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 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.

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 months ended March 31, 2026 and 2025, although in some circumstances the fourth 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 35. 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 2026, “last year” and equivalent terms refer to calendar year 2025, “first quarter” refers to the three months ended March 31, 2026, and earnings per share (“EPS”) figures refer to diluted EPS.

Previous wording

As a result of the complex and dynamic nature of the Company’s business, management must exercise judgment in selecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with the current accounting principles generally accepted in the United States of America (“GAAP”), but also reflects management’s discretion with regard to choosing the most suitable methodology for reporting the Company’s financial performance. It is management’s opinion that the accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates affect the reported amounts of assets and liabilities as well as disclosures of revenues and expenses during the reporting period. Actual results could meaningfully differ from these estimates. Management considers its critical accounting estimates those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s financial condition or results of operations. Management believes that the critical accounting estimates include the allowance for credit losses; actuarial assumptions associated with the pension, post-retirement and other employee benefit plans; and the carrying value of goodwill and other intangible assets. A summary of the critical accounting policies and estimates used by management is disclosed in the MD&A on pages 39-40 of the most recent Form 10-K (fiscal year ended December 31, 2024) filed with the Securities and Exchange Commission (“SEC”) on February 28, 2025. There have been no material changes other than those described below regarding the Allowance for Credit Losses. A summary of new accounting policies used by management is disclosed in Note C, “Accounting Policies” on page 12 of this Form 10-Q.

Current wording

As a result of the complex and dynamic nature of the Company’s business, management must exercise judgment in selecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with current accounting principles generally accepted in the United States of America (“GAAP”) but also reflects management’s discretion with regard to choosing the most suitable methodology for reporting the Company’s financial performance. It is management’s opinion that the accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates affect the reported amounts of assets and liabilities as well as disclosures of revenues and expenses during the reporting period. Actual results could meaningfully differ from these estimates. Management considers its critical accounting estimates those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s financial condition or results of operations. Management believes that the critical accounting estimates include the allowance for credit losses; actuarial assumptions associated with the pension, post-retirement and other employee benefit plans; and the carrying value of goodwill and other intangible assets. A summary of the critical accounting policies and estimates used by management is disclosed in the MD&A on pages 38-40 of the most recent Form 10-K (fiscal year ended December 31, 2025) filed with the Securities and Exchange Commission (“SEC”) on February 27, 2026. There have been no material changes other than those described below regarding the Allowance for Credit Losses. A summary of new accounting policies used by management is disclosed in Note C, “Accounting Policies” on page 11 of this Form 10-Q.

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 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.

Current wording

The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses 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 portfolio 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 2026, the Company updated the ACL model to add 2025 data into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures. With the update, the quantitative reserve in the first quarter of 2026 now includes loss history for business loans that previously was not captured in the historical quantitative loss data and was instead addressed through the use of qualitative overlays. As a result, the Company decreased the additional qualitative reserve for business loans related to size and volume of the loans in that portfolio during the first quarter of 2026. The decrease in the business lending qualitative factor decreased the ACL by $4.8 million as compared to the prior factor in use at December 31, 2025. The update to the historical quantitative loss data increased the ACL by $3.2 million as compared to the quantitative loss rates in use at December 31, 2025.

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 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.

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 March 31, 2026 were 5.4% and 1.6%, respectively, compared to 5.5% and 1.3%, respectively, at December 31, 2025. The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, rising energy prices, a peak unemployment rate of 8.5% and an average unemployment rate of 7.1%. The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the three months ended March 31, 2026 by approximately $4.2 million, and decrease net income by $3.1 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 being 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 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.

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, 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 or restructuring activities. 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, 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 acquisition or restructuring activities. 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 earning assets that have different tax profiles. Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in Table 14.

Previous 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.

Current wording

The Company reported net income of $57.2 million for the first quarter that was $7.6 million, or 15.3%, above the prior year’s first quarter, while earnings per share of $1.08 for the first quarter was $0.15, or 16.1%, above the prior year. The 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

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.

Current wording

Operating net income, a non-GAAP measure, of $61.1 million, increased $9.1 million, or 17.4%, compared to the prior year’s first quarter, while operating earnings per share, a non-GAAP measure, of $1.15 increased $0.17, or 17.3%, from last year. Operating pre-tax, pre-provision net revenue (“PPNR”), a non-GAAP measure, of $85.3 million, increased $11.2 million, or 15.1%, compared to the first quarter of 2025, while operating PPNR per share, a non-GAAP measure, of $1.61, increased $0.21, or 15.0%, compared to the prior year. These increases demonstrate improvement in the Company’s core operating performance between the periods.

Previous 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.

Current wording

As shown in Table 1, net income for the first quarter of $57.2 million increased $7.6 million, or 15.3%, as compared to the first quarter of 2025. Earnings per share of $1.08 for the first quarter of 2026 increased $0.15, or 16.1%, compared to the first quarter of 2026. The increase in net income and earnings per share for the quarter was the result of 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. Operating net income, a non-GAAP measure, of $61.1 million for the first quarter increased $9.1 million, or 17.4%, as compared to the first quarter of 2025. Operating earnings per share, a non-GAAP measure, of $1.15 for the first quarter increased $0.17 compared to the first quarter of 2025. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

Previous 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.

Current wording

As reflected in Table 1, first quarter net interest income of $134.7 million increased $14.5 million, or 12.1%, from the comparable prior year period. The increase was the result of higher yields on interest-earning assets and a decrease in the rate paid on interest-bearing liabilities.

Previous 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.

Current wording

First quarter noninterest revenues were $78.6 million, an increase of $2.5 million, or 3.3%, from the first quarter of 2025. Total operating noninterest revenues, a non-GAAP measure, for the first quarter were $79.0 million, an increase of $3.2 million, or 4.2%, from the prior first quarter. The increase over the prior year first quarter was driven by a $2.7 million, or 14.2%, increase in banking noninterest revenues and a $0.9 million, or 1.4%, increase in nonbanking financial services business revenues, while the remaining decrease of $1.1 million was comprised of unrealized losses on equity securities and a loss from equity method investments. The increase in nonbanking financial services business revenues was comprised of increases in employee benefit services revenue of $2.0 million and wealth management services revenue of $0.5 million, partially offset by a decrease in insurance services revenue of $1.6 million.

Previous 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.

Current wording

Net interest income totaled $134.7 million for the first quarter of 2026 compared to $120.2 million for the first quarter of 2025. As shown in Table 2, fully tax-equivalent net interest income, a non-GAAP measure, for the first quarter was $135.6 million, an increase of $14.5 million from the prior year first quarter. The increase was driven by a 9 basis point increase in the yield on average interest-earning assets, a $774.9 million increase in average interest-earning asset balances and a 16 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $583.4 million increase in average interest-bearing liability balances in comparison to the first quarter of 2025. 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 $8.7 million, the increase in the yield on average interest-earning assets of $3.6 million and the decrease in the rate paid on average interest-bearing liabilities of $4.7 million were partially offset by the volume increase in average interest-bearing liability balances of $2.5 million. Net interest margin of 3.43% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.45% for the first quarter of 2026 increased 22 and 21 basis points, respectively, compared to the prior year period.

Previous 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.

Current wording

The 9-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 first quarter increased 10 basis points compared to the first quarter of 2025. The first quarter of 2026 yield on average investments including cash equivalents increased 1 basis point compared to the prior year while the yield on average investments excluding cash equivalents decreased 1 basis point for the same timeframe. The increase in loan yields was reflective of an increase in the proportion of higher rate loan originations over recent periods.

Previous 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.

Current wording

The first quarter average book balance of investments, including cash equivalents, increased $148.0 million as compared to the corresponding prior year period as investment purchases outpaced maturities, calls and principal payments and the balance of cash equivalents increased primarily due to net deposit inflows, including the impact of the Santander branch acquisition in the fourth quarter of 2025. The cash equivalents component of average interest-earning assets increased $99.9 million for the first quarter compared to the prior year period. Average loan balances increased $626.9 million for the quarter as compared to the prior year, with increases in all five major loan portfolios between the periods primarily due to organic growth.

Previous 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.

Current wording

The rate paid on average interest-bearing liabilities decreased 16 basis points compared to the prior year quarter as the average rate paid on interest-bearing deposits decreased 12 basis points and the average rate paid on external borrowings decreased 8 basis points from the comparable prior period. The decreases in the rates paid on average interest-bearing deposits and on average borrowings were 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 $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.

Current wording

Average interest-bearing deposits increased $819.2 million compared to the prior year quarter, with increases in all deposit account types, including demand deposits, interest checking, savings, money market and time deposits. The average borrowing balance, which primarily includes borrowings at the FHLB and securities sold under agreement to repurchase (customer repurchase agreements), decreased $235.8 million for the quarter.

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 25.3% 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.

Current wording

Table 2 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 25.2% in 2026 and 25.1% in 2025. 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 $6.9 million for the first quarter and $5.9 million for the prior first quarter. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.

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 activities that impact noninterest revenues, including income earned on bank owned life insurance and 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, customer interest rate swap fees, CRE financing and structuring fees, and other core customer activities typically provided through the branch network, commercial banking offices, 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 Trust division within CBNA), broker-dealer and investment advisory products and services (performed by 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 income earned on bank owned life insurance, realized and unrealized gains or losses on investment securities, and income or losses on equity method investments.

Previous wording

Employee benefit services revenues increased $1.2 million, or 3.6%, and $2.4 million, or 2.5%, for the three and nine months ended September 30, 2025, respectively, as compared to the equivalent prior year periods, driven by revenue growth in the recordkeeping and third-party administration services business line due in part to revenue growth from acquisitions.

Current wording

Employee benefit services revenues increased $2.0 million, or 6.0%, for the three months ended March 31, 2026, as compared to the equivalent prior year period, driven by revenue growth in the recordkeeping and third-party administration services business line due in part to revenue growth from acquisitions and higher average market values of assets under administration.

Previous 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%.

Current wording

The ratio of noninterest revenues to total revenues was 36.8% for the first quarter of 2026, compared to 38.7% for the prior year’s first quarter. The quarterly decrease was due to net interest income increasing 12.1% while noninterest revenues increased 3.3%.

Previous 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%.

Current wording

The ratio of operating noninterest revenues to operating revenues (FTE), a non-GAAP measure as defined in the table above, was 36.8% for the quarter compared to 38.5% for the prior year. The decrease between the quarterly periods was due to an 11.9% increase in fully tax-equivalent net interest income, a non-GAAP measure, while operating noninterest revenues, a non-GAAP measure, increased 4.2%.

Previous wording

Table 5 below sets forth the quarterly and YTD results of the major noninterest expense categories for the current and prior year, as well as efficiency ratios (defined below), a standard measure of expense utilization effectiveness commonly used in the banking industry.

Current wording

Table 5 below sets forth the quarterly results of the major noninterest expense categories for the current and prior year, as well as efficiency ratios (defined below), a standard measure of expense utilization effectiveness commonly used in the banking industry.

Previous 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).

Current wording

As shown in Table 5, the Company recorded noninterest expenses of $133.0 million for the first quarter of 2026, representing an increase of $7.7 million, or 6.2% from the prior year. The change was primarily attributable to an increase in salaries and employee benefits (an increase of $3.9 million), occupancy and equipment (an increase of $2.2 million), and data processing and communications (an increase of $1.7 million). The remaining change to noninterest expenses is attributable to other expenses (a decrease of $1.0 million), amortization of intangible assets (an increase of $0.8 million), business development and marketing (a decrease of $0.6 million), acquisition expenses (an increase of $0.4 million), legal and professional fees (an increase of $0.2 million), and litigation accrual (an increase of $0.1 million).

Previous 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.

Current wording

The Company’s efficiency ratio was 62.4% for the first quarter of 2026, 1.4 percentage points favorable to the comparable quarter of 2025. This resulted from total revenues increasing 8.7%, primarily due to higher net interest income, while total noninterest expenses increased 6.2% 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 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%.

Current wording

The Company’s operating efficiency ratio, a non-GAAP measure as defined in the table above, was 59.8% for the first quarter, 2.1 percentage points favorable to the comparable quarter of 2025. This resulted from operating revenues (FTE), a non-GAAP measure as defined in Table 5, increasing 9.0% while operating noninterest expenses, a non-GAAP measure as described above, increased 5.3%.

Previous wording

Annualized current quarter operating noninterest expenses, a non-GAAP measure as defined in the table above, as a percentage of average assets decreased 0.05 percentage points versus the third quarter of the prior year as noninterest expenses increased 2.9% while average assets increased 4.3%. On a YTD basis, annualized noninterest expenses as a percentage of average assets increased 0.05 percentage points as noninterest expenses increased 6.0% 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.

Current wording

Annualized current quarter noninterest expenses as a percentage of average assets was slightly lower than the prior year as noninterest expenses increased 6.2% and average assets increased 6.3%. Annualized current quarter operating noninterest expenses, a non-GAAP measure as defined in the table above, as a percentage of average assets decreased 0.03 percentage points versus the first quarter of the prior year as operating noninterest expenses increased 5.3% while average assets increased 6.3%. Noninterest expenses increased between the periods due to the factors noted above and average assets increased between the periods primarily due to an increase in interest earning assets driven by organic growth in deposit balances and the impact of the Santander acquisition.

Previous 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.

Current wording

The first quarter 2026 effective income tax rate was 23.3%, compared to 22.8% for the first quarter of 2025. The increase in the first quarter 2026 effective income tax rate is primarily attributable to an increase in amortization of income tax credit investments. The first quarter 2026 tax expense associated with the amortization of income tax credit investments was $1.1 million, as compared to $0.3 million for the comparable period of 2025. In addition, the Company recorded a $0.7 million and $0.5 million tax benefit associated with stock-based compensation for the first quarter of 2026 and the first quarter of 2025, respectively. The effective tax rates adjusted to exclude the income tax impact of stock-based compensation and amortization of income tax credit investments were 22.8% for the first quarter of 2026 and 23.1% for the first quarter of 2025. The decrease was primarily 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 $4.38 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.

Current wording

The carrying value of investment securities (including unrealized gains and losses) was $4.39 billion at the end of the first quarter, a decrease of $16.2 million, or 0.4%, from December 31, 2025 and an increase of $89.3 million, or 2.1%, from March 31, 2025. The book value of investment securities (excluding unrealized gains and losses) of $4.67 billion at the end of the first quarter decreased $4.4 million, or 0.1%, from December 31, 2025 and increased $19.2 million, or 0.4%, from March 31, 2025. The increase from the end of the prior year’s first quarter was primarily driven by U.S. government agency mortgage-backed securities purchases and net accretion of discounts on securities outpacing maturities, calls and principal paydowns. During the first quarter of 2026, the Company purchased $10.5 million of U.S. government agency mortgage-backed securities with an average yield of 4.87%, which the Company classified as held-to-maturity. These additions were offset by $25.7 million of investment maturities, calls and principal payments during the first quarter of 2026. Additionally, there was $9.5 million of net accretion on investment securities during the first quarter of 2026. The effective duration of the investment securities portfolio was 5.2 years at the end of the first quarter of 2026, as compared to 6.0 years at the end of the first quarter of 2025.

Previous 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.

Current wording

The change in the carrying value of investment securities is also impacted by the amount of net unrealized gains or losses. At March 31, 2026, the investment portfolio (excluding held-to-maturity investment securities) had a $283.0 million net unrealized loss, an $11.8 million increase from the $271.2 million net unrealized loss at December 31, 2025 and a $70.0 million decrease from the $353.0 million net unrealized loss at March 31, 2025. These changes were principally driven by the general movements in medium to long-term interest rates, as well as the volume and rates associated with the securities purchases and maturities that occurred during the 12 months.

Previous 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.

Current wording

Loans ended the first quarter at $11.13 billion, $181.4 million, or 1.7%, higher than December 31, 2025 and $710.0 million, or 6.8%, higher than March 31, 2025 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 $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.

Current wording

Mortgages on commercial property combined with general-purpose business lending to commercial, industrial, non-profit and governmental customers is characterized as the Company’s business lending activity. The business lending portfolio increased $343.4 million, or 7.6%, from March 31, 2025, and $149.6 million, or 3.2%, from December 31, 2025, driven by organic growth over both periods. As compared to December 31, 2025, multifamily increased $2.6 million, or 0.3% and business non-real estate loans, including commercial and industrial lending, increased $22.8 million, or 1.8%, while non-owner occupied CRE increased $116.4 million, or 7.0%, and owner occupied CRE increased $7.7 million, or 0.9%. The Company’s non-owner occupied CRE exposure (including multifamily) remains diverse both geographically and by property type, and remains relatively low at 15% of total assets, 24% of total loans and 194% of total bank-level regulatory capital. CRE lending represents 73.4% of the total business lending portfolio at March 31, 2026, compared to 73.1% at December 31, 2025 and 74.0% at March 31, 2025. Other commercial and industrial lending represents the remaining 26.6% of total business lending at March 31, 2026, compared to 26.9% at December 31, 2025 and 26.0% at March 31, 2025. The Company’s largest non-owner occupied CRE lending concentration by property type is multifamily at 25.7% of total CRE lending, followed by office and lodging, at 10.9% and 10.1%, respectively. The Company’s largest owner occupied lending concentration by industry is retail trade at 7.6% of total CRE lending, followed by manufacturing and real estate rental and leasing 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 13% 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.

Previous wording

Consumer mortgages increased $117.0 million, or 3.4%, from one year ago and increased $54.5 million, or 1.6%, from December 31, 2024, with the increases over both periods representing organic growth, including the impact of certain secondary market sales of new volume production. The Company sold $32.6 million and $66.7 million of consumer mortgage production during the three and nine months ended 2025, respectively. Over the past year, the Company produced organic growth in the consumer mortgage segment due to the Company’s competitive product offerings, recruitment of additional mortgage loan originators and proactive business development efforts, while also benefitting from the comparatively stable housing market conditions in the Company’s primary markets relative to the national environment. Home equity loans increased $50.0 million, or 10.8%, from one year ago and increased $33.5 million, or 7.0%, from December 31, 2024, in part a result of competitive pricing and lower levels of payoffs and paydowns related to consumer mortgage refinancing in a relatively high interest rate environment.

Current wording

Consumer mortgages increased $114.9 million, or 3.3%, from one year ago (including $4.1 million acquired in the Santander transaction) and increased $1.9 million, or 0.1%, from December 31, 2025, with the increases over both periods primarily representing organic growth, including the impact of certain secondary market sales of new volume production. The Company sold $17.6 million and $79.1 million of consumer mortgage production during the first quarter of 2026 and over the last twelve months, respectively. Over the past year, the Company produced organic growth in the consumer mortgage segment due to the Company’s competitive product offerings, recruitment of additional mortgage loan originators and proactive business development efforts, while also benefitting from the comparatively stable housing market conditions in the Company’s primary markets relative to the national environment. Home equity loans increased $53.2 million, or 11.1%, from one year ago (including $16.9 million acquired in the Santander transaction) and increased $0.7 million, or 0.1%, from December 31, 2025, in part a result of competitive pricing and lower levels of payoffs and paydowns related to consumer mortgage refinancing in a relatively high interest rate environment.

Previous wording

Consumer installment loans, both those originated directly in the branches and online (referred to as “consumer direct”) and indirectly in automobile, marine and recreational vehicle dealerships (referred to as “consumer indirect”), increased $59.4 million, or 3.0%, from one year ago, and increased $71.2 million, or 3.6%, from December 31, 2024. The moderate increases were primarily due to increasingly competitive market conditions as certain competitors increased their activities, making growth in market share and expansion of the dealer network more challenging. The Company is focused on maintaining a profitable in-market and contiguous market indirect portfolio by providing competitive market offerings to its customers and pursuing the expansion of its dealer network. These loans have historically provided attractive returns, and the Company strives to grow these key portfolios despite the strong competition from the financing subsidiaries of vehicle manufacturers and other financial intermediaries

Current wording

Consumer installment loans, both those originated directly in the branches and online (referred to as “consumer direct”) and indirectly in automobile, marine and recreational vehicle dealerships (referred to as “consumer indirect”), increased $198.5 million, or 10.5%, from one year ago (including $9.3 million acquired in the Santander transaction), and increased $29.3 million, or 1.4%, from December 31, 2025. The Company is focused on maintaining a profitable in-market and contiguous market indirect portfolio by providing competitive market offerings to its customers and pursuing the expansion of its dealer network. Consumer installment loans have historically provided attractive returns, and the Company strives to grow these key portfolios despite the strong competition from the financing subsidiaries of vehicle manufacturers and other financial intermediaries.

Previous wording

The following table sets forth the allocation of the allowance for credit losses by loan category as of the end of the periods indicated, as well as the proportional share of each category’s loan balance to total loans. This allocation is based on management’s assessment, as of a given point in time, of the risk characteristics of each of the component parts of the total loan portfolio and is subject to change when the risk factors of each component part change. The allocation is not indicative of the specific amount of future net charge-offs that is expected to be incurred in each of the loan categories, nor should it be taken as an indicator of future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb losses in any category. As shown in Table 9, total allowance for credit losses at the end of the third quarter was $84.9 million, an increase of $8.8 million, or 11.5%, from one year earlier and an increase of $5.8 million, or 7.4%, from the end of 2024.

Current wording

The following table sets forth the allocation of the allowance for credit losses by loan category as of the end of the periods indicated, as well as the proportional share of each category’s loan balance to total loans. This allocation is based on management’s assessment, at a given point in time, of the risk characteristics of each of the component parts of the total loan portfolio and is subject to change when the risk factors of each component part change. The allocation is not indicative of the specific amount of future net charge-offs that are projected for each of the loan categories, nor should it be taken as an indicator of future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb losses in any category. As shown in Table 9, total allowance for credit losses at the end of the first quarter was $90.2 million, an increase of $7.4 million, or 8.9%, from one year earlier and an increase of $2.3 million, or 2.6%, from the end of 2025.

Previous wording

As demonstrated in Table 9, the consumer direct, consumer indirect and the business lending portfolios carry higher credit risk than the consumer mortgage and home equity portfolios; therefore, the Company allocates a higher proportional allowance to these portfolios. The unallocated allowance is maintained for potential losses not captured in the specific allowance categories due to model imprecision. The unallocated allowance of $1.0 million at September 30, 2025 was consistent with December 31, 2024 and September 30, 2024.

Current wording

As demonstrated in Table 9, the consumer direct, consumer indirect and the business lending portfolios carry higher credit risk than the consumer mortgage and home equity portfolios and therefore the Company allocates a higher proportional allowance to these portfolios. The unallocated allowance is maintained for potential losses not captured in the specific allowance categories due to model imprecision. The unallocated allowance of $1.0 million at March 31, 2026 was consistent with December 31, 2025 and March 31, 2025.

Previous wording

Net charge-offs during the third quarter of 2025 were $2.5 million, a decrease of $0.3 million compared to the third quarter of 2024. The business lending and consumer mortgage portfolios experienced lower net charge-off levels compared with the third quarter of 2024 while the consumer installment and home equity portfolios were above prior year levels. The total net charge-off ratio (net charge-offs annualized as a percentage of average loans outstanding for the quarter) for the third quarter was 0.09%, 3 basis points lower than the ratio for the fourth quarter of 2024 and 2 basis points lower than the ratio for the third quarter of 2024. The net charge-off ratios for the third quarter of 2025 for the business lending and consumer mortgage portfolios were below the Company’s average for the trailing eight quarters, while the net charge-off ratio for the consumer installment and home equity portfolios were above the Company’s average for the trailing eight quarters.

Current wording

Net charge-offs during the first quarter of 2026 were $3.0 million, a decrease of $0.3 million compared to the first quarter of 2025. The business lending portfolio experienced lower net charge-off levels compared with the first quarter of 2025 while the consumer installment and consumer mortgage were above prior year levels and home equity was consistent. The total net charge-off ratio (net charge-offs annualized as a percentage of average loans outstanding for the quarter) for the first quarter was 0.11%, 2 basis points higher than the ratio for the fourth quarter of 2025 and 2 basis points lower than the ratio for the first quarter of 2025. The net charge-off ratios for the first quarter of 2026 for the business lending and home equity portfolios were below the Company’s average for the trailing eight quarters, while the net charge-off ratio for the consumer mortgage and consumer installment portfolios were above the Company’s average for the trailing eight quarters.

Previous wording

Other real estate owned (“OREO”) at September 30, 2025 was $7.9 million. This compares to $2.8 million at December 31, 2024 and $2.3 million at September 30, 2024. At September 30, 2025, OREO consisted of 40 residential properties with a total value of $2.5 million and one commercial lending relationship consisting of multiple properties with an aggregate value of $5.4 million. This compares to 44 residential properties with a total value of $2.8 million and no commercial properties at December 31, 2024, and 34 residential properties with a total value of $2.3 million at September 30, 2024. The increase in OREO over the last twelve months was primarily driven by commercial OREO related to a non-owner occupied CRE loan that was charged off in the second quarter of 2025, while the increase in residential OREO is related to the Company working through a backlog of residential foreclosures that arose due to pandemic-related moratoriums that have since been lifted.

Current wording

Other real estate owned (“OREO”) at March 31, 2026 was $8.1 million. This compares to $8.2 million at December 31, 2025 and $2.7 million at March 31, 2025. At March 31, 2026, OREO consisted of 45 residential properties with a total value of $2.7 million and one commercial lending relationship consisting of multiple properties with an aggregate value of $5.4 million. This compares to 42 residential properties with a total value of $2.9 million and one commercial lending relationship consisting of multiple properties with an aggregate value of $5.4 million at December 31, 2025, and 46 residential properties with a total value of $2.7 million and no commercial properties at March 31, 2025. The increase in OREO over the last twelve months was primarily driven by commercial OREO related to an investment in a special purpose entity that holds the property underlying a non-owner occupied CRE loan that was charged off in the second quarter of 2025.

Previous wording

Approximately 38% of the nonperforming loans at September 30, 2025 were related to the business lending portfolio, which is comprised of business loans broadly diversified by industry, geography and property type. Of the nonperforming loans in the business lending portfolio, other commercial and industrial loans represents 60% of the balance, owner-occupied CRE represents 33% of the balance and non-owner occupied CRE represents 7% of the balance. There were no nonperforming multifamily loans at September 30, 2025. Nonperforming business loans decreased 43 basis points as compared to December 31, 2024 and decreased 23 basis points as compared to September 30, 2024. The decrease in nonperforming business loans as compared to December 31, 2024 is primarily related to the charge-off of one non-owner occupied CRE loan relationship previously mentioned and the substantial repayment of one multifamily CRE nonperforming loan relationship.

Current wording

Approximately 30% of the nonperforming loans at March 31, 2026 were related to the business lending portfolio, which is comprised of business loans broadly diversified by geography, collateral category and industry. Of the nonperforming loans in the business lending portfolio, other commercial and industrial loans represents 64% of the balance, owner occupied CRE represents 32% of the balance, multifamily represents 3% of the balance and non-owner occupied CRE represents 1% of the balance. Nonperforming business loans decreased 9 basis points as compared to December 31, 2025 and decreased 57 basis points as compared to March 31, 2025. The decrease in nonperforming business loans as compared to March 31, 2025 is primarily related to the charge-off of one non-owner occupied CRE loan relationship previously mentioned and the substantial repayment of one multifamily CRE nonperforming loan relationship.

Previous wording

Approximately 56% of nonperforming loans at September 30, 2025 were comprised of consumer mortgages. Collateral values of residential properties within most of the Company’s market areas have generally remained stable or increased over the past several years. Inflation rates have trended lower and become more stable, and the unemployment rate remains low; this has contributed to the credit performance in the consumer mortgage loan portfolio remaining favorable. The remaining 6% of nonperforming loans relate to consumer installment and home equity loans, with home equity nonperforming loan levels being driven by the same factors that were identified for consumer mortgages. The allowance for credit losses to nonperforming loans ratio, a general measure of coverage adequacy, was 152% at the end of the third quarter, as compared to 108% at year-end 2024 and 121% at September 30, 2024. The increase in this ratio versus the end of 2024 and one year ago was due to the allowance for credit losses increasing proportionally more than nonperforming loan levels.

Current wording

Approximately 61% of nonperforming loans at March 31, 2026 were comprised of consumer mortgages. Collateral values of residential properties within most of the Company’s market areas have generally remained stable or increased over the past several years. Inflation rates have trended lower and become more stable, and the unemployment rate remains relatively stable. This has contributed to the credit performance in the consumer mortgage loan portfolio remaining favorable. The remaining 9% of nonperforming loans relate to consumer installment and home equity loans, with home equity nonperforming loan levels being driven by the same factors that were identified for consumer mortgages. Nonperforming loan levels in the consumer installment category are typically lower than the other portfolios because they are generally charged off before they reach non-performing status. The allowance for credit losses to nonperforming loans ratio, a general measure of coverage adequacy, was 168% at the end of the first quarter, as compared to 156% at year-end 2025 and 110% at March 31, 2025. The increase in this ratio versus the end of 2025 and one year ago was due to the allowance for credit losses increasing proportionally more than nonperforming loan levels.

Previous wording

Delinquent loans (defined as loans 30 days or more past due or in nonaccrual status) as a percent of total loans was 1.00% at the end of the third quarter, 24 basis points below the 1.24% at year-end 2024 and 7 basis points below the 1.07% at September 30, 2024. The business lending delinquency ratio at the end of the third quarter of 0.51% was 47 basis points below the level of 0.98% at December 31, 2024 and 23 basis points below the level of 0.74% at September 30, 2024. The changes in the delinquent loan ratios over the indicated prior periods were related to the previously mentioned charged-off and substantially repaid CRE loans. The delinquency rates for all loan portfolios decreased as compared to the levels at December 31, 2024. The delinquency rates for business lending and home equity decreased as compared to the levels at September 30, 2024, while consumer mortgage and consumer installment increased.

Current wording

Delinquent loans (defined as loans 30 days or more past due or in nonaccrual status) as a percent of total loans was 1.12% at the end of the first quarter, 2 basis points above the 1.10% at year-end 2025 and 17 basis points below the 1.29% at March 31, 2025. The business lending delinquency ratio at the end of the first quarter of 0.71% was 17 basis points above the level of 0.54% at December 31, 2025 and 54 basis points below the level of 1.25% at March 31, 2025. The changes in the delinquent loan ratios over the indicated prior periods were related to the previously mentioned charged-off and substantially repaid CRE loans. The delinquency rates for business lending, home equity and consumer mortgage loan portfolios increased as compared to the levels at December 31, 2025, while consumer installment decreased. The delinquency rates for business lending decreased as compared to the levels at March 31, 2025, while consumer mortgage, home equity and consumer installment increased.

Previous wording

The Company recorded a $5.6 million provision for credit losses in the third quarter of 2025. The third quarter provision for credit losses was $2.1 million lower than the equivalent prior year period’s provision for credit losses of $7.7 million, primarily due to strong loan growth and increase in non-economic qualitative factors in the prior year quarter. The allowance for credit losses of $84.9 million as of September 30, 2025 increased $8.8 million from the level one year ago. The current quarter provision for credit losses is primarily reflective of organic loan growth and a relatively stable economic environment. The allowance for credit losses to total loans ratio was 0.79% at September 30, 2025, 3 and 5 basis points higher than the levels at December 31, 2024 and September 30, 2024, respectively. Refer to Note E: Loans and Allowance for Credit Losses in the notes to the consolidated financial statements for a discussion of management’s methodology used to estimate the allowance for credit losses.

Current wording

The Company recorded a $5.6 million provision for credit losses in the first quarter of 2026. The first quarter provision for credit losses was $1.1 million lower than the equivalent prior year period’s provision for credit losses of $6.7 million, primarily due to modest improvement in credit quality metrics. The allowance for credit losses of $90.2 million as of March 31, 2026 increased $7.4 million from the level one year ago, primarily due to organic loan growth. The allowance for credit losses to total loans ratio was 0.81% at March 31, 2026, 1 and 2 basis points higher than the levels at December 31, 2025 and March 31, 2025, respectively. Refer to Note E: Loans and Allowance for Credit Losses in the notes to the consolidated financial statements for a discussion of management’s methodology used to estimate the allowance for credit losses.