CBU 10-K & 10-Q changes, risk factors and insider trading

The Company’s liquidity and ability to fund and run its business could be materially adversely affected by a variety of conditions and factors, including financial and credit market disruptions and volatility, a lack of market or customer confidence in financial markets in general, or deposit competition based on interest rates, which may result in a loss of customer deposits or outflows of cash or collateral and/or adversely affect the Company’s ability to access capital markets on favorable terms. Other conditions and factors that could materially adversely affect the Company’s liquidity and funding include a lack of market or customer confidence in, or negative news about, the Company or the financial services industry generally which also may result in a loss of deposits and/or negatively affect the Company’s ability to access the capital markets; the loss of customer deposits due to reductions in customer savings rates, increased spending due to inflation, or other factors including shifting to alternative investments such as stablecoins; counterparty availability; interest rate fluctuations; general economic conditions; and the legal, regulatory, accounting and tax environments governing the Company’s funding transactions. The possibility of a funding crisis exists at all financial institutions. A funding crisis would most likely result from a shock to the financial system that disrupts orderly short-term funding operations or from a significant tightening of monetary policy that limits the national money supply. Many of the foregoing conditions and factors may be caused by events over which the Company has little or no control. There can be no assurance that significant disruption and volatility in the financial markets will not occur in the future. Further, the Company’s customers may be adversely impacted by such conditions, which could have a negative impact on the Company’s business, financial condition and results of operations.

The deterioration of the commercial real estate market across the nation may negatively affect the economies where the Company operates and may result in customers engaged in the commercial real estate having greater difficulties fulfilling their financial responsibilities to the Company. The macroeconomic environment driving these conditions include elevated interest rates, increases in property expenses, such as casualty insurance, decreases in rents, and increases in vacancy rates, particularly for office real estate. This could lead to a material adverse effect on the Company’s financial condition and results of operations through resulting increases in the Company’s allowance for credit losses, provision for credit losses and net charge - offs.charge-offs.

Regulatory agencies, including the CPFB,agencies may introduce new regulatory initiatives or pursue more aggressive enforcement policies with respect to a range of regulatory compliance matters. Regulators continue to focus on consumer protection, including product design and pricing constructs, account management and security, credit bureau reporting, disclosure rules, marketing and debt collection practices. New initiatives by applicable regulatory agencies may significantly limit the types and the terms of the products the Company may offer and the fees it may charge for its services which may have a material impact on the Company’s fee income. Any new requirements or increased enforcement of existing requirements could materially and adversely impact the Company’s revenue growth and profitability, including, as a result of increased scrutiny of pricing, underwriting and account management practices; the imposition of fines and customer remediation; higher compliance costs; reputational harm; restrictions on the Company’s ability to offer certain products or services, appropriately price for the value of products or work with certain business partners; and changes to business practices generally. The Company may also be required to add additional compliance personnel or incur other significant compliance-related expenses. The Company’s business, results of operations or competitive position may be adversely affected as a result.

Regulation in the areas of privacy, data protection, data management, resiliency, data transfer, third partythird-party oversight, account access, artificial intelligence and machine learning and information security and cybersecurity could increase the Company’s costs and affect or limit business opportunities and how the Company collects and/or uses personal information.

Legislators and regulators are increasingly adopting or revising privacy, data protection, data management, resiliency, data transfer, third partythird-party oversight, account access, artificial intelligence (“AI”) and machine learning and information security and cybersecurity laws, including data localization, authentication and notification laws. As such laws are interpreted and applied (in some cases, with significant differences or conflicting requirements across jurisdictions), compliance and technology costs will continue to increase, particularly in the context of ensuring that adequate privacy, data protection, data management, incident management, resiliency, third partythird-party management, data transfer, security controls, account access mechanisms and controls related to artificial intelligence and machine learning are in place. Additionally, new laws and regulations related to automated decision making, artificial intelligence and machine learning as well as the application of existing laws and regulations to these technologies may restrict or impose burdensome and costly requirements on the Company’s ability to use them or impact other aspects of the Company’s business.

The Company relies heavily on existing and emerging communications and information systems to conduct its business. Like other financial services businesses, the Company and its third - partythird-party service providers have been the victim of sophisticated and targeted cyberattacks intended to obtain unauthorized access to assets or confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, ransomware, phishing attacks, cyber-attacks, or breaches due to errors or malfeasance by employees, contractors and others who have access to or obtain unauthorized access to the Company’s systems and networks. Although the Company and its service providers regularly defend against, respond to and mitigate the risks of cyberattacks, cybersecurity incidents among financial services businesses and industry generally are on the rise. The Company is not aware of any material losses it has incurred relating to cyberattacks or other information security breaches.

The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time. Cyberattacks can originate from a variety of sources, including foreign governments and third-parties affiliated with them, organized crime or terrorist organizations, and malicious individuals both outside and inside a targeted company, including through use of relatively new AI tools or methods that can be used to create deepfakes for impersonation or to enable attack campaigns more quickly and effectively. The constantly changing nature of the threats means that the Company may not be able to prevent all data security breaches or misuse of data. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company’s online banking system, its general ledger, and its deposit and loan servicing and origination systems or other systems. Furthermore, if personal, confidential or proprietary information of customers or clients in the Company’s or third-party service providers’ possession were to be mishandled or misused, the Company could suffer significant regulatory consequences, reputational damage and financial loss. Such mishandling or misuse could include circumstances where, for example, such information was erroneously provided to parties who are not permitted to have the information, either by fault of the Company’s systems, employees, or counterparties, or where such information was intercepted or otherwise inappropriately taken by third parties. The Company has policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of its information systems; however, any such failure, interruption or security breach could adversely affect the Company’s business and results of operations through loss of assets or by requiring it to expend significant resources to correct the defect, as well as exposing the Company to customer dissatisfaction and civil litigation, regulatory fines or penalties or losses not covered by insurance.

Third partyThird-party service providers provide key components of the Company’s business infrastructure, including certain data processing, cloud computing, and information services. On behalf of the Company, third parties may transmit confidential, propriety information. Although the Company requires third partythird-party providers to maintain certain levels of information security which are verified through review of documentation collected as part of due diligence and ongoing monitoring of third-party providers, such providers may remain vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious attacks that could ultimately compromise sensitive information or result in funds being transferred. While the Company may contractually limit liability in connection with attacks against third partythird-party providers, the Company remains exposed to the risk of loss associated with such third-party service providers. In addition, a number of the Company’s third-party service providers are large national entities with dominant market presence in their respective fields. Their services could prove difficult to replace in a timely manner if a failure or other service interruption were to occur. Failures of certain third-party service providers to provide contracted services could adversely affect the Company’s ability to deliver products and services to customers and cause the Company to incur significant expense.

The Company’s main markets are currently located in the states of New York, Pennsylvania, Vermont, Massachusetts, and New Hampshire. Most of the Company’s customers are individuals and small and medium-sized businesses which are dependent upon the regional economy. Accordingly, the local economic conditions in these areas have a significant impact on the demand for the Company’s products and services as well as the ability of the Company’s customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding sources. An economic downturn in these markets could negatively impact the Company.

General political, economic, and social conditions in the U.S. and in countries abroad affect markets in the U.S. and ultimately the Company’s business. In particular, U.S. markets may be affected by the newcurrent government administration,administration and the domestic political environment, including but not limited to government agency staff reductions and related operating issues, uncertainty related to policy changes that directly or indirectly impact consumer spending and business investment, the level and volatility of interest rates, availability and market conditions of financing, economic growth, historically high levels of inflation, supply chain disruptions, consumer spending, employment levels, labor shortages, wage escalation or stagnation, changes in home prices, commercial property values, the growth of global trade and commerce, the availability and cost of capital and credit, and investor sentiment and confidence. Additionally, U.S. energy and commodity markets may be adversely affected by the current or anticipated impact of climate change, extreme weather events or natural disasters, the emergence or continuation of widespread health emergencies or pandemics, cyberattacks or campaigns, military conflict, terrorism or other geopolitical events. The scarcity or unavailability of affordable casualty insurance on consumers’ homes and autos, as well as businesses’ property, plant, and equipment, would impair asset prices and have a negative impact on economic activity and growth. Also, any sudden or prolonged market downturn in the U.S., as a result of the above factors or otherwise, could result in a decline in net interest income and noninterest income and adversely affect the Company’s results of operations and financial condition, including capital and liquidity levels. The economic developments in connection with the pandemic, including supply chain disruptions, increased inflation, changes to the Company’s customers’ industries, and the potential emergence of pandemics and other health crises in the U.S. and abroad have adversely impacted and may continue to adversely impact financial markets and macroeconomic conditions and could result in additional market volatility and disruptions globally.

Actions taken by the Federal Reserve Board,FRB, including changes in its target funds rate, balance sheet management, and lending facilities are beyond the Company’s control and difficult to predict. These actions can affect interest rates and the value of financial instruments and other assets and liabilities and can impact the Company’s borrowers. Sudden changes in monetary policy, for example in response to high inflation, could lead to financial market volatility, increases in market interest rates, and a flattening or inversion of the yield curve. For example, higher inflation, or volatility and uncertainty related to inflation, could reduce demand for the Company’s products, adversely affect the creditworthiness of the Company’s borrowers, or result in lower values for the Company’s investment securities and other interest-earning assets.

RecentCertain negative developments affecting the banking industry have eroded customer confidence in the banking system and may have adverse impacts on the Company’s business.

The Company anticipates increased regulatory scrutiny, within the course of routine examinations and new regulations designed to address the recentcertain negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability.

Unless otherwise noted, all earnings per share (“EPS”) figures disclosed in the MD&A refer to diluted EPS. The term “this year” and equivalent terms refer to results in calendar year 2024,2025, “last year” and equivalent terms refer to calendar year 2023,2024, and all references to income statement results correspond to full-year activity unless otherwise noted. For a discussion of 2024 results as compared with 2023 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2024.

This MD&A contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are provided under the caption “Forward-Looking Statements” beginning on page 76.70.

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-retirementpost-retirement, and other employee benefit plans; and the carrying value of goodwill and other intangible assets. A summary of the significant accounting policies used by management is disclosed in Note A, “Summary of Significant Accounting PoliciesPolicies,”, starting on page 89.83.

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 conditionsconditions, 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 vintagevintage, and payment structure. The Company utilizes three methods for calculating the ACL: cumulative loss, vintage lossloss, 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-specificportfolio risk characteristics such as differences in underwriting standards, portfolio mix, acquisition status, current levels of delinquencies, net charge-offscharge-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, upsideupside, and downside forecasts. During 2024,2025, the Company updated the ACL model to add 20232024 loss history results into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures; updatedadjusted the ACLweighting modelof the three economic scenarios, increasing the weight for the downside scenario from 30% to incorporate office property-specific price forecasts40% and officedecreasing property-specificthe vacancyweight forecastsof the upside scenario from 30% to provide20%, greaterto precisioncapture additional economic uncertainty; and increased reserves for business lending to capture additional risk in the portfolio due to the model; applied an additional qualitative overlay to the factor for volume and size of business lending loans and risk rating trends to capture future loss expectationsincrease in thatlarger portfolio;individual and utilized the current quarter levels of risk ratingsexposures in the qualitative factor calculation, rather than a four-quarter average, to more precisely capture the risk profile of the current business lending portfolio. 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 $9.3 million as compared to the prior factor in use at December 31, 2024.

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%, 30%,20%, and 30%,40%, respectively. The scenario-weighted average unemployment rate and gross domestic product (“GDP”) growth forecasts used in the ACL model at December 31, 20242025 were 4.8%5.5% and 1.8%,1.3%, respectively, compared to 4.5%4.8% and 1.7%1.8% at December 31, 2023,2024, respectively. The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, elevated inflation, a peak unemployment rate of 8.3%8.4% and an average unemployment rate of 6.9%.7.1%. The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the year ended December 31, 20242025 by approximately $4.7$3.8 million, and decrease net income by $3.5$2.8 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 concurrentat withthe changingsame time that economic conditions,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 partythird-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, resultsis 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 sensitivesensitive, to fluctuations in historical and projected national economic activity. Further details regarding the methodologies applied to estimate the various components of the ACL are provided in Note A, “Summary of Significant Accounting PoliciesPolicies,”, starting on page 89.83.

The Company provides a qualified defined benefit pension to eligible employees and retirees, other post-retirement health and life insurance benefits to certain retirees, an unfunded supplemental pension plan for certain key executives and an unfunded stock balance plan for certain of its nonemployee directors. The benefit obligations for the pension and post-retirement benefits plans require significant management judgment. The assumptions used in calculating the benefit obligation include the discount rate, expected return on plan assets, rate of compensation increase and interest crediting rates. The discount rate was determined based upon the yield on high-quality fixed income investments expected to be available during the period to maturity of the pension benefits. The expected long-term rate of return was estimated by taking into consideration asset allocation, long-term capital market assumptions, reviewing historical returns on the type of assets held and current economic factors. Mortality tables are also utilized in calculating the benefit obligation, the selection of which is based on management judgment. The Company analyzed the sensitivity of the discount rate and the expected long-term rate of return on plan assets on the pension benefit obligation and net periodic pension cost. At December 31, 2024,2025, a decrease in the discount rate of 100 basis points would increase the pension benefit obligation by $11.6$11.3 million, while an increase in the discount rate of 100 basis points would decrease the pension benefit obligation by $9.8$9.5 million. For the year ended December 31, 2024,2025, a decrease in the discount rate of 100 basis points would reduce the net periodic pension income by $1.2$0.7 million, while an increase in the discount rate of 100 basis points would increasedecrease the net periodic pension income by $0.7$0.2 million. A decrease in the expected long-term rate of return on plan assets of 100 basis points would reduce the net periodic pension income by $2.6$2.7 million, while an increase of 100 basis points would increase net periodic pension income by $2.6$2.7 million. Further detail on the assumptions used and a comparison between 20242025 and 20232024 assumptions is included in Note J,K, “Pension and Other Benefit Plans”, starting on page 123.119.

The initial carrying value of goodwill is impacted by the initial carrying value of intangible assets including core deposit intangibles, customer relationship intangibles and acquired loans that are recorded at their fair value as of the date of acquisition. Management judgment and estimates are involved in determining the initial and ongoing carrying value of goodwill and other intangible assets. Initial and ongoing carrying values require the assessment of fair value based on discounted cash flow modeling techniques and inputs such as discount rates, required equity market premiums, peer stock price volatility indicatorsmetrics and company-specific risk indicators. Core deposit intangibles and customer relationship intangibles are amortized on either an accelerated or straight-line basis over periods ranging from seven to 20 years, based on management judgment.

The Company evaluates goodwill for impairment on an annual basis and performs a quarterly analysis to determine if any triggering events have occurred that would require an interim evaluation. In accordance with FASB ASC 350, the Company evaluates whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, and performs either a qualitative or quantitative assessment, depending on circumstances and management judgment. The qualitative assessment requires significant management judgment, and if the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is not lessgreater than its carrying value, no quantitative analysis is necessary. The inputs for the qualitative analysis that require management judgment include macroeconomic conditions, industry and market conditions, financial performance of the reporting unit and other relevant events that affect the fair value of a reporting unit.

During 2024,2025, the Company performed qualitativequantitative goodwill analyses for all of the Company’s operating segments. The inputs for the qualitativequantitative analyses that require management judgment include macroeconomicdetermination conditions,of industrythe anddiscount marketrate, conditions,forecasted financial performance of the operatingbusiness unitentity, macroeconomic and industry conditions, and other relevant factorsevents that affect the fair value of athe reporting unit, including an assessment of the quantitative goodwill analysis performed as of October 1, 2023.unit. Based on the Company’s annual qualitative impairment analysis of goodwill as of October 1, 2024,2025, it was determined that it was more likely than not that the fair value of each reporting unit was in excess of its respective carrying value, therefore goodwill was not impaired. The Company also performs sensitivity analyses around assumptions for key inputs including the discount rates in order to assess the reasonableness of the assumptions utilized. AThe fair value-weighted average discount rate used for the October 1, 2025 quantitative assessment was 10.4%, compared to 11.1% for the October 1, 2023 assessment. As of October 1, 2025, a 100 basis point increase in the discount rates used in each operating segment model would reduce estimated entity level fair value in total by approximately $275.1$361.2 million at the October 1, 2023 valuation date and was determined it would more likely than not result in no impairment of goodwill, as each reporting unit’s fair value would still exceed its carrying value.

The Company also provides supplemental reporting of its results on an “operating” or “tangible” basis. During the first quarter of 2024, the Company modified the presentation of its non-GAAP operating results to exclude amortization of intangible assets which the Company believes better reflects core performance across its segments and enhances comparability to both banking and non-banking organizations. The prior period has been recast to conform to the current period presentation. Results on an “operating” basis exclude the after-tax effects of acquisition expenses, acquisition-related contingent consideration adjustments, litigation accrual, restructuring expenses, gain on debt extinguishment, loss on sales of investment securities, unrealized gain (loss) on equity securities and amortization of intangible assets. Results on a “tangible” basis exclude goodwill and intangible asset balances, net of accumulated amortization and applicable deferred tax amounts. Although these items are non-GAAP measures, the Company’s management believes this information helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisitionsacquisition 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, restructuring expenses, gain on debt extinguishment, loss on sales of investment securities, unrealized gain (loss) on equity securities and amortization of intangible assets from income before income taxes. Although operating pre-tax, pre-provision net revenue is a non-GAAP measure, the Company’s management believes this information helps investors and analysts measure and compare the Company’s performance through a credit cycle by excluding the volatility in the provision for credit losses associated with theCurrent impactExpected ofCredit CECL,Loss (“CECL”) allowance methods, helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisitionsacquisition 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 liabilities.profiles. Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in Table 20.

The Company’s business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services, including employee benefit services, insurance servicesservices, and wealth management services, to retail, commercial, institutionalinstitutional, and governmental customers. The Company’s banking subsidiary is Community Bank, N.A. (the “Bank” or “CBNA”). The Company’s Benefit Plans Administrative Services, Inc. (“BPAS”) subsidiary is a leading provider of employee benefits administration, trust services, collective investment fund administrationadministration, and actuarial consulting services to customers on a national scale. In addition, the Company offers comprehensive financial planning, trust administration and wealth management services through its WealthNottingham ManagementFinancial Group operating unit and insurance services through its OneGroup NY, Inc. (“OneGroup”) operating unit.subsidiary.

The Company’s core operating objectives are: (i) maintain diverse revenue streams to achieve positive operating results in all four of the Company’s business units: banking and corporate, employee benefit services, insurance services, and wealth management services, (ii) utilize technology to deliver customer-responsive products and services and improve efficiencies, (iii) increase the noninterest component of total revenues through both organic and acquisition strategies, (iviii) optimize the branch network and digital banking delivery systems, primarily through disciplined acquisition strategies, de novo expansions and divestitures/consolidations, (viv) build profitable loan and deposit volumebases using both organic and acquisition strategies, (v) utilize technology to deliver customer-responsive products and services and improve efficiencies, and (vi) manage an investment securities portfolio to complement the Company’s loan and deposit strategies and mitigate interest rate and liquidity risk and optimize net interest income generation.

Significant factors reviewed by management to evaluate achievement of the Company’s operating objectives andobjectives, results and financial condition include, but are not limited to: net income and earnings per share; return on assets and equity; components of net interest margin; noninterest revenues; noninterest expenses; asset quality metrics; loan and deposit growth; capital management; performance of individual banking and financial services units; performance of specific product lines and customers; liquidity and interest rate sensitivity; enhancements to customer products and services and their underlying performance characteristics; technology advancements; market share; peer comparisons; the performance of recently acquired businesses and the performance of recently opened and consolidated branch offices.

The Company reported net income of $182.5$210.5 million for the year ended December 31, 20242025 that was $50.6$28.0 million, or 38.3%,15.3%, above the prior year, while earnings per share of $3.44$3.97 for the year was $0.99,$0.53, or 40.4%,15.4%, above the prior year. The increases in net income and earnings per share includedwere theprimarily impactdriven ofby increases in net interest income and noninterest revenues and a $52.3 million pre-tax realized loss on sales of investment securitiesdecrease in the firstprovision quarterfor ofcredit 2023losses, aspartially partoffset ofby aincreases balancein sheetnoninterest repositioning.expenses and income taxes. Income taxes increased in 2025 driven by increases in pre-tax income and certain state income tax rates.

Net interest income increased to $449.1$506.6 million in 2024,2025, ana $11.8$57.4 million, or 2.7%,12.8%, increase from the prior year, marking the eighteenthnineteenth consecutive year of net interest income growth. The increase in 20242025 was primarily due to increases in the yield on average interest-earning assets and average loan balances, partiallyalong offsetwith by higherlower funding costs. The provision for credit losses of $21.4 million in 2025 decreased $1.4 million, or 6.2%, from 2024 as the Company's asset quality metrics improved in 2025 compared to the slight degradation experienced in 2024 that increased the prior year's provision for credit losses. Noninterest revenues also increased to $311.5 million in 2025, a $14.3 million, or 4.8%, increase from 2024, with record results in all four operating segments: ofbanking banking,and corporate, employee benefit services, insurance servicesservices, and wealth management services.

Net interest margin for full year 20242025 of 3.04%3.29% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.07%3.31% bothincreased decreased seven25 basis points and 24 basis points, respectively, from the priorfull year period.2024. The yield on average interest earning assets increased 5118 basis points compared to the prior year, asprimarily thedriven yieldsby onhigher averageloan loans, investments and interest-earning cash equivalents all improved.yields. The Company’s total cost of funds increaseddecreased 617 basis points from the prior year as the rate paid on interest-bearing deposits and borrowings both increased.decreased.

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 higherorganic governmentalgrowth in non-governmental deposit balances,balances reflectiveand the $543.7 million of competitivedeposits offerings and expansion of its governmental deposit relationship base dueassumed in part to the Company’sSantander businessbranch development efforts.acquisition. Average and ending external borrowings in 20242025 increaseddecreased from 20232024 asreflective theof Companygrowth securedin certaindeposit fixedbalances rateoutpacing Federalloan Homegrowth, Loan Bank (“FHLB”) term borrowings during the year to supportincluding the funding ofprovided continuedfrom loanthe growthSantander thatbranch resulted in earning asset growth that outpaced deposit growth.acquisition.

Operating net income, a non-GAAP measure, of $193.9$225.1 million, increased $1.2$31.2 million, or 0.6%,16.1%, compared to the prior year, while operating earnings per share, a non-GAAP measure, of $3.65$4.24 increased $0.08,$0.59, or 2.2%,16.2%, from last year. Operating pre-tax, pre-provision net revenue (“PPNR”), a non-GAAP measure, of $273.6$315.3 million, increased $17.2$41.7 million, or 6.7%,15.3%, compared to 2023,2024, while operating PPNR per share, a non-GAAP measure, of $5.15,$5.94, increased $0.39,$0.79, or 8.2%,15.3%, compared to the prior yearyear, demonstrating improvement in the Company’s core operating performance between the periods.

Net income for 20242025 was $182.5$210.5 million, an increase of $50.6$28.0 million, or 38.3%,15.3%, from 2023.2024. Earnings per share for 20242025 was $3.44,$3.97, an increase of $0.99,$0.53, or 40.4%,15.4%, from 2023’s2024’s results. NetThese income and earnings per share for 2023increases were unfavorablyachieved impacteddespite bythe impacts from certain notable non-operating itemsitems, including a $52.3$3.7 million pre-tax realized loss on the sales of investmentacquisition securities, a $5.8 million litigation accrualexpenses associated with athe threatenedacquisition collectiveof seven branch locations from Santander and class action matter that was settled in 2024, $3.3 million of acquisition-related contingent consideration adjustments associated with potential future contingent consideration payments for the FBD and TGA acquisitions completed in 2021, and $1.2$1.5 million of restructuring expenses linkedassociated towith severance payments as part of a retail workforce optimization strategy.plan due to planned branch consolidations and other operational initiatives. Operating net income, a non-GAAP measure, of $193.9$225.1 million, increased $1.2$31.2 million, or 0.6%,16.1%, compared to the prior year, while operating earnings per share, a non-GAAP measure, of $3.65$4.24 increased $0.08,$0.59, or 2.2%,16.2%, from last year. Operating PPNR, a non-GAAP measure, of $273.6$315.3 million, increased $17.2$41.7 million, or 6.7%,15.3%, compared to 2023,2024, while operating PPNR per share, a non-GAAP measure, of $5.15,$5.94, increased $0.39,$0.79, or 8.2%,15.3%, compared to the prior year demonstrating improvement in the Company’s noncredit-relatednon-credit and non-income tax-related operating performance between the periods. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures.

The Company operates four businesses: Banking, Employee Benefit Services, Insurance Services and Wealth Management Services. These businesses are aggregated into the following four reportable segments: Banking and Corporate, Employee Benefit Services, Insurance Services and Wealth Management Services. The Banking and Corporate segment provides a wide array of lending and depository-related products and services to individuals, businesses, and governmental units with branch locations in Upstate New York as well as Northeastern Pennsylvania, VermontVermont, Western Massachusetts, and WesternSouthern Massachusetts.New Hampshire. In addition to these general intermediation services, the Banking and Corporate segment provides treasury management solutions and payment processing services. The Banking and Corporate segment also holds and manages the Company’s investment and borrowing portfolios and includes certain banking support and corporate overhead-related expenses. Employee Benefit Services, consisting of BPAS and its subsidiaries, provides the following on a national basis: employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, and health and welfare consulting services. BPAS services more than 6,10010,000 benefit plans with approximately 910,000960,000 plan participants and supports $117.3$132.1 billion in employee benefit trust assets as of December 31, 2024.2025. In addition, BPAS employs 459479 professionals serving clients in every U.S. state plus the Commonwealth of Puerto Rico, and occupies 1617 offices located in New York, Pennsylvania, Massachusetts, New Jersey, Texas, Minnesota, South Dakota, Washington, FloridaFlorida, and Puerto Rico. The Insurance Services segment includes the operating subsidiary OneGroup, a full-service insurance agency offering personal and commercial lines of insurance and other risk management products and services. The Insurance Services segment includes 267256 employees and 2223 customer service facilities in New York, Pennsylvania, Massachusetts, South CarolinaCarolina, and Florida. Wealth Management Services include trust services provided by Nottingham Trust, a division of CBNA, broker-dealer and investment advisory services provided by CommunityNottingham Investment Services, Inc. (“CISI”), The Carta Group, Inc. (“Carta GroupNISI”) and OneGroupNottingham Wealth Partners, Inc. (“Wealth Partners”), as well as asset management provided by Nottingham Advisors, Inc. (“Nottingham”). The Wealth Management Services segment includes 113109 employees and assets under management or administration of $13.2$14.0 billion at the end of 2024.2025. For additional financial information on the Company’s segments, refer to Note SU – Segment Information in the Notes to Consolidated Financial Statements.

Return on average assets, return on average equity, dividend payoutpayout, and average equity to average asset ratios for the years indicated are as follows:

As displayed in Table 2, the 20242025 return on average assets ratio increased 2712 basis points, while the return on average equity ratio increased 24953 basis points as compared to 2023.2024. The increase in the return on average assets was the result of an increase in net income thatprimarily was impacteddriven by anet $52.3interest millionincome pre-tax realized loss on sales of investment securities in the prior year,growth, partially offset by an increase in average assets driven by strong organic loan growth.and deposit growth, securities purchases, and deposit funding from the Santander acquisition. The return on average equity ratio increased in 20242025 as net income increased,increased whichat wasa impactedhigher byrate thethan aforementionedaverage lossequity. onThe salesincrease of investment securities, whilein average equity increasedwas driven by an increase in retained earnings and a decrease in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio. The return on average assets ratio in 2023 decreased 34 basis points from 2022, while the return on average equity ratio decreased 258 basis points as compared to 2022, primarily as a result of a decrease in net income impacted by the aforementioned loss on sales of investment securities. This was partially offset by a decrease in average assets, primarily related to the sales and maturities of certain lower-yielding available-for-sale investment securities, partially offset by strong organic loan growth during the year. The return on average equity ratio decreased in 2023 as net income decreased, which was impacted by the aforementioned loss on sales of investment securities, which was only partially offset by a decrease in average equity due primarily to an increase in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio.

The dividend payout ratio for 20242025 of 52.6%46.6% decreased from 72.4%52.6% in 20232024 driven by a 38.3%15.3% increase in net income andoutpacing athe 0.5%2.2% increase in dividends declared. The increase in dividends declared in 20242025 was a result of a 2.2% increase in the dividends declared per share, partially offset by a 1.2% decrease inwhile common shares outstanding were consistent as aissuances resultassociated ofwith employee stock plans were offset by share repurchases during the year. The dividend payout ratio for 2023 of 72.4% increased from 49.9% in 2022 driven by a 29.9% decrease in net income, which was impacted by the aforementioned loss on sales of investment securities, and a 1.7% increase in dividends declared. The increase in dividends declared in 2023 was a result of a 2.3% increase in the dividends declared per share, partially offset by a 0.8% decrease in common shares outstanding as a result of share repurchases during the year.

Net interest income is the amount by which interest, dividendsdividends, and fees on interest-earning assets (loans, investments and cash equivalents) exceeds the cost of funds, which consists primarily of interest paid to the Company’s depositors and interest paid on borrowings. Net interest margin is the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities as a percentage of interest-earning assets.

Net interest income totaled $449.1$506.5 million in 2024,2025, an increase of $11.8$57.4 million, or 2.7%,12.8%, from the prior year. As disclosed in Table 3, fully tax-equivalent net interest income, a non-GAAP measure, totaled $452.8$510.1 million in 2024,2025, an increase of $11.3$57.2 million, or 2.6%,12.6%, from the prior year. The increase is a result of aan 5118 basis point increase in the yield on average interest-earning assets andassets, a $676.8$638.9 million, or 4.8%,4.3%, increase in average interest-earning asset balances,balances partially offset byand a 7610 basis point increasedecrease in the rate paid on average interest-bearing liabilitiesliabilities, andpartially anoffset $871.4by a $546.6 million, or 9.0%,5.2%, increase in average interest-bearing liability balances. As reflected in Table 4, the favorable impactimpacts of the increasesincrease in average interest-earnings asset balances ($28.6 million), the increase in the yield on average interest-earning assets ($74.4$26.9 million) and average interest-earnings asset balances ($27.2 million) were partially offset by the unfavorable impacts of the increasesdecrease in the rate paid on average interest-bearing liabilities ($80.2$11.5 million) andwere partially offset by the unfavorable impact of the increase in average interest-bearing liability balances ($10.1$9.8 million).

The 20242025 net interest margin decreasedincreased seven25 basis points to 3.04%3.29% from 3.11%3.04% reported in 2023,2024, while the fully tax-equivalent net interest margin, a non-GAAP measure, alsoincreased decreased seven24 basis points to 3.07%3.31% from the 3.14%3.07% reported in the prior year. These decreasesincreases were the result of aan 76 basis point increase in the rate paid on average interest-bearing liabilities, partially offset by a 5118 basis point increase in the yield on interest-earning assets and a higher10 proportionbasis ofpoint thosedecrease assetsin beingthe comprisedrate ofpaid higheron yieldingaverage loaninterest-bearing balances due to strong organic loan growth.liabilities. The increases in the yield on interest-earnings assets and decrease in the rate on interest-bearing liabilities were primarily due to an increase in the impactproportion of higher rate loans originated over recent periods, the maturity of lower rate investment securities and purchase of higher rate investment securities, and a decrease in market rates duringon mostborrowings ofand 2024.deposits. The 5.43%5.64% yield on average loans in 20242025 increased 5921 basis points as compared to 4.84%5.43% in 20232024, reflectivedriven by the change in proportion of higher interestloan rates onas newdiscussed and adjustable rate loans during the year.above. The yield on investments, including cash equivalents, of 2.15%2.13% in 20242025 was 105 basis points higher than 20232024 primarily due to higher yields on investment purchases during the year and maturities, pre-payments, and calls on certain lower yielding available-for-sale securities, partially offset by the favorable impact higherof lower market rates had on the yield earned on cash equivalents. The cost of interest-bearing liabilities was 1.84%1.74% during 20242025 as compared to 1.08%1.84% for 2023.2024. The increaseddecreased cost reflects the 724 basis point increasedecrease in the rate paid on average deposits and the 15 basis point lower average rate paid on borrowings due in part to a shift in deposit mix as customers respondedprimarily to changes in market interest rates byas movingwell fundsas intolower higherlevels yieldingof account types and the 83 basis point higher average rate paid onovernight borrowings in 2024 that included the impact of $250.0 million of FHLB term borrowings secured during 2024.2025.

Total interest income increased by $102.1$55.7 million, or 18.9%,8.7%, while as shown in Table 3,3 on page 47, total FTE-basis interest income, a non-GAAP measure, increased by $101.6$55.6 million, or 18.6%,8.6%, in 20242025 compared to the prior year. Average loans increased $849.0$524.7 million, or 9.2%,5.2%, in 2024.2025. This increase was driven primarily by organic growth in all of the Company’s five main portfolios - business lending, consumer mortgage, consumer indirect, home equity and consumer direct. Included in this increase was $31.9 million of loans acquired from Santander in the fourth quarter of 2025 as part of a branch acquisition. Loan interest income and fees increased $100.6$50.9 million, or 22.6%,9.3%, while FTE-basis loan interest income and fees, a non-GAAP measure, increased $100.7$51.0 million, or 22.6%,9.3%, in 20242025 as compared to 2023.2024. These increases were attributable to the aforementioned higher average loan balances and the impact of a 5921 basis point higher loan yield, as the yield primarily due to higher interest rates on new andvolume adjustablecontinued rateto loans duringoutpace the year.yield on loan paydowns and maturities. Investment and interest-earning cash interest income in 20242025 was $1.5$4.6 million, or 1.6%,4.5%, higher than the prior year as a result of a 105 basis point increase in the average investment yield including cash equivalents andequivalents, a $46.8$76.8 million increase in average cash equivalent balances, partially offset by a $219.0 million decrease in the average book basis balance of investments.investments and a $37.5 million increase in average cash equivalent balances.

Total interest expense increaseddecreased by $90.3$1.7 million to $192.7 million in 2025 from $194.4 million in 2024 from $104.1 million in 2023.2024. As shown in Table 4,4 higheron page 48, lower interest rates on interest-bearing liabilities resulted in ana increasedecrease in interest expense of $80.2$11.5 million, while higher average interest-bearing liability balances resulted in a $10.1$9.8 million increase in interest expense. Interest expense as a percentage of average interest-earning assets for 20242025 increaseddecreased 587 basis points to 1.32%1.25% from 0.74%1.32% in the prior year. The rate on interest-bearing deposits of 1.66%1.58% was 728 basis points higherlower than 2023,2024, primarily due to ana increasedecrease in certain product rates in response to changes in market interest rates during the year and a higher proportion of average money market and time deposit balances that carry a higher average rate than interest checking and savings deposits.year. The rate on borrowings increaseddecreased 8315 basis points to 3.80%3.65% in 2024,2025, primarily due to the aforementioned increasedecrease in market interest rates. Total average funding balances (deposits and borrowings) in 20242025 increased $603.4$563.4 million, or 4.5%.4.0%. Average deposits increased $317.4$644.3 million, driven by an increaseincreases in averageall timedeposit product types from organic growth and moneythe marketSantander deposit balances partially offset by decreases in average demand, interest checking and savings deposit balances.acquisition. Average non-time deposit balances decreasedincreased $439.1$555.5 million, or 3.8%,5.0%, and accounted for 84.6%84.7% of total average deposits in 20242025 compared to 90.1%84.6% in 2023, reflective of shifts to higher-rate time and money market deposit accounts in the higher interest rate environment during most of 2024. Average time deposit balances increased $756.6$88.8 million year-over-year and represented 15.4%15.3% of total average deposits for 20242025 compared to 9.9%15.4% in 2023.2024. Average external borrowings increaseddecreased $286.0$80.9 million, or 45.3%,8.8%, in 20242025 as compared to 2023,2024, primarily due to increasesa decrease in average FHLB term borrowings of $360.1 million and Federal Reserve short-term borrowings of $54.1 million, partially offset by decreases in average overnight borrowings of $97.8 million and average securities sold under agreement to repurchase (“customer repurchase agreements”) of $33.9$46.7 million and average overnight borrowings of $20.9 million, partially offset by an increase in term FHLB borrowings of $40.8 million. The decrease in average customer repurchase agreements in 2025 was primarily driven by lower governmental balances due in part to certain customers transferring funds to the Company’s reciprocal deposit product offerings. The increase in average FHLB term borrowings was due to the timing of when the Company securingsecured funding in 2024, as the Company secured a total of $250.0 million of fixedFHLB rateterm borrowings in the second and third quarters of 2024 to meet the Company’s funding needs, including to support strong loan growth.2024.

The following table sets forth information related to average interest-earning assets and average 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 25.3% for 2025, 25.0% for 2024,2024 and 24.4% infor 2023 and 24.3% in 2022.2023. 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 accretion of acquired loan purchase discounts and premiums. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.

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, commercialCRE real estate transaction advisoryfinancing and placementstructuring services,fees, and other core customer activities typically provided through the branch networknetwork, 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 division within CBNA), broker-dealer and investment advisory products and services (performed by CommunityNISI) Investmentand Services Inc. (“CISI”), OneGroupNottingham Wealth Partners, Inc. and The Carta Group, Inc.) and asset management services (performed by Nottingham), Advisors,collectively Inc.)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, gains or losses on debt extinguishment, realized and unrealized gains or losses on investment securities and gainsincome or losses on debtequity extinguishment.method investments.

Noninterest revenues as a percentpercentage of total revenues (defined as net interest income plus noninterest revenues) was 38.1% in 2025, a decrease from 39.8% in 2024, an increase from 32.9% in 2023.2024. Operating noninterest revenues as a percentpercentage of operating revenues (FTE basis), a non-GAAP measure, were 39.6%37.9% in 2024,2025, ana increasedecrease from 37.7%39.6% in the prior year. The current year increasedecrease was due to the 11.0% increase in operating noninterest revenues, a non-GAAP measure, as mentioned above that was larger than the 2.6%12.6% increase in fully tax-equivalent net interest income, a non-GAAP measure, drivenoutpacing bythe strong organic loan growth. The decrease in this ratio from 37.9% in 2022 to 37.7% in 2023 was due to a 4.0%4.9% increase in fully tax-equivalent net interest income, a non-GAAP measure, driven by a higher net interest margin and strong organic loan growth, while operating noninterest revenues, a non-GAAP measure, increased by the 3.2% mentioned above.measure.

Banking noninterest revenues, comprised of deposit service charges and fees, debit interchange and ATM fees, mortgage banking and other banking revenues, totaled $78.5$83.9 million in 2024,2025, an increase of $8.6$5.4 million, or 12.3%,6.8%, from the prior year. The increase was driven by increases in mortgageother banking revenues ($3.8$5.2 million), deposit service charges and fees ($2.7$0.8 million), other banking revenues ($1.2 million) and debit interchange and ATM fees ($0.3 million), partially offset by a decrease in mortgage banking revenues ($0.9 million). The increase in mortgage banking revenues reflected higher sales volumes of secondary market eligible residential mortgage loans and an increase in the value of mortgage servicing rights. The increases in other banking revenues werewas associated with higher customer interest rate swap fee revenues due to the recent implementation of this product offering andrevenues, other commercial banking-related fees, including an increase in commercialCRE real estate transaction advisoryfinancing and placementstructuring revenuesfees generated by Axiom whichRealty wasGroup acquired(“Axiom”), inincome Marchfrom 2023.bank-owned life insurance and a $1.6 million income distribution received from a limited partnership investment.

As disclosed in Table 5, noninterest revenue from non-banking financial services (noninterest revenues from employee benefit services, insurance services, and wealth management services) increased $20.9$9.6 million, or 10.6%,4.4%, in 20242025 to $217.9$227.4 million. Financial services revenues represented 73% of total noninterest revenues in 2024both compared2025 toand 92% of total noninterest revenues in 2023, which included the impact of the loss on sales of investment securities.2024. Financial services revenues accounted for 74%73% of total operating noninterest revenues, a non-GAAP measure, in both2025 2024compared andto 2023.74% in 2024.

Wealth management services revenues increased $4.7$0.4 million, or 14.8%,1.1%, in 20242025 asdue investment advisory customer accounts increased and moreto favorable investment market conditionsconditions. drove an increase in the value of assetsAssets under management betweenand administration within the periods.wealth management businesses increased $0.8 billion to $14.0 billion at December 31, 2025 as compared to one year earlier. Assets under management and administration within the wealth management businesses increased $1.4 billion to $13.2 billion at December 31, 2024 as compared to one year earlier, a new year-end record. Wealth management services revenues increased $0.3 million, or 0.9%, in 2023 as more favorable investment market conditions drove increases in assets under management between the periods. Assets under management and administration within the Company’s wealth management services segment were $11.8 billion at the end of 2023, an increase of $4.5 billion from year-end 2022.earlier. Assets under management and administration included approximately $3.3$3.6 billion and $3.1$3.3 billion of intercompany assets under management and administration at the end of 20242025 and 2023,2024, respectively, associated with certainaffiliated employee benefit trust accounts.

As shown in Table 6, noninterest expenses of $486.8$521.3 million in 20242025 were $14.1$34.4 million, or 3.0%,7.1%, higher than 2023,2024, reflective of increases in salaries and employee benefits, data processing and communications expenses, occupancy and equipment expenses, businessacquisition developmentexpenses, other expenses, legal and marketingprofessional expensesfees and acquisitionrestructuring expenses. These increases were partially offset by decreases in legalbusiness development and professionalmarketing fees,expenses, amortization of intangible assets, restructuring expenses, acquisition-related contingent consideration adjustmentsadjustments, and litigation expenses.

Noninterest expenses as a percent of average assets for 20242025 was 3.04%,3.11%, aan decreaseincrease of six7 basis points from 3.10%3.04% in 2023 and 31 basis points higher than 2.73% in 2022.2024. Operating noninterest expenses (non-GAAP) as a percent of average assets, a non-GAAP measure, for 20242025 was 2.95%,3.00%, which was consistent with the 2023 level and 355 basis points higher than 2.60% in 2022.2024. The changesincreases in these ratios for 20242025 were due to a 3.0%7.1% increase in noninterest expenses and a 5.4%6.4% increase in operating noninterest expenses, a non-GAAP measure, while average assets increased by 4.9%,4.7%, primarily due to organic loan growth. The increases in these ratios for 2023 were due to a 11.4% increase in noninterest expenses and a 10.8% increase in operating noninterest expenses, a non-GAAP measure, while average assets declined by 2.1%, primarily due to the sales and maturities of certain lower-yielding available-for-sale investment securities.

The GAAP efficiency ratio expresses the level of noninterest expenses as a percentage of total revenues (net interest income plus total noninterest revenues). The Company also utilizes the operating efficiency ratio, a non-GAAP measure, which is a performance measurement tool widely used by banks and is defined by the Company as operating noninterest expenses, a non-GAAP measure, divided by fully-tax equivalent operating revenues, a non-GAAP measure. Lower ratios correlate to better operating efficiency.

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 MarchJune 31,30, 2026 and 2025, although in some circumstances the fourthfirst quarter of 20252026 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 35.40. 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, “firstsecond quarter” refers to the three months ended MarchJune 31,30, 2026, “YTD” refers to the six months ended June 30, 2026 and earnings per share (“EPS”) figures refer to diluted EPS.

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 2026.2026 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 decreasedecreases in the business lending qualitative factor decreased the ACL by $4.8$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 $3.2$3.5 million as compared to the quantitative loss rates in use at December 31, 2025.

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 MarchJune 31,30, 2026 were 5.4% and 1.6%,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 MarchJune 31,30, 2026 by approximately $4.2$4.5 million, and decrease net income by $3.1$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.

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, unrealized gain (loss) on equity securitiessecurities, 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, unrealized gain (loss) on equity securitiessecurities, 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.

The Company reported net income of $57.2$61.3 million for the firstsecond quarter thatwhich wasincreased $7.6$10.0 million, or 15.3%,19.5%, abovefrom the prior year’s firstsecond 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 $1.08$2.24 forincreased $0.34, or 17.9%, from the first2025 quarterYTD was $0.15, or 16.1%, above the prior year.period. 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,revenues, partially offset by increases in noninterest expenses and income taxes.

Net interest income increased to $134.7$139.1 million in the firstsecond quarter, a $14.5$14.4 million, or 12.1%,11.5%, increase from the prior year.year’s second quarter. YTD net interest income of $273.9 million increased $28.9 million, or 11.8%, from the prior YTD period. The increaseincreases waswere primarily due to lower funding costs, along with increases in the yield on average interest-earning assets and average loan balances, along with lower funding costs.balances. The provision for credit losses of $5.6$4.6 million in the firstsecond quarter decreasedincreased $1.1$0.5 million, or 15.8%,11.9%, from last year’s firstsecond quarter while the YTD provision for credit losses of $10.2 million decreased $0.6 million, or 5.2% from the 2025 YTD period, reflective of improvementsstability in the Company's asset quality metrics between the periods. Noninterest revenues increased to $78.6 million in the first quarter, a $2.5 million, or 3.3%, increase from the first quarter of 2025, driven by increases in banking, employee benefit services and wealth management services noninterest revenues, partially offset by a decrease in insurance services noninterest revenues that were impacted by the timing of collection of contingent commissions.

Noninterest expenses were $133.0$137.7 million in the firstsecond quarter, an increase of $7.7$8.6 million, or 6.2%,6.7%, from the prior year’s firstsecond quarter. YTD noninterest expenses of $270.8 million increased $16.4 million, or 6.4%, from the comparable 2025 YTD period. The increaseincreases in noninterest expenses waswere driven primarily by increases in salaries and employee benefits, occupancy and equipment and data processing and communications expenses.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 and the Company’s continued investment in customer-facing and back-office technologies.periods. Income taxes increased for the quarter,quarter and YTD periods, driven by increases in pre-tax income and amortizationcertain ofstate income tax credit investments.taxes.

Net interest margin for the firstsecond quarter of 3.43%3.46% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.45%3.49% both increased 2219 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 2120 basis points, respectively, from the prior2025 year’sYTD first quarter.period. The yield on average interest earning assets increased 95 basis points compared to the prior year,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 1314 basis points from both the prior yearyear’s assecond quarter and the prior YTD period primarily due to decreases in the rate paid on interest-bearing deposits and borrowings both decreased.deposits.

The Company’s average and ending interest-earning assets both increased year-over-year,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 balancesbalances, andalong with the $543.7 million of deposits assumed in the Santander Bank N.A. (“Santander”) branch acquisition.and ClearPoint Federal Bank & Trust (“ClearPoint”) acquisitions. Average and ending borrowings decreased from the prior yearyear’s second quarter and YTD reflective of growth in deposit balances outpacing loan growth, including the net funding provided from the Santander branch acquisition.

Asset quality remained solid in the firstsecond quarter. The net charge-off ratio decreased slightly from 1320 basis points of average loans in the firstsecond quarter of 2025 to 1112 basis points of average loans in the firstsecond 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 241 basis pointspoint from MarchJune 31,30, 2025 to 0.48%0.50% of loans outstanding at MarchJune 31,30, 2026, while the delinquent loan ratio decreasedincreased 173 basis points betweencompared the pastto twelve months earlier to 1.12%1.04% of loans outstanding.

OperatingSecond quarter and YTD operating net income, a non-GAAP measure, of $61.1 million, increased $9.1$6.1 million, or 17.4%,10.9%, as compared to the priorsecond year’squarter firstof quarter,2025 whileand increased $15.2 million, or 14.1%, compared to June YTD 2025. Second quarter and YTD operating earnings per share, a non-GAAP measure, increased $0.12, or 11.5%, compared to the second quarter of $1.152025 and increased $0.17,$0.29, or 17.3%,14.4%, fromcompared lastto year.June OperatingYTD 2025. Second quarter and YTD operating pre-tax, pre-provision net revenue (“PPNR”), a non-GAAP measure, of $85.3 million, increased $11.2$10.5 million, or 15.1%,13.9%, compared to the firstsecond quarter of 2025,2025 whileand increased $21.7 million, or 14.5%, compared to June YTD 2025. Second quarter and YTD operating PPNR per share, a non-GAAP measure, of $1.61, increased $0.21, or 15.0%,14.9%, compared to the priorsecond year.quarter of 2025 and increased $0.42, or 14.9%, compared to June YTD 2025. These increasesresults demonstrate improvement in the Company’s core operating performance between the periods.periods, particularly net interest margin expansion.

As shown in Table 1, net income for the firstsecond quarter and June YTD of $57.2$61.3 million and $118.6 million, respectively, increased $7.6$10.0 million, or 15.3%,19.5%, as compared to the firstsecond quarter of 2025 and increased $17.6 million, or 17.4%, compared to June YTD 2025. Earnings per share of $1.08$1.16 for the firstsecond quarter of 2026 increased $0.15,$0.19, or 16.1%,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 quartersix months of 2026.2025. 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 andas 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 $61.1$61.5 million and $122.6 million for the firstsecond quarter and June YTD 2026, respectively, increased $9.1$6.1 million, or 17.4%,10.9%, as compared to the firstsecond 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 $1.15$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 quartersix months of 2026 increased $0.17$0.29 compared to the first quartersix months of 2025. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

As reflected in Table 1, firstsecond quarter net interest income of $134.7$139.1 million increased $14.5$14.4 million, or 12.1%,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 increasequarterly wasand YTD increases were the result of higher yields on interest-earning assets and a decrease in the rate paid on interest-bearing liabilities.

Reflective of improvements instable credit quality metrics and partially offset byorganic loan growth, the provision for credit losses of $5.6$4.6 million for the firstsecond quarter and $10.2 million for June YTD increased $0.5 million as compared to the prior year second quarter and decreased $1.1$0.6 million as compared to the first quartersix months of 2025.

FirstSecond quarter and YTD noninterest revenues weretotaled $78.6$84.0 million and $162.6 million, anrespectively, increasewhich ofincreased $2.5$9.5 million, or 3.3%,12.8%, from the second quarter of 2025 and increased $12.0 million, or 8.0%, from the first quartersix months of 2025. Total operating noninterest revenues, a non-GAAP measure, for the firstsecond quarter and June YTD were $79.0$79.3 million and $158.3 million, respectively, an increase of $3.2$4.8 million, or 4.2%,6.4%, and $8.0 million, or 5.3%, from the prior firstyear quarter.second quarter and YTD period, respectively. The increase over the prior year firstsecond quarter was driven by a $2.7$3.6 million, or 14.2%, increase in banking noninterest revenues and a $0.9 million, or 1.4%,6.5%, increase in nonbanking financial services business revenues and a $1.2 million, or 6.1%, increase in banking noninterest revenues, whileas thewell remainingas decreasea of $1.1$4.7 million wasincrease comprisedin of unrealized lossesgains on equity securitiessecurities. The increase over the prior June YTD period was driven by a $4.0 million, or 3.6%, increase in nonbanking financial services business revenues and a loss$3.9 frommillion, or 10.0%, increase in banking noninterest revenues, as well as a $4.1 million increase in gain on equity method investments.securities. The increase in nonbanking financial services business revenues for the second quarter of 2026 and June YTD period was comprised of increases in employee benefit services revenue of $2.0$2.5 million and $4.4 million, respectively; an increase in wealth management services revenue of $0.5$1.7 million and $2.2 million, respectively, including $0.7 million of revenue related to the ClearPoint acquisition in the second quarter of 2026; partially offset by a decrease in insurance services revenue of $1.6$0.2 million.million and $1.8 million, respectively and a loss from equity method investments of $0.4 million and $0.8 million, respectively.

Noninterest expenses of $133.0$137.7 million and $270.8 million for the firstsecond quarter and June YTD periods, respectively, reflected an increase of $7.7$8.6 million, or 6.2%,6.7%, from the second quarter of 2025 and an increase of $16.4 million, or 6.4%, from the first quartersix months of 2025. The increase in noninterest expenses for the firstsecond quarter and June YTD periods was primarily driven by higher salaries and employee benefits expenses, occupancy and equipment expenses and 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 $6.5$8.7 million, or 5.3%,7.0%, from the prior-yearprior firstyear quarter.second quarter and $15.2 million, or 6.2%, from the prior June YTD.

The effective income tax raterates waswere 23.3%24.1% and 23.7% for the firstsecond quarter,quarter and YTD 2026, respectively, as compared to 22.8%22.3% and 22.5% for the comparable prior year period,periods, primarily due to an increase in amortization ofpre-tax income taxand creditcertain investments.state income taxes.

Net interest income totaled $134.7$139.1 million for the firstsecond quarter of 2026 compared to $120.2$124.7 million for the firstsecond quarter of 2025. As shown in Table 2,2a, fully tax-equivalent net interest income, a non-GAAP measure, for the firstsecond quarter was $135.6$140.0 million, an increase of $14.5$14.4 million from the prior year firstsecond quarter. The increase was driven by a 95 basis point increase in the yield on average interest-earning assets, aan $774.9$823.2 million increase in average interest-earning asset balances and aan 1618 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $583.4$539.7 million increase in average interest-bearing liability balances in comparison to the firstsecond 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$9.4 million, the increase in the yield on average interest-earning assets of $3.6$2.0 million and the decrease in the rate paid on average interest-bearing liabilities of $4.7$5.2 million were partially offset by the volume increase in average interest-bearing liability balances of $2.5$2.3 million. Net interest margin of 3.43%3.46% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.45%3.49% for the firstsecond quarter of 2026 both increased 22 and 2119 basis points, respectively,points compared to the prior year period.

The 9-basis5 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 andwhile the yield on average investments, including cash equivalents.equivalents, remained consistent with the prior year periods. The yield on average loans for the firstsecond quarter increased 103 basis points compared to the firstsecond 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. 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.

The firstsecond quarter and YTD average book balance of investments, including cash equivalents, increased $148.0$101.7 million and $124.7 million, respectively, as compared to the corresponding prior year period asprimarily due to the ClearPoint acquisition in the second quarter of 2026, partially offset by investment purchases outpaced maturities, calls and principal payments andduring 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.periods. The cash equivalents component of average interest-earning assets increased $99.9$61.4 million and $80.6 million for the firstsecond quarter and June YTD periods, respectively, compared to the corresponding prior year period.periods. Average loan balances increased $626.9$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 theboth periods primarily due to organic growth.

The rate paid on average interest-bearing liabilities decreased 1618 basis points compared to the prior year quarter as the average rate paid on interest-bearing deposits decreased 1215 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 81 basis points from the comparable prior period.point. The decreasesdecrease in the ratesrate 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.borrowings during the periods.

Average interest-bearing deposits increased $819.2$740.1 million compared to the prior year quarter,quarter withand $779.4 million compared to the prior YTD period, including increases in all deposit account types, including demand deposits, interest checking, savings, and money market andfor both periods. The average balance of time deposits.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 $235.8$200.5 million for the quarter.quarter and $218.0 million for the June YTD period.

TableTables 22a 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 ana 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 prepayments,prepayment, late and other fees and the amortization or accretion of acquired loan purchase discounts and premiums, which decreaseddecreasing loan interest income by $6.9$7.2 million for the firstsecond quarter and $5.9$14.1 million for theJune priorYTD first quarter.period. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.

Table 22a: Quarterly Average Balance Sheet

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 divisionand 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.

As displayed in Table 4, noninterest revenues totaled $78.6$84.0 million for the second quarter of 2026 and $162.6 million for the first quartersix months of 2026. This represents an increase of $2.5$9.5 million, or 3.3%,12.8%, for the quarter and an increase of $12.0 million, or 8.0%, in comparison to the equivalent 2025 period.periods. The Company recognized a $4.7 million gain on equity securities during the second quarter of 2026 including a $3.3 million gain associated with the sale of a limited partnership investment and a $0.9 million gain associated with the conversion of certain Visa Class B shares to Visa Class C shares. Operating noninterest revenues, a non-GAAP measure as defined in the table above, totaled $79.0$79.3 million and $158.3 million for the firstsecond quarter of 2026,2026 and June YTD periods, respectively, an increase of $3.2$4.8 million, or 4.2%,6.4%, from the prior year’s firstsecond quarter.quarter and $8.0 million, or 5.3%, from the prior June YTD period.

Employee benefit services revenues increased $2.0$2.5 million, or 6.0%,7.7%, and $4.4 million, or 6.8%, for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the equivalent prior year period,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.

Insurance services revenues decreased $1.6$0.2 million, or 11.4%,1.4%, and $1.8 million, or 6.6%, for the three and six months ended June 30, 2026, respectively, primarily due to changesdecreases in the timing of collections of contingent commission revenues.

Wealth management services revenues increased $0.5$1.7 million, or 4.8%,19.8%, asand compared$2.2 tomillion, or 11.8%, for the priorthree year,and six months ended June 30, 2026, respectively, reflective of higher average market values of assets under management.management and revenue growth from the ClearPoint acquisition in the second quarter of 2026.

Banking noninterest revenues increased $2.7$1.2 million, or 14.2%,6.1%, between the second quarter of 2025 and 2026 and increased $3.9 million, or 10.0%, between the first quartersix months of 2025 and 2026. Deposit service charges and fees increased $1.1$0.3 million, or 14.0%,3.3%, and $1.4 million, or 8.6%, compared to the prior year.year second quarter and June YTD periods, respectively. Other banking revenues for the second quarter were consistent with the prior year and increased $1.0 million, or 26.1%,12.3%, for the June YTD period, driven by increases in customerCRE interestfinancing rateand swapstructuring feefees revenues.and an increase in the cash surrender value of bank-owned life insurance policies. Debit interchange and ATM fees increased $0.5$0.7 million, or 7.9%,10.8%, for the second quarter and $1.2 million, or 9.4%, for the June YTD period, and mortgage banking revenues increased $0.1$0.2 million, or 10.2%.22.5% for the second quarter and $0.3 million, or 16.3%, for the June YTD period.

The ratio of noninterest revenues to total revenues was 36.8%37.6% for the second quarter of 2026 and 37.3% for the first quartersix months of 2026, compared to 38.7%37.4% and 38.1% for the prior year’s firstsecond quarter.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 12.1%11.8% for June YTD while noninterest revenues increased 3.3%.8.0%.

The ratio of operating noninterest revenues to operating revenues (FTE), a non-GAAP measure as defined in the table above, was 36.8%36.2% for the quarter and 36.5% for June YTD, compared to 38.5%37.2% and 37.9% for the respective prior year.year periods. The decreasedecreases between the quarterly and YTD periods waswere due to an 11.9%11.5% increaseand 11.7% increase, respectively, in fully tax-equivalent net interest income, a non-GAAP measure, while operating noninterest revenues, a non-GAAP measure, increased 4.2%.6.4% and 5.3%, respectively, excluding the $4.7 million gain on equity securities.

As shown in Table 5, the Company recorded noninterest expenses of $133.0$137.7 million for the firstsecond quarter of 2026,2026 and $270.8 million for the June YTD period, representing an increase of $7.7$8.6 million, or 6.2%6.7%, and $16.4 million, or 6.4%, from the respective prior year.year periods. The change was primarily attributable to an increase in salaries and employee benefits (an increase of $3.9$3.4 million), occupancyfor the quarter and equipment (an increase of $2.2$7.3 million YTD), and data processing and communications (an increase of $1.7$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 (aan decreaseincrease of $1.0$1.4 million for the quarter and $0.5 million YTD), amortization of intangible assets (an increase of $0.8$1.0 million for the quarter and $1.8 million YTD), business development and marketing (a decrease of $0.6$1.4 million for the quarter and $2.0 million YTD), acquisition expenses (an increase of $0.4$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), and litigation accrual (an increase of $0.1$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).

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.and ClearPoint acquisitions. The increase in acquisition expenses was driven by the transaction-related costs associated with the pending acquisition of ClearPoint Federal Bank & Trust.acquisition. The decreasedecreases in otherbusiness development and marketing expenses includeswas aattributable $0.5 million benefit from the non-service related components ofto the Company’s pension.efforts to more selectively allocate marketing resources toward channels with higher expected returns.

The Company’s efficiency ratio was 62.4%61.7% for the firstsecond quarter of 2026, 1.43.1 percentage points favorable to the comparable quarter of 2025. This resulted from total revenues increasing 8.7%,12.0%, primarily due to higher net interest income, while total noninterest expenses increased 6.2%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%.

The Company’s operating efficiency ratio, a non-GAAP measure as defined in the table above, was 59.8%60.6% for the firstsecond quarter, 2.11.4 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 9.0%9.5% while operating noninterest expenses, a non-GAAP measure as described above, increased 5.3%.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%.

Annualized current quarter noninterest expenses as a percentage of average assets was slightly lowerhigher than the prior year as noninterest expenses increased 6.2%6.7% and average assets increased 6.3%.6.2%. Annualized current quarter operating noninterest expenses, a non-GAAP measure as defined in the table above, as a percentage of average assets decreasedwas 0.03consistent percentage points versuswith the firstsecond quarter of the prior year as operating noninterest expenses increased 5.3% while average assets increased 6.3%.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 acquisition.and ClearPoint acquisitions.

The firstsecond quarter 2026and June YTD effective income tax rate waswere 23.3%,24.1% and 23.7%, respectively, as compared to 22.8%22.3% and 22.5% for the firstcomparable quarterperiods of 2025. The increase in the firstsecond quarter 2026and June YTD effective income tax rate is primarily attributable to an increase in amortizationcertain ofstate income tax credit investments.taxes. The firstsecond quarter 2026and June YTD tax expense associated with the amortization of income tax credit investments was $1.1$0.8 million and $1.9 million, respectively, as compared to $0.3$3.0 million and $3.3 million for the comparable periodperiods of 2025. In addition, the Company recorded a $0.7 million and $0.5 million tax benefit associated with stock-based compensation for the firstsecond 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 firstcomparable quarterperiods of 2025, respectively.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 22.8%23.1% and 23.0%, respectively, as compared to 18.0% and 20.5% for the firstcomparable quarter of 2026 and 23.1% for the first quarterperiods of 2025. TheThese increases reflect a 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.

The carrying value of investment securities (including unrealized gains and losses) was $4.39$4.52 billion at the end of the firstsecond quarter, aan decreaseincrease of $16.2$117.4 million, or 0.4%,2.7%, from December 31, 2025 and an increase of $89.3$174.1 million, or 2.1%,4.0%, from MarchJune 31,30, 2025. The book value of investment securities (excluding unrealized gains and losses) of $4.67$4.80 billion at the end of the firstsecond quarter decreasedincreased $4.4$122.7 million, or 0.1%,2.6%, from December 31, 2025 and increased $19.2$115.9 million, or 0.4%,2.5%, from MarchJune 31,30, 2025. The increase from the end of the prior year’s firstsecond quarter was primarily driven by U.S.acquiring government$118.1 agencymillion mortgage-backedof investment securities purchasesobtained andthrough netthe accretionClearPoint acquisition, which was completed during the second quarter of discounts2026. onExclusive securitiesof outpacingthe maturities,investments callsacquired andfrom principalClearPoint, paydowns. Duringduring the first quartersix months of 2026,2026 the Company purchased $10.5$30.9 million of U.S. government agency mortgage-backed securities with an average yield of 4.87%,4.99%, which the Company classified as held-to-maturity. These additions were offset by $25.7$51.3 million of investment maturities, calls and principal payments during the first quartersix months of 2026. Additionally, there was $9.5$19.2 million of net accretion of discounts on investment securities during the first quartersix months of 2026. The effective duration of the investment securities portfolio was 5.25.0 years at the end of the firstsecond quarter of 2026, as compared to 6.05.8 years at the end of the firstsecond quarter of 2025.

The change in the carrying value of investment securities is also impacted by the amount of net unrealized gains or losses. At MarchJune 31,30, 2026, the investment portfolio (excluding held-to-maturity investment securities) had a $283.0$276.4 million net unrealized loss, ana $11.8$5.2 million increase from the $271.2 million net unrealized loss at December 31, 2025 and a $70.0$58.3 million decrease from the $353.0$334.7 million net unrealized loss at MarchJune 31,30, 2025. These changes were principally driven by the general movements in medium to long-term interest rates, as well as the volume and ratesyields associated with the securities purchases and maturities that occurred during the 12 months.

Loans ended the firstsecond quarter at $11.13$11.28 billion, $181.4$333.1 million, or 1.7%,3.0%, higher than December 31, 2025 and $710.0$763.7 million, or 6.8%,7.3%, higher than MarchJune 31,30, 2025 ending loans.

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$499.4 million, or 7.6%,11.0%, from MarchJune 31,30, 2025, and $149.6$306.8 million, or 3.2%,6.5%, from December 31, 2025, driven by organic growth over both periods. As compared to December 31, 2025, multifamily increased $2.6$34.3 million, or 0.3% and3.7%, business non-real estate loans, including commercial and industrial lending, increased $22.8$74.2 million, or 1.8%, while5.8%, non-owner occupied CRE increased $116.4$177.7 million, or 7.0%,10.6%, and owner occupied CRE increased $7.7$20.5 million, or 0.9%.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 15%16% of total assets, 24%25% of total loans and 194%201% of total bank-level regulatory capital. CRE lending represents 73.4%73.3% of the total business lending portfolio at MarchJune 31,30, 2026, compared to 73.1% at December 31, 2025 and 74.0%72.7% at MarchJune 31,30, 2025. Other commercial and industrial lending represents the remaining 26.6%26.7% of total business lending at MarchJune 31,30, 2026, compared to 26.9% at December 31, 2025 and 26.0%27.3% at MarchJune 31,30, 2025. The Company’s largest non-owner occupied CRE lending concentration by property type is multifamily at 25.7%25.8% of total CRE lending, followed by office and lodging, at 10.9%10.6% and 10.1%,9.7%, respectively. The Company’s largest owner occupied lending concentration by industry is retail trade at 7.6%7.0% of total CRE lending, followed by manufacturing and realarts, estate rentalentertainment and leasingrecreation that comprise 2.6%2.9% and 2.4%,2.5%, respectively, of total CRE lending. These levels demonstrate the Company’s diversity in the lending portfolio, as there are no significant industry orconcentrations as noted above, and minimal geographic concentrations, as reflected by no metropolitan statistical area (“MSA”) accounting for more than 13%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.

The business loan balance increases are reflective of continued high demand for multi-familynon-owner housing,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 2932 of this Form 10-Q.

The following table presents the concentration by borrower type of the Company’s CRE loan balances as of MarchJune 31,30, 2026 and December 31, 2025.

The following table presents the geographic concentrations of the Company’s CRE loan balances by property location (MSA) as of MarchJune 31,30, 2026 and December 31, 2025.

Consumer mortgages increased $114.9$106.3 million, or 3.3%,3.0%, from one year ago (including $4.1 million acquired in the Santander transaction) and increased $1.9$12.1 million, or 0.1%,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 $17.6$16.7 million and $79.1$34.5 million of consumer mortgage production during the firstsecond quarter ofand 2026June YTD periods, respectively, as compared to $16.6 million and over$34.1 million in the lastcomparable twelveprior months,year respectively.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 $53.2$45.0 million, or 11.1%,9.1%, from one year ago (including $16.9 million acquired in the Santander transaction) and increased $0.7$5.4 million, or 0.1%,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.

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 firstsecond quarter was $90.2$91.7 million, an increase of $7.4$9.8 million, or 8.9%,12.0%, from one year earlier and an increase of $2.3$3.8 million, or 2.6%,4.3%, from the end of 2025.

As demonstrated in Table 9, theThe 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 MarchJune 31,30, 2026 was consistent with December 31, 2025 and MarchJune 31,30, 2025.

Net charge-offs during the firstsecond quarter of 2026 were $3.0$3.3 million, a decrease of $0.3$1.8 million compared to the firstsecond quarter of 2025. The business lending portfolio experienced lower net charge-off levels compared with the firstsecond quarter of 2025 while the consumer installmentinstallment, home equity and consumer mortgage portfolios were above the prior year levels and home equity was consistent.level. The total net charge-off ratio (net charge-offs annualized as a percentage of average loans outstanding for the quarter) for the firstsecond quarter was 0.11%,0.12%, 23 basis points higher than the ratio for the fourth quarter of 2025 and 28 basis points lower than the ratio for the firstsecond quarter of 2025. The net charge-off ratios for the firstsecond 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.

Other real estate owned (“OREO”) at MarchJune 31,30, 2026 was $8.1$7.7 million. This compares to $8.2 million at December 31, 2025 and $2.7$8.0 million at MarchJune 31,30, 2025. At MarchJune 31,30, 2026, OREO consisted of 4538 residential properties with a total value of $2.7$2.3 million and one1 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 one1 commercial lending relationship consisting of multiple properties with an aggregate value of $5.4 million at December 31, 2025, and 4644 residential properties with a total value of $2.7$2.6 million and no1 commercial lending relationship consisting of multiple properties with an aggregate value of $5.4 million at MarchJune 31,30, 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.

Approximately 30%31% of the nonperforming loans at MarchJune 31,30, 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%63% of the balance, owner occupied CRE represents 32%24% of the balance, multifamily represents 3% of the balance and non-owner occupied CRE represents 1%10% of the balance, and multifamily represents 2% of the balance. Nonperforming business loans as a percentage of total loans decreased 97 basis points as compared to December 31, 2025 and decreased 575 basis points as compared to MarchJune 31,30, 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.

Approximately 61% of nonperforming loans at MarchJune 31,30, 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 remainsalso remain relatively stable. This has contributed to the credit performance in the consumer mortgage loan portfolio remaining favorable. The remaining 9%8% 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%161% at the end of the firstsecond quarter, as compared to 156% at year-end 2025 and 110%153% at MarchJune 31,30, 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.

The Company’s senior management, special asset officers and business lending management review all delinquent and nonaccrual loans and OREO regularly in order to identify deteriorating situations, monitor known problem credits and discuss any needed changes to collection efforts, if warranted. Based on this analysis, a relationship may be assigned a special assets officer or other senior lending officer to meet with the borrowers, assess the collateral and recommend an action plan. This plan could include foreclosure, restructuring loans, issuing demand lettersletters, or other actions. The Company’s larger criticized credits (greater than $2.0 million exposure) are also reviewed on a quarterly basis by banking senior management, senior credit administration management, special assets officers and business lending management to monitor their status and discuss relationship management plans. Business lending management reviews the criticized business loan portfolio on a monthly basis.