	12,461
Charge-offs		-		-		-		-		(11)		(11)
Recoveries		240		-		-		-		-		240
Provisions (credits) on loans		(353)		38		(404)		205		30		(484)
Ending Balance - September 30, 2024	$	5,995	$	233	$	516	$	5,429	$	33	$	12,206

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following tables represent the allocation for credit losses and the related loan portfolio disaggregated based on impairment methodology at September 30, 2025 and December 31, 2024:



	Commercial Real Estate		Commercial Construction		Commercial		Residential Real Estate		Consumer		Total

	(In Thousands)
September 30, 2025
Allowance for Credit Losses
Ending Balance	$	5,819	$	182	$	426	$	5,495	$	19	$	11,941
Ending balance: individually evaluated for impairment - real estate collateral dependent	$	-	$	18	$	-	$	124	$	-	$	142
Ending balance: individually evaluated for impairment - non-collateral dependent	$	-	$	-	$	16	$	-	$	-	$	16
Ending balance: collectively evaluated for impairment	$	5,819	$	164	$	410	$	5,371	$	19	$	11,783

Loans receivables:
Ending balance	$	550,530	$	16,202	$	31,672	$	680,177	$	567	$	1,279,148
Ending balance: individually evaluated for impairment - real estate collateral dependent	$	565	$	292	$	-	$	1,745	$	-	$	2,602
Ending balance: individually evaluated for impairment - non-collateral dependent	$	-	$	-	$	16	$	-	$	-	$	16
Ending balance: collectively evaluated for impairment	$	549,965	$	15,910	$	31,656	$	678,432	$	567	$	1,276,530

December 31, 2024
Allowance for Credit Losses
Ending Balance	$	5,897	$	257	$	536	$	5,446	$	30	$	12,166
Ending balance: individually evaluated for impairment - real estate collateral dependent	$	-	$	19	$	-	$	81	$	-	$	100
Ending balance: individually evaluated for impairment - non-collateral dependent	$	-	$	-	$	34	$	-	$	-	$	34
Ending balance: collectively evaluated for impairment	$	5,897	$	238	$	502	$	5,365	$	30	$	12,032

Loans receivables:
Ending balance	$	536,594	$	22,556	$	39,384	$	668,725	$	475	$	1,267,734
Ending balance: individually evaluated for impairment - real estate collateral dependent	$	1,335	$	293	$	-	$	1,378	$	-	$	3,006
Ending balance: individually evaluated for impairment - non-collateral dependent	$	-	$	-	$	34	$	-	$	-	$	34
Ending balance: collectively evaluated for impairment	$	535,259	$	22,263	$	39,350	$	667,347	$	475	$	1,264,694

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans. Accrued interest receivable on loans is reported as a component of accrued interest receivable on the Consolidated Balance Sheets, totaling $2.6 million and $2.5 million at September 30, 2025 and December 31, 2024, respectively, and is excluded from the estimate of credit losses.

Based on the guidance in ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, a loan modification or refinancing results in a new loan if the terms of the new loan are at least as favorable to the lender as the terms with customers with similar collection risks that are not refinancing or restricting their loans and the modification to the terms of the loan are more than minor. If a loan modification or refinancing does not result in a new loan, it is classified as a loan modification.

There are additional disclosures for modification of loans with borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows. The disclosures are applicable to situations where there is principal forgiveness, interest rate reductions, other than insignificant payment delays, term extensions, or a combination of any of these items. If the Company modifies any loans to borrowers in financial distress that involves principal forgiveness, the amount of principal that is forgiven is charged off against the allowance for credit losses. The Company had no new loan modifications to borrowers experiencing financial difficulties in the three and nine months ended September 30, 2025.

The Company had no new loan modifications to borrowers experiencing financial difficulties in the three months ending September 30, 2024. The following table presents new loan modifications for credit concerns during the nine months ending September 30, 2024:


	Number of Loans	Pre-Modification Outstanding Balance		Post- Modification Outstanding Balance

	(Dollars In Thousands)
Nine Months Ending September 30, 2024
Residential real estate	1	$	79	$	79
	1	$	79	$	79

Regarding the loan modification listed above, the borrower was experiencing financial stress. The modified home equity loan had an extended maturity date compared to the original loan. There is no commitment to lend additional amounts on this modified loan, which was paid off in full during the second quarter of 2025.

There were $59 thousand and $136 thousand of modifications to borrowers experiencing financial difficulties that were outstanding at September 30, 2025 and December 31, 2024, respectively. The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. During the three and nine months ended September 30, 2025, there were $59 thousand of modifications to borrowers experiencing financial difficulties that experienced a payment default (loans ninety days or more past due) within the prior twelve months. There were no modifications to borrowers experiencing financial difficulties that experienced a payment default (loans ninety days or more past due) within the prior twelve months during the three and nine months ended September 30, 2024.

Note 6 – Deposits

The components of deposits at September 30, 2025 and December 31, 2024 are as follows:


	September 30, 2025		December 31, 2024
	(In Thousands)

Demand, non-interest bearing	$	336,060	$	351,371
Demand, NOW and money market, interest bearing		294,299		270,775
Savings		448,662		444,102
Time, $250 and over		183,972		167,615
Time, other		357,570		319,096
Total deposits	$	1,620,563	$	1,552,959

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

At September 30, 2025, the scheduled maturities of time deposits are as follows (in thousands):


2025 (remainder of the year)	$	236,013
2026		288,697
2027		12,611
2028		3,990
2029		165
2030		66
	$	541,542

Note 7 – Short-term and Long-term Borrowings

Securities sold under agreements to repurchase, federal funds purchased, and FHLB short term advances generally represent overnight or less than twelve month borrowings. Long term advances from the FHLB are for periods of twelve months or more and are generally less than sixty months. The Bank has an agreement with the FHLB, which allows for borrowings up to a percentage of qualifying assets. At September 30, 2025, the Bank had a maximum borrowing capacity for short-term and long-term FHLB advances of approximately $703.9 million, of which $703.7 million is available for borrowing at September 30, 2025. This borrowing capacity with the FHLB includes a line of credit of $150.0 million. The Bank had an outstanding FHLB letter of credit in the amount of $160 thousand as of September 30, 2025. There were no FHLB short-term or long-term advances outstanding as of September 30, 2025. There were $15.6 million short-term FHLB advances outstanding and no long-term FHLB advances outstanding as of December 31, 2024. All FHLB borrowings are secured by qualifying assets of the Bank.

The Bank has a federal funds line of credit with the ACBB of $10.0 million, of which none was outstanding at September 30, 2025 and December 31, 2024. Advances from this line are unsecured.

The Bank is also eligible to borrow under the Federal Reserve Bank’s discount window borrowing programs.

The Company has a revolving line of credit facility with the ACBB of $7.5 million, of which none was outstanding at September 30, 2025 and December 31, 2024. Advances from this line are unsecured. Under the terms of this facility, availability under the revolving line of credit would be reduced to $5.0 million should the Company’s net tangible equity ratio drop below 5% and availability would be reduced to $2.0 million should the Company’s net tangible equity ratio drop below 2%. If the Company’s net tangible equity ratio drops below 0%, the commitment is cancelled.

Note 8 – Stock Incentive Plan and Employee Stock Purchase Plan

Stock Incentive Plan:

The Company maintains the Embassy Bancorp, Inc. Stock Incentive Plan (the “SIP”), originally adopted by the Company’s shareholders effective June 16, 2010 and subsequently amended, restated, and approved on June 20, 2019. The SIP authorizes the Board of Directors, or a committee authorized by the Board of Directors, to award a stock based incentive to (i) designated officers (including officers who are directors) and other designated employees at the Company and its subsidiaries, and (ii) non-employee members of the Board of Directors and advisors and consultants to the Company and its subsidiaries. The SIP provides for stock based incentives in the form of incentive stock options as provided in Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, stock appreciation rights, restricted stock and deferred stock awards. The term of the option, the amount of time for the option to vest after grant, if any, and other terms and limitations will be determined at the time of grant. Options granted under the SIP may not have an exercise period that is more than ten years from the time the option is granted. The maximum number of shares of common stock authorized for issuance under the SIP is 756,356. The SIP provides for appropriate adjustments in the number and kind of shares available for grant or subject to outstanding awards under the SIP to avoid dilution in the event of a merger, stock splits, stock dividends or other changes in the capitalization of the Company. The SIP expires on June 20, 2029. At September 30, 2025, there were 347,510 shares available for issuance under the SIP.

The Company grants shares of restricted stock, under the SIP, to certain members of its Board of Directors as compensation for their services, in accordance with the Company’s Non-employee Directors Compensation program adopted in October 2010. The Company also grants restricted stock to certain officers under individual agreements with these officers. Some of these restricted stock awards vest immediately, while the remainder vest over the service period of three years. Management recognizes compensation expense for

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

the fair value of the restricted stock awards on a straight-line basis over the requisite service period. Since inception of the plan and through the nine months ended September 30, 2025, there have been 275,758 awards granted. There were no awards granted during the three months ended September 30, 2025 and 2024. During the three months ended September 30, 2025 and September 30, 2024, the Company recognized compensation expense for restricted stock awards of $28 thousand and $62 thousand, respectively. During the nine months ended September 30, 2025 and 2024, there were 16,845 and 18,843 awards granted, respectively. During the nine months ended September 30, 2025 and September 30, 2024, the Company recognized compensation expense for restricted stock awards of $354 thousand and $462 thousand, respectively.

Employee Stock Purchase Plan:

On January 1, 2017, the Company implemented the Embassy Bancorp, Inc. Employee Stock Purchase Plan (“ESPP”), which was approved by the Company’s shareholders at the annual meeting held on June 16, 2016. Under the ESPP, each employee of the Company and its subsidiaries who is employed on an offering date and customarily is scheduled to work at least twenty (20) hours per week and more than five (5) months in a calendar year is eligible to participate. The purchase price for shares purchased under the ESPP is 95% of the fair market value of such shares on the date of purchase. This discount was adjusted to 90% from 95% effective October 1, 2025. The purchase price may be adjusted from time to time by the Board of Directors; provided, however, that the discount to fair market value shall not exceed 15%. The Company has authorized 350,000 shares of its common stock for the ESPP, of which 34,235 shares have been issued as of September 30, 2025. The Company recognized discount expense in relation to the ESPP of $1 thousand and $3 thousand during the three and nine months ended September 30, 2025 and September 30, 2024, respectively.

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 9 – Other Comprehensive Income

US GAAP requires that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. Management believes that the unrealized losses on securities available for sale are primarily a result of the increasing market interest rates since the time of purchase and the overall current market conditions.

The components of other comprehensive income both before tax and net of tax are as follows:



	Three Months Ended September 30,
	2025						2024

	(In Thousands)

	Before		Tax		Net of		Before		Tax		Net of
	Tax		Effect		Tax		Tax		Effect		Tax
Change in accumulated other comprehensive loss:
Unrealized holding gains on securities ‎ available for sale	$	5,425	$	(1,139)	$	4,286	$	11,496	$	(2,414)	$	9,082
Reclassification adjustments for gains on securities ‎ transactions included in net income (A),(B)		-		-		-		-		-		-
Total other comprehensive income	$	5,425	$	(1,139)	$	4,286	$	11,496	$	(2,414)	$	9,082



	Nine Months Ended September 30,
	2025						2024

	(In Thousands)

	Before		Tax		Net of		Before		Tax		Net of
	Tax		Effect		Tax		Tax		Effect		Tax
Change in accumulated other comprehensive loss:
Unrealized holding gains on securities ‎ available for sale	$	11,523	$	(2,420)	$	9,103	$	4,789	$	(1,006)	$	3,783
Reclassification adjustments for gains on securities ‎ transactions included in net income (A),(B)		-		-		-		-		-		-
Total other comprehensive income	$	11,523	$	(2,420)	$	9,103	$	4,789	$	(1,006)	$	3,783

A.Realized gains on securities transactions included in gain on sales of securities in the accompanying Consolidated Statements of Income, as applicable.

B.Tax effect included in income tax expense in the accompanying Consolidated Statements of Income.

There were no realized gains on securities available for sale for the three and nine months ended September 30, 2025 and 2024.

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

A summary of the accumulated other comprehensive loss, net of tax, is as follows:


	Securities
	Available
	for Sale
Three Months Ended September 30, 2025 and 2024	(In Thousands)
Balance June 30, 2025	$	(45,818)
Other comprehensive income before reclassifications		4,286
Amounts reclassified from accumulated other ‎ comprehensive loss		-
Net other comprehensive income during the period		4,286
Balance September 30, 2025	$	(41,532)

Balance June 30, 2024	$	(48,999)
Other comprehensive income before reclassifications		9,082
Amounts reclassified from accumulated other ‎ comprehensive loss		-
Net other comprehensive income during the period		9,082
Balance September 30, 2024	$	(39,917)

Nine Months Ended September 30, 2025 and 2024
Balance January 1, 2025	$	(50,635)
Other comprehensive income before reclassifications		9,103
Amounts reclassified from accumulated other ‎ comprehensive loss		-
Net other comprehensive income during the period		9,103
Balance September 30, 2025	$	(41,532)

Balance January 1, 2024	$	(43,700)
Other comprehensive income before reclassifications		3,783
Amounts reclassified from accumulated other ‎ comprehensive loss		-
Net other comprehensive income during the period		3,783
Balance September 30, 2024	$	(39,917)

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 10 – Basic and Diluted Earnings per Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period, as adjusted for stock dividends and splits. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustments to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024

	(Dollars In Thousands, Except Share and Per Share Data)
Net income	$	3,793	$	2,714	$	10,117	$	7,742

Weighted average shares outstanding		7,645,258		7,617,691		7,642,158		7,612,311
Dilutive effect of potential common shares, stock options		-		-		-		-
Diluted weighted average common shares outstanding		7,645,258		7,617,691		7,642,158		7,612,311

Basic earnings per share	$	0.50	$	0.36	$	1.32	$	1.02
Diluted earnings per share	$	0.50	$	0.36	$	1.32	$	1.02

There were no stock options not considered in computing diluted earnings per common share for the three and nine months ended September 30, 2025 and September 30, 2024.

Note 11 – Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

US GAAP 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 are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).
‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy utilized at September 30, 2025 and December 31, 2024, respectively, are as follows:


		(Level 1)		(Level 2)
		Quoted		Significant		(Level 3)
		Prices in Active		Other		Significant
		Markets for		Observable		Unobservable
Description	Identical Assets		Inputs		Inputs		Total

		(In Thousands)
U.S. Treasury securities	$	-	$	75,934	$	-	$	75,934
U.S. Government agency obligations		-		19,138		-		19,138
Municipal bonds		-		59,559		-		59,559
U.S. Government Sponsored Enterprise (GSE) -
Mortgage-backed securities - residential		-		179,683		-		179,683
September 30, 2025 Securities available for sale	$	-	$	334,314	$	-	$	334,314

U.S. Treasury securities	$	-	$	34,740	$	-	$	34,740
U.S. Government agency obligations		-		12,446		-		12,446
Municipal bonds		-		58,000		-		58,000
U.S. Government Sponsored Enterprise (GSE) -
Mortgage-backed securities - commercial		-		436		-		436
U.S. Government Sponsored Enterprise (GSE) -
Mortgage-backed securities - residential		-		175,206		-		175,206
December 31, 2024 Securities available for sale	$	-	$	280,828	$	-	$	280,828

The fair value of securities available for sale are determined by matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted prices. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2025 and December 31, 2024, respectively, are as follows:


		(Level 1)		(Level 2)
		Quoted		Significant		(Level 3)
		Prices in Active		Other		Significant
		Markets for		Observable		Unobservable
Description	Identical Assets		Inputs		Inputs		Total
		(In Thousands)
September 30, 2025 Loans Individually evaluated for credit losses	$	-	$	-	$	926	$	926
December 31, 2024 Loans Individually evaluated for credit losses	$	-	$	-	$	557	$	557

Loans individually evaluated for credit losses are those that are accounted for under existing Financial Accounting Standards Board (“FASB”) guidance, in which the Bank has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. Fair values may also include qualitative adjustments by management based on economic conditions and liquidation expenses. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

At September 30, 2025, of the loans individually evaluated for credit losses having an aggregate balance of $2.6 million, $1.5 million did not require a valuation allowance because the value of the collateral, including estimated selling costs, securing the loan was determined to meet or exceed the balance owed on the loan. Of the remaining $1.1 million in loans individually evaluated for credit losses, an aggregate valuation allowance of $158 thousand was required to reflect what was determined to be a shortfall in the value of the collateral as compared to the balance on such loans.

At December 31, 2024, of the loans individually evaluated for credit losses having an aggregate balance of $3.0 million, $2.3 million did not require a valuation allowance because the value of the collateral, including estimated selling costs, securing the loan was determined to meet or exceed the balance owed on the loan. Of the remaining $691 thousand in loans individually evaluated for credit losses, an aggregate valuation allowance of $134 thousand was required to reflect what was determined to be a shortfall in the value of the collateral as compared to the balance on such loans.

Real estate properties acquired through, or in lieu of, foreclosure are to be sold and are carried at fair value less estimated cost to sell. Fair value is based upon independent market prices or appraised value of the property. These assets would be included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement. At September 30, 2025 and December 31, 2024, respectively, the Company had no real estate properties acquired through, or in lieu of, foreclosure.

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:



	Quantitative Information about Level 3 Fair Value Measurements
Description	Fair Value ‎Estimate		Valuation Techniques	Unobservable Input	Range ‎(Weighted Average)

		(Dollars In Thousands)
September 30, 2025:
Loans Individually evaluated for credit losses	$	926	Appraisal of real estate collateral	Appraisal adjustments (1)	0% to -25% (-25.0%)
			and pending agreement of sale	Liquidation expenses (2)	0% to -7.5% (-7.5%)
December 31, 2024:
Loans Individually evaluated for credit losses	$	557	Appraisal of real estate collateral	Appraisal adjustments (1)	0% to -25% (-25.0%)
			and pending agreement of sale	Liquidation expenses (2)	0% to -7.5% (-7.5%)

1.Appraisals may be adjusted by management for qualitative factors including economic conditions and the age of the appraisal. The range and weighted average of appraisal adjustments are presented as a percent of the appraisal.

2.Appraisals and pending agreements of sale are adjusted by management for liquidation expenses. The range and weighted average of liquidation expense adjustments are presented as a percent of the appraisal or pending agreement of sale.

‎

Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The estimated fair values of the Company’s financial instruments were as follows at September 30, 2025 and December 31, 2024:



						(Level 1)
						Quoted		(Level 2)
						Prices in		Significant		(Level 3)
						Active		Other		Significant
		Carrying		Fair Value		Markets for		Observable		Unobservable
		Amount		Estimate		Identical Assets		Inputs		Inputs

	(In Thousands)
September 30, 2025:
Financial assets:
Cash and cash equivalents	$	107,997	$	107,997	$	107,997	$	-	$	-
Securities available-for-sale		334,314		334,314		-		334,314		-
Loans receivable, net of allowance		1,268,139		1,195,789		-		-		1,195,789
Restricted investments in bank stock		1,051		1,051		-		1,051		-
Accrued interest receivable		4,054		4,054		-		4,054		-
Financial liabilities:
Deposits		1,620,563		1,618,687		-		1,618,687		-
Securities sold under agreements to
repurchase and federal funds purchased		12,116		12,116		-		12,116		-
Accrued interest payable		7,068		7,068		-		7,068		-
Off-balance sheet financial instruments:
Commitments to grant loans		-		-		-		-		-
Unfunded commitments under lines of credit		-		-		-		-		-
Standby letters of credit		-		-		-		-		-

December 31, 2024:
Financial assets:
Cash and cash equivalents	$	96,522	$	96,522	$	96,522	$	-	$	-
Securities available-for-sale		280,828		280,828		-		280,828		-
Loans receivable, net of allowance		1,256,256		1,155,247		-		-		1,155,247
Restricted investments in bank stock		1,663		1,663		-		1,663		-
Accrued interest receivable		3,604		3,604		-		3,604		-
Financial liabilities:
Deposits		1,552,959		1,550,360		-		1,550,360		-
Securities sold under agreements to
repurchase and federal funds purchased		4,895		4,895		-		4,895		-
Short-term borrowings		15,625		15,625		-		15,625		-
Accrued interest payable		7,812		7,812		-		7,812		-
Off-balance sheet financial instruments:
Commitments to grant loans		-		-		-		-		-
Unfunded commitments under lines of credit		-		-		-		-		-
Standby letters of credit		-		-		-		-		-

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis provides an overview of the financial condition and results of operations of Embassy Bancorp, Inc. (the “Company”) as of September 30, 2025 and for the three and nine months ended September 30, 2025 and 2024, respectively. This discussion should be read in conjunction with the preceding consolidated financial statements and related footnotes, as well as with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2024 included in the Company’s Form 10-K filed with the Securities and Exchange Commission. Current performance does not guarantee and may not be indicative of similar performance in the future.

Critical Accounting Policies

Disclosure of the Company’s significant accounting policies is included in Note 1 to the consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2024. Some of these policies are particularly sensitive, requiring significant judgments, estimates and assumptions to be made by management, most particularly in connection with determining the provision for credit losses and the appropriate level of the allowance for credit losses. Additional information is contained in this Form 10-Q under the paragraphs titled “Provision for Credit Losses and Reserve for Unfunded Loan Commitments” and “Credit Risk and Loan Quality,” contained on the following pages.

Caution About Forward-looking Statements

This report contains forward-looking statements, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies and regarding general economic conditions. These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. These statements are based upon current and anticipated economic conditions, nationally and in the Company’s market, interest rates and interest rate policy, competitive factors and other conditions that, by their nature, are not susceptible to accurate forecast, and are subject to significant uncertainty.

Such forward-looking statements can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “intends”, “will”, “should”, “anticipates”, or the negative of any of the foregoing or other variations thereon or comparable terminology, or by discussion of strategy.

No assurance can be given that the future results covered by forward-looking statements will be achieved. Such statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could impact the Company’s operating results include, but are not limited to:

the impact of adverse conditions in the economy and financial markets, including increasing or elevated interest rates, on the performance of the Company's loan portfolio and demand for the Company's products and services;

the potential impact of recent events affecting the financial services industry on the Company, including increased competition for, and costs of, deposits and other funding sources, more stringent regulatory requirements relating to liquidity, interest rate risk management, capital adequacy and increased FDIC insurance expenses;

the effects of actions by the federal government, including those of the Federal Reserve Board and other government agencies, that impact the money supply, the potential effect of tariffs on cost of goods, and market interest rates;

the effects of market interest rates, and the relative balances of interest rate-sensitive assets to interest rate-sensitive liabilities, on net interest margin and net interest income;

the composition of the Company's loan portfolio, including commercial real estate and residential real estate, which collectively represent a majority of the loan portfolio, may expose the Company to increased credit risk;

the effects of changes in interest rates on demand for the Company's products and services;

investment securities gains and losses, including declines in the fair value of securities which may result in changes to earnings or shareholders' equity;

the effects of changes in interest rates or disruptions in liquidity markets on the Company's sources of funding;

capital and liquidity strategies, including the Company's ability to comply with applicable capital and liquidity requirements, and the Company's ability to generate capital internally or raise capital on favorable terms;

the effects of competition on deposit rates and growth, loan rates and growth and net interest margin;

the impact of operational risks, including the risk of human error, inadequate or failed internal processes and systems, computer and telecommunications systems failures, faulty or incomplete data and an inadequate risk management framework;

the loss of, or failure to safeguard, confidential or proprietary information;

the Company's failure to identify and adequately and promptly address cybersecurity risks, including data breaches and cyberattacks;

the impact of third party fraud schemes;

the impact of failures from third-party vendors upon which the Company relies to perform in accordance with contractual arrangements and the effects of concerns about other financial institutions on the Company;

the potential effects of increases in non-performing assets, which may require the Company to increase the allowance for credit losses, charge-off loans and incur elevated collection and carrying costs related to such non-performing assets;

the determination of the allowance for credit losses, which depends significantly upon assumptions and judgments with respect to a variety of factors, including the performance of the loan portfolio, the weighted-average remaining lives of different classifications of loans within the loan portfolio and current and forecasted economic conditions, among other factors;

the effects of the extensive level of regulation and supervision to which the Company and Bank are subject;

changes in regulation and government policy, which could result in significant changes in banking and financial services regulation;

the continuing impact of the Dodd-Frank Act on the Company’s business and results of operations;

the potential for negative consequences resulting from regulatory violations, investigations and examinations, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to the Company’s reputation;

the effects of adverse outcomes in litigation and governmental or administrative proceedings;

the effects of changes in U.S. federal, state or local tax laws;

the effects of the significant amounts of time and expense associated with regulatory compliance and risk management;

geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad;

public health crises and pandemics and their effects on the economic and business environments in which the Company operates, including on the Company’s credit quality and business operations, as well as the impact on general economic and financial market conditions;

the Company’s ability to achieve its growth plans;

the Company’s ability to attract and retain talented personnel;

the effects of competition from financial service companies and other companies offering bank services;

the Company’s ability to keep pace with technological changes;

the effects of negative publicity on the Company’s reputation; and

other factors that may affect future results of the Company, as well as the risks described in the Company’s Form 10-K for the year ended December 31, 2024 and subsequent filings with the SEC.

OVERVIEW

The Company is a Pennsylvania corporation organized in 2008 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Company was formed for purposes of acquiring Embassy Bank For The Lehigh Valley (the “Bank”) in connection with the reorganization of the Bank into a bank holding company structure, which was consummated on November 11, 2008. Accordingly, the Company owns all of the capital stock of the Bank, giving the organization more flexibility in meeting its capital needs as the Company continues to grow. Embassy Holdings, LLC (the “LLC”) is a wholly-owned subsidiary of the Bank organized to engage in the holding of property acquired by the Bank in satisfaction of debts previously contracted. As such, the consolidated financial statements contained herein include the accounts of the Company, the Bank and the LLC.

The Bank, which is the Company’s primary operating subsidiary, was originally incorporated as a Pennsylvania bank on May 11, 2001 and opened its doors on November 6, 2001. It was formed by a group of local business persons and professionals with significant prior experience in community banking in the Lehigh Valley area of Pennsylvania, the Bank’s primary market area, for the purpose of providing a local community bank to serve Lehigh and Northampton Counties in Pennsylvania.

Since its inception, the Board’s philosophy has been that, by running the Bank with a view toward the long term, only good things will happen for the Bank’s customers, team members, shareholders and the Lehigh Valley community.

At September 30, 2025, the Company continued to be in a strong financial and operational condition. The Bank’s September 30, 2025 capital ratios exceeded the amounts required to be considered “well capitalized” as defined in applicable banking regulations. The Company’s ratio of non-performing loans to total loans at September 30, 2025 was 0.04% and the ratio of non-performing assets to total assets was 0.03%. The Company had its most recent Community Reinvestment Act (“CRA”) examination in 2025 and received a “satisfactory” rating.

The Company’s assets increased by $73.6 million from $1.70 billion at December 31, 2024 to $1.78 billion at September 30, 2025. The increase was due to an increase of $11.5 million in cash and cash equivalents, an increase of $53.5 million in securities available for sale, and an increase of $11.9 million in net loans receivable, offset by a decrease of $3.7 million in other assets. The $11.5 million

increase in cash and cash equivalents was due to an increase in deposits of $67.6 million, an increase in securities sold under agreement to repurchase of $7.2 million, $55.4 million in principal pay downs on mortgage-backed securities and maturities within the securities available for sale portfolio, offset by a decrease in short term borrowings of $15.6 million, the net loan growth of $11.9 million, and the purchase of $96.5 million in securities available for sale. The $53.5 million increase in securities was net of a decrease in unrealized losses of $11.5 million. The current unrealized loss position of the securities portfolio is due to the increase in market interest rates in response to economic conditions since purchase and not due to the credit quality of the investment portfolio.

The Company's deposits increased by $67.6 million from $1.55 billion at December 31, 2024 to $1.62 billion at September 30, 2025. The increase in deposits was due to an increase of $82.9 million in interest bearing deposits, offset by a decrease of $15.3 million in non-interest bearing deposits. The Company continues to seek deposits using a highly effective relationship building, sales and marketing effort, which serves to further increase the Company’s overall presence in the market it serves, along with deposit relationships developed as a result of cross-marketing efforts to its loan and other non-depository banking service customers. The Company’s success in attracting new deposit relationships is, in part, due to the increased usage of the Company’s online banking platform, competitively offered rates, and the continued convenience and efficiency of our branch network and branch personnel. The Company continues to take advantage of deposit opportunities created by mergers, name changes, competitive branch hour and service adjustments and/or closures in the Company’s market area, and by attracting new customers looking to relocate to a local, reputable community bank.

Net loans receivable of $1.27 billion and $1.26 billion at September 30, 2025 and December 31, 2024, respectively, reflected an increase of $11.9 million. The market continues to be very competitive and the Company is committed to maintaining a high-quality portfolio that returns a reasonable market rate. While the past and current economic and competitive conditions in the marketplace have created more competition for loans to creditworthy customers, the Company continues to expand its market presence and pipeline, and continues to focus on developing a reputation as being a market leader in both commercial and consumer/mortgage lending. Management believes that this combination of relationship building, cross marketing and responsible underwriting will translate into continued long-term growth of a portfolio of quality loans and core deposit relationships. The Company continues to monitor the interest rate exposure of its interest-bearing assets and liabilities. See the expanded discussion under the Financial Condition: Loans section below.

Net income for the three months ended September 30, 2025 was $3.8 million compared to net income for the three months ended September 30, 2024 of $2.7 million, an increase of $1.1 million, or 39.8%. Basic and diluted earnings per share increased to $0.50 for the three months ended September 30, 2025, as compared to $0.36 for the three months ended September 30, 2024. The difference in net income for the three months ended September 30, 2025 and September 30, 2024 resulted primarily from an increase in interest income of $1.3 million, a decrease in interest expense of $348 thousand, an increase of $34 thousand in non-interest income, offset by an increase of $299 thousand in non-interest expenses and an increase of $57 thousand in the provision for credit losses.

Net income for the nine months ended September 30, 2025 was $10.1 million compared to net income for the nine months ended September 30, 2024 of $7.7 million, an increase of $2.4 million, or 30.7%. Basic and diluted earnings per share increased to $1.32 for the nine months ended September 30, 2025, as compared to $1.02 for the nine months ended September 30, 2024. The difference in net income for the nine months ended September 30, 2025 and September 30, 2024 resulted primarily from an increase in interest income of $4.8 million and an increase of $162 thousand in non-interest income, offset by an increase in interest expense of $460 thousand, an increase of $1.2 million in non-interest expenses, and a decrease of $281 thousand in the credit for credit losses.

RESULTS OF OPERATIONS

Net Interest Income

The Company determines interest rate spread and margin on both a US GAAP and tax equivalent basis. The use of tax equivalent basis in determining interest rate spread and margin is considered a non-US GAAP measure. The Company believes the use of this measure provides meaningful information to the reader of the consolidated financial statements when comparing taxable and nontaxable assets. However, it is supplemental to US GAAP which is used to prepare the Company’s consolidated financial statements and should not be read in isolation or relied upon as a substitute for US GAAP measures. In addition, the non-US GAAP measure may not be comparable to non-US GAAP measures reported by other companies. The tax rate used to calculate the tax equivalent adjustments was 21% for 2025 and 2024.

Total interest income for the three months ended September 30, 2025 increased $1.3 million to $18.3 million, as compared to $16.9 million for the three months ended September 30, 2024. Average earning assets were $1.69 billion for the three months ended September 30, 2025, as compared to $1.63 billion for the three months ended September 30, 2024. The tax equivalent yield on average earning assets was 4.32% for the third quarter of 2025 compared to 4.16% for the third quarter of 2024.

Total interest expense for the three months ended September 30, 2025 decreased $348 thousand to $7.4 million, as compared to $7.8 million for the three months ended September 30, 2024. Average interest bearing liabilities were $1.28 billion for the three months

ended September 30, 2025 and $1.23 billion for the three months ended September 30, 2024. The yield on average interest bearing liabilities was 2.30% and 2.51% for the third quarter of 2025 and 2024, respectively. Over the past year the Company has experienced a consistent decrease in the cost of funds with reductions observed in each successive quarter. This downward trend reflects more favorable market conditions and strategic financial management. The Company’s cost of funds was 1.81%, 1.82%, and 1.97% for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, respectively.

Net interest income for the three months ended September 30, 2025 was $10.9 million, compared to $9.2 million for the three months ended September 30, 2024. The increase in net interest income is, in part, the result of an increase in the average balances of taxable loans and an increase in the average balances of taxable investments, along with an increase in the rates of taxable and non-taxable loans and taxable and non-taxable investments. Also contributing to the increase in net interest income was a decrease in the average balance of NOW accounts, a decrease in the average balance of securities sold under agreement to repurchase, and a decrease in the average balance of other borrowings, along with a decrease in the rates of interest bearing demand deposits, NOW and money markets, savings, certificates of deposits, and securities sold under agreement to repurchase and other borrowings. The increase in net interest income was offset by a decrease in the average balance of non-taxable loans, a decrease in the average balance of non-taxable investments, a decrease in the average balances of interest bearing deposits with banks, an increase in the average balance of money markets, an increase in the average balance of savings, and an increase in the average balance of certificates of deposit, along with a decrease in the rate of fed funds sold and interest bearing deposits with banks. The Company’s net interest margin is 2.54% on a US GAAP basis and 2.58% on a tax equivalent (non-US GAAP) basis for the three months ended September 30, 2025, as compared to 2.24% on a US GAAP basis and 2.27% on a tax equivalent (non-US GAAP) basis for the three months ended September 30, 2024.

Total interest income for the nine months ended September 30, 2025 increased $4.8 million to $52.9 million, as compared to $48.1 million for the nine months ended September 30, 2024. Average earning assets were $1.67 billion for the nine months ended September 30, 2025 as compared to $1.60 billion for the nine months ended September 30, 2024. The tax equivalent yield on average earning assets was 4.27% for the nine months ended September 30, 2025 compared to 4.07% for the nine months ended September 30, 2024.

Total interest expense for the nine months ended September 30, 2025 increased $460 thousand to $21.8 million, as compared to $21.4 million for the nine months ended September 30, 2024. Average interest bearing liabilities were $1.26 billion for the nine months ended September 30, 2025 and $1.20 billion for the nine months ended September 30, 2024. The yield on average interest bearing liabilities was 2.32% and 2.38% for the nine months ended September 30, 2025 and 2024, respectively. The Company’s cost of funds was 1.82% and 1.86% for the nine months ended September 30, 2025 and 2024, respectively.

Net interest income for the nine months ended September 30, 2025 was $31.1 million, compared to $26.8 million for the nine months ended September 30, 2024. The increase in net interest income is, in part, the result of an increase in the average balances of taxable loans, an increase in the average balances of taxable investments, an increase in the average balances of interest bearing deposits with banks and federal funds sold, along with an increase in the rates of taxable and non-taxable loans and taxable and non-taxable investments. Also contributing to the increase in net interest income was a decrease in the average balance of savings, a decrease in the average balance of NOW accounts, a decrease in the average balance of securities sold under agreement to repurchase and other borrowings, along with a decrease in the rates of interest bearing demand deposits, NOW and money markets, certificates of deposits, and securities sold under agreement to repurchase and other borrowings. The increase in net interest income was offset by a decrease in the average balance of non-taxable loans, a decrease in the average balance of non-taxable investments, an increase in the average balance of money markets, and an increase in the average balance of certificates of deposit, along with a decrease in the rate of fed funds sold and interest bearing deposits with banks. The Company’s net interest margin is 2.49% on a US GAAP basis and 2.52% on a tax equivalent (non-US GAAP) basis for the nine months ended September 30, 2025, as compared to 2.24% on a US GAAP basis and 2.28% on a tax equivalent (non-US GAAP) basis for the nine months ended September 30, 2024.

‎

The tables below set forth average balances and corresponding yields for the corresponding periods ended September 30, 2025 and 2024, respectively:

Distribution of Assets, Liabilities and Stockholders’ Equity:

Interest Rates and Interest Differential (quarter to date)


	Three Months Ended September 30,
	2025					2024
					Tax					Tax
	Average				Equivalent	Average				Equivalent
	Balance			Interest	Yield	Balance			Interest	Yield

		(Dollars In Thousands)
ASSETS
Loans - taxable (2)	$	1,257,154	$	14,628	4.62%	$	1,235,284	$	13,568	4.37%
Loans - non-taxable (1)		26,214		249	4.77%		27,530		235	4.30%
Investment securities - taxable		295,716		2,267	3.04%		247,014		1,694	2.73%
Investment securities - non-taxable (1)		39,065		298	3.83%		40,718		296	3.66%
Federal funds sold		1,000		11	4.36%		1,000		14	5.57%
Interest bearing deposits with banks		72,568		802	4.38%		78,392		1,115	5.66%
TOTAL INTEREST EARNING ASSETS		1,691,717		18,255	4.32%		1,629,938		16,922	4.16%
Less allowance for credit losses		(11,946)					(12,257)
Other assets		82,945					81,704
TOTAL ASSETS	$	1,762,716				$	1,699,385

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand deposits, ‎ NOW and money market	$	279,226	$	978	1.39%	$	290,046	$	1,250	1.71%
Savings		454,706		997	0.87%		448,229		1,000	0.89%
Certificates of deposit		533,726		5,395	4.01%		468,302		5,337	4.53%
Securities sold under agreements to repurchase ‎and other borrowings		11,449		34	1.18%		20,049		165	3.27%
TOTAL INTEREST BEARING LIABILITIES		1,279,107		7,404	2.30%		1,226,626		7,752	2.51%

Non-interest bearing demand deposits		342,838					339,961
Other liabilities		23,996					24,888
Stockholders' equity		116,775					107,910
TOTAL LIABILITIES AND ‎STOCKHOLDERS' EQUITY	$	1,762,716				$	1,699,385

Net interest income			$	10,851				$	9,170
Tax equivalent adjustments
Loans				66					62
Investments				79					79
Total tax equivalent adjustments				145					141
Net interest income on a tax equivalent basis			$	10,996				$	9,311
Net interest spread (US GAAP basis)					2.00%					1.62%
Net interest margin (US GAAP basis)					2.54%					2.24%
Net interest spread (non-US GAAP basis) (3)					2.02%					1.65%
Net interest margin (non-US GAAP basis) (3)					2.58%					2.27%
Cost of funds					1.81%					1.97%

(1)Yields on tax exempt assets have been calculated on a fully tax equivalent basis at a tax rate of 21% for the three months ended September 30, 2025 and 2024, respectively.

(2)The average balance of taxable loans includes loans in which interest is no longer accruing.

(3)Non-US GAAP net interest spread and net interest margin calculated on a fully tax equivalent basis at a tax rate of 21% for the three months ended September 30, 2025 and 2024, respectively.

‎

Distribution of Assets, Liabilities and Stockholders’ Equity:

Interest Rates and Interest Differential (year to date)


		Nine Months Ended September 30,

	2025						2024

					Tax					Tax
	Average				Equivalent	Average				Equivalent
	Balance		Interest		Yield	Balance		Interest		Yield

		(Dollars In Thousands)
ASSETS
Loans - taxable (2)	$	1,249,619	$	42,487	4.55%	$	1,236,151	$	39,585	4.28%
Loans - non-taxable (1)		26,459		753	4.82%		27,356		692	4.28%
Investment securities - taxable		286,875		6,485	3.02%		231,342		4,512	2.61%
Investment securities - non-taxable (1)		39,396		892	3.83%		40,620		890	3.70%
Federal funds sold		1,000		33	4.41%		991		41	5.53%
Interest bearing deposits with banks		68,566		2,269	4.42%		58,910		2,418	5.48%
TOTAL INTEREST EARNING ASSETS		1,671,915		52,919	4.27%		1,595,370		48,138	4.07%
Less allowance for credit losses		(12,087)					(12,416)
Other assets		83,212					81,936
TOTAL ASSETS	$	1,743,040				$	1,664,890

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand deposits,
NOW and money market	$	276,262	$	2,906	1.41%	$	271,604	$	3,232	1.59%
Savings		455,715		2,936	0.86%		466,114		2,988	0.86%
Certificates of deposit		518,854		15,861	4.09%		442,595		14,707	4.44%
Securities sold under agreements to repurchase ‎and other borrowings		8,219		118	1.92%		18,010		434	3.22%
TOTAL INTEREST BEARING LIABILITIES		1,259,050		21,821	2.32%		1,198,323		21,361	2.38%

Non-interest bearing demand deposits		346,671					338,799
Other liabilities		23,491					23,890
Stockholders' equity		113,828					103,878
TOTAL LIABILITIES AND ‎STOCKHOLDERS' EQUITY	$	1,743,040				$	1,664,890

Net interest income			$	31,098				$	26,777
Tax equivalent adjustments
Loans				200					184
Investments				237					237
Total tax equivalent adjustments				437					421
Net interest income on a tax equivalent basis			$	31,535				$	27,198
Net interest spread (US GAAP basis)					1.93%					1.65%
Net interest margin (US GAAP basis)					2.49%					2.24%
Net interest spread (non-US GAAP basis) (3)					1.95%					1.69%
Net interest margin (non-US GAAP basis) (3)					2.52%					2.28%
Cost of funds					1.82%					1.86%

(1)Yields on tax exempt assets have been calculated on a fully tax equivalent basis at a tax rate of 21% for the nine months ended September 30, 2025 and 2024, respectively.

(2)The average balance of taxable loans includes loans in which interest is no longer accruing.

(3)Non-US GAAP net interest spread and net interest margin calculated on a fully tax equivalent basis at a tax rate of 21% for the nine months ended September 30, 2025 and 2024, respectively.

‎

The table below demonstrates the relative impact on net interest income of changes in the volume of interest-earning assets and interest-bearing liabilities and changes in rates earned and paid by the Company on such assets and liabilities:


	Three Months Ended								Nine Months Ended
	September 30, 2025								September 30, 2025
	compared to September 30, 2024								compared to September 30, 2024
	(In Thousands)
	Due to change in:								Due to change in:
	Total						# of		Total						# of
	Change		Volume		Rate		Days		Change		Volume		Rate		Days
Interest-earning assets:
Loans - taxable	$	1,060	$	241	$	782	$	37	$	2,902	$	431	$	2,508	$	(37)
Loans - non-taxable		14		(12)		25		1		61		(22)		85		(2)
Investment securities - taxable		573		335		233		5		1,973		1,082		895		(4)
Investment securities - non-taxable		2		(12)		13		1		2		(27)		28		1
Federal funds sold		(3)		-		(3)		-		(8)		-		(8)		-
Interest bearing deposits with banks		(313)		(83)		(233)		3		(149)		396		(543)		(2)
Total net change in income on
interest-earning assets		1,333		469		817		47		4,781		1,860		2,965		(44)

Interest-bearing liabilities:
Interest bearing demand deposits,
NOW and money market		(272)		(47)		(229)		4		(326)		55		(378)		(3)
Savings		(3)		14		(20)		3		(52)		(67)		17		(2)
Certificates of deposit		58		748		(704)		14		1,154		2,532		(1,364)		(14)
Total deposits		(217)		715		(953)		21		776		2,520		(1,725)		(19)
Securities sold under agreements to
repurchase and other borrowings		(131)		(71)		(60)		-		(316)		(236)		(81)		1
Total net change in expense on
interest-bearing liabilities		(348)		644		(1,013)		21		460		2,284		(1,806)		(18)
Change in net interest income	$	1,681	$	(175)	$	1,830	$	26	$	4,321	$	(424)	$	4,771	$	(26)

Provision for Credit Losses and Reserve for Unfunded Loan Commitments

The allowance for credit losses is established through provisions for credit losses charged against income. Loans deemed to be uncollectible are charged against the allowance for credit losses, and subsequent recoveries, if any, are credited to the allowance. The measurement of expected credit losses also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit.

The allowance for credit losses is maintained at a level management considers to be adequate to provide for losses that can be reasonably anticipated over the expected life of the loans. Management’s periodic evaluation of the adequacy of the allowance is based on 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 and forecasted economic conditions and other relevant factors. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant change.

The allowance consists of a collectively evaluated component and an individually evaluated component. The collectively evaluated component covers non-classified loans and classified loans not considered loans individually evaluated for credit losses, and is based on historical loss experience adjusted for forecasting factors and qualitative factors. The individually evaluated component relates to loans that are classified as loans individually evaluated for credit losses and/or restructured. For loans that are classified as loans individually evaluated for credit losses, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the loans individually evaluated for credit losses is lower than the carrying value of that loan.

For the three months ended September 30, 2025, the provision for credit losses on loans was $36 thousand and the credit for credit losses on unused commitments was $9 thousand, compared to credit for credit losses on loans of $40 thousand and the provision for credit losses on unused commitments of $10 thousand for the three months ended September 30, 2024. In the three months ended September 30, 2025 and September 30, 2024, there were no charge-offs and no recoveries.

For the nine months ended September 30, 2025, the credit for credit losses on loans was $73 thousand and the credit for credit losses on unused commitments was $31 thousand, compared to credit for credit losses on loans of $484 thousand and the provision for credit losses on unused commitments of $99 thousand for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, there were $152 thousand of charge-offs and no recoveries. For the nine months ended September 30, 2024, there were $11 thousand of charge-offs and recoveries of $240 thousand.

The provision for credit losses is a function of the allowance for credit loss methodology that the Company uses to determine the appropriate level of the allowance for inherent credit losses after net charge-offs have been deducted. See the discussion below under “Credit Risk and Loan Quality” regarding the Company’s considerations of its September 30, 2025 allowance for credit loss levels. The allowance for credit losses is $11.9 million as of September 30, 2025, which is 0.93% of total loans receivable, compared to $12.2 million or 0.97% of total loans receivable as of September 30, 2024. At December 31, 2024, the allowance for credit losses was $12.2 million, which represented 0.96% of total loans receivable. Based principally on loan growth, economic conditions, asset quality, and loan-loss experience, including that of comparable institutions in the Company’s market area, the allowance is believed to be adequate to absorb any losses expected in the portfolio. Because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for credit losses is adequate, or that material increases will not be necessary should the quality of the loans deteriorate. The Company has not participated in any sub-prime lending activity.

The activity in the allowance for credit losses is shown in the following table, as well as period end loans receivable and the allowance for credit losses as a percent of the total loans receivable portfolio:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024

	(In Thousands)
Loans receivable at end of period	$	1,279,148	$	1,258,084	$	1,279,148	$	1,258,084
Allowance for credit losses:
Balance, beginning	$	11,905	$	12,246	$	12,166	$	12,461
Provision (credit) for credit losses		36		(40)		(73)		(484)
Loans charged off:
Commercial real estate		-		-		(136)		-
Commercial construction		-		-		-		-
Commercial		-		-		(15)		-
Residential real estate		-		-		-		-
Consumer		-		-		(1)		(11)
Total loans charged off		-		-		(152)		(11)
Recoveries of loans previously charged off:
Commercial real estate		-		-		-		240
Commercial construction		-		-		-		-
Commercial		-		-		-		-
Residential real estate		-		-		-		-
Consumer		-		-		-		-
Total recoveries		-		-		-		240
Net (charge offs) recoveries		-		-		(152)		229
Balance at end of period	$	11,941	$	12,206	$	11,941	$	12,206
Allowance for credit losses to loans receivable at end of period		0.93%		0.97%		0.93%		0.97%

In addition to the allowance for credit losses, the Company maintains a reserve for unfunded commitments at a level that management believes is adequate to absorb probable losses. At September 30, 2025 and December 31, 2024, a $61 thousand and $92 thousand unfunded commitment reserve was reported, respectively, on the Consolidated Balance Sheets in other liabilities.

‎

Non-interest Income

Total non-interest income was $887 thousand for the three months ended September 30, 2025 compared to $853 thousand for the same period in 2024. The increase is, in part, attributable to an increase in other service fees of $15 thousand and an increase of $29 thousand from the gain on the sale of other real estate owned during the third quarter of 2025. Offsetting this increase is a decrease in merchant and credit card processing fees of $17 thousand.

Total non-interest income was $2.5 million for the nine months ended September 30, 2025, compared to $2.3 million for the same period in 2024. The increase is, in part, attributable to an increase in bank owned life insurance of $118 thousand, an increase of $29 thousand from the gain on the sale of other real estate owned during the third quarter of 2025, and an increase in other service fees of $53 thousand primarily due to overdraft fees, certificate of deposit penalty fees, and wire fees. Offsetting this increase is a decrease in merchant and credit card processing fees of $52 thousand.

Non-interest Expense

Non-interest expenses increased $299 thousand from $6.8 million for the three months ended September 30, 2024 to $7.1 million for the three months ended September 30, 2025. The increase in non-interest expenses is, in part, attributable to a $95 thousand increase in salaries and employee benefits due to annual increases in salaries, an increase in health insurance cost, and an increase in contributions to retirement plans, offset by a decrease in stock grant expenses and an increase in deferred loan costs. Additional increases in non-interest expenses are attributable to an increase of $60 thousand in occupancy and equipment in part due to an increase in rent and building maintenance, an increase of $251 thousand in data processing expenses due, in part, to the implementation of a new content management software and general ledger system, offset by a decrease of $20 thousand in advertising and promotion expenses, a decrease of $24 thousand in professional fees, and a decrease of $98 thousand in other expenses. The Company’s efficiency ratio, a non-GAAP measure, was 60.5% and 67.9% for the three months ended September 30, 2025 and 2024, respectively.

Non-interest expenses increased $1.2 million from $20.2 million for the nine months ended September 30, 2024 to $21.4 million for the nine months ended September 30, 2025. The increase in non-interest expenses is, in part, attributable to a $583 thousand increase in salaries and employee benefits due to annual increases in salaries and bonuses, an increase in employer payroll taxes, an increase in contributions to retirement plans, and an increase in health insurance cost, offset by a decrease in stock grant expense and an increase in deferred loan costs. Additional increases in non-interest expenses are attributable to an increase of $133 thousand in occupancy and equipment in part due to an increase in rent and building maintenance, an increase of $499 thousand in data processing expenses due, in part, to the implementation of a new content management software and general ledger system and an increase in maintenance contracts, an increase of $32 thousand in advertising and promotion expenses, an increase of $63 thousand in loan and real estate expenses, and an increase of $36 thousand in charitable contributions, offset by a decrease of $148 thousand in other expenses. The Company’s efficiency ratio, a non-GAAP measure, was 63.8% and 69.4% for the nine months ended September 30, 2025 and 2024, respectively.

A breakdown of other expenses can be found in the Consolidated Statements of Income.

Income Taxes

The provision for income taxes for the three months ended September 30, 2025 totaled $811 thousand, or 17.6% of income before taxes, compared to income taxes for the three months ended September 30, 2024 totaling $531 thousand, or 16.4% of income before taxes. The increase in the tax rate is, in part, the result of the change in the mix of taxable and tax free loans and investments, offset by an increase in income on bank owned life insurance.

The provision for income taxes for the nine months ended September 30, 2025 totaled $2.1 million, or 17.3% of income before taxes, compared to income taxes for the nine months ended September 30, 2024 totaling $1.5 million, or 16.4% of income before taxes. The increase in the tax rate is, in part, the result of the change in the mix of taxable and tax free loans and investments, offset by an increase in income on bank owned life insurance.

On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allows for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100 percent bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Company is currently evaluating the impact on future periods.

‎

FINANCIAL CONDITION

Securities

The Company’s securities portfolio continues to be classified, in its entirety, as “available for sale.” Management believes that a portfolio classification of available for sale allows complete flexibility in the investment portfolio. Using this classification, the Company intends to hold these securities for an indefinite amount of time, but not necessarily to maturity. Such securities are carried at fair value with unrealized gains or losses reported as a separate component of stockholders’ equity. The portfolio is structured to provide a return on investments while providing a consistent source of liquidity and meeting strict risk standards. Investment securities consist primarily of mortgage-backed securities issued by FHLMC or FNMA, taxable and non-taxable municipal bonds, government agency bonds, and Treasury bonds. The Company holds no high-risk or direct internationally exposed securities or derivatives as of September 30, 2025. The Company has not made any investments in non-U.S. government agency mortgage backed securities or sub-prime loans. The current liquidity of the portfolio has been impacted by the increase in market interest rates. Selling of securities would not be expected as a primary source of short term liquidity given the unrealized losses currently in the portfolio.

Total securities at September 30, 2025 were $334.3 million compared to $280.8 million at December 31, 2024. The increase in the investment portfolio resulted from the purchase of twenty-five (25) Treasury bonds, six (6) government agency bonds, and three (3) mortgage-backed securities totaling $96.5 million and a decrease in unrealized losses of $11.5 million, offset by principal pay downs on mortgage-backed securities, the maturity of two (2) government agency bonds, and the maturity of ten (10) Treasury bonds totaling $55.4 million. The carrying value of the securities portfolio as of September 30, 2025 includes a net unrealized loss of $52.6 million, which is recorded as accumulated other comprehensive loss in stockholders’ equity net of income tax effect. This compares to a net unrealized loss of $64.1 million at December 31, 2024. The current unrealized loss position of the securities portfolio is due to increasing market interest rates in 2022 through 2023 in response to economic conditions since initial purchase. Management determined the Company does not have the intent to sell, nor is it more likely than not that it will be required to sell, securities in an unrealized loss position at September 30, 2025. Further, management reviewed the Company's securities as of September 30, 2025 and concluded there were no credit-related declines in fair value. The effective duration of the securities portfolio is approximately 5 to 6 years at September 30, 2025. The Company remains focused on strategically assessing and managing the portfolio to address the unrealized losses.

Loans

The loan portfolio comprises a major component of the Company’s earning assets. All of the Company’s loans are to domestic borrowers. Net loans receivable were at $1.27 billion at September 30, 2025 and $1.26 billion at December 31, 2024, with an increase of $11.9 million. The gross loan-to-deposit ratio decreased to 79% at September 30, 2025, compared to 82% at December 31, 2024. The Company’s loan portfolio at September 30, 2025 was comprised of residential real estate and consumer loans of $680.7 million, an increase of $11.5 million from December 31, 2024, and commercial loans of $598.4 million, a decrease of $130 thousand from December 31, 2024. The Company has not originated, nor does it intend to originate, sub-prime mortgage loans.

Credit Risk and Loan Quality

The Company’s allowance for credit losses was $11.9 million and $12.2 million at September 30, 2025 and December 31, 2024, respectively, a decrease of $225 thousand. At September 30, 2025 and December 31, 2024, the allowance for credit losses represented 0.93% and 0.96% of total loans receivable, respectively. The Company’s non-performing loans to total loans receivable were 0.04% at September 30, 2025, compared to 0.10% at September 30, 2024, and 0.04% at December 31, 2024. In the three months ended September 30, 2025 and September 30, 2024, there were no charge-offs and no recoveries. In the nine months ended September 30, 2025, there were charge-offs of $152 thousand and no recoveries. In the nine months ended September 30, 2024, there were charge-offs of $11 thousand and recoveries of $240 thousand. The aggregate balances on non-performing loans are included in the following table.

At September 30, 2025, approximately 96% of the Company’s loan portfolio is collateralized by real estate. Our loan portfolio includes a large amount of commercial real estate loans. Management believes the commercial real estate loan portfolio is well-diversified. At September 30, 2025 and December 31, 2024, high volatility commercial real estate exposures were $6.4 million and $11.0 million, respectively. Commercial real estate loans are originated primarily within Lehigh and Northampton counties, are within the Company’s underwriting criteria, and generally include the guarantee of one or more of the borrowers’ affiliates. At September 30, 2025, the Company’s office space portfolio included no exposure to properties in major metropolitan markets. Commercial real estate loans have drawn the attention of the regulators in recent years as a potential source of risk. The Company monitors these types of loans closely, obtaining updated appraisals on loans when required. As detailed in the Allowance for Credit Losses table, the Company had no charge-offs in this category in 2024, and $136 thousand in commercial real estate charge-offs in 2025. The Company believes it has taken the appropriate steps to implement appropriate risk management practices for its commercial real estate loan portfolio, which are subject to regulatory examination.

‎

The details for non-performing loans and assets are included in the following table:


		September 30, 2025		December 31, 2024		September 30, 2024

	(In Thousands)
Non-accrual - commercial	$	-	$	151	$	664
Non-accrual - consumer		496		344		544
Loans past due 90 or more days, accruing interest		-		-		-
Total nonperforming loans		496		495		1,208
Foreclosed assets		-		-		-
Total nonperforming assets	$	496	$	495	$	1,208
Nonperforming loans to total loans		0.04%		0.04%		0.10%
Nonperforming assets to total assets		0.03%		0.03%		0.07%
Non-accrual loans to total loans		0.04%		0.04%		0.10%
Allowance to non-accrual loans		2407.46%		2457.78%		1010.43%
Net charge-offs (recoveries) to average loans		0.01%		-0.02%		-0.02%

Premises and Equipment

Company premises and equipment, net of accumulated depreciation, decreased $308 thousand from December 31, 2024 to September 30, 2025. This decrease is primarily due to depreciation on existing premises and equipment, offset by new purchases.

Deposits

Total deposits at September 30, 2025 increased by $67.6 million to $1.62 billion from $1.55 billion at December 31, 2024. The increase in the Company’s deposits was due to an increase of $8.2 million in demand, NOW and money market deposits, an increase of $4.6 million in savings, and an increase of $54.8 million in time deposits. Included in the above mentioned increase was a $345 thousand increase in non-interest bearing demand business deposits, offset by a $15.7 million decrease in non-interest bearing demand personal deposits. Included in total deposits at September 30, 2025 were personal deposits of $1.12 billion, business deposits of $401.3 million, and municipal deposits of $100.5 million. Included in total deposits at December 31, 2024 were personal deposits of $1.11 billion, business deposits of $351.9 million, and municipal deposits of $93.4 million. The Company continues to see steady increases in new deposit accounts and customer relationships as bank mergers and sales of branches disrupt the local banking environment. The estimated amount of uninsured assessable deposits, including related interest accrued and unpaid, at September 30, 2025 and December 31, 2024 was $565.1 million and $514.1 million, respectively.

Liquidity

Liquidity represents the Company’s ability to meet the demands required for the funding of loans and to meet depositors’ requirements for use of their funds. The Company’s sources of liquidity are cash balances, due from banks, and federal funds sold. Cash and cash equivalents were $108.0 million at September 30, 2025, compared to $96.5 million at December 31, 2024.

Additional asset liquidity sources include principal and interest payments from the investment security and loan portfolios. Long-term liquidity needs may be met by selling unpledged securities available for sale, selling or participating loans, or raising additional capital. As noted above, selling of securities would not be a primary source of short term liquidity given the unrealized losses currently in the portfolio. At September 30, 2025, the Company had $334.3 million of available for sale securities, compared to $280.8 million at December 31, 2024. At September 30, 2025, the Bank had a maximum borrowing capacity for short-term and long-term FHLB advances of approximately $703.9 million, of which $703.7 million is available for borrowing at September 30, 2025. This borrowing capacity with the FHLB includes a line of credit of $150.0 million. The Bank had an outstanding FHLB letter of credit in the amount of $160 thousand as of September 30, 2025. There were no FHLB short-term or long-term advances outstanding as of September 30, 2025. There were $15.6 million short-term FHLB advances outstanding and no long-term FHLB advances outstanding as of December 31, 2024. All FHLB borrowings are secured by qualifying assets of the Bank.

The Bank has a federal funds line of credit with the ACBB of $10.0 million, of which none was outstanding at September 30, 2025 and December 31, 2024. Advances from this line are unsecured.

The Bank is also eligible to borrow under the Federal Reserve Bank’s discount window borrowing programs.

The Company has a revolving line of credit facility with the ACBB of $7.5 million, of which none was outstanding at September 30, 2025 and December 31, 2024. Advances from this line are unsecured.

The Bank is a member of the Certificate of Deposit Account Registry Services (CDARS) program and the Insured Cash Sweep (ICS) program offered by Promontory Interfinancial Network, LLC. CDARS is a funding and liquidity management tool used by banks to

access funds and manage their balance sheet. ICS provides liquidity similar to a money market or savings account. Both programs enable financial institutions to provide customers with full FDIC insurance on deposits over $250 thousand that are placed in the program. The Bank also has access to other brokered deposits as a source of liquidity.

Because of the composition of the Company’s balance sheet, its strong capital base, ability to attract new deposit relationships, access to brokered deposits, and borrowing capacity, the Company believes that it remains well positioned with respect to liquidity. The majority of the Company’s funds are invested in loans with a portion invested in investment securities that generally carry a lower yield. While it is desirable to be liquid, it has the effect of a lower interest margin. The Company has no investment in or financial relationship with any unconsolidated entities that are reasonably likely to have a material effect on liquidity or capital resources.

Off-Balance Sheet Arrangements

The Company’s consolidated financial statements do not reflect the various off-balance sheet arrangements that are made in the normal course of business, which may involve some liquidity risk. These off-balance sheet arrangements consist of unfunded loans and commitments, as well as lines of credit made under the same standards as on-balance sheet instruments. These unused commitments totaled $197.6 million and $180.5 million at September 30, 2025 and December 31, 2024, respectively. At September 30, 2025 and December 31, 2024, there was a $61 thousand and $92 thousand allowance for credit losses required for off-balance sheet arrangements, respectively. At September 30, 2025 and December 31, 2024, the Company had letters of credit outstanding of $4.4 million and $6.6 million, respectively. 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 Company. Management is of the opinion that the Company’s liquidity is sufficient to meet its anticipated needs.

Capital Resources and Adequacy

Total stockholders’ equity was $122.4 million as of September 30, 2025, representing a net increase of $16.0 million from December 31, 2024. The increase in capital was the result of net income of $10.1 million, an increase in common stock of $20 thousand, an increase in surplus of $383 thousand due to employee stock purchases and stock grants with compensation expense, and a decrease of $9.1 million in accumulated other comprehensive loss, offset by dividends paid of $3.7 million. The accumulated other comprehensive losses are excluded from both the Bank’s and the Company’s Tier 1 regulatory capital calculations.

The Company’s tangible book value per share, calculated as total stockholders’ equity divided by outstanding common stock shares, was $16.01 and $13.96 at September 30, 2025 and December 31, 2024, respectively.

The Company and the Bank are subject to various regulatory capital requirements administered by banking regulators. Failure to meet minimum capital requirements can initiate certain actions by regulators that could have a material effect on the consolidated financial statements.

The regulations require that banks maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined in the regulations), and Tier 1 capital to average assets (as defined in the regulations). As of September 30, 2025, the Bank met the minimum requirements. In addition, the Bank’s capital ratios exceeded the amounts required to be considered “well capitalized” as defined in the regulations.

‎

The following table provides a comparison of the Bank’s risk-based capital ratios and leverage ratios:



Consolidated Bank

	September 30, 2025			December 31, 2024

	(Dollars In Thousands)
Tier 1, common stockholders' equity	$	163,767		$	156,892
Tier 2, allowable portion of allowance for credit losses		12,002			12,258
Total capital	$	175,769		$	169,150

Common equity tier 1 capital ratio		14.3	%		13.9	%
Tier 1 risk based capital ratio		14.3	%		13.9	%
Total risk based capital ratio		15.4	%		14.9	%
Tier 1 leverage ratio		9.1	%		9.0	%

Note: Unrealized gains and losses on securities available for sale are excluded from regulatory capital components of risk-based capital and leverage ratios.

In addition to the risk-based capital guidelines, the federal banking regulators established minimum leverage ratio (Tier 1 capital to total assets) guidelines for bank holding companies. These guidelines provide for a minimum leverage ratio of 3% for those bank holding companies which have the highest regulatory examination ratings and are not contemplating or experiencing significant growth or expansion. All other bank holding companies are required to maintain a leverage ratio of at least 4%.

The capital ratios to be considered “well capitalized” under the capital rules are:

Common equity of 6.5%;

 Tier 1 leverage of 5%;

 Tier 1 risk-based capital of 8%; and

Total risk-based capital of 10%.

The Company qualifies as a small bank holding company and is not subject to the Federal Reserve’s consolidated capital rules, although an institution that so qualifies may continue to file reports that include such capital amounts and ratios. The Company has elected to continue to report those amounts and ratios.

The following table provides the Company’s risk-based capital ratios and leverage ratios:



Consolidated Corporation

	September 30, 2025			December 31, 2024

	(Dollars In Thousands)
Tier 1, common stockholders' equity	$	163,966		$	157,115
Tier 2, allowable portion of allowance for credit losses		12,002			12,258
Total capital	$	175,968		$	169,373

Common equity tier 1 capital ratio		14.4	%		13.9	%
Tier 1 risk based capital ratio		14.4	%		13.9	%
Total risk based capital ratio		15.4	%		15.0	%
Tier 1 leverage ratio		9.1	%		9.1	%

Note: Unrealized gains and losses on securities available for sale are excluded from regulatory capital components of risk-based capital and leverage ratios.

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary source of market risk is interest rate risk. A principal objective of the Company’s asset/liability management policy is to minimize the Company’s exposure to changes in interest rates by an ongoing review of the maturity and repricing of

interest earning assets and interest bearing liabilities. The Asset Liability Committee (ALCO), included as part of the Board of Directors meetings, oversees this review, which establishes policies to control interest rate sensitivity. Interest rate sensitivity is the volatility of a company’s earnings resulting from a movement in market interest rates. The Company monitors rate sensitivity in order to reduce vulnerability to interest rate fluctuations while maintaining adequate capital levels and acceptable levels of liquidity. Beginning in 2022 through 2023, the Federal Reserve raised its key interest rate in an attempt to tame inflation. Conversely, in September 2024 the Federal Reserve decreased its key interest rate by 50 basis point and by 25 basis points in November 2024, December 2024, and September 2025. The Company’s asset/liability management policy, monthly and quarterly financial reports, along with simulation modeling, supplies management with guidelines to evaluate and manage rate sensitivity.

Because income simulations assume that the Company’s balance sheet will remain static over the simulation horizon, the results do not reflect adjustments in strategy that management could implement in response to rate shifts. Computations of future effects of hypothetical interest rate changes are based on numerous assumptions and should not be relied upon as indicative of actual results. Assets and liabilities may react differently than projected to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while rates on other types of assets and liabilities may lag changes in market interest rates. Interest rate shifts may not be parallel.

Based on a twelve-month forecast of the balance sheet, the following table sets forth the Company’s interest rate risk profile at September 30, 2025. For income simulation purposes, personal and business savings accounts reprice every two months, personal and business NOW accounts reprice every two months, and personal and business money market accounts reprice every month. Management reviews all assumptions on a periodic basis and believes current assumptions support market conditions. The Company is liability sensitive, which means if interest rates fall, interest income will fall slower than interest expense and interest income will likely increase. The impact on net interest income, illustrated in the following table, would vary if different assumptions were used or if actual experience differs from that indicated by the assumptions.



	Change in Interest Rates		Percentage Change in Net Interest Income

	Down 100 basis points		3.1%
	Down 200 basis points		5.0%

	Up 100 basis points		-4.0%
	Up 200 basis points		-8.6%

Item 4 – Controls and Procedures

The term “disclosure controls and procedures” is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2025, and they have concluded that, as of this date, our disclosure controls and procedures were effective at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act. There were no significant changes to our internal controls over financial reporting or in the other factors that could significantly affect our internal controls over financial reporting during the quarter ended September 30, 2025, including any corrective actions with regard to significant deficiencies and material weakness.

Part II - Other Information

Item 1 - Legal Proceedings

The Company and the Bank are an occasional party to legal actions arising in the ordinary course of its business. In the opinion of management, the Company has adequate legal defenses and/or insurance coverage respecting any and each of these actions and does not believe that they will materially affect the Company’s operations or financial position.

Item 1A - Risk Factors

In addition to the other information set forth in this Quarterly Report, the reader should carefully consider the factors discussed in “Risk Factors” included within the Company’s 2024 Form 10-K and subsequent filings with the SEC. There are no material changes to such risk factors. Such risks are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, financial condition and/or operating

results. See “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Caution About Forward-looking Statements.”

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3 - Defaults Upon Senior Securities

None.

Item 4 – Mine Safety Disclosures

None.

Item 5 - Other Information

Other than as described below, during the three months ended September 30, 2025, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s common stock that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as such term is defined in Item 408(c) of Regulation S-K.

On September 8, 2025, Judith A. Hunsicker, First Executive Officer, Chief Financial Officer and Chief Operating Officer of the Company (the “Insider”), adopted a written plan providing for the periodic sale of shares of Company common stock owned by the Insider (the “Plan”) solely to satisfy the withholding tax obligation resulting from the vesting of restricted stock previously issued to the Insider. The number of shares to be sold in order to satisfy the withholding tax obligation will depend on the value of Company common stock on the vesting date. The Plan: (i) is intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c); (ii) provides that the first transaction shall not occur prior to the later of ninety (90) days after the effective date of the Plan and two (2) business days following the disclosure of Company’s financial results of the quarter ended September 30, 2025; and (iii) shall continue until the Insider no longer holds any shares of restricted stock for which an Internal Revenue Code Section 83(b) election has not been made, unless earlier terminated by the Insider.

‎

Item 6 - Exhibits



	Exhibit
	Number		Description
	3.1		Articles of Incorporation as amended (conformed) (Incorporated by reference to Exhibit 3.1 of Registrant's
			Form 10-K filed on March 18, 2022).
	3.2		Amended and Restated By-Laws (conformed) (Incorporated by reference to Exhibit 3.2 of Registrant's
			Form 10-K filed on March 18, 2022).
	31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
	31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
	32		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 1350
			of the Sarbanes-Oxley Act of 2002.
	101.1		Interactive Data Files (XBRL)

No.	Description
101.INS	XBRL Instance Document.*
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document.
104	Cover Page Interactive Data File (formatted as inline XBRL
	and contained in Exhibit 101)

* This instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL.

‎

SIGNATURES

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.


		EMBASSY BANCORP, INC.
		(Registrant)

Dated: November 13, 2025	By:	/s/ David M. Lobach, Jr.
		David M. Lobach, Jr.
		President and Chief Executive Officer


Dated: November 13, 2025	By:	/s/ Judith A. Hunsicker
		Judith A. Hunsicker
		First Executive Officer,
		Chief Operating Officer, Secretary and
		Chief Financial Officer

‎

Source: View Original Filing on SEC EDGAR

FAQ

How did EMYB perform in Q3 2025?

Q3 net income was $3.793 million and EPS was $0.50, up from $2.714 million and $0.36 in Q3 2024.

What were EMYB’s assets and deposits as of September 30, 2025?

Total assets were $1.778 billion and total deposits were $1.621 billion.

How did net interest income trend?

Net interest income was $10.851 million in Q3 2025 and $31.098 million for the nine months, both higher year over year.

What is the status of unrealized losses in the securities portfolio?

Accumulated other comprehensive loss improved to $(41.532) million from $(50.635) million at year‑end.

What were nonaccrual loans and credit reserves?

Nonaccrual loans were $496 thousand; the allowance for credit losses was $11.941 million.

Did EMYB announce any capital actions after quarter‑end?

Yes. A stock repurchase program of up to $5.0 million was authorized, effective October 31, 2025.

How many common shares were outstanding?

Common shares outstanding were 7,646,114 as of November 7, 2025.

[10-Q] Embassy Bancorp, Inc. Quarterly Earnings Report

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FAQ

How did EMYB perform in Q3 2025?

What were EMYB’s assets and deposits as of September 30, 2025?

How did net interest income trend?

What is the status of unrealized losses in the securities portfolio?

What were nonaccrual loans and credit reserves?

Did EMYB announce any capital actions after quarter‑end?

How many common shares were outstanding?

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[10-Q] Embassy Bancorp, Inc. Quarterly Earnings Report

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Banking analyst neutral

FAQ

How did EMYB perform in Q3 2025?

What were EMYB’s assets and deposits as of September 30, 2025?

How did net interest income trend?

What is the status of unrealized losses in the securities portfolio?

What were nonaccrual loans and credit reserves?

Did EMYB announce any capital actions after quarter‑end?

How many common shares were outstanding?

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