COMMUNITY FINANCIAL SYSTEM, INC.

Previous wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) primarily reviews the financial condition and results of operations of Community Financial System, Inc. (the “Company” or “CFSI”) as of and for the three and six months ended June 30, 2025 and 2024, although in some circumstances the first quarter of 2025 is also discussed in order to more fully explain recent trends. The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and related notes that appear on pages 3 through 39. All references in the discussion of the financial condition and results of operations refer to the consolidated position and results of the Company and its subsidiaries taken as a whole. Unless otherwise noted, the term “this year” and equivalent terms refers to results in calendar year 2025, “last year” and equivalent terms refer to calendar year 2024, “second quarter” refers to the three months ended June 30, 2025, “YTD” refers to the six months ended June 30, 2025, and earnings per share (“EPS”) figures refer to diluted EPS.

Current wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) primarily reviews the financial condition and results of operations of Community Financial System, Inc. (the “Company” or “CFSI”) as of and for the three and nine months ended September 30, 2025 and 2024, although in some circumstances the first and second quarters of 2025 are also discussed in order to more fully explain recent trends. The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and related notes that appear on pages 3 through 38. All references in the discussion of the financial condition and results of operations refer to the consolidated position and results of the Company and its subsidiaries taken as a whole. Unless otherwise noted, the term “this year” and equivalent terms refers to results in calendar year 2025, “last year” and equivalent terms refer to calendar year 2024, “third quarter” refers to the three months ended September 30, 2025, “YTD” refers to the nine months ended September 30, 2025, and earnings per share (“EPS”) figures refer to diluted EPS.

Previous wording

The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses expected to be incurred on outstanding loans at the balance sheet date. This is estimated using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The determination of the appropriateness of the ACL is complex and applies significant and highly subjective estimates. The ACL is measured on a collective (pooled) basis for loan segments that share similar risk characteristics, including collateral type, credit ratings/scores, size, duration, interest rate structure, origination vintage and payment structure. The Company utilizes three methods for calculating the ACL: cumulative loss, vintage loss and line loss. Historical credit loss experience provides the basis for the estimation of expected future credit losses in all three methodologies. Qualitative adjustments are made for differences in loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, acquisition status, current levels of delinquencies, net charge-offs and risk ratings, as well as actual and forecasted macroeconomic variables. Macroeconomic data includes unemployment rates, changes in collateral values such as home prices, commercial real estate prices including office property-specific price forecasts, office property-specific vacancy rates, automobile prices, gross domestic product, and median household income net of inflation. Management utilizes judgment in determining and applying the qualitative factors and weighting the economic scenarios used, which include baseline, upside and downside forecasts. During first quarter of 2025, the Company updated the ACL model to add 2024 data into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures. In addition, management adjusted the weighting of the three economic scenarios, increasing the weight for the downside scenario from 30% to 40% and decreasing the weight of the upside scenario from 30% to 20%, to capture additional economic uncertainty. The Company also added additional reserves for business lending to capture additional risk in the portfolio due to the increase in size and volume of business loans, which was further increased in the second quarter of 2025. The change in weighting of the economic scenarios increases the ACL by $0.7 million as compared to the prior weighting in use at December 31, 2024. The additional business lending qualitative factor increases the ACL by $6.7 million as compared to the prior factor in use at December 31, 2024.

Current wording

The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses expected to be incurred on outstanding loans at the balance sheet date. This is estimated using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The determination of the appropriateness of the ACL is complex and applies significant and highly subjective estimates. The ACL is measured on a collective (pooled) basis for loan segments that share similar risk characteristics, including collateral type, credit ratings/scores, size, duration, interest rate structure, origination vintage and payment structure. The Company utilizes three methods for calculating the ACL: cumulative loss, vintage loss and line loss. Historical credit loss experience provides the basis for the estimation of expected future credit losses in all three methodologies. Qualitative adjustments are made for differences in loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, acquisition status, current levels of delinquencies, net charge-offs and risk ratings, as well as actual and forecasted macroeconomic variables. Macroeconomic data includes unemployment rates, changes in collateral values such as home prices, commercial real estate prices including office property-specific price forecasts, office property-specific vacancy rates, automobile prices, gross domestic product, and median household income net of inflation. Management utilizes judgment in determining and applying the qualitative factors and weighting the economic scenarios used, which include baseline, upside and downside forecasts. During the first quarter of 2025, the Company updated the ACL model to add 2024 data into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures. In addition, management adjusted the weighting of the three economic scenarios, increasing the weight for the downside scenario from 30% to 40% and decreasing the weight of the upside scenario from 30% to 20%, to capture additional economic uncertainty. The Company also added additional reserves for business lending to capture additional risk in the portfolio due to the increase in size and volume of business loans, which was further increased in the second quarter of 2025. The change in weighting of the economic scenarios increased the ACL by $0.7 million as compared to the prior weighting in use at December 31, 2024. The additional business lending qualitative factor increased the ACL by $6.9 million as compared to the prior factor in use at December 31, 2024.

Previous wording

One of the most significant estimates and judgments influencing the results of the ACL calculation is the macroeconomic forecasts. Changes in these economic forecasts could significantly affect the estimated expected credit losses and lead to materially different amounts from one period to the next. To illustrate the sensitivity of the ACL calculation to these economic forecasts, management performed a hypothetical sensitivity analysis using a weighting of 100% to the downside forecast, rather than the existing weighting of baseline, upside and downside of 40%, 20% and 40%, respectively. The scenario-weighted average unemployment rate and GDP growth forecasts used in the ACL model at June 30, 2025 were 5.4% and 1.0%, respectively, compared to 4.8% and 1.8%, respectively, at December 31, 2024. The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, elevated inflation, a peak unemployment rate of 8.3% and an average unemployment rate of 7.0%. The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the three and six months ended June 30, 2025 by approximately $3.5 million, and decrease net income by $2.7 million (net of tax). This change is reflective of the sensitivity of the various economic factors used in the ACL model. The resulting difference is not intended to represent an expected increase in allowance levels, as future conditions are uncertain and there are several other quantitative and qualitative factors that will also fluctuate at the same time that economic conditions are changing, which would affect the results of the ACL calculation. The impact that the economic factors have on the model is affected by the upside or downside severity of the scenarios used, the product type mix, and the interaction of the economic factors with other quantitative and qualitative factors in the model, as changes in any particular factor or input may not occur at the same rate or be directionally consistent across all loan segments. Improvements in one factor may offset deterioration in other factors, both qualitative and quantitative. The third-party downside economic forecast used in the hypothetical scenario described does not predict a severe economic downturn, but rather a moderate recessionary environment. The Company’s geographic distribution of loans primarily outside of major metropolitan areas, combined with low statistical correlation between its historical losses and national economic indicators is reflected in the current methodology that would produce changes to the allowance that are less significant as compared to economic metric-based modeling that is more directly correlated, and therefore sensitive, to fluctuations in historical and projected national economic activity.

Current wording

One of the most significant estimates and judgments influencing the results of the ACL calculation is the macroeconomic forecasts. Changes in these economic forecasts could significantly affect the estimated expected credit losses and lead to materially different amounts from one period to the next. To illustrate the sensitivity of the ACL calculation to these economic forecasts, management performed a hypothetical sensitivity analysis using a weighting of 100% to the downside forecast, rather than the existing weighting of baseline, upside and downside of 40%, 20% and 40%, respectively. The scenario-weighted average unemployment rate and GDP growth forecasts used in the ACL model at September 30, 2025 were 5.4% and 1.2%, respectively, compared to 4.8% and 1.8%, respectively, at December 31, 2024. The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, elevated inflation, a peak unemployment rate of 8.4% and an average unemployment rate of 7.0%. The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the three and nine months ended September 30, 2025 by approximately $3.6 million, and decrease net income by $2.7 million (net of tax). This change is reflective of the sensitivity of the various economic factors used in the ACL model. The resulting difference is not intended to represent an expected increase in allowance levels, as future conditions are uncertain and there are several other quantitative and qualitative factors that will also fluctuate at the same time that economic conditions are changing, which would affect the results of the ACL calculation. The impact that the economic factors have on the model is affected by the upside or downside severity of the scenarios used, the product type mix, and the interaction of the economic factors with other quantitative and qualitative factors in the model, as changes in any particular factor or input may not occur at the same rate or be directionally consistent across all loan segments. Improvements in one factor may offset deterioration in other factors, both qualitative and quantitative. The third-party downside economic forecast used in the hypothetical scenario described does not predict a severe economic downturn, but rather a moderate recessionary environment. The Company’s geographic distribution of loans primarily outside of major metropolitan areas, combined with low statistical correlation between its historical losses and national economic indicators is reflected in the current methodology that would produce changes to the allowance that are less significant as compared to economic metric-based modeling that is more directly correlated, and therefore sensitive, to fluctuations in historical and projected national economic activity.

Previous wording

The Company also provides supplemental reporting of its results on an “operating” or “tangible” basis. Results on an “operating” basis exclude the after-tax effects of acquisition expenses, litigation accrual, restructuring expenses, loss on sales of investment securities, unrealized gain (loss) on equity securities and amortization of intangible assets. Results on a “tangible” basis exclude goodwill and intangible asset balances, net of accumulated amortization and applicable deferred tax amounts. Although these items are non-GAAP measures, the Company’s management believes this information helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisition activity. In addition, the Company provides supplemental reporting for “operating pre-tax, pre-provision net revenues,” which excludes the provision for credit losses, acquisition expenses, litigation accrual, restructuring expenses, loss on sales of investment securities, unrealized gain (loss) on equity securities and amortization of intangible assets from income before income taxes. Although operating pre-tax, pre-provision net revenue is a non-GAAP measure, the Company’s management believes this information helps investors and analysts measure and compare the Company’s performance through a credit cycle by excluding the volatility in the provision for credit losses associated with Current Expected Credit Loss (“CECL”) allowance methods, helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisitions. The Company also provides supplemental reporting of its interest income, net interest income and net interest margin on a fully tax-equivalent (“FTE”) basis, which includes an adjustment to interest income and net interest income that represents taxes that would have been paid had nontaxable investment securities and loans been taxable. Although fully tax-equivalent interest income, net interest income and net interest margin are non-GAAP measures, the Company’s management believes this information helps enhance comparability of the performance of assets that have different tax profiles. Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in Table 14.

Current wording

The Company also provides supplemental reporting of its results on an “operating” or “tangible” basis. Results on an “operating” basis exclude the after-tax effects of acquisition expenses, litigation accrual, restructuring expenses, loss on sales of investment securities, unrealized gain on equity securities and amortization of intangible assets. Results on a “tangible” basis exclude goodwill and intangible asset balances, net of accumulated amortization and applicable deferred tax amounts. Although these items are non-GAAP measures, the Company’s management believes this information helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisition activity. In addition, the Company provides supplemental reporting for “operating pre-tax, pre-provision net revenues,” which excludes the provision for credit losses, acquisition expenses, litigation accrual, restructuring expenses, loss on sales of investment securities, unrealized gain on equity securities and amortization of intangible assets from income before income taxes. Although operating pre-tax, pre-provision net revenue is a non-GAAP measure, the Company’s management believes this information helps investors and analysts measure and compare the Company’s performance through a credit cycle by excluding the volatility in the provision for credit losses associated with Current Expected Credit Loss (“CECL”) allowance methods, helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisitions. The Company also provides supplemental reporting of its interest income, net interest income and net interest margin on a fully tax-equivalent (“FTE”) basis, which includes an adjustment to interest income and net interest income that represents taxes that would have been paid had nontaxable investment securities and loans been taxable. Although fully tax-equivalent interest income, net interest income and net interest margin are non-GAAP measures, the Company’s management believes this information helps enhance comparability of the performance of assets that have different tax profiles. Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in Table 14.

Previous wording

Second quarter 2025 net income increased $3.4 million, or 7.1%, compared to the second quarter of 2024, while YTD net income increased $12.2 million, or 13.7% compared to the equivalent 2024 timeframe. Earnings per share of $0.97 for the second quarter of 2025 was $0.06 more than the second quarter of 2024, while 2025 YTD earnings per share of $1.90 was $0.23 higher than 2024 YTD earnings per share. The quarterly increase in net income and earnings per share was primarily driven by an increase in net interest income, partially offset by increases in noninterest expenses and the provision for credit losses. The YTD increase in net income and earnings per share was the result of increases in net interest income and noninterest revenues, partially offset by increases in noninterest expenses, the provision for credit losses and income taxes.

Current wording

Third quarter 2025 net income increased $11.2 million, or 25.5%, compared to the third quarter of 2024, while YTD net income increased $23.3 million, or 17.6% compared to the equivalent 2024 timeframe. Earnings per share of $1.04 for the third quarter of 2025 was $0.21 more than the third quarter of 2024, while 2025 YTD earnings per share of $2.94 was $0.44 higher than 2024 YTD earnings per share. The quarterly and YTD increases in net income and earnings per share were primarily driven by increases in net interest income and noninterest revenues and a decrease in the provision for credit losses, partially offset by increases in noninterest expenses and income taxes.

Previous wording

Net interest margin and fully tax-equivalent net interest margin, a non-GAAP measure, increased 26 basis points between both the second quarter of 2024 and the second quarter of 2025 and on a YTD basis. The yield on average interest-earning assets increased 21 basis points compared to the prior year’s second quarter and 23 basis points compared to the prior YTD period, as the yield on average loans and average investments both improved. The yield on average loans for the second quarter increased 25 basis points compared to the second quarter of 2024 and 29 basis points between comparable YTD periods. The yield on average investments, including cash equivalents, increased 10 basis points compared to the prior year’s second quarter and 4 basis points on a YTD basis. The Company’s total cost of funds decreased 5 basis points from last year’s second quarter and 1 basis point YTD, as the rate paid on interest-bearing deposits and the rate paid on borrowings both decreased.

Current wording

Net interest margin increased 27 basis points between the third quarter of 2024 and the third quarter of 2025 and 26 basis points on a YTD basis, while fully tax-equivalent net interest margin, a non-GAAP measure, increased 28 basis points between the third quarter of 2024 and the third quarter of 2025 and 27 basis points on a YTD basis. The yield on average interest-earning assets increased 16 basis points compared to the prior year’s third quarter and 21 basis points compared to the prior YTD period, as the yield on average loans and average investments (including cash equivalents) both improved. The yield on average loans for the third quarter increased 17 basis points compared to the third quarter of 2024 and 25 basis points between comparable YTD periods. The yield on average investments, including cash equivalents, increased 7 basis points compared to the prior year’s third quarter and 5 basis points on a YTD basis. The Company’s total cost of funds decreased 11 basis points from last year’s third quarter and 4 basis points YTD compared to the prior year, as the rate paid on interest-bearing deposits and the rate paid on borrowings both decreased.

Previous wording

Loan balances increased on both an average and ending basis as compared to the prior year second quarter and YTD period, reflective of organic loan growth between the periods. Deposit balances also increased on both an average and ending basis as compared to the second quarter of 2024 and YTD comprised of growth in both governmental and non-governmental deposit balances. Investment balances increased on both an average and ending basis as compared to the prior year second quarter and YTD period, driven by purchases of mortgage-backed securities between the periods. Borrowing balances increased on an average basis compared to the second quarter of 2024 and YTD reflective of the Company securing certain fixed rate Federal Home Loan Bank (“FHLB”) term borrowings during the prior year’s second and third quarters to support the funding of continued loan growth, while total borrowings decreased on an ending basis compared to June 30, 2024.

Current wording

Loan balances increased on both an average and ending basis as compared to the prior year third quarter and YTD period, reflective of organic loan growth between the periods. Deposit balances also increased on both an average and ending basis as compared to the third quarter of 2024 and YTD comprised of organic growth in both governmental and non-governmental deposit balances. Investment balances increased on both an average and ending basis as compared to the prior year third quarter and YTD period, driven by purchases of mortgage-backed securities between the periods. Borrowing balances decreased on both an average and ending basis compared to the third quarter of 2024 and YTD reflective of growth in deposit balances outpacing loan growth.

Previous wording

The Company recorded a $4.1 million provision for credit losses during the second quarter and $10.8 million for YTD 2025 resulting in a $1.4 million and $2.0 million higher provision for credit losses than comparable prior year periods, respectively, as the Company increased credit loss reserves primarily related to the business lending portfolio. Second quarter asset quality metrics were impacted by the resolution of two nonperforming loan relationships in the business lending portfolio; one multifamily commercial real estate (“CRE”) loan relationship which was substantially paid off and one non-owner occupied CRE loan relationship which had a $4.3 million associated net charge-off. Net charge-offs were $5.1 million, or an annualized 0.20% of average loans, for the second quarter and $8.3 million, or an annualized 0.16% of average loans, for the first six months of 2025, compared to net charge-offs of $1.3 million, or an annualized 0.05% of average loans, for the prior year’s second quarter and $4.1 million, or an annualized 0.08% of average loans, for the first six months of 2024. The nonperforming loan ratio of 0.51% at June 30, 2025 increased 1 basis point from June 30, 2024 and decreased 19 basis points from December 31, 2024 primarily driven by the resolution of the two nonperforming business lending relationships described above. The 30 to 89 day delinquent loan ratio remained low at 0.51%, up slightly from 0.45% at the end of the second quarter of 2024 and down from 0.54% at December 31, 2024.

Current wording

The Company recorded a $5.6 million provision for credit losses during the third quarter and $16.4 million for YTD 2025 resulting in a $2.1 million and $0.2 million lower provision for credit losses than comparable prior year periods, respectively. Third quarter credit quality metrics remain relatively favorable compared to the banking industry. Net charge-offs were $2.5 million, or an annualized 0.09% of average loans, for the third quarter and $10.8 million, or an annualized 0.14% of average loans, for the first nine months of 2025, compared to net charge-offs of $2.8 million, or an annualized 0.11% of average loans, for the prior year’s third quarter and $6.9 million, or an annualized 0.09% of average loans, for the first nine months of 2024. The nonperforming loan ratio of 0.52% at September 30, 2025 decreased 9 basis points from September 30, 2024 and decreased 18 basis points from December 31, 2024 primarily driven by the resolution of two nonperforming business lending relationships in the second quarter. The 30 to 89 day delinquent loan ratio remained low at 0.48%, up slightly from 0.46% at the end of the third quarter of 2024 and down from 0.54% at December 31, 2024.

Previous wording

Banking services noninterest revenues, comprised of deposit service fees, mortgage banking and other banking services revenues, increased $0.4 million, or 2.1%, as compared to the prior year’s second quarter, and increased $1.3 million, or 3.4%, between the comparable YTD periods. The growth between both periods was primarily due to increases in customer interest rate swap fee revenues and CRE financing and advisory revenues. Financial services business revenues, comprised of employee benefit services, insurance services and wealth management services revenues, increased $0.3 million, or 0.6%, as compared to the prior year’s second quarter and increased $5.0 million, or 4.7%, compared to the prior YTD period, reflecting revenue growth in all three segments.

Current wording

Banking services noninterest revenues, comprised of deposit service charges and fees, mortgage banking and other banking revenues, increased $0.6 million, or 2.8%, as compared to the prior year’s third quarter, and increased $1.8 million, or 3.1%, between the comparable YTD periods. The YTD growth was primarily due to an increase in other banking revenues driven by increases in bank-owned life insurance income and customer interest rate swap fee revenues. Nonbanking financial services revenues, comprised of employee benefit services, insurance services and wealth management services revenues, increased $1.7 million, or 3.1%, as compared to the prior year’s third quarter and increased $6.7 million, or 4.2%, compared to the prior YTD period, reflecting revenue growth in all three businesses.

Previous wording

Second quarter and YTD operating net income, a non-GAAP measure, increased $4.9 million, or 9.7%, as compared to the second quarter of 2024 and increased $13.1 million, or 13.9%, compared to June YTD 2024. Second quarter and YTD operating earnings per share, a non-GAAP measure, increased $0.09 compared to the second quarter of 2024 and increased $0.25 compared to June YTD 2024. Second quarter and YTD operating pre-tax, pre-provision net revenue per share, a non-GAAP measure, increased $0.12 compared to the second quarter of 2024 and increased $0.35 compared to June YTD 2024. These results demonstrate improvement in the Company’s core operating performance between the periods.

Current wording

Third quarter and YTD operating net income, a non-GAAP measure, increased $11.4 million, or 24.5%, as compared to the third quarter of 2024 and increased $24.6 million, or 17.4%, compared to September YTD 2024. Third quarter and YTD operating earnings per share, a non-GAAP measure, increased $0.21 compared to the third quarter of 2024 and increased $0.47 compared to September YTD 2024. Third quarter and YTD operating pre-tax, pre-provision net revenue per share, a non-GAAP measure, increased $0.27 compared to the third quarter of 2024 and increased $0.62 compared to September YTD 2024. These results demonstrate improvement in the Company’s core operating performance between the periods, particularly net interest margin expansion.

Previous wording

As shown in Table 1, net income for the second quarter and June YTD of $51.3 million and $100.9 million, respectively, increased $3.4 million, or 7.1%, as compared to the second quarter of 2024 and increased $12.2 million, or 13.7%, compared to June YTD 2024. Earnings per share of $0.97 for the second quarter of 2025 was $0.06 higher than the second quarter of 2024, while earnings per share for the first six months of 2025 of $1.90 was $0.23 higher than the first six months of 2024. The increase in net income and earnings per share for the quarter was the result of an increase in net interest income, partially offset by increases in noninterest expenses and provision for credit losses. The increase in net income and earnings per share for the YTD period as compared to the prior year was the result of an increase in net interest income and noninterest revenues, partially offset by an increase in noninterest expenses, income taxes and the provision for credit losses. Operating net income, a non-GAAP measure, of $55.4 million and $107.5 million for the second quarter and June YTD 2025, respectively, increased $4.9 million, or 9.7%, as compared to the second quarter of 2024 and increased $13.1 million, or 13.9%, compared to June YTD 2024. Operating earnings per share, a non-GAAP measure, of $1.04 for the second quarter increased $0.09 compared to the second quarter of 2024, while operating earnings per share of $2.02 for the first six months of 2025 increased $0.25 compared to the first six months of 2024. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

Current wording

As shown in Table 1, net income for the third quarter and September YTD of $55.1 million and $156.0 million, respectively, increased $11.2 million, or 25.5%, as compared to the third quarter of 2024 and increased $23.3 million, or 17.6%, compared to September YTD 2024. Earnings per share of $1.04 for the third quarter of 2025 was $0.21 higher than the third quarter of 2024, while earnings per share for the first nine months of 2025 of $2.94 was $0.44 higher than the first nine months of 2024. The increase in net income and earnings per share for the quarter and the YTD period was the result of increases in net interest income and noninterest revenues, as well as a decrease in the provision for credit losses, partially offset by increases in noninterest expenses and income taxes. Operating net income, a non-GAAP measure, of $58.1 million and $165.5 million for the third quarter and September YTD 2025, respectively, increased $11.4 million, or 24.5%, as compared to the third quarter of 2024 and increased $24.6 million, or 17.4%, compared to September YTD 2024. Operating earnings per share, a non-GAAP measure, of $1.09 for the third quarter increased $0.21 compared to the third quarter of 2024, while operating earnings per share, a non-GAAP measure, of $3.12 for the first nine months of 2025 increased $0.47 compared to the first nine months of 2024.

Previous wording

As reflected in Table 1, second quarter net interest income of $124.7 million increased $15.3 million, or 14.0%, from the comparable prior year period. Net interest income for the first six months of 2025 increased $28.6 million, or 13.2%, compared to the first six months of 2024. The quarterly and YTD increases were primarily the result of higher yields on interest-earning assets and a higher proportion of those assets being comprised of loan balances due to organic loan growth, as well as a decrease in the rate paid on interest-bearing liabilities, partially offset by an increase in the balance of interest-bearing liabilities.

Current wording

As reflected in Table 1, third quarter net interest income of $128.2 million increased $15.4 million, or 13.7%, from the comparable prior year period. Net interest income of $373.1 million for the first nine months of 2025 increased $44.0 million, or 13.4%, compared to the first nine months of 2024. The quarterly and YTD increases were the result of higher yields on interest-earning assets, a decrease in the rate paid on interest-bearing liabilities and an increase in interest-earning assets from organic loan growth.

Previous wording

Second quarter and year-to-date noninterest revenues were $74.5 million and $150.5 million, respectively, up $0.1 million, or 0.2%, from the second quarter of 2024 and up $5.9 million, or 4.1%, from the first six months of 2024. Total operating noninterest revenues, a non-GAAP measure, for the second quarter and June YTD were $74.5 million and $150.3 million, respectively, an increase of $0.8 million, or 1.0%, and $6.3 million, or 4.4%, from the prior second quarter and YTD period, respectively. The increase over the prior year second quarter was driven by a $0.3 million, or 0.6%, increase in financial services business revenues and a $0.4 million, or 2.1%, increase in banking noninterest revenues. The increase over the prior June YTD period was driven by a $5.0 million, or 4.7%, increase in financial services business revenues and a $1.3 million, or 3.4%, increase in banking noninterest revenues.

Current wording

Third quarter and year-to-date noninterest revenues were $78.9 million and $229.4 million, respectively, up $2.7 million, or 3.5%, from the third quarter of 2024 and up $8.6 million, or 3.9%, from the first nine months of 2024. Total operating noninterest revenues, a non-GAAP measure, for the third quarter and September YTD were $78.7 million and $229.0 million, respectively, an increase of $2.3 million, or 3.0%, and $8.6 million, or 3.9%, from the prior third quarter and YTD period, respectively. The increase over the prior year third quarter was driven by a $1.7 million, or 3.1%, increase in nonbanking financial services business revenues and a $0.6 million, or 2.8%, increase in banking noninterest revenues. The increase over the prior September YTD period was driven by a $6.7 million, or 4.2%, increase in nonbanking financial services business revenues and a $1.8 million, or 3.1%, increase in banking noninterest revenues.

Previous wording

Noninterest expenses of $129.1 million and $254.4 million for the second quarter and June YTD periods, respectively, reflected an increase of $10.1 million, or 8.5%, from the second quarter of 2024 and an increase of $17.3 million, or 7.3%, from the first six months of 2024. The increase in noninterest expenses for the second quarter and June YTD periods was primarily due to increases in salaries and employee benefits, data processing and communications, occupancy and equipment expenses, legal and professional fees and other expenses, including the impact of $1.5 million of restructuring expenses associated with severance payments accrued for a workforce optimization plan due to planned branch consolidations and other operational initiatives. Operating noninterest expenses increased $9.1 million, or 7.9%, from the prior year second quarter, and $16.6 million, or 7.2%, from the prior June YTD.

Current wording

Noninterest expenses of $128.3 million and $382.7 million for the third quarter and September YTD periods, respectively, reflected an increase of $4.1 million, or 3.3%, from the third quarter of 2024 and an increase of $21.4 million, or 5.9%, from the first nine months of 2024. The increase in noninterest expenses for the third quarter was primarily due to increases in data processing and communications expenses, occupancy and equipment expenses, legal and professional fees and acquisition expenses, partially offset by a decrease in salaries and employee benefits expenses. The increase in noninterest expenses for the YTD period was primarily due to increases in salaries and employee benefits, data processing and communications, occupancy and equipment expenses, legal and professional fees and other expenses. The increase in noninterest expenses also includes the impact of $1.5 million of restructuring expenses in the second quarter of 2025 associated with severance payments accrued for a workforce optimization plan due to planned branch consolidations and other operational initiatives. Operating noninterest expenses increased $3.5 million, or 2.9%, from the prior year third quarter, and $20.1 million, or 5.7%, from the prior September YTD.

Previous wording

The effective income tax rates were 22.3% and 22.5% for second quarter and YTD 2025, respectively, as compared to 22.8% and 22.9% for the comparable prior year periods.

Current wording

The effective income tax rates were 24.7% and 23.3% for third quarter and YTD 2025, respectively, as compared to 23.0% and 22.9% for the comparable prior year periods.

Previous wording

Net interest income totaled $124.7 million for the second quarter of 2025 compared to $109.4 million for the second quarter of 2024. As shown in Table 2a, fully tax-equivalent net interest income, a non-GAAP measure, for the second quarter was $125.6 million, an increase of $15.3 million from the prior year second quarter. The increase was driven by a 21 basis point increase in the yield on average interest-earning assets, a $684.6 million increase in average interest-earning asset balances and a 9 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $599.4 million increase in average interest-bearing liability balances in comparison to the second quarter of 2024. As reflected in Table 3 for the quarter, the favorable net interest income impacts of the increase in the yield on average interest-earning assets of $8.2 million, the volume increase in average interest-earning asset balances of $7.6 million and the decrease in the rate paid on average interest-bearing liabilities of $2.2 million were partially offset by the volume increase in average interest-bearing liability balances of $2.7 million.

Current wording

Net interest income totaled $128.2 million for the third quarter of 2025 compared to $112.7 million for the third quarter of 2024. As shown in Table 2a, fully tax-equivalent net interest income, a non-GAAP measure, for the third quarter was $129.0 million, an increase of $15.4 million from the prior year third quarter. The increase was driven by a 16 basis point increase in the yield on average interest-earning assets, a $596.7 million increase in average interest-earning asset balances and a 17 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $479.8 million increase in average interest-bearing liability balances in comparison to the third quarter of 2024. As reflected in Table 3 for the quarter, the favorable net interest income impacts of the volume increase in average interest-earning asset balances of $6.8 million, the increase in the yield on average interest-earning assets of $6.6 million and the decrease in the rate paid on average interest-bearing liabilities of $4.3 million were partially offset by the volume increase in average interest-bearing liability balances of $2.3 million.

Previous wording

Net interest income totaled $245.0 million for the first six months of 2025 compared to $216.4 million for the first six months of 2024. As reflected in Table 2b, June YTD fully tax-equivalent net interest income, a non-GAAP measure, of $246.7 million, increased $28.4 million, or 13.0%, from the year-earlier period. The June YTD increase resulted from a $636.0 million increase in average interest-earning asset balances and a 23 basis point increase in the yield on average interest-earning assets and a 6 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $581.6 million increase in average interest-bearing liability balances. As reflected in Table 3 for June YTD, the favorable net interest income impacts of the increase in the yield on average interest-earning assets of $16.7 million, the volume increase in average interest-earning asset balances of $13.9 million and the decrease in the rate paid on average interest-bearing liabilities of $3.2 million were partially offset by the negative impact from the volume increase in average interest-bearing liability balances of $5.4 million.

Current wording

Net interest income totaled $373.1 million for the first nine months of 2025 compared to $329.1 million for the first nine months of 2024. As reflected in Table 2b, September YTD fully tax-equivalent net interest income, a non-GAAP measure, of $375.8 million increased $43.8 million, or 13.2%, from the year-earlier period. The September YTD increase resulted from a $623.0 million increase in average interest-earning asset balances and a 21 basis point increase in the yield on average interest-earning assets and a 9 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $547.4 million increase in average interest-bearing liability balances. As reflected in Table 3 for September YTD, the favorable net interest income impacts of the increase in the yield on average interest-earning assets of $23.3 million, the volume increase in average interest-earning asset balances of $20.7 million and the decrease in the rate paid on average interest-bearing liabilities of $7.9 million were partially offset by the negative impact from the volume increase in average interest-bearing liability balances of $8.2 million.

Previous wording

Net interest margin of 3.27% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.30% for the second quarter of 2025, as well as YTD net interest margin of 3.24% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.27%, were each 26 basis points higher compared to their respective prior year periods. The increase was primarily the result of higher yields on interest-earning assets and a higher proportion of those assets being comprised of higher yielding loan balances due to organic loan growth, as well as a decrease in the rate paid on interest-bearing liabilities, partially offset by an increase in the balance of interest-bearing liabilities.

Current wording

Net interest margin of 3.30% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.33% for the third quarter of 2025 increased 27 and 28 basis points, respectively, compared to their respective prior year periods. September YTD net interest margin of 3.26% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.29%, increased 26 and 27 basis points, respectively, compared to their respective prior year periods. The increase was primarily the result of higher yields on interest-earning assets and a higher proportion of those assets being comprised of higher yielding loan balances due to organic loan growth, as well as a decrease in the rate paid on interest-bearing liabilities, partially offset by an increase in the balance of interest-bearing liabilities.

Previous wording

The 21 basis point increase in the average yield on interest-earning assets for the quarter was the result of increases in both the yield on average loans and the yield on average investments, including cash equivalents. The yield on average loans for the second quarter increased by 25 basis points compared to the second quarter of 2024. The second quarter of 2025 yield on average investments including cash equivalents increased 12 basis points compared to the prior year while the yield on average investments excluding cash equivalents increased 7 basis points for the same timeframe. The 23 basis point increase in the yield on interest-earning assets for the first six months of 2025 was the result of a 29 basis point increase in the yield on average loans and a 6 basis point increase in the yield on average investments, including cash equivalents, compared to the prior YTD period. Excluding cash equivalents, the yield on average investments increased 9 basis points compared to the prior YTD period. The increase in loan yields were reflective of an increase in the proportion of higher rate new loan originations and the increase of certain variable and adjustable-rate loan yields. As the majority of the Company’s investment portfolio, excluding cash equivalents, is comprised of fixed yield securities, the increase in investment yields were driven by the sales and maturities of certain lower-yielding available-for-sale investment securities and the purchases of certain higher-yielding government agency mortgage-backed securities between the periods.

Current wording

The 16 basis point increase in the average yield on interest-earning assets for the quarter was the result of increases in both the yield on average loans and the yield on average investments, including cash equivalents. The yield on average loans for the third quarter increased 17 basis points compared to the third quarter of 2024. The third quarter of 2025 yield on average investments including cash equivalents increased 7 basis points compared to the prior year while the yield on average investments excluding cash equivalents increased 9 basis points for the same timeframe. The 25 basis point increase in the yield on interest-earning assets for the first nine months of 2025 was the result of a 25 basis point increase in the yield on average loans and a 6 basis point increase in the yield on average investments, including cash equivalents, compared to the prior YTD period. Excluding cash equivalents, the yield on average investments increased 10 basis points compared to the prior YTD period. The increase in loan yields were reflective of an increase in the proportion of higher rate loans originated over recent periods and the increase of certain adjustable-rate loan yields. As the majority of the Company’s investment portfolio, excluding cash equivalents, is comprised of fixed rate securities, the increase in investment yields were driven by the maturities of certain lower-yielding available-for-sale investment securities and the purchase of certain higher-yielding government agency mortgage-backed securities between the periods.

Previous wording

The second quarter and YTD average book balance of investments, including cash equivalents, increased $198.4 million and $85.6 million, respectively, as compared to the corresponding prior year periods, reflective of purchases of investment securities between the periods as well as sales and maturities of investment securities. Investment purchases outpaced sales, maturities, calls and principal payments during the second quarter and YTD periods, driven by $83.1 million of YTD government agency mortgage-backed securities purchases classified as held-to-maturity. The cash equivalents component of average interest-earning assets increased $110.8 million and $5.7 million for the second quarter and YTD periods, respectively, compared to the prior year periods. Average loan balances increased $486.2 million for the quarter and $550.4 million YTD as compared to the prior year, with increases in all five major loan portfolios between both periods due to organic growth.

Current wording

The third quarter and YTD average book balance of investments, including cash equivalents, increased $87.8 million and $86.3 million, respectively, as compared to the corresponding prior year periods. Investment purchases outpaced sales, maturities, calls and principal payments during the third quarter and YTD periods, driven by $94.0 million of YTD government agency mortgage-backed securities purchases classified as held-to-maturity. The cash equivalents component of average interest-earning assets increased $8.1 million and $6.4 million for the third quarter and YTD periods, respectively, compared to the prior year periods. Average loan balances increased $508.9 million for the quarter and $536.7 million YTD as compared to the prior year, with increases in all five major loan portfolios between both periods due to organic growth.

Previous wording

The rate paid on average interest-bearing liabilities decreased by 9 basis points compared to the prior year quarter as the average rate paid on interest-bearing deposits decreased 9 basis points and the average rate paid on external borrowings decreased 15 basis points from the comparable prior period. For the first six months of 2025, the rate paid on average interest-bearing liabilities decreased by 6 basis points from the comparable prior year period as the rate paid on average interest-bearing deposits decreased 3 basis points and the rate paid on average external borrowings decreased 16 basis points. The decrease in the rate paid on average interest-bearing deposits and on average borrowings was due to market-related interest rate changes between the periods, as well as a change in the proportion of overnight borrowings and term borrowings to total borrowings.

Current wording

The rate paid on average interest-bearing liabilities decreased 17 basis points compared to the prior year quarter as the average rate paid on interest-bearing deposits decreased 11 basis points and the average rate paid on external borrowings decreased 25 basis points from the comparable prior period. For the first nine months of 2025, the rate paid on average interest-bearing liabilities decreased 9 basis points from the comparable prior year period as the rate paid on average interest-bearing deposits decreased 6 basis points and the rate paid on average external borrowings decreased 21 basis points. The decrease in the rate paid on average interest-bearing deposits and on average borrowings was due to market-related interest rate changes between the periods, as well as a change in the proportion of overnight borrowings and term borrowings to total borrowings.

Previous wording

Average interest-bearing deposits increased $540.6 million compared to the prior year quarter and $565.6 million compared to the prior YTD period. The quarterly and YTD increases in average interest-bearing deposits were due to increases in all account types, including time, money market, savings and interest checking deposits. The average borrowing balance, which primarily includes borrowings at the FHLB and securities sold under agreement to repurchase (customer repurchase agreements), increased $58.8 million and $16.0 million for the quarter and YTD periods, respectively. The increase in average borrowings from the prior year quarter and YTD periods was primarily due to an increase in FHLB term borrowings to meet the Company’s funding needs.

Current wording

Average interest-bearing deposits increased $638.6 million compared to the prior year quarter and $590.1 million compared to the prior YTD period. The quarterly and YTD increases in average interest-bearing deposits were due primarily to increases in non-time deposits, including money market, savings and interest checking deposits. The average borrowing balance, which primarily includes borrowings at the FHLB and securities sold under agreement to repurchase (customer repurchase agreements), decreased $158.9 million and $42.7 million for the quarter and YTD periods, respectively. The decrease in average borrowings from the prior year quarter and YTD periods was primarily due to the increase in deposit balances outpacing the growth of interest earning assets.

Previous wording

Tables 2a and 2b below sets forth information related to average interest-earning assets and interest-bearing liabilities and their associated yields and rates for the periods indicated. Interest income and yields are on an FTE basis using a marginal income tax rate of 25.1% in 2025 and 24.4% in 2024. Average balances are computed by totaling the daily ending balances in a period and dividing by the number of days in that period. Loan interest income and yields include amortization of deferred loan income and costs, loan prepayments, late and other fees and the amortization or accretion of acquired loan purchase discounts and premiums. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.

Current wording

Tables 2a and 2b below sets forth information related to average interest-earning assets and interest-bearing liabilities and their associated yields and rates for the periods indicated. Interest income and yields are on an FTE basis using a marginal income tax rate of 25.3% in 2025 and 24.4% in 2024. Average balances are computed by totaling the daily ending balances in a period and dividing by the number of days in that period. Loan interest income and yields include amortization of deferred loan income and costs, loan prepayments, late and other fees and the amortization or accretion of acquired loan purchase discounts and premiums, which decreased loan interest income by $5.4 million and $15.4 million for the third quarter and YTD periods, respectively, and $5.2 million and $15.0 million for the prior third quarter and YTD periods, respectively. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.

Previous wording

(3)The FTE adjustment represents taxes that would have been paid had nontaxable investment securities and loans been fully taxable. The adjustment enhances the comparability of the performance of assets that have different tax liabilities.

Current wording

(3)The FTE adjustment represents taxes that would have been paid had nontaxable investment securities and loans been fully taxable.

Previous wording

The Company’s sources of noninterest revenues are of four primary types: 1) general banking services related to loans, including mortgage banking, deposits and other core customer activities typically provided through the branch network and digital banking channels (performed by CBNA); 2) employee benefit trust, collective investment fund, transfer agency, actuarial, benefit plan administration and recordkeeping services (performed by BPAS and its subsidiaries); 3) wealth management services, comprised of trust services (performed by the Nottingham Trust division within CBNA), broker-dealer and investment advisory products and services (performed by Nottingham Investment Services, Inc. (“NISI”) and Nottingham Wealth Partners, Inc.) and asset management services (performed by Nottingham Advisors, Inc.), collectively referred to as Nottingham Financial Group; and 4) insurance and risk management products and services (performed by OneGroup). Additionally, the Company has other transactions that impact noninterest revenues, including realized and unrealized gains or losses on investment securities.

Current wording

The Company’s sources of noninterest revenues are of four primary types: 1) general banking services related to loans, including mortgage banking, deposits and other core customer activities typically provided through the branch network and digital banking channels (performed by CBNA); 2) employee benefit trust, collective investment fund, transfer agency, actuarial, benefit plan administration and recordkeeping services (performed by BPAS and its subsidiaries); 3) wealth management services, comprised of trust services (performed by the Nottingham Trust division within CBNA), broker-dealer and investment advisory products and services (performed by Nottingham Investment Services, Inc. (“NISI”) and Nottingham Wealth Partners, Inc.) and asset management services (performed by Nottingham Advisors, Inc.), collectively referred to as Nottingham Financial Group; and 4) insurance and risk management products and services (performed by OneGroup). Additionally, the Company has other activities that impact noninterest revenues, including income earned on bank owned life insurance and realized and unrealized gains or losses on investment securities.

Previous wording

As displayed in Table 4, noninterest revenues totaled $74.5 million for the second quarter of 2025 and $150.5 million for the first six months of 2025. This represents an increase of $0.1 million, or 0.2%, for the quarter and an increase of $5.9 million, or 4.1%, for the YTD period in comparison to the equivalent 2024 periods. Noninterest revenues for the second quarter and YTD periods of 2024 include a $0.9 million unrealized gain on equity securities associated with the conversion of certain Visa Class B shares to Visa Class C shares and a $0.2 million loss on sales of investment securities associated with the sales of certain available-for-sale investment securities. Operating noninterest revenues, a non-GAAP measure as defined in the table above, totaled $74.5 million for the second quarter of 2025, an increase of $0.8 million, or 1.0%, from the prior year’s second quarter and totaled $150.3 million for the first six months of 2025, an increase of $6.3 million, or 4.4%, from the first six months of 2024.

Current wording

As displayed in Table 4, noninterest revenues totaled $78.9 million for the third quarter of 2025 and $229.4 million for the first nine months of 2025. This represents an increase of $2.7 million, or 3.5%, for the quarter and an increase of $8.6 million, or 3.9%, for the YTD period in comparison to the equivalent 2024 periods. Noninterest revenues for the third quarter and YTD periods of 2024 include a $1.0 million unrealized gain on equity securities associated with the conversion of certain Visa Class B shares to Visa Class C shares. Operating noninterest revenues, a non-GAAP measure as defined in the table above, totaled $78.7 million for the third quarter of 2025, an increase of $2.3 million, or 3.0%, from the prior year’s third quarter and totaled $229.0 million for the first nine months of 2025, an increase of $8.6 million, or 3.9%, from the first nine months of 2024.

Previous wording

Wealth management services revenues were consistent for the second quarter of 2025 and increased $0.6 million, or 3.6%, for June 2025 YTD as compared to the same time periods of 2024, driven by increases in trust and broker-dealer services, partially offset by declines in asset management service revenues.

Current wording

Wealth management services revenues were consistent for the third quarter of 2025 and increased $0.7 million, or 2.6%, for September 2025 YTD as compared to the same time periods of 2024, reflective of generally favorable market conditions.

Previous wording

Banking noninterest revenues increased $0.4 million, or 2.1%, between the second quarter of 2024 and 2025 and increased $1.3 million, or 3.4%, between the first six months of 2024 and 2025. The growth between both periods was driven by increases in other banking revenues (an increase of $1.4 million for the quarter and $1.5 million YTD) and deposit service charges and fees (an increase of $0.3 million for the quarter and $0.6 million YTD), partially offset by decreases in mortgage banking revenues (a decrease of $1.3 million for the quarter and $0.6 million YTD), and debit interchange and ATM fees (consistent with the prior year quarter and a decrease of $0.2 million YTD). The increase in other banking revenues is primarily driven by higher customer interest rate swap fee revenues and CRE financing and advisory revenues, while the decrease in mortgage banking revenues was due to the prior year including a one-time gain on mortgage servicing rights.

Current wording

Banking noninterest revenues increased $0.6 million, or 2.8%, between the third quarter of 2024 and 2025 and increased $1.8 million, or 3.1%, between the first nine months of 2024 and 2025. The growth between both periods was driven by increases in other banking revenues (an increase of $0.2 million for the quarter and $1.7 million YTD) and deposit service charges and fees (an increase of $0.2 million for the quarter and $0.8 million YTD). Mortgage banking revenues increased $0.1 million for the quarter and decreased $0.5 million YTD and debit interchange and ATM fees increased $0.1 million for the quarter and decreased $0.1 million YTD. The YTD increase in other banking revenues is primarily driven by an increase in bank-owned life insurance income, while the decrease in mortgage banking revenues for the YTD period was due to the prior year including a more significant increase in the value of mortgage servicing rights.

Previous wording

The ratio of noninterest revenues to total revenues was 37.4% for the second quarter of 2025 and 38.1% for June YTD 2025, compared to 40.5% for the prior year’s second quarter and 40.1% for June YTD 2024. The quarterly decrease was due to net interest income increasing 14.0% while noninterest revenues increased 0.2%. The YTD decrease was the result of net interest income increasing 13.2% while noninterest revenues increased 4.1%.

Current wording

The ratio of noninterest revenues to total revenues was 38.1% for both the third quarter of 2025 and September YTD 2025, compared to 40.3% for the prior year’s third quarter and 40.2% for September YTD 2024. The quarterly decrease was due to net interest income increasing 13.7% while noninterest revenues increased 3.5%. The YTD decrease was the result of net interest income increasing 13.4% while noninterest revenues increased 3.9%.

Previous wording

The ratio of operating noninterest revenues to operating revenues (FTE), a non-GAAP measure as defined in the table above, was 37.2% for the quarter and 37.9% for the six months ended June 30, 2025, respectively, compared to 40.1% and 39.7% for the corresponding periods of 2024. The decrease between the quarterly periods was due to a 13.8% increase in fully tax-equivalent net interest income, a non-GAAP measure, while operating noninterest revenues, a non-GAAP measure, increased 1.0%. The year-to-date decrease was a function of a 13.0% increase in fully tax-equivalent net interest income, a non-GAAP measure, while operating noninterest revenues, a non-GAAP measure, increased 4.4%.

Current wording

The ratio of operating noninterest revenues to operating revenues (FTE), a non-GAAP measure as defined in the table above, was 37.9% for the quarter and nine months ended September 30, 2025 compared to 40.2% and 39.9% for the corresponding periods of 2024. The decrease between the quarterly periods was due to an 8.1% increase in fully tax-equivalent net interest income, a non-GAAP measure, while operating noninterest revenues, a non-GAAP measure, increased 3.0%. The year-to-date decrease was a function of an 8.5% increase in fully tax-equivalent net interest income, a non-GAAP measure, while operating noninterest revenues, a non-GAAP measure, increased 3.9%.

Previous wording

As shown in Table 5, the Company recorded noninterest expenses of $129.1 million and $254.4 million for the second quarter and YTD periods of 2025, respectively, representing an increase of $10.1 million, or 8.5%, and an increase of $17.3 million, or 7.3%, from the prior year periods, respectively. The increases were primarily driven by salaries and employee benefits that increased $5.6 million, or 7.6%, and $9.0 million, or 6.1%, for the second quarter and YTD periods of 2025, respectively, as compared to the corresponding periods of 2024. The remaining change to noninterest expenses is attributable to data processing and communications (an increase of $1.4 million for the quarter and $3.2 million YTD), occupancy and equipment (an increase of $0.8 million for the quarter and $2.1 million YTD), business development and marketing (a decrease of $0.1 million for the quarter and YTD), legal and professional fees (an increase of $0.9 million for the quarter and $1.4 million YTD), amortization of intangible assets (a decrease of $0.5 million for the quarter and $0.6 million YTD), litigation accrual (no change for the quarter and a decrease of $0.2 million YTD), acquisition expenses (a decrease of $0.1 million for the quarter and YTD), restructuring expenses (an increase of $1.5 million for the quarter and YTD) and other expenses (an increase of $0.6 million for the quarter and $1.0 million YTD).

Current wording

As shown in Table 5, the Company recorded noninterest expenses of $128.3 million and $382.7 million for the third quarter and YTD periods of 2025, respectively, representing an increase of $4.1 million, or 3.3%, and an increase of $21.4 million, or 5.9%, from the prior year periods, respectively. The change for the third quarter was primarily attributable to an increase in data processing and communications ($3.2 million), while salaries and employee benefits decreased $1.5 million. The change for the YTD period was primarily attributable to an increase in salaries and employee benefits ($7.5 million), as well as data processing and communications ($6.4 million). The remaining change to noninterest expenses is attributable to occupancy and equipment (an increase of $0.8 million for the quarter and $2.9 million YTD), business development and marketing (an increase of $0.2 million for the quarter and YTD), legal and professional fees (an increase of $0.7 million for the quarter and $2.1 million YTD), amortization of intangible assets (a decrease of $0.1 million for the quarter and $0.7 million YTD), litigation accrual (a decrease of $0.1 million for the quarter and $0.3 million YTD), acquisition expenses (an increase of $0.7 million for the quarter and $0.6 million YTD), acquisition-related contingent consideration adjustments (an increase of $0.2 million for the quarter and YTD), restructuring expenses (consistent for the quarter and an increase of $1.5 million YTD) and other expenses (consistent for the quarter and an increase of $1.0 million YTD).

Previous wording

The increases in salaries and benefits expense were driven by merit and market-related increases in employee wages and incentive compensation, select staff additions and higher employee medical costs. Data processing increases were reflective of the Company’s continued investment in key technologies, including artificial intelligence applications, customer payment fraud and cybersecurity risk management software, credit administration software and other workflow modernization initiatives. Increases in occupancy and equipment expenses were primarily due to higher property maintenance costs along with incremental expenses associated with the Bank’s de novo branches opened between the periods. The Company also recorded $1.5 million in costs related to severance payments accrued for a workforce optimization plan due to planned branch consolidations and other consumer banking operational initiatives.

Current wording

The decrease in salaries and benefits expense for the quarter was driven by lower employee medical costs that reflected rebates received and a decrease in performance-based incentive compensation expense for certain business units. The increases in salaries and benefits expense for the YTD period were driven by merit and market-related increases in employee wages and select staff additions. Data processing increases were reflective of the Company’s continued investment in key technologies, including artificial intelligence applications, customer payment fraud and cybersecurity risk management software, credit administration software and other workflow modernization initiatives as well as a $1.4 million consulting expense in connection with a contract renegotiation with its core system provider which is expected to result in lower future core system costs. Increases in occupancy and equipment expenses were primarily due to higher property maintenance costs along with incremental expenses associated with the Bank’s de novo branches opened between the periods. The Company also recorded $1.5 million in costs in the second quarter of 2025 that related to severance payments accrued for a workforce optimization plan due to planned branch consolidations and other consumer banking operational initiatives.

Previous wording

The Company’s GAAP efficiency ratio was 64.8% for the second quarter of 2025, 0.1 percentage point unfavorable to the comparable quarter of 2024. This resulted from total revenues increasing 8.4%, primarily due to higher net interest income, while total noninterest expenses increased 8.5% due to the factors noted above. The GAAP efficiency ratio of 64.3% for June YTD 2025 was 1.4 percentage points favorable to the 65.7% GAAP efficiency ratio for June YTD 2024. The improvement in the GAAP efficiency ratio between the comparable YTD periods was the result of total revenues increasing 9.5% primarily due to increases in net interest income, while total noninterest expenses increased 7.3% due to the factors noted above.

Current wording

The Company’s efficiency ratio was 62.0% for the third quarter of 2025, 3.7 percentage points favorable to the comparable quarter of 2024. This resulted from total revenues increasing 9.6%, primarily due to higher net interest income, while total noninterest expenses increased 3.3% due to the factors noted above. The efficiency ratio of 63.5% for September YTD 2025 was 2.2 percentage points favorable to the 65.7% efficiency ratio for September YTD 2024. The improvement in the efficiency ratio between the comparable YTD periods was the result of total revenues increasing 9.6% primarily due to increases in net interest income, while total noninterest expenses increased 5.9% due to the factors noted above.

Previous wording

The Company’s operating efficiency ratio, a non-GAAP measure as defined in the table above, was 62.2% for the second quarter, 0.3 percentage points favorable to the comparable quarter of 2024. This resulted from operating revenues (FTE), a non-GAAP measure as described above, increasing 8.7% while operating noninterest expenses, a non-GAAP measure as described above, increased 7.9%. The Company’s operating efficiency ratio, a non-GAAP measure as defined in the table above, of 62.0% for the first six months of 2025 was 1.3 percentage points favorable compared to the first six months of 2024 due to operating revenues (FTE), a non-GAAP measure as described above, increasing by 9.6% while operating noninterest expenses, a non-GAAP measure as described above, increased 7.2%.

Current wording

The Company’s operating efficiency ratio, a non-GAAP measure as defined in the table above, was 59.9% for the third quarter, 3.7 percentage points favorable to the comparable quarter of 2024. This resulted from operating revenues (FTE), a non-GAAP measure as described above, increasing 9.3% while operating noninterest expenses, a non-GAAP measure as described above, increased 2.9%. The Company’s operating efficiency ratio, a non-GAAP measure as defined in the table above, of 61.5% for the first nine months of 2025 was 1.9 percentage points favorable compared to the first nine months of 2024 due to operating revenues (FTE), a non-GAAP measure as described above, increasing by 9.5% while operating noninterest expenses, a non-GAAP measure as described above, increased 6.2%.

Previous wording

Annualized current quarter noninterest expenses as a percentage of average assets increased 0.09 percentage points versus the second quarter of the prior year as noninterest expenses increased 8.5% while average assets increased 5.1%. On a YTD basis, annualized noninterest expenses as a percentage of average assets increased 0.09 percentage points as noninterest expenses increased 7.3% while average assets increased 4.6%. Noninterest expenses increased between both periods due to the factors noted above and average assets increased between both periods primarily due to interest-earning asset growth.

Current wording

Annualized current quarter noninterest expenses as a percentage of average assets decreased 0.04 percentage points versus the third quarter of the prior year as noninterest expenses increased 3.0% while average assets increased 4.3%. On a YTD basis, annualized noninterest expenses as a percentage of average assets increased 0.04 percentage points as noninterest expenses increased 6.2% while average assets increased 4.5%. Noninterest expenses increased between both periods due to the factors noted above and average assets increased between both periods primarily due to interest-earning asset growth.

Previous wording

The second quarter and YTD 2025 effective income tax rates were 22.3% and 22.5%, respectively, as compared to 22.8% and 22.9% for the comparable periods of 2024. The decreases in the second quarter and YTD 2025 effective income tax rates are primarily attributable to an increase in stock-based compensation tax benefits between the periods. The Company recorded a $0.1 million and $0.6 million income tax benefit associated with stock-based compensation for the second quarter and YTD 2025, respectively. The Company recorded a $0.2 million tax expense associated with stock-based compensation for YTD 2024, while the tax expense associated with stock-based compensation was immaterial for the second quarter of 2024. The second quarter and YTD 2025 tax expense associated with the amortization of income tax credit investments was $3.0 million and $3.3 million, respectively, as compared to $0.3 million and $0.6 million for the comparable periods of 2024. The effective tax rates adjusted to exclude the income tax impact of stock-based compensation and amortization of income tax credit investments for the second quarter and YTD 2025 were 18.0% and 20.5%, respectively, as compared to 22.3% and 22.1% for the comparable periods of 2024, due to an increase in federal income tax credits associated with the Company’s investment in tax credits generated by a solar energy producing company.

Current wording

The third quarter and YTD 2025 effective income tax rates were 24.7% and 23.3%, respectively, as compared to 23.0% and 22.9% for the comparable periods of 2024. The increases in the third quarter and YTD 2025 effective income tax rates are primarily attributable to an increase in certain state income taxes. The Company recorded a $0.1 million and $0.7 million income tax benefit associated with stock-based compensation for the third quarter and YTD 2025, respectively. The Company recorded a $0.2 million tax expense associated with stock-based compensation for YTD 2024, while the tax benefit associated with stock-based compensation was immaterial for the third quarter of 2024. The third quarter and YTD 2025 tax expense associated with the amortization of income tax credit investments was $2.9 million and $6.2 million, respectively, as compared to $0.3 million and $0.9 million for the comparable periods of 2024. The effective tax rates adjusted to exclude the income tax impact of stock-based compensation and amortization of income tax credit investments for the third quarter and YTD 2025 were 20.8% and 20.6%, respectively, as compared to 22.6% and 22.3% for the comparable periods of 2024, due to an increase in federal income tax credits associated with the Company’s investment in tax credits generated by a solar energy producing company.

Previous wording

The carrying value of investment securities (including unrealized gains and losses) was $4.35 billion at the end of the second quarter, an increase of $131.7 million, or 3.1%, from December 31, 2024 and an increase of $183.5 million, or 4.4%, from June 30, 2024. The book value of investment securities (excluding unrealized gains and losses) of $4.68 billion at the end of the second quarter increased $61.8 million, or 1.3%, from December 31, 2024 and increased $87.3 million, or 1.9%, from June 30, 2024, driven by government agency mortgage-backed securities purchases. During the first six months of 2025, the Company purchased $82.2 million of government agency mortgage-backed securities with an average yield of 5.41%, which the Company classified as held-to-maturity. These additions were offset by $36.1 million of investment maturities, calls and principal payments during the first six months of 2025. Additionally, there was $19.0 million of net accretion on investment securities during the first six months of 2025. The effective duration of the investment securities portfolio was 5.8 years at the end of the second quarter of 2025, as compared to 6.2 years at the end of 2024 and 6.6 years at the end of the second quarter of 2024.

Current wording

The carrying value of investment securities (including unrealized gains and losses) was $4.38 billion at the end of the third quarter, an increase of $162.1 million, or 3.8%, from December 31, 2024 and an increase of $93.0 million, or 2.2%, from September 30, 2024. The book value of investment securities (excluding unrealized gains and losses) of $4.68 billion at the end of the third quarter increased $53.6 million, or 1.2%, from December 31, 2024 and increased $73.1 million, or 1.6%, from September 30, 2024, driven by U.S. government agency mortgage-backed securities purchases. During the first nine months of 2025, the Company purchased $92.8 million of government agency mortgage-backed securities with an average yield of 5.42%, which the Company classified as held-to-maturity. These additions were offset by $57.2 million of investment maturities, calls and principal payments during the first nine months of 2025. Additionally, there was $28.6 million of net accretion on investment securities during the first nine months of 2025. The effective duration of the investment securities portfolio was 5.6 years at the end of the third quarter of 2025, as compared to 6.2 years at the end of 2024 and 6.4 years at the end of the third quarter of 2024.

Previous wording

The change in the carrying value of investment securities is also impacted by the amount of net unrealized gains or losses. At June 30, 2025, the investment portfolio (excluding held-to-maturity investment securities) had a $334.7 million net unrealized loss, a $69.9 million decrease from the $404.6 million net unrealized loss at December 31, 2024 and a $96.2 million decrease from the $430.9 million net unrealized loss at June 30, 2024. These decreases were principally driven by the movements in medium to long-term interest rates, as well as the volume and rates associated with the securities sales and maturities that occurred during the past 12 months.

Current wording

The change in the carrying value of investment securities is also impacted by the amount of net unrealized gains or losses. At September 30, 2025, the investment portfolio (excluding held-to-maturity investment securities) had a $296.0 million net unrealized loss, a $108.6 million decrease from the $404.6 million net unrealized loss at December 31, 2024 and a $19.9 million decrease from the $315.9 million net unrealized loss at September 30, 2024. These decreases were principally driven by the general downward movements in medium to long-term interest rates, as well as the volume and rates associated with the securities maturities that occurred during the past 12 months.

Previous wording

Loans ended the second quarter at $10.52 billion, $86.8 million, or 0.8%, higher than December 31, 2024 and $495.3 million, or 4.9%, higher than June 30, 2024 ending loans.

Current wording

Loans ended the third quarter at $10.75 billion, $317.9 million, or 3.0%, higher than December 31, 2024 and $498.6 million, or 4.9%, higher than September 30, 2024 ending loans.

Previous wording

Mortgages on commercial property combined with general-purpose business lending to commercial, industrial, non-profit and governmental customers and vehicle dealer floor plan financing is characterized as the Company’s business lending activity. The business lending portfolio increased $247.0 million, or 5.8%, from June 30, 2024, and $36.0 million, or 0.8%, from December 31, 2024, driven by net organic growth over both periods. As compared to December 31, 2024, multifamily increased $66.6 million, or 9.2% and business non-real estate loans, including commercial and industrial lending, increased $97.7 million, or 8.6%, while non-owner occupied CRE decreased $108.5 million, or 6.1%, and owner-occupied CRE decreased $19.7 million, or 2.3%. The change from December 31, 2024 includes $80.3 million of construction loans that were reclassified from non-owner occupied to multifamily during the first quarter of 2025. While certain macroeconomic concerns persist related to non-owner occupied and multifamily CRE, the Company’s exposure to these portfolios is diverse both geographically and by industry type, and remains relatively low at 15% of total assets, 24% of total loans and 184% of total bank-level regulatory capital. CRE lending represents 72.7% of the total business lending portfolio at June 30, 2025, compared to 74.7% at December 31, 2024 and 74.5% at June 30, 2024. Other commercial and industrial lending represents the remaining 27.3% of total business lending at June 30, 2025, compared to 25.3% at December 31, 2024 and 25.5% at June 30, 2024. The Company’s largest non-owner occupied CRE lending concentration by property type is multifamily at 23.9% of total business lending, followed by office and lodging, at 10.9% and 10.3%, respectively. The Company’s largest owner-occupied lending concentration by industry is retail trade at 8.7% of total business lending, followed by real estate rental and leasing and health care and social assistance that each comprise 2.5% of total business lending. These levels demonstrate the Company’s diversity in the lending portfolio, as there are no significant industry or geographic concentrations, no metropolitan statistical area (“MSA”) accounting for more than 14% of the CRE portfolio and a very low level of CRE lending being conducted in major metropolitan areas. See Table 7 below for concentrations of CRE lending by borrower type and Table 8 below for concentrations of CRE by property location.

Current wording

Mortgages on commercial property combined with general-purpose business lending to commercial, industrial, non-profit and governmental customers and vehicle dealer floor plan financing is characterized as the Company’s business lending activity. The business lending portfolio increased $272.2 million, or 6.2%, from September 30, 2024, and $158.7 million, or 3.5%, from December 31, 2024, driven by organic growth over both periods. As compared to December 31, 2024, multifamily increased $170.9 million, or 23.6% and business non-real estate loans, including commercial and industrial lending, increased $95.6 million, or 8.4%, while non-owner occupied CRE decreased $103.4 million, or 5.8%, and owner-occupied CRE decreased $4.4 million, or 0.5%. The change from December 31, 2024 includes $52.6 million of construction loans that were reclassified from non-owner occupied to multifamily during the third quarter of 2025. While certain macroeconomic concerns persist related to non-owner occupied and multifamily CRE, the Company’s exposure to these portfolios is diverse both geographically and by industry type, and remains relatively low at 15% of total assets and 24% of total loans. CRE lending represents 73.5% of the total business lending portfolio at September 30, 2025, compared to 74.7% at December 31, 2024 and 75.1% at September 30, 2024. Other commercial and industrial lending represents the remaining 26.5% of total business lending at September 30, 2025, compared to 25.3% at December 31, 2024 and 24.9% at September 30, 2024. The Company’s largest non-owner occupied CRE lending concentration by property type is multifamily at 26.1% of total CRE lending, followed by office and commercial construction, at 10.4% and 9.4%, respectively. The Company’s largest owner-occupied lending concentration by industry is retail trade at 8.2% of total CRE lending, followed by real estate rental and leasing and arts, entertainment and recreation that comprise 2.6% and 2.4%, respectively, of total CRE lending. These levels demonstrate the Company’s diversity in the lending portfolio, as there are no significant industry or geographic concentrations, no metropolitan statistical area (“MSA”) accounting for more than 14% of the CRE portfolio and a very low level of CRE lending being conducted in major metropolitan areas. See Table 7 below for concentrations of CRE lending by borrower type and Table 8 below for concentrations of CRE by property location.