3.       Business Acquisition

Effective February 1, 2026, the Corporation completed its previously announced Acquisition of Cecil Bancorp, Inc. (“Cecil”) pursuant to an Agreement and Plan of Stock Acquisition, by and among the Corporation, ENB South Acquisition Subsidiary, Inc. (“Acquisition Subsidiary”), The Ephrata National Bank, Cecil, and Cecil Bank (the “Agreement”). At the effective time of the Acquisition, Acquisition Subsidiary merged with and into Cecil, with Cecil surviving the merger and becoming the wholly-owned subsidiary of the Corporation. Immediately after the merger, Cecil’s board of directors approved, and sole stockholder adopted the complete liquidation and dissolution of Cecil, pursuant to the plan of complete liquidation. Immediately thereafter that, Cecil Bank merged with and into The Ephrata National Bank, a national banking association and the Corporation’s wholly-owned subsidiary, with The Ephrata National Bank as the surviving bank, collectively the Acquisition. Subject to the terms and conditions of the Agreement, as adjusted, each outstanding share of Cecil common stock was converted into the right to receive $1.88 in cash. In addition, all outstanding and unexercised options to purchase shares of stock of Cecil common stock were redeemed for cash. The transaction was valued at $31,329,000.

The following table summarizes the actual cash consideration paid for outstanding shares of Cecil’s common stock, including restricted stock that vested upon change in control, and the settlement of stock options (dollars in thousands except per share data):

Under the acquisition method of accounting, the total Acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of Cecil based on their estimated fair value as of the Acquisition date. The excess of the Acquisition consideration over the fair value of the assets acquired and liabilities assumed, if any, is allocated to goodwill.

The total Acquisition consideration as shown in the table above is allocated to Cecil’s tangible and intangible assets and liabilities based on their fair value as follows (in thousands):

The following discusses the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed from the Acquisition. The Corporation used independent valuation specialists to assist with the fair value determinations.

Securities available for sale: The Corporation decreased the fair value of securities available for sale for the differences between Cecil’s matrix pricing and the third party quoted prices for the securities, as the majority were liquidated shortly after the Acquisition date.

Loans: The Corporation early adopted the provisions of Financial Accounting Standards Board ASU 2025-08, Financial Instruments – Credit Losses (Topic 326). This ASU requires that loans acquired without credit deterioration and deemed “seasoned”, will be considered purchased seasoned loans (“PSLs”). PSLs include all loans acquired in a business combination, which do not have “more than significant” deterioration of credit quality since origination. Loans with more than significant deterioration of credit quality, or purchase credit deteriorated (“PCD”) loans, included loans on nonaccrual status, loans with historical delinquencies since loan origination or having a risk rating of watch, special mention, substandard, doubtful or loss based on the Corporation’s internal risk rating system.

The fair value of loans acquired were estimated using the discounted cash flow method on an individual loan basis. To estimate the value of the loans, each loan’s contractual cash flows were projected, adjusted for expected current market rates, prepayments, and credit losses. Assumptions for credit losses were based on the risk characteristics of each loan. For loans specifically evaluated by the Corporation, credit losses were based on estimated losses identified by the Corporation. The projected cash flows were discounted to present value using a discount rate based on the relative risk of cash flows. An allowance for credit losses was determined for PSL and PCD loans using the same methodology as the Corporation’s other loans. The initial allowance for credit losses determined on a collective basis was allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. These PSL and PCD loans were evaluated on a collective basis and were accounted for using the gross-up approach at Acquisition (i.e., record the loan at its amortized cost and separately record an allowance for expected credit losses). Subsequent changes to the allowance for credit losses will be recorded through the provision for credit loss expense. The component of the fair value mark related to interest rates will be accreted into income over the estimated remaining maturities of the loans.

Of the $147,400,000 net loans acquired, $11,014,000 were identified as PCD loans on the Acquisition date. The following table provides a summary of these PCD loans at Acquisition at February 1, 2026 (in thousands):

In connection with the adoption of ASU 2025-08, the Corporation recorded a $1,792,000 allowance for credit losses on PSLs; no provision expense was recorded at the date of Acquisition.

Premises and equipment: The fair value of bank premises and equipment was valued by obtaining recent market data for similar properties, with adjustments for characteristics of the individual property. The Corporation acquired four branches of which one was owned property. Fair value adjustment will offset depreciation based on an estimated useful life of 40 years.

Core deposit intangible: The Corporation identified core deposit intangibles based on an income approach, which is based on the present value of cash flows that can be expected to be generated in the future. The core deposit intangible will be amortized based on the sum-of-the-years digit amortization method over the expected life of 10 years.

Operating lease right of use (“ROU”) assets and lease liabilities: The fair value of the lease ROU assets was measured at an amount equal to the lease liability established at the date of Acquisition and adjusted for favorable or unfavorable lease terms when compared with market terms on a lease-by-lease basis.

Deferred tax assets: The net deferred tax asset was adjusted for the tax effect of other purchase accounting fair value adjustments and expected net assets to be realized of the tax benefit of expected book and tax timing differences.

Other assets: Fair value of other assets and liabilities represent the amounts that are expected to be received or need paid out, with an adjustment for the carrying value of repossessed assets to their net realizable value.

Time deposits: The Corporation recorded an adjustment on time deposits to reflect the fair value of the time deposits assumed, which was determined using a discounted cash flow approach that utilized a discount rate equal to current market interest rates for instruments with similar terms and maturities. The fair value adjustment for time deposits will be amortized over the remaining maturities.

Supplemental Proforma Information

The following table presents supplemental proforma information for the three and six months ended June 30, 2026 and 2025 as if the Acquisition had occurred January 1, 2025. The unaudited proforma includes adjustments on loans acquired, amortization of core deposit intangibles arising from the transaction, depreciation expense on property acquired, lease expense on leases acquired, interest expense on deposits acquired and the related tax effects. The proforma information is not necessarily indicative of the results of operations that would have occurred had the transactions been effected on the assumed dates. In addition, the unaudited proforma information excluded merger-related expenses, and does not reflect management’s estimate of any revenue-enhancing opportunities or anticipated cost savings as a result of integration (dollars in thousands):