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 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.

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 six months ended June 30, 2026 and 2025, although in some circumstances the first quarter of 2026 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 40. 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, “second quarter” refers to the three months ended June 30, 2026, “YTD” refers to the six months ended June 30, 2026 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 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.

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 and again in the second quarter of 2026, as other components of the model were determined to have adequately captured the risk associated with these loans. The decreases in the business lending qualitative factor decreased the ACL by $7.5 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 $3.5 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 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.

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 June 30, 2026 were 5.4% and 1.3%, 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 and six months ended June 30, 2026 by approximately $4.5 million, and decrease net income by $3.4 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, 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.

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, acquisition-related contingent consideration adjustments, litigation accrual, gain (loss) on equity securities, restructuring expenses 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, acquisition-related contingent consideration adjustments, litigation accrual, gain (loss) on equity securities, restructuring expenses 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

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.

Current wording

The Company reported net income of $61.3 million for the second quarter which increased $10.0 million, or 19.5%, from the prior year’s second quarter, while YTD net income of $118.6 million increased $17.6 million, or 17.4%, compared to the equivalent 2025 timeframe. Earnings per share of $1.16 for the second quarter increased $0.19, or 19.6%, from the second quarter of 2025, while YTD earnings per share of $2.24 increased $0.34, or 17.9%, from the 2025 YTD period. The increases in net income and earnings per share were primarily driven by increases in net interest income and noninterest revenues, partially offset by increases in noninterest expenses and income taxes.

Previous wording

Noninterest expenses were $133.0 million in the first quarter, an increase of $7.7 million, or 6.2%, from the prior year’s first quarter. The increase in noninterest expenses was driven primarily by increases in salaries and employee benefits, occupancy and equipment and data processing and communications expenses. These increases were due in part to annual merit-based salary increases, operating expenses associated with acquisitions completed and de novo branches opened between the periods and the Company’s continued investment in customer-facing and back-office technologies. Income taxes increased for the quarter, driven by increases in pre-tax income and amortization of income tax credit investments.

Current wording

Noninterest expenses were $137.7 million in the second quarter, an increase of $8.6 million, or 6.7%, from the prior year’s second quarter. YTD noninterest expenses of $270.8 million increased $16.4 million, or 6.4%, from the comparable 2025 YTD period. The increases in noninterest expenses were driven primarily by increases in salaries and employee benefits, data processing and communications expenses and occupancy and equipment. These increases were due in part to annual merit-based salary increases, the Company’s continued investment in customer-facing and back-office technologies and operating expenses associated with acquisitions completed and de novo branches and regional headquarters opened between the periods. Income taxes increased for the quarter and YTD periods, driven by increases in pre-tax income and certain state income taxes.

Previous wording

Net interest margin for the first quarter of 3.43% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.45% increased 22 basis points and 21 basis points, respectively, from the prior year’s first quarter. The yield on average interest earning assets increased 9 basis points compared to the prior year, primarily driven by higher loan yields. The Company’s total cost of funds decreased 13 basis points from the prior year as the rate paid on interest-bearing deposits and borrowings both decreased.

Current wording

Net interest margin for the second quarter of 3.46% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.49% both increased 19 basis points from the prior year’s second quarter. YTD net interest margin of 3.45% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.47% increased 21 basis points and 20 basis points, respectively, from the 2025 YTD period. The yield on average interest earning assets increased 5 basis points compared to the prior year’s second quarter and increased 8 basis points on a YTD basis, primarily driven by higher loan yields. The Company’s total cost of funds decreased 14 basis points from both the prior year’s second quarter and the prior YTD period primarily due to decreases in the rate paid on interest-bearing deposits.

Previous wording

The Company’s average and ending interest-earning assets both increased year-over-year, reflective of strong organic loan growth. Average and ending deposits also increased primarily driven by organic growth in non-governmental deposit balances and the $543.7 million of deposits assumed in the Santander branch acquisition. Average and ending borrowings decreased from the prior year reflective of growth in deposit balances outpacing loan growth, including the funding provided from the Santander branch acquisition.

Current wording

The Company’s average and ending interest-earning assets both increased as compared to the prior year second quarter and YTD period, primarily reflective of strong organic loan growth. Average and ending deposits also increased as compared to the prior year second quarter and YTD period, primarily driven by organic growth in non-governmental deposit balances, along with the deposits assumed in the Santander Bank N.A. (“Santander”) branch and ClearPoint Federal Bank & Trust (“ClearPoint”) acquisitions. Average and ending borrowings decreased from the prior year’s second quarter and YTD reflective of growth in deposit balances outpacing loan growth, including the net funding provided from the Santander branch acquisition.

Previous wording

Asset quality remained solid in the first quarter. The net charge-off ratio decreased slightly from 13 basis points of average loans in the first quarter of 2025 to 11 basis points of average loans in the first quarter of 2026. The nonperforming loan ratio decreased 24 basis points from March 31, 2025 to 0.48% of loans outstanding at March 31, 2026, while the delinquent loan ratio decreased 17 basis points between the past twelve months to 1.12% of loans outstanding.

Current wording

Asset quality remained solid in the second quarter. The net charge-off ratio decreased from 20 basis points of average loans in the second quarter of 2025 to 12 basis points of average loans in the second quarter of 2026. On a YTD basis, the net charge-off ratio decreased 5 basis points versus the prior year period to 11 basis points of average loans. The nonperforming loan ratio decreased 1 basis point from June 30, 2025 to 0.50% of loans outstanding at June 30, 2026, while the delinquent loan ratio increased 3 basis points compared to twelve months earlier to 1.04% of loans outstanding.

Previous 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.

Current wording

As shown in Table 1, net income for the second quarter and June YTD of $61.3 million and $118.6 million, respectively, increased $10.0 million, or 19.5%, as compared to the second quarter of 2025 and increased $17.6 million, or 17.4%, compared to June YTD 2025. Earnings per share of $1.16 for the second quarter of 2026 increased $0.19, or 19.6%, compared to the second quarter of 2025, while earnings per share for the first six months of 2026 of $2.24 increased $0.34, or 17.9%, compared to the first six months of 2025. The increase in net income and earnings per share for the quarter was the result of increases in net interest income and noninterest revenues, partially offset by increases in the provision for credit losses, noninterest expenses and income taxes. 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 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 $61.5 million and $122.6 million for the second quarter and June YTD 2026, respectively, increased $6.1 million, or 10.9%, as compared to the second quarter of 2025 and increased $15.2 million, or 14.1%, compared to June YTD 2025. Operating earnings per share, a non-GAAP measure, of $1.16 for the second quarter increased $0.12 compared to the second quarter of 2025, while operating earnings per share of $2.32 for the first six months of 2026 increased $0.29 compared to the first six months of 2025. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

Previous 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.

Current wording

As reflected in Table 1, second quarter net interest income of $139.1 million increased $14.4 million, or 11.5%, from the comparable prior year period. Net interest income for the first six months of 2026 increased $28.9 million, or 11.8%, compared to the first six months of 2025. The quarterly and YTD increases were the result of higher yields on interest-earning assets and a decrease in the rate paid on interest-bearing liabilities.

Previous wording

Reflective of improvements in credit quality metrics and partially offset by loan growth, the provision for credit losses of $5.6 million for the first quarter decreased $1.1 million as compared to the first quarter of 2025.

Current wording

Reflective of stable credit quality metrics and organic loan growth, the provision for credit losses of $4.6 million for the second quarter and $10.2 million for June YTD increased $0.5 million as compared to the prior year second quarter and decreased $0.6 million as compared to the first six months of 2025.

Previous wording

Noninterest expenses of $133.0 million for the first quarter reflected an increase of $7.7 million, or 6.2%, from the first quarter of 2025. The increase in noninterest expenses for the first quarter was primarily driven by higher salaries and employee benefits expenses, occupancy and equipment expenses and data processing and communications expenses. Operating noninterest expenses, a non-GAAP measure, increased $6.5 million, or 5.3%, from the prior-year first quarter.

Current wording

Noninterest expenses of $137.7 million and $270.8 million for the second quarter and June YTD periods, respectively, reflected an increase of $8.6 million, or 6.7%, from the second quarter of 2025 and an increase of $16.4 million, or 6.4%, from the first six months of 2025. The increase in noninterest expenses for the second quarter and June YTD periods was primarily driven by higher salaries and employee benefits expenses, data processing and communications expenses, and occupancy and equipment expenses, partially offset by a decrease in business development and marketing expenses and restructuring expenses. Operating noninterest expenses, a non-GAAP measure, increased $8.7 million, or 7.0%, from the prior year second quarter and $15.2 million, or 6.2%, from the prior June YTD.

Previous wording

The effective income tax rate was 23.3% for the first quarter, as compared to 22.8% for the comparable prior year period, primarily due to an increase in amortization of income tax credit investments.

Current wording

The effective income tax rates were 24.1% and 23.7% for the second quarter and YTD 2026, respectively, as compared to 22.3% and 22.5% for the comparable prior year periods, primarily due to an increase in pre-tax income and certain state income taxes.

Previous 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.

Current wording

Net interest income totaled $139.1 million for the second quarter of 2026 compared to $124.7 million for the second quarter of 2025. As shown in Table 2a, fully tax-equivalent net interest income, a non-GAAP measure, for the second quarter was $140.0 million, an increase of $14.4 million from the prior year second quarter. The increase was driven by a 5 basis point increase in the yield on average interest-earning assets, an $823.2 million increase in average interest-earning asset balances and an 18 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $539.7 million increase in average interest-bearing liability balances in comparison to the second 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 $9.4 million, the increase in the yield on average interest-earning assets of $2.0 million and the decrease in the rate paid on average interest-bearing liabilities of $5.2 million were partially offset by the volume increase in average interest-bearing liability balances of $2.3 million. Net interest margin of 3.46% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.49% for the second quarter of 2026 both increased 19 basis points compared to the prior year period.

Previous 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.

Current wording

The 5 basis point increase in the average yield on interest-earning assets for the quarter was the result of increases in the yield on average loans while the yield on average investments, including cash equivalents, remained consistent with the prior year periods. The yield on average loans for the second quarter increased 3 basis points compared to the second quarter of 2025. The increase in loan yields was reflective of an increase in the proportion of higher rate loan originations over recent periods. The 7 basis point increase in the average yield on interest-earning assets for the June YTD period was driven by the same factors, with a 7 basis point increase in the yield on average loans and a consistent yield on average investments, including cash equivalents that carried a lower rate in 2026, when compared with the prior year period.

Previous 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.

Current wording

The second quarter and YTD average book balance of investments, including cash equivalents, increased $101.7 million and $124.7 million, respectively, as compared to the corresponding prior year period primarily due to the ClearPoint acquisition in the second quarter of 2026, partially offset by investment maturities, calls and principal payments during the periods. The cash equivalents component of average interest-earning assets increased $61.4 million and $80.6 million for the second quarter and June YTD periods, respectively, compared to the corresponding prior year periods. Average loan balances increased $721.5 million for the quarter and $674.5 million YTD as compared to the prior year, with increases in all five major loan portfolios between both periods primarily due to organic growth.

Previous 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.

Current wording

The rate paid on average interest-bearing liabilities decreased 18 basis points compared to the prior year quarter as the average rate paid on interest-bearing deposits decreased 15 basis points and the average rate paid on external borrowings increased 7 basis points from the comparable prior period. For the first six months of 2026, the rate paid on average interest-bearing liabilities decreased 17 basis points as the rate paid on average interest-bearing deposits decreased 14 basis points and the average rate paid on external borrowings decreased 1 basis point. The decrease in the rate paid on average interest-bearing deposits and changes in the rate paid 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 during the periods.

Previous 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.

Current wording

Average interest-bearing deposits increased $740.1 million compared to the prior year quarter and $779.4 million compared to the prior YTD period, including increases in demand deposits, interest checking, savings, and money market for both periods. The average balance of time deposits decreased in the second quarter compared to the prior year, while the average balance increased for the June YTD period as compared to the prior year. The average borrowing balance, which primarily includes borrowings at the Federal Home Loan Banks of New York, Boston, and Indianapolis (collectively, “FHLB”) and securities sold under agreement to repurchase (customer repurchase agreements), decreased $200.5 million for the quarter and $218.0 million for the June YTD period.

Previous 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.

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 a fully tax-equivalent (“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 prepayment, late and other fees and the amortization or accretion of acquired loan purchase discounts and premiums, decreasing loan interest income by $7.2 million for the second quarter and $14.1 million for June YTD period. 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, 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.

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, commercial real estate (“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 Nottingham Trust and ClearPoint Trust divisions 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 $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.

Current wording

Employee benefit services revenues increased $2.5 million, or 7.7%, and $4.4 million, or 6.8%, for the three and six months ended June 30, 2026, respectively, as compared to the equivalent prior year periods. The increases were 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

Wealth management services revenues increased $0.5 million, or 4.8%, as compared to the prior year, reflective of higher average market values of assets under management.

Current wording

Wealth management services revenues increased $1.7 million, or 19.8%, and $2.2 million, or 11.8%, for the three and six months ended June 30, 2026, respectively, reflective of higher average market values of assets under management and revenue growth from the ClearPoint acquisition in the second quarter of 2026.

Previous 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%.

Current wording

The ratio of noninterest revenues to total revenues was 37.6% for the second quarter of 2026 and 37.3% for the first six months of 2026, compared to 37.4% and 38.1% for the prior year’s second quarter and June YTD periods, respectively. The quarterly increase was due to noninterest revenues increasing 12.8%, including the $4.7 million gain on equity securities, while net interest income increased 11.5%. The YTD decrease was due to net interest income increasing 11.8% for June YTD while noninterest revenues increased 8.0%.

Previous 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%.

Current wording

The ratio of operating noninterest revenues to operating revenues (FTE), a non-GAAP measure as defined in the table above, was 36.2% for the quarter and 36.5% for June YTD, compared to 37.2% and 37.9% for the respective prior year periods. The decreases between the quarterly and YTD periods were due to an 11.5% and 11.7% increase, respectively, in fully tax-equivalent net interest income, a non-GAAP measure, while operating noninterest revenues, a non-GAAP measure, increased 6.4% and 5.3%, respectively, excluding the $4.7 million gain on equity securities.

Previous 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).

Current wording

As shown in Table 5, the Company recorded noninterest expenses of $137.7 million for the second quarter of 2026 and $270.8 million for the June YTD period, representing an increase of $8.6 million, or 6.7%, and $16.4 million, or 6.4%, from the respective prior year periods. The change was primarily attributable to an increase in salaries and employee benefits (an increase of $3.4 million for the quarter and $7.3 million YTD), data processing and communications (an increase of $3.0 million for the quarter and $4.7 million YTD), and occupancy and equipment (an increase of $2.4 million for the quarter and $4.6 million YTD). The remaining change to noninterest expenses is attributable to other expenses (an increase of $1.4 million for the quarter and $0.5 million YTD), amortization of intangible assets (an increase of $1.0 million for the quarter and $1.8 million YTD), business development and marketing (a decrease of $1.4 million for the quarter and $2.0 million YTD), acquisition expenses (an increase of $0.1 million for the quarter and $0.5 million YTD), legal and professional fees (a decrease of $0.1 million for the quarter and an increase of $0.2 million YTD), litigation accrual (an increase of $0.3 million for the quarter and $0.4 million YTD), and restructuring expenses (a decrease of $1.5 million for the quarter and YTD).

Previous wording

The increase in salaries and benefits expense for the quarter was primarily driven by incremental costs associated with acquisitions and de novo bank branches opened between the periods, along with the impact of annual merit-based increases. Data processing increases were reflective of the Company’s continued investment in customer-facing and back-office technologies, including artificial intelligence applications and other workflow efficiency initiatives. Increases in occupancy and equipment expenses were primarily due to incremental costs associated with the opening of de novo bank branches and regional headquarters and the Santander branch acquisition. Amortization of intangible assets increased primarily due to the Santander acquisition. The increase in acquisition expenses was driven by the transaction-related costs associated with the pending acquisition of ClearPoint Federal Bank & Trust. The decrease in other expenses includes a $0.5 million benefit from the non-service related components of the Company’s pension.

Current wording

The increase in salaries and benefits expense for the quarter was primarily driven by incremental costs associated with acquisitions and de novo bank branches opened between the periods, along with the impact of annual merit-based increases. Data processing increases were reflective of the Company’s continued investment in customer-facing and back-office technologies, including artificial intelligence applications and other workflow efficiency initiatives. Increases in occupancy and equipment expenses were primarily due to incremental costs associated with the opening of de novo bank branches and regional headquarters and the Santander branch acquisition. Amortization of intangible assets increased primarily due to the Santander and ClearPoint acquisitions. The increase in acquisition expenses was driven by the transaction-related costs associated with the ClearPoint acquisition. The decreases in business development and marketing expenses was attributable to the Company’s efforts to more selectively allocate marketing resources toward channels with higher expected returns.

Previous 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.

Current wording

The Company’s efficiency ratio was 61.7% for the second quarter of 2026, 3.1 percentage points favorable to the comparable quarter of 2025. This resulted from total revenues increasing 12.0%, primarily due to higher net interest income, while total noninterest expenses increased 6.7% due to the factors noted above. The efficiency ratio for June YTD of 62.0% was 2.3 percentage points favorable to the prior June YTD period, resulting from total revenues increasing 10.4% while total noninterest expenses increased 6.4%.

Previous 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%.

Current wording

The Company’s operating efficiency ratio, a non-GAAP measure as defined in the table above, was 60.6% for the second quarter, 1.4 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 9.5% while operating noninterest expenses, a non-GAAP measure as described above, increased 7.0%. The Company’s operating efficiency ratio, a non-GAAP measure, of 60.2% for the June YTD period was 1.8 percentage points favorable to the comparable period of 2025, a result of operating revenues (FTE), a non-GAAP measure as defined in Table 5, increasing 9.3% 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 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.

Current wording

Annualized current quarter noninterest expenses as a percentage of average assets was slightly higher than the prior year as noninterest expenses increased 6.7% and average assets increased 6.2%. Annualized current quarter operating noninterest expenses, a non-GAAP measure as defined in the table above, as a percentage of average assets was consistent with the second quarter of the prior year. 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 and ClearPoint acquisitions.

Previous 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.

Current wording

The second quarter and June YTD effective income tax rate were 24.1% and 23.7%, respectively, as compared to 22.3% and 22.5% for the comparable periods of 2025. The increase in the second quarter and June YTD effective income tax rate is primarily attributable to an increase in certain state income taxes. The second quarter and June YTD tax expense associated with the amortization of income tax credit investments was $0.8 million and $1.9 million, respectively, as compared to $3.0 million and $3.3 million for the comparable periods of 2025. In addition, the tax benefit associated with stock-based compensation for the second quarter of 2026 was immaterial and was $0.7 million for June YTD, as compared to a $0.1 million and $0.6 million tax benefit for the comparable periods of 2025. 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 2026 were 23.1% and 23.0%, respectively, as compared to 18.0% and 20.5% for the comparable periods of 2025. These increases reflect a decrease 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 $4.39 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.

Current wording

The carrying value of investment securities (including unrealized gains and losses) was $4.52 billion at the end of the second quarter, an increase of $117.4 million, or 2.7%, from December 31, 2025 and an increase of $174.1 million, or 4.0%, from June 30, 2025. The book value of investment securities (excluding unrealized gains and losses) of $4.80 billion at the end of the second quarter increased $122.7 million, or 2.6%, from December 31, 2025 and increased $115.9 million, or 2.5%, from June 30, 2025. The increase from the end of the prior year’s second quarter was primarily driven by acquiring $118.1 million of investment securities obtained through the ClearPoint acquisition, which was completed during the second quarter of 2026. Exclusive of the investments acquired from ClearPoint, during the first six months of 2026 the Company purchased $30.9 million of U.S. government agency mortgage-backed securities with an average yield of 4.99%, which the Company classified as held-to-maturity. These additions were offset by $51.3 million of investment maturities, calls and principal payments during the first six months of 2026. Additionally, there was $19.2 million of net accretion of discounts on investment securities during the first six months of 2026. The effective duration of the investment securities portfolio was 5.0 years at the end of the second quarter of 2026, as compared to 5.8 years at the end of the second 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 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.

Current 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, 2026, the investment portfolio (excluding held-to-maturity investment securities) had a $276.4 million net unrealized loss, a $5.2 million increase from the $271.2 million net unrealized loss at December 31, 2025 and a $58.3 million decrease from the $334.7 million net unrealized loss at June 30, 2025. These changes were principally driven by the general movements in medium to long-term interest rates, as well as the volume and yields associated with the securities purchases and maturities that occurred during the 12 months.

Previous 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.

Current wording

Loans ended the second quarter at $11.28 billion, $333.1 million, or 3.0%, higher than December 31, 2025 and $763.7 million, or 7.3%, higher than June 30, 2025 ending loans.

Previous 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.

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 $499.4 million, or 11.0%, from June 30, 2025, and $306.8 million, or 6.5%, from December 31, 2025, driven by organic growth over both periods. As compared to December 31, 2025, multifamily increased $34.3 million, or 3.7%, business non-real estate loans, including commercial and industrial lending, increased $74.2 million, or 5.8%, non-owner occupied CRE increased $177.7 million, or 10.6%, and owner occupied CRE increased $20.5 million, or 2.4%. The Company’s non-owner occupied CRE exposure (including multifamily) remains diverse both geographically and by property type, and remains relatively low at 16% of total assets, 25% of total loans and 201% of total bank-level regulatory capital. CRE lending represents 73.3% of the total business lending portfolio at June 30, 2026, compared to 73.1% at December 31, 2025 and 72.7% at June 30, 2025. Other commercial and industrial lending represents the remaining 26.7% of total business lending at June 30, 2026, compared to 26.9% at December 31, 2025 and 27.3% at June 30, 2025. The Company’s largest non-owner occupied CRE lending concentration by property type is multifamily at 25.8% of total CRE lending, followed by office and lodging, at 10.6% and 9.7%, respectively. The Company’s largest owner occupied lending concentration by industry is retail trade at 7.0% of total CRE lending, followed by manufacturing and arts, entertainment and recreation that comprise 2.9% and 2.5%, respectively, of total CRE lending. These levels demonstrate the Company’s diversity in the lending portfolio, as there are no significant industry concentrations as noted above, and minimal geographic concentrations, as reflected by 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.

Previous wording

The business loan balance increases are reflective of continued high demand for multi-family housing, expansion of internal resources and proactive business development and pricing in the Company’s market areas, as well as the Company’s strong liquidity profile relative to competitors that creates opportunities to gain market share. The Company strives to generate growth in its business portfolio in a manner that adheres to its goals of maintaining strong credit quality and producing profitable margins. The Company continues to invest in additional personnel, technology and business development resources to further strengthen its capabilities in this important product category. To assist business lending customers in managing their interest rate risk, the Company enters into interest rate swaps which have associated interest rate and credit risk; for additional detail on the Company’s use of interest rate swaps, see Note J beginning on page 29 of this Form 10-Q.

Current wording

The business loan balance increases are reflective of continued high demand for non-owner occupied CRE, expansion of internal resources and proactive business development and pricing in the Company’s market areas, as well as the Company’s strong liquidity profile relative to competitors that creates opportunities to gain market share. The Company strives to generate growth in its business portfolio in a manner that adheres to its goals of maintaining strong credit quality and producing profitable margins. The Company continues to invest in additional personnel, technology and business development resources to further strengthen its capabilities in this important product category. To assist business lending customers in managing their interest rate risk, the Company enters into interest rate swaps which have associated interest rate and credit risk; for additional detail on the Company’s use of interest rate swaps, see Note J beginning on page 32 of this Form 10-Q.

Previous 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.

Current wording

Consumer mortgages increased $106.3 million, or 3.0%, from one year ago (including $4.1 million acquired in the Santander transaction) and increased $12.1 million, or 0.3%, 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 $16.7 million and $34.5 million of consumer mortgage production during the second quarter and June YTD periods, respectively, as compared to $16.6 million and $34.1 million in the comparable prior year periods. 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 $45.0 million, or 9.1%, from one year ago (including $16.9 million acquired in the Santander transaction) and increased $5.4 million, or 1.0%, 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 $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.

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 $113.0 million, or 5.8%, from one year ago (including $9.3 million acquired in the Santander transaction), and increased $8.8 million, or 0.4%, 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, 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.

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 second quarter was $91.7 million, an increase of $9.8 million, or 12.0%, from one year earlier and an increase of $3.8 million, or 4.3%, 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 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.

Current wording

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 June 30, 2026 was consistent with December 31, 2025 and June 30, 2025.