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

The FDIC and the other federal banking regulatory agencies have jointly promulgated the CRE Lending Guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under the CRE Lending Guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors, (i) total reported loans for construction, land acquisition and development, and other land represent 100% or more of total capital, or (ii) total reported loans secured by multi-family and non-farm residential properties, loans for construction, land acquisition and development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital. Based on these factors, we have a concentration in multi-familyresidential and commercial real estate lending, as such loans represent 357%a combined 342% of total bank capital as of December 31, 2024.2025. The particular focus of the guidance is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the CRE Lending Guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The CRE Lending Guidance states that management should employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing. While we believe we have implemented policies and procedures with respect to our commercial real estate loan portfolio consistent with this guidance, bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us or that may result in a curtailment of our multi-family and commercial real estate lending that would adversely affect our loan originations and profitability. For additional information, see “Supervision and Regulation—Federal Banking Regulation—Real Estate Lending Standards and Guidance.”

The judicial foreclosure process is protracted, which delays our ability to resolve non-performing loans through the sale of the underlying collateral. The longer timelines have been the result of the economic crisis, additional consumer protection initiatives related to the foreclosure process, increased documentary requirements and judicial scrutiny, and, both voluntary and mandatory programs under which lenders may consider loan modifications or other alternatives to foreclosure. These reasons and the legal and regulatory responses have impacted the foreclosure process and completion time of foreclosures for residential mortgage lenders. This may result in a material adverse effect on collateral values and our ability to minimize its losses.

The Company and Northwest Bank operate in a highly regulated industry and are subject to extensive laws, regulation, supervision and examination by the Federal Reserve Board, the Department of Banking, the FDICFDIC, the CFPB and the CFPB.SEC. These laws and regulations are imposed primarily for the protection and benefit of depositors and other customers, the DIF the U.S. banking and financial system, and the broader economy, not for the protection or benefit of the Company’s investors or non-deposit creditors. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on Northwest Bank’s operations, reclassify assets, determine the adequacy of Northwest Bank’s allowance for credit losses and determine the level of deposit insurance premiums assessed. The laws and regulations applicable to us are subject to frequent change and interpretations and the supervisory environment may be heightened at the regulators’ discretion. For example, the Company is unable to predict what, if any, changes to the regulatory environment may be enacted by Congress, both chambers of which became under Republican control beginning in 2025, or the new presidential administration and what the impact of any changes will be on the Company. WeThe expectcurrent U.S. administration has implemented significant changes in federal priorities and has taken steps to change the Trumpoperations, administrationstructure, willand seekpolicy tofocus implementof avarious federal agencies, as well as regulatory reformpriorities, agendapolicy thatapproaches isand significantly different than thatinterpretations of theexisting Bidenlaws administration,by impacting the rulemaking, supervision, examination, and enforcement priorities of thethose federal banking agencies. AnyFuture changechanges in these regulations and oversight, whether in the form of regulatory policy, new regulations or legislationlegislation, presidential executive orders, or new interpretation or application of existing statutes and regulations by courts and government agencies, or additional deposit insurance premiums could have a material impact on our operations. It is also possible the expected changes in regulation do not occur or are reversed by a subsequent administration, or the regulatory measures that are ultimately enacted deliver significant competitive advantages to financial services that are structured differently or serve different markets than the Company and Northwest Bank The potential exists for additional federal or state laws and regulations, or changes in policy, affecting lending and funding practices and liquidity standards. Moreover, bank regulatory agencies have been active in responding to concerns and trends identified in examinations, and have issued many formal enforcement orders requiring capital ratios in excess of regulatory requirements. In addition, new laws and regulations may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the fees we can charge and our ongoing operations, costs and profitability.

The BSA, as amended, and its implementing regulations require certain financial institutions, such as banks, to develop compliance programs that prevent the financial institutions from being used to facilitate money laundering, terrorist financing and other illicit financial crimes. If a financial institution detects suspicious activities, financial institutions are obligated to, among other things, file suspicious activity reports with the U.S. Treasury’s FinCEN. The BSA, as amended, and its implementing regulations also require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open accounts at the financial institution. Failure to comply with the Bank Secrecy,BSA, as amended, and its implementing regulations could result in fines or sanctions or affect our ability to pursue further acquisition opportunities. DuringIn therecent last year,years, several banking institutions have received large fines for non-compliance with the BSA, as amended, and its implementing regulations. While we have developed policies and procedures designed to promote compliance with the BSA, as amended, and its implementing regulations, these policies and procedures may not be effective in preventing violations of the law.

From time to time, the regulators implement changes to these regulatory capital requirements. The application of more stringent capital requirements could, among other things, result in lower returns on equity, require the raising of additional capital, and result in regulatory actions if we were to be unable to comply with such requirements. Changes to applicable capital requirements, including to asset risk weightings for risk-based capital calculations, items included or deducted in calculating regulatory capital and/or capital buffers, could result in management modifying its business strategy, and could limit our ability to make distributions, including paying out dividends or buying back shares. Furthermore, changes to the Basel III capital rules, including the implementation of Basel III endgame, that apply to banking organizations that are larger or more internationally active than the Company and Northwest may be informally applied or considered by the Federal Reserve Board and the FDIC in their regulation, supervision and examination of, and indirectly adversely impact, smaller institutions such as the Company and the Bank.

The Federal Reserve Board decreased benchmark interest rates significantly, to near zero, in response to the COVID-19 pandemic. Beginning in 2022, the Federal Reserve Board reversed its historical policy of near zero interest rates givenin itsan concernseffort overto curb inflation. Market interest rates have risen significantly in response to the Federal Reserve Board’s rate increases. Although they have decreased sinceIn late 2023 in response to2023, the Federal Reserve Board’sBoard ratebegan decreases,lowering benchmark interest rates, and although interest rates have decreased as a result, they remain at historically high levels. As discussed below, the increase in market interest rates has had, and may continue to have, an adverse effect on our net interest income and profitability.

Changes in interest rates also affect the current fair value of our interest-earning investment securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. At December 31, 2024,2025, the fair value of our investment and mortgage-backed securities portfolio totaled $1.7$2.2 billion. Net unrealized losses on these securities totaled $282$202 million at December 31, 2024.2025. During the year ended December 31, 2024,2025, we incurred other comprehensive lossincome of $6$34 million related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio.

On occasion we have employed various financial methodologies that limit, or “hedge,” the adverse effects of rising or decreasing interest rates on our loan portfolios and short-term liabilities. We also engage in hedging strategies with respect to arrangements with our customers. Our hedging activity varies based on the level and volatility of interest rates and other changing market conditions. Hedging strategies can be imperfect and may fail to protect us from loss. Moreover, hedging activities could result in costs if the hedge proves to be ineffective. Additionally, hedging activities could fail to protect us or adversely affect us because, among other things:

The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of financial institutions in the past and are expected to continue to do so in the future. New appointments to the Federal Reserve Board could affect its monetary policies, and in turn, interest rates. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

We regularly evaluate merger and acquisition opportunities with other financial institutions and financial services companies. As a result, negotiations may take place and future mergers or acquisitions involving cash, debt, or equity securities may occur at any time. We would seek acquisition partners that offer us either significant market presence or the potential to expand our market footprint and improve profitability through economies of scale or expanded services. For example, on DecemberJuly 16,25, 2024,2025, we entered into the Merger Agreement with Penns Woods. The Merger Agreement provides for a business combination wherebyacquired Penns Woods willBancorp, mergeInc. with("Penns and into the Company, with the Company as the surviving corporation in the merger.Woods").

Loans that were acquired as part of our acquisitions of other depository institutions, such as Penns Woods, were not underwritten or originated in accordance with our credit standards, including environmental matters, and we did not have long-standing relationships with many of these borrowers at the time of acquisition. The acquired loans are re-riskedre-risk rated at that date of acquisition based on our credit standards, which can temporarily increase loans classified as special mention and substandard for a period of time until these loans are integrated and conform to our credit standards. Although we reviewed the loan portfolios of each institution acquired as part of the diligence process, and believe that we have established reasonable credit marks with regard to all loans acquired, we may incur losses in excess of the credit marks with regard to these acquired loans, and any such losses, if they occur, may have a material adverse effect on our business, financial condition, and results of operations.

Our business strategy includes growth in assets, deposits anddeposits, the scale of our operations.operations and potentially opening new banking locations. Achieving our growth targets will require us to attract customers that currently bank at other financial institutions in our market, thereby increasing our share of the market. Our ability to successfully grow will depend on a variety of factors, including our ability to attract and retain experienced bankers, the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market area and our ability to manage our growth. In order to successfully manage our growth, the Company may need to adopt and effectively implement new or revise existing policies, procedures, and controls, as well as hire additional employees or pay higher salaries to retain existing employees, to maintain credit quality, control costs and oversee the Company’s operations. Growth opportunities may not be available or we may not be able to manage our growth successfully. If we do not manage our growth effectively, our financial condition and operating results could be negatively affected.

Competition in the banking and financial services industry is intense. We compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, fintech companies, including those related to digital currencies or cryptocurrencies (including stablecoins), money market funds and other mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors (whether regional or national institutions) have substantially greater resources and lending limits than we have and may offer certain services that we do not or cannot provide. In addition, some have competitive advantages such as the credit union exemption from paying federal income tax. Moreover, competition with fintech companies may be particularly intense, due to, among other things, differing regulatory environments. For example, the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (GENIUS Act) provides a legal framework for stablecoins to be issued in the United States, which may allow new and existing competitors to compete for funds that may have otherwise been deposited with banks, such as Northwest Bank. Competitive factors driven by consumer sentiment or otherwise can also reduce our ability to generate fee income, such as through overdraft fees. Our profitability depends upon our ability to successfully compete in our market areas.

The Board of the Company has ana InnovationRisk andManagement Technology Sub-Committee,Committee, consisting of wholly independent directors chartered, among other items, with a focus on cybersecurity risk. Additionally, the Company’s Board has a designated Risk Management Sub-Committee with the responsibility of monitoring enterprise level risks, including those related to cybersecurity. Furthermore, management of the Company has both an Enterprise Risk Management Committee and an InformationOperational TechnologyRisk SteeringManagement Committee (“ITSC”),Committee, both of which are comprised of the most senior members of management, including the Chief Executive Officer, Chief Information Officer (“CIO”), and Chief OperatingInformation Security Officer. The ITSCOperating meetsRisk monthly,Management or more frequently if needed,Committee and the ERMC meets quarterly, or more frequently if needed. Material items related to cybersecurity are reported to the Innovation and Technology and Risk Management Sub-Committees.Sub-Committee. The Company also engages outside consultants to support its cybersecurity efforts. The directors of the Company do not have significantmodest experience in cybersecurity risk management in other business entities comparable to the Company and rely on members of management, including, but not limited to, the CISO, CIO, Chief Operational Risk Management Officer, Chief Technology Officer and Chief Data Officer, for cybersecurity guidance.

The economy is subject to worldwide events, such as the COVID-19 pandemic and geopolitical tensions in Europe, the Middle EastEast, and Europe,Latin America, as well as domestic events, any or all of which could impact inflationary pressures and interest rates to dampen demand. The current U.S. administration has implemented rapid shifts in macroeconomic policies, such as those relating to trade restrictions and tariffs, which have created concerns over an increase in inflation and a slowdown in economic growth. These and other political and market developments are affecting and could continue to affect consumer confidence levels and cause adverse changes in loan payment patterns, causing increases in delinquencies and default rates, which may impact our charge-offs and the provision for credit losses. Changes in the financial services industry and the effects of current and future law and regulations that may be imposed in response to future market developments also could negatively affect us by restricting our business operations, including our ability to originate or sell loans, and adversely impact our financial performance.

There continues to be concern, including on the part of ourstate regulators, regarding climate change and its impacts. Climate change could manifest as a financial risk to us either through changes in the physical climate or from the process of transitioning to a low-carbon economy. Both physical risks and transition risks associated with climate change could have negative impacts on the financial condition or creditworthiness of our customers, and on its exposure to those customers. Physical risks include the increased frequency or severity of acute weather events, such as floods, wildfires and tropical cyclones, and chronic shifts in the climate, such as persistent changes in precipitation levels, rising sea levels, or increases in average ambient temperature. Transition risks arise from societal adjustment to a low-carbon economy, such as changes in public policy, adoption of new technologies or changes in consumer preferences towards low-carbon goods and services. These risks could also be influenced by changes in the physical climate.

Further, there is increased public, investor, activist, legislative, and regulatory scrutiny of climate change-related policies, goals and disclosures. Our stakeholders may disagree with these policies and goals or, conversely, believe that these policies and goals are insufficient. This may lead to a decrease in demand for our products and services or damage to our reputation. We may also incur additional costs and require additional resources as we evolve our strategy, practices and related disclosures with respect to these matters. In addition, there are and will continue to be challenges related to capturing, verifying, analyzing and disclosing climate-related data that is subject to measurement uncertainties.

A number of factors or combinations of factors could require us to conclude in one or more future reporting periods that an unrealized loss that exists with respect to these and other securities constitutes a credit related impairment, which could result in material losses to us. These factors include, but are not limited to, failure by the issuer to make scheduled interest payments, the issuer of the securities and their creditworthiness, any changes to the rating of the security and any adverse conditions specifically related to the security that would render us unable to forecast a full recovery in value. In addition, the fair values of securities could decline if the overall economy and the financial condition of some of the issuers deteriorates and there remains limited liquidity for these securities. During the year ended December 31, 2024,2025, we incurred other comprehensive lossesincome of $6$34 million related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio.

Within our investment portfolio, we have a significant amount of corporate debt and mortgage-backed securities issued by companies in the financial services sector. Given current market conditions, this sector has an enhanced level of credit risk.

As the financial services industry evolves, consumers may find debit financialcard services to be less attractive than traditional or other financial services. Consumers might not use debit card financial services for any number of reasons, including the general perception of our industry. If consumers do not continue or increase their usage of debit cards, including making changes in the way debit cards are loaded, our operating revenues and debit card deposits may remain at current levels or decline. Any projected growth for the industry may not occur or may occur more slowly than estimated. If consumer acceptance of debit financialcard services does not continue to develop or develops more slowly than expected or if there is a shift in the mix of payment forms, such as cash, credit cards, and debit cards, away from our products and services, it could have a material adverse effect on our financial position and results of operations.

Provisions in our articles of incorporation and bylaws may prevent or impede holders of our common stock from obtaining representation on our Board of Directors and may make takeovers of Northwestthe Bancshares, Inc.Company more difficult. As a result, our stockholders may not have the opportunity to participate in such a transaction, which could provide a premium over the prevailing price of our common stock. The provisions that may discourage takeover attempts or make them more difficult include that our Board of Directors is divided into three staggered classes. A classified board makes it more difficult for stockholders to change a majority of the directors because it generally takes at least two annual elections of directors for this to occur. Our articles of incorporation include a provision that no person will be entitled to vote any shares of our common stock in excess of 10% of our outstanding shares of common stock. This limitation does not apply to the purchase of shares by a tax-qualified employee stock benefit plan established by us. In addition, our articles of incorporation and bylaws restrict who may call special meetings of stockholders and how directors may be removed from office. Additionally, in certain instances, the Maryland General Corporation Law requires a super majority vote of our stockholders to approve a merger or other business combination with a large stockholder, if the proposed transaction is not approved by a majority of our directors.

As of December 31, 2024,2025, we held $618$700 million of deposits from municipalities throughout Pennsylvania, New York, Ohio, and Indiana. These deposits may be more volatile than other deposits. If a significant amount of these deposits were withdrawn within a short period of time, it could have a negative impact on our short-term liquidity and have an adverse impact on our earnings.

We must maintain sufficient liquidity to respond to the needs of depositors and borrowers. As such, we utilize a diverse set of funding sources in addition to core deposits. As we continue to grow, we are likely to become more dependent on these sources, which may include FHLB advances, proceeds from the sale of loans,loans and securities, federal funds purchased and brokered certificates of deposit. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to maintain timely access to these additional funding sources. Our financial flexibility will be materially constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. If we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our operating margins and profitability would be adversely affected.

Our allowance for credit losses is sensitive to a number of inputs, most notably the macroeconomic forecast assumptions as well as the reasonable and supportable forecasting periods that are incorporated in our estimate of credit losses. Therefore, as the macroeconomic environment and related forecasts change or decisions are made to shorten or lengthen the forecasting period, the allowance for credit losses may change materially. The following sensitivity analyses dodoes not represent management’s expectations of the deterioration of our portfolios or the economic environment, but areis provided as a hypothetical scenariosscenario to assess the sensitivity of the allowance for credit losses to changes in key inputs. We utilized a multi-scenario based macroeconomic forecast in determining the December 31, 20242025 allowance for credit losses, which included a weighting of three scenarios: an upside scenario, a baseline scenario and a downside scenario. We placed the most weight on the baseline scenario, with the remaining weight split evenly between the upside and downside scenarios. If we placed 100% weighting on the downside scenario, the quantitative allowance for credit losses would have been approximately $31$89 million higher.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”. The guidance requires disaggregated disclosure of specified expense categories. The guidance also requires disclosure of total selling expenses and how the Company defines selling expenses. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Prospective application is required, with retrospective application permitted. The Company is currently evaluating the effect the updated guidance will have on the Company’s financial statement disclosures. In January 2025, the FASB issued ASU 2025-01, “Income Statement — Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40).” The guidance amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted.

Assets. Total assets at December 31, 20242025 were flat at $14.4$16.8 billion, a decreasing slightlyincreasing by $11$2.4 millionbillion from December 31, 2023.2024. This decreaseincrease in assets was driven by decreasesthe inaddition personalof bankingthe loansPenns receivable,Woods partially offset by increases in cash and cash equivalents and commercial banking loans receivable.assets. A discussion of significant changes follows.

Cash and cash equivalents. Cash and cash equivalents increaseddecreased by $166$55 million, or 136%,19%, to $234 million at December 31, 2025, from $288 million at December 31, 2024, from $122 million at December 31, 2023.2024. This increasedecrease was primarily due to growththese funds being invested in ourhigher depositsyielding coupled with a focus on profitabilityloans and creditmarketable discipline while investing these cash flows into commercial loans.securities.

Marketable securities. Marketable securities remainedincreased flatto $2.3 billion at December 31, 2025 from $1.9 billion at both December 31, 2024 and December 31, 2023.2024. Available-for-sale marketable securities increased $66$477 million driven by the securitiesacquisition portfolioof restructurePenns Woods which included $160 million in marketable securities, of which, $82 million were immediately sold. Additional increases were driven by the currentpurchase year,of whileadditional held-to-maturitysecurities and the improvement of our unrealized loss position. Held-to-maturity securities decreased $64$67 million drivedriven by maturities and regular monthly cash flows. During the second quarter the Company restructured our security portfolio by selling 15% of available-for-sale securities during the year in order to reallocate these funds into higher interest-earning products.

In addition, at year end we had $713$941 million of deposits through our participation in the Intrafi Network Deposits and FISR&T Insured Deposit programs. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC insurance coverage above the insurance coverage available to our depositors at a single FDIC-insured institution, by placing multiple interest-bearing demand accounts at other member banks and Northwest receives an equal amount of deposits from other member banks. The balance carried an average cost of 3.68%.3.00%.

Shareholders’ equity. Total shareholders’ equity at December 31, 20242025 was $1.89 billion, or $12.94 per share, an increase of $294 million, or 18.4%, from $1.60 billion, or $12.52 per share, an increase of $46 million, or 2.9%, from $1.55 billion, or $12.20 per share, at December 31, 2023.2024. This increase was the result stock issued as part of our Penns Woods merger of 230 million, net income of $100$126 million for the year ended December 31, 2024,2025, as well as a decrease in accumulated other comprehensive loss of $39$40 million due primarily to a decrease in unrealized loss in the available-for-sale investment portfolio. These changes were partially offset by $102$110 million of cash dividend payments during the year ended December 31, 2024.2025.

Net income for the year ended December 31, 20242025 was $126 million, or $0.92 per diluted share, an increase of $26 million, or 26%, from $100 million, or $0.79 per diluted share, a decrease of $35 million, or 25.7%, from $135 million, or $1.06 per diluted share, for the year ended December 31, 2023.2024. The decreaseincrease in net income resulted, primarily from aan decreaseincrease in net interest income of 90 million, or 21%, resulting primarily from an increase in interest earning assets driven by the Penns Woods acquisition. Additionally, contributing to the increase in net income was an increase in noninterest income of $27$42 million, or 23.6%,49%, resulting from a loss on investment sale as part of our securities portfolio restructure.restructure Additionally contributing toin the decreaseprior inyear. netOffsetting incomethese increases was an increase in noninterest expense of $17$68 million or 4.8%,18%, partiallyan offset by a decreaseincrease in the provision for credit losses of $2$31 million, or 7.1%,127%, and aan decreaseincrease in income taxes of $11$8 million or 27.1%.26%. Net income for the year ended December 31, 20242025 represents a return on average equity and average assets of 6.41%7.27% and 0.70%,0.82%, respectively, compared to 8.94%6.41% and 0.95%0.70% for the year ended December 31, 2023.2024. A discussion of significant changes follows.

Net interest income for 20242025 was $436$525 million, which remainedincreased flat$90 million compared to 2023.2024. Net interest income (FTE) was $439$529 million for 20242025 and net interest margin (FTE) was 3.26%.3.69%. Compared to the prior year, net interest income (FTE) increased $0.2$90 million and net interest margin (FTE) decreasedincreased by twoforty-three basis points. The increase in net interest income (FTE) and decrease in net interest margin (FTE) was driven by an increase in interest income resulting from an increase in average earning assets from the Penns Woods acquisition coupled with higher earning asset yields which was offset by an increase in interest-bearinginterest deposit costs and a shift in funding mix to higher cost depositsexpense due to an increase in the higheraverage balance interest ratebearing environment.liabilities from the Penns Woods acquisitions which was slightly offset by a lower costs of funding.

Average investments declinedincreased 7%4% from the year ended December 31, 20232024 driven by the salePenns ofWoods investmentacquisition and a targeted increase in the overall securities portfolio during the secondyear quarterthrough the reinvestment of 2024cash coupledflows withfrom regular principal payments and maturities. Interest income on investment securities increased by $7$13 million, or 17%,28%, from the year ended December 31, 20232024 due to the increase in the average balance of investments and the increase in yield on investments (FTE) to 2.25%2.78% for 2024 which was partially offset by a decline in the average balance of investments for both periods.2025.

Average deposits grew 4%7% from 20232024 driven by an increase in ouraverage balances from the Penns Woods acquisition. The average timemoney depositsmarket dueand tonon-interest customerbearing preferenceschecking fordeposit this fixed maturity product type whichaccounts grew by $845$315 million and $236 million, respectively, from the year ended December 31, 2023.2024. Additionally, interest-bearing checking deposit accounts and savings deposit accounts grew by $158 million and $136 million, respectively. This increase was partially offset by a $217$35 million decrease in money market balances as customers shifted balances into higher yielding time depositdeposits accounts.balances. Interest expense on deposits increaseddecreased by $100$7 million, or 95%,3%, from 20232024 primarily attributable to increasesthe decrease in both the average yield andpaid on deposits which was partially offset by the increase in average balance of deposit accounts as we continued competitively positioning our deposit products.accounts.

Compared to the year ended December 31, 2023,2024, average borrowings saw a 55%8% reductiondecrease primarily attributable to the strategic pay-down of wholesale borrowings.borrowings This decreasewhich was madepartially possibleoffset by athe substantialacquisition increaseof inlong-term cash reserves, resultingborrowings from thePenns sale of investment securities during the year, as well as a notable rise in the average balance of deposits.Woods. The decrease in the average balance of borrowings resulted in a decrease in interest expense on borrowings by $19$3 million from 2023.2024.

(8) Average cost of deposits was 1.71%,1.55%, 0.91%1.71% and 0.12%, respectively and average cost of interest-bearing deposits were 2.18%, 1.20%, and 0.16%,0.91%, respectively.

The provision for credit losses increased by $2$31 million, or 7.1%,127%, compared to the year ended December 31, 2023.2024. This increase included a $9$29 million increase in the provision for credit losses - loans,loans which was partly offset byand a $7$2 million decreaseincrease in the provision for credit losses - unfunded commitments. This increase is due to the initial Day 1 provision from the Penns Woods merger of $21 million. Excluding the Day 1 provision for credit losses from the acquisition, the provision for credit losses for the year ended December 31, 2025 was $36 million, which increased from the prior year end primarily due to growth within our commercial lending portfolio and an increase in net charge-offs.

The changes in the provision noted above is driven by growth within our commercial lending portfolio and changes in the economic forecasts coupled with a declineincrease in our reservesprovision for unfunded commitments inis due to the currentPenns period.Woods Thisacquisition offset by a decline is based on the timing of organic origination and funding of commercial construction loans and lines of credit.

Noninterest income decreasedincreased by $27$42 million, or 24%49% which was driven by a loss on sale of investments in 2024 of $39 million;million. excluding the loss on sale of securities non interestAdditionally, income grewfrom bybank $13owned life insurance increased $6 million, or 11%. The increaseresulting from thea priorlarge yearclaim wasrecognized drivenin by2025, service charges and fees,fees SBAincreased $2 million, or 3%, driven by commercial loan salesfees and deposit related fees based on customer activity in the current year. Offsetting these increases was a decrease in other operating income. Other operating income increasedof $6$7 million, or 37%31% driven by a gain on sale of Visa B shares and a gain on a low income housing tax credit investment. Service charges and fees increased $4 million, or 6%, driven by commercial loan fees and deposit related fees based on customer activity in the current year. Gains on the sales of SBA loans increased $2 million in during the current. Partially offsetting these increases was a decrease in income from bank owned life insurance of $2 million, resulting from higher death benefits receivedinvestment in the prior year.

(1) Other noninterest expense includes collections expense, marketing expense, FDIC insurance expense, amortization of intangible assets, real estate owned expense, merger, asset disposition and restructuring expense, and other expenses. See the “Consolidated Statements of Income” in Item 1. Financial Statements of this report.

Noninterest expense increased $17$68 million, or 5%,18%, from the year ended December 31, 2023.2024. This increase was primarily attributable to an increase in compensationmerger, asset disposition and restructuring expense of $37 million, and a $3 million increase in other operating expense that is attributable to an increase in intangible amortization expense from the Penns Woods merger. Compensation and employee benefits expense ofincreased $19$23 million, or 10%,11%, for the year ended December 31, 20242025 driven primarily by an increase in core compensation and benefits expense due to the build outaddition of thePenns commercialWoods business and related credit, risk management, and internal audit support functions over the past yearemployees coupled with an increase in contractedperformance employeesbased expenseincentive and an increase in employee benefitscompensation expense. Partially offsetting this increase was a decrease in non-personnelprofessional services expense related to professional services. Professional serviceswhich decreased $3$2 million, or 16%12% from the year ended December 31, 2023 primarily due to the use of third-party consulting and staffing support in the prior year.2024.

The provision for income taxes decreasedincreased by $11$8 million, or 27%,26%, from the year ended December 31, 20232024 primarily due to lowerhigher income before taxes. Our effective tax rate for the year ended December 31, 20242025 was 22.6% compared to 22.9% for the year endedand December 31, 2023.2024 was 22.6%.

Real estate acquired as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until such time that it is sold. When real estate is acquired through foreclosure or by deed in lieu of foreclosure, it is recorded at the lower of the related loan balance or its fair value as determined by an appraisal, less estimated costs of disposal. If the value of the property is less than the principal balance, less any relatedprior specificcharge credit loss reserve allocations,offs, the difference is charged against the allowance for credit losses. Any subsequent write-down of real estate owned or loss at the time of disposition is charged against income.

We utilize a structured methodology each period when analyzing the adequacy of the allowance for credit losses and the related provision for credit losses, which the ACL Committee assesses regularly for appropriateness. As part of the analysis as of December 31, 2024,2025, we considered the most recent economic conditions and forecasts available. In addition, we considered the overall trends in asset quality, reserves on individually assessed loans, historical loss rates and collateral valuations. The ACL decreasedincreased by $8$33 million, or 7%,29%, to $117$150 million, or 1.04%1.15% of gross loans at December 31, 20242025 from $125$117 million, or 1.10%1.04% of total loans, at December 31, 2023.2024. This decreaseincrease was the result of the reductionincrease in total loans of $226$1.8 million,billion, coupled with the de-riskingincrease ofin ournon-performing loan portfolio through the reduction of nonperforming, criticizedassets and classifiedsubstandard assets.loans.

We also consider how the levels of non-accrual loans and historical charge-offs have influenced the required amount of ACL. Nonaccrual loans of $61$107 million, or 0.55%0.82% of total gross loans receivable at December 31, 2024,2025, decreasedincreased by $33$46 million, or 35%,75%, from $94$61 million, or 0.83%0.55% of total gross loans receivable, at December 31, 2023.2024. This decreaseincrease was primarily related to current commercial real estate loans that resulted from the loanPenns salesWoods and loans moved to held-for-sale as of year end.acquisition. As a percentage of average loans, net charge-offs increaseddecreased to 0.32%0.25% for the year ended December 31, 20242025 compared to 0.11%0.32% due to thecertain commercial real estate loans notedthat abovewere beingwritten written-downdown to fair value prior to thebe sale.transferred to held-for-sale as of December 31, 2024. Total charge-offs related to the loan sales and transfer to loans held-for-sale was a combined $15 million.million for December 31, 2024.

Following the first quarter of 2023 bank failures, the Federal Reserve Board established the Bank Term Funding Program (“BTFP”) as an additional source of available liquidity to support depository institutions through pledging qualifying assets as collateral. In January 2024, the Federal Reserve Board announced it will stop extending loans under the BTFP after March 11, 2024. The Bank took steps to support readiness but did not participate in the BTFP. At December 31, 2024,2025, Northwest Bank had $3.2$3.4 billion of additional borrowing capacity available with the FHLB of Pittsburgh, including a $250 million overnight line of credit, which had no balance at December 31, 2024,2025, as well as $555$1.5 millionbillion of borrowing capacity available with the Federal Reserve Bank and $105$369 million with twofour correspondent banks. We believe the Bank has sufficient liquidity and capital resources to meet its cash flow obligations over the next 12 months and for the foreseeable future.

Deposits are our primary source of externally generated funds. The level of deposit inflows during any given period is heavily influenced by factors outside of our control, such as consumer savings tendencies, the general level of short-term and long-term market interest rates, as well as higher alternative yields that investors may obtain on competing investments such as money market mutual funds. Financial institutions, such as Northwest Bank, are also subject to deposit outflows. Our net deposits increased by $1.8 billion for the year ended December 31, 2025, increased by $165 million for the year ended December 31, 2024, and increased by $515 million for the year ended December 31, 2023, and decreased by $837 million for the year ended December 31, 2022.2023.

When necessary, we utilize borrowings as a source of liquidity and as a source of funds for long-term investment when market conditions permit. The net cash flow from the receipt and repayment of borrowings was a net decrease of $199$148 million, a net decrease of $282$199 million, and a net increase of $532$282 million for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively.

Please refer to Note 1 of the Notes to Consolidated Financial Statements in Item 8 of Part II of our 2025 Annual Report on Form 10-K.10-K and Note 1 “Basis of Presentation and Informational Disclosures” within this Item 1 of this Quarterly Report for more information.

On July 25, 2025, the Company completed its acquisition of Penns Woods, pursuant to the merger agreement, which was entered into by the Company and Penns Woods on December 16, 2024 (the "Merger Agreement"). In accordance with the Merger Agreement, the Company and Penns Woods completed a business combination whereby Penns Woods merged with and into the Company (the “Merger”), with the Company as the surviving corporation in the Merger. Immediately after the effective time of the Merger (the “Effective Time”), Penns Woods’ wholly-owned subsidiary banks, Luzerne Bank, a Pennsylvania-chartered state bank, and Jersey Shore State Bank, a Pennsylvania-chartered state bank, merged with and into Northwest Bank, with Northwest Bank as the surviving bank in the subsidiary bank mergers. Under the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each share of Penns Woods’ common stock, $5.55 par value, issued and outstanding immediately prior to the Effective Time (except for Treasury Shares (as provided for in the Merger Agreement)), converted, in accordance with the procedures set forth in the Merger Agreement, into a right to receive 2.385 shares of common stock, $0.01 par value, of the Company.

The Penns Woods results of operations are included in the Company’s consolidated results since the date of acquisition. Therefore, the Company’s firstsecond quarter 2026 results reflect increased levels of average balances, net interest income, and noninterest expense compared to the firstsecond quarter 2025 results. After purchase accounting fair value adjustments, the acquisition added $2.2 billion of total assets, including $1.8 billion of loans, $160 million of investments, of which $82 million were immediately sold, as well as $2.0 billion of total liabilities, primarily consisting of $1.6 billion in deposits. The Company recorded preliminary goodwill of $63$64 million and core deposit intangibles of $42 million related to the acquisition.

Total assets at MarchJune 31,30, 2026 were $16.9$17.2 billion, an increase of $140$441 million from December 31, 2025. A discussion of significant changes follows.

Cash and cash equivalents increased by $53$15 million, or 23%,6%, to $287$248 million at MarchJune 31,30, 2026, from $234 million at December 31, 2025 due to growth in our deposits and borrowings exceeding the growth in loans and securities.

Total marketable securities increased to $2.4$2.5 billion at MarchJune 31,30, 2026, increasing by $124$190 million, or 5%,8%, from December 31, 2025. Available-for-sale securities increased by $161$243 million, this was driven by the purchase of additional securities. Held-to-maturity securities decreaseddeclined $37$53 million, driven by maturities and regularrecurring monthly cash flows.

Gross loans receivable was $13.1$13.2 billion at MarchJune 31,30, 2026, increasing $49$222 million from December 31, 2025. This increase is attributed to net growth of commercial and industrial (C&I) and vehicle loans. Our total personal banking loan portfolio increased by $20$170 million, to $7.2$7.3 billion at MarchJune 31,30, 20262026, while our total commercial banking loans increased by $28$52 million, to $5.9 billion at MarchJune 31,30, 2026.

The following table provides the various loan sectors in our commercial real estate portfolio at MarchJune 31,30, 2026:

The following table describes the collateral of our commercial real estate portfolio by state at MarchJune 31,30, 2026:

Total deposits increased by $270$219 million, to $14.2 billion at MarchJune 31,30, 20262026, from $13.9 billion at December 31, 2025. This increase was driven primarily by an increase in the balance of money market,market and savings deposits of $226 million and $93 million, respectively, partly due to customers shifting funds to these products as their time deposits of $194 million, $78 million and $58 million, respectively.matured. This is partially offset by a decrease in interest-bearing checking and time deposits of $58$79 million.million and $89 million, respectively.

As of MarchJune 31,30, 2026, we had $306$236 million of brokered deposits, which made up 10%9% of our time deposits and 2% of our total deposit balance at quarter end. As of December 31, 2025, we had $193 million of brokered deposits, which made up 7% of our time deposits and 1% of our total deposit balance at year end. The brokered deposits had an average original term of 7 and 8.5 months, respectively.

In addition, we had $903$901 million and $941 million of deposits through our participation in the IntraFi Network Deposits and R&T Insured Deposit programs as of MarchJune 31,30, 2026 and December 31, 2025, respectively. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple interest-bearing demand accounts at other member banks and Northwest Bank receives an equal amount of deposits from other member banks. The balance carried an average cost of 2.85%3.03% as of MarchJune 31,30, 2026 and 3.00% as of December 31, 2025.

At MarchJune 31,30, 2026 and December 31, 2025, we had total deposits in excess of $250,000 (the limit for FDIC insurance) of $2.1 billion and $1.9 billion, respectively. At those dates, we had no deposits that were uninsured for any other reason. The following table presents details regarding the Company's uninsured deposits portfolio:

Our largest uninsured depositor, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $134$185 million, or 0.95%1.3% of total deposits, as of MarchJune 31,30, 2026. Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $358$404 million, or 2.53%,2.9%, of total deposits, as of MarchJune 31,30, 2026. The average uninsured deposit account balance, excluding intercompany and collateralized accounts, was $336,335$344,187 as of MarchJune 31,30, 2026.

Total shareholders’ equity increased to $1.9 billion, or $13.02$13.17 per share, at MarchJune 31,30, 2026 compared to $12.94 per share at December 31, 2025, increasing by $14$37 million in the current year. The increase was the result of year-to-date earnings of $51$104 million, partially offset by a $29$59 million of cash dividend paymentpayments and an increase in accumulated other comprehensive loss of $8$12 million, or 12%,17%, due to an increase in unrealized loss in the available-for-sale investment portfolio.

Northwest Bank is required to maintain a sufficient level of liquid assets, as determined by management and reviewed for adequacy by the FDIC and the Pennsylvania Department of Banking and Securities during their regular examinations. Northwest frequently monitors its liquidity position primarily using the ratio of unencumbered available-for-sale liquid assets as a percentage of deposits and borrowings (“liquidity ratio”). Northwest Bank’s liquidity ratio at MarchJune 31,30, 2026 was 21.89%23.56% compared to 18.44% as of December 31, 2025. Northwest Bank adjusts liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes and insurance on mortgage loan escrow accounts, repayment of borrowings and loan commitments. At MarchJune 31,30, 2026, Northwest had $4.4$4.3 billion of additional borrowing capacity available with the FHLB, including $250 million on an overnight line of credit, which had noa drawn balance of $227 million as of MarchJune 31,30, 2026, as well as $1.7$1.9 billion of borrowing capacity available with the Federal Reserve Bank and $369$419 million with fourfive correspondent banks.

We paid $29 million in cash dividends during the quarter ended MarchJune 31,30, 2026 compared to $26 million for the quarter ended MarchJune 31,30, 2025. The common stock dividend payout ratio (dividends declared per share divided by net income per diluted share) for the quarters ended MarchJune 31,30, 2026 and 2025 was 58.8%55.6% and 76.9%, respectively, on dividends of $0.20 per share. On AprilJuly 22, 2026, the Board of Directors declared a cash dividend of $0.20 per share payable on MayAugust 20,18, 2026 to shareholders of record as of MayAugust 7,6, 2026. This represents the 126th127th consecutive quarter we have paid a cash dividend.

On an ongoing basis, the Credit Administration department, as well as loan officers and department heads, review and monitor the loan portfolio for problem loans. This portfolio monitoring includes a review of the monthly delinquency reports as well as historical comparisons and trend analysis. Personal and small business commercial loans are classified primarily by delinquency status. In addition, a meeting is held every quarter with each vertical to monitor the performance and status of commercial loans on an internal watch list. On an on-going basis, the loan officer, in conjunction with a portfolio manager, grades or classifies problem commercial loans or potential problem commercial loans based upon their knowledge of the lending relationship and other information previously accumulated. ThisThese rating isare alsoperiodically reviewed independently by our LoanCredit Risk Review department onas part of a periodictargeted basis.risk-based review program. Our loan grading system for problem commercial loans is consistent with industry regulatory guidelines which classifies loans as “substandard”, “doubtful” or “loss”. Loans that do not expose us to risk sufficient to warrant classification in one of the previous categories, but which possess somepotential weaknesses, are designated as “special mention”. A “substandard” loan is any loan that has well defined weaknesses, is 90 days or more contractually delinquent or is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as “doubtful” have all the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions or values, highly questionable and improbable. Loans classified as “loss” have all the weakness inherent in those classified as “doubtful” and are considered uncollectible.

If a substandard or doubtful loan is not individually assessed, it is grouped with other loans that possess common characteristics for credit losses and analysis. For the purpose of calculating reserves, we have grouped our loans into seven segments: residential mortgage loans, home equity loans, vehicle loans, consumer loans, commercial real estate loans, commercial real estate loans - owner occupied and commercial and industrial loans. The allowance for credit losses is measured using a combination of statistical models and qualitative assessments. We use a twenty four month forecasting period and revert to historical average loss rates thereafter. Reversion to average loss rates takes place over twelve months. Historical average loss rates are calculated using historical data beginning in October 2009 through the current period.

We utilize a structured methodology each period when analyzing the adequacy of the allowance for credit losses and the related provision for credit losses, which the ACL Committee assesses regularly for appropriateness. As part of the analysis as of MarchJune 31,30, 2026, we considered the most recent economic conditions and forecasts available which incorporated the impact of material recent economic events. In addition, we considered the overall trends in asset quality, reserves on individually assessed loans, historical loss rates and collateral valuations. The ACL increaseddecreased by $167$1 thousandmillion to $150$149 million, or 1.15%1.13% of total loans at MarchJune 31,30, 2026, consistentwhich withis a slight decrease from 1.15% at December 31, 2025. This increasedecrease was primarily driven by theour increaseloan inportfolio the balance of total loans.mix. The provision for credit losses for the quarter ended MarchJune 31,30, 2026 was $4$7 million, driven by growth in our commercial lending portfolioportfolio, andincluding increasedunfunded uncertainty in the economic outlook,commitments, compared to $8$9 million for the quarter ended MarchJune 31,30, 2025.

Total classified loans increased by $44$71 million to $498$524 million at MarchJune 31,30, 2026 compared to $453 million at December 31, 2025. This increase was driven by net increases in our C&I and commercial real estate portfolios which increased $30$26 million and $15$44 million, respectively. The increase in classified loans was driven primarily by receiptacquired ofloans updated financials andto borrowers whose performanceupdated deterioratedfinancial duringstatements theindicated quarter.financial deterioration.

We also consider how the levels of nonaccrual loans and historical charge-offs have influenced the required amount of allowance for credit losses. Nonaccrual loans of $91 million at MarchJune 31,30, 2026 decreased by $16 million, or 15%, from $107 million at December 31, 2025, or 0.70%0.69% of total loans receivable as of MarchJune 31,30, 2026 and 0.82% of total loans receivable as of December 31, 2025. As a percentage of average loans, annualized net charge-offs were 0.16%0.15% for the three months ended MarchJune 31,30, 2026 compared to 0.25% for the year ended December 31, 2025.

Comparison of Operating Results for the Quarters Ended MarchJune 31,30, 2026 and 2025

The following chart provides a reconciliation of net income from the quarter ended MarchJune 31,30, 2025 to the quarter ended MarchJune 31,30, 2026 (dollars in thousands):

Net income for the quarter ended MarchJune 31,30, 2026 was $51$54 million, or $0.34$0.36 per diluted share, an increase of $7$20 million, or 16%,59%, from net income of $43$34 million, or $0.34$0.26 per diluted share, for the quarter ended MarchJune 31,30, 2025. This increase in net income resulted primarily from an increase in net interest income of $15$27 million which was driven by the increase in interest income on loans receivable of $16$28 million. This was offset by an increase in noninterest expense of $12$7 million which was driven by an increase in compensation and employee benefits and processing expenses of $4$8 million and $3$4 million, respectively. Net income for the quarter ended MarchJune 31,30, 2026 represents annualized returns on average equity and average assets of 10.86%11.20% and 1.22%,1.27%, respectively, compared to 10.90%8.26% and 1.22%0.93% for the same quarter last year.

Net interest income for the firstsecond quarter of 2026 was $142$147 million which increased $15$27 million, or 11%,23%, from the firstsecond quarter of 2025. Net interest income (FTE) was $143$148 million for the quarter ended MarchJune 31,30, 2026 and net interest margin (FTE) was 3.70%.3.75%. Compared to the same quarter of the prior year, net interest income (FTE) increased $15$27 million and net interest margin (FTE) decreasedincreased by seventeennineteen basis points. The increase in net interest income (FTE) and net interest margin (FTE) was primarily driven by a higher average balance of earnings assets and interest bearing liabilities acquired from the Penns Woods acquisition. The decrease in net interest margin (FTE) was driven by a $13.1 million non-accrual loan interest recovery in the first quarter of 2025.

Average loans receivable increased $1.9$1.8 billion, or 17%,16%, from the quarter ended MarchJune 31,30, 2025. This increase was driven by the acquisition of Penns Woods which resulted in an additional $1.8 billion in loans. Interest income on loans receivable increased by $16$28 million, or 10%,18%, from the same quarter in the prior year, driven by the Penns Woods acquisition and a loan mix shift towards higher yielding commercial loans which was partially offset by an interest recovery of $13.1 million on a non-accrual commercial real estate loan payoff during the first quarter of 2025.loans.

Average investments increased 21%23% from the firstsecond quarter of 2025 driven by the Penns Woods acquisition and a targeted increase in the overall securities portfolio. Interest income on investment securities increased by $6$7 million, or 47%,50%, from the quarter ended MarchJune 31,30, 2025. The increase is due to the increase in the average balance of investments and the increase in average yield on investments (FTE) to 3.17%3.27% for the quarter ended MarchJune 31,30, 2026.

Average deposits grew 16% from the quarter ended MarchJune 31,30, 2025 driven by deposits acquired from the Penns Woods merger. Our average money market, interest-bearing checking, and time deposit accounts grew by $526$608 million, $406$364 million, $338$283 million respectively, from the quarter ended MarchJune 31,30, 2025 partly due to acquisition and higher use of brokered CDs. Interest expense on deposits increased by $4 million, or 8% from the quarter ended MarchJune 31,30, 2025, primarily attributable to an increase in average balance of deposits partially offset by lower cost of funds.

Compared to the quarter ended MarchJune 31,30, 2025, average borrowings saw aan 81%82% increase. This increase was attributable to the acquisition of long-term borrowings from Penns Woods. The increase in the average balance of borrowings resulted in an increase in interest expense on borrowings of $3 million from the quarter ended MarchJune 31,30, 2025.

(b)Interest income includes accretion/amortization of deferred loan fees/expenses,expenses and fair value marks, which were not material.

The provision for credit losses decreased by $4$2 million from the quarter ended MarchJune 31,30, 2025. This decrease included a $3$7 million decrease in the provision for credit losses - loans, as well as a $0.2$5 million decreaseincrease in the provision for credit losses - unfunded commitments. The current year provision was driven by growth in our commercial lending portfolio. The prior year provision for credit losses - loans was driven by downgrades within our commercial real estate portfolio offset by changes in the economic forecasts. This decreaseincrease isin provision for unfunded was due to thean increase in timing of organicundrawn originationcommitments and funding of commercial construction loans and lines of credit which was partially offset by increased uncertainty in the economic outlook.

Additionally, the Company saw an increase in classified loans to $524 million, or 3.96% of total loans, at June 30, 2026 from $518 million, or 4.57% of total loans, at June 30, 2025 and $498 million, or 3.81% of total loans, at March 31, 2026 from $279 million, or 2.49% of total loans, at March 31, 2025 and $453 million, or 3.49% of total loans, at December 31, 2025.2026. The increase from the prior year was primarily due to classified loans acquired in the Penns Woods acquisition. The increase from the prior quarter was due to receiptchanges ofin updatedour financialscommercial andreal borrowersestate whose performance deteriorated during the quarter.portfolio.

In determining the amount of the current period provision, we considered current and forecasted economic conditions, including but not limited to improvements in unemployment levels, expected economic growth, bankruptcy filings, and changes in real estate values and the impact of these factors on the quality of our loan portfolio and historical loss experience. We analyze the allowance for credit losses as described in the section entitled “Allowance for Credit Losses.” The provision that is recorded is appropriate, in our judgment, to bring this reserve to a level that reflects the current expected lifetime losses in our loan portfolio relative to loan mix, a reasonable and supportable economic forecast period and historical loss experience at MarchJune 31,30, 2026.

Noninterest income for the quarter ended MarchJune 31,30, 2026 was $33$34 million, an increase of $4$3 million from the quarter ended MarchJune 31,30, 2025, and an increase of $8 million from the six months ended June 30, 2025 driven by an increase in service charges and fees driven by deposit related fees based on customer activity related to the Penns Woods acquisition and trust and other operatingfinancial services income driven by aan gainincrease onin equityour methodwealth investmentsmanagement during the current quarter.business.

Noninterest expense increased by $12$7 million, or 13%,7%, from the quarter ended MarchJune 31,30, 2025 and $19 million, or 10% from the six months ended June 30, 2025. The increase from the prior year quarter was primarily attributable an increase in compensation and employee benefits expense of $4$8 million, or 7%,15%, to $58$63 million for the quarter ended MarchJune 31,30, 2026 driven by an increase in core compensation and benefits expense due to the addition of Penns Woods employees. Additional increases included an increase in processing expenses of $3$4 million for the quarter ended MarchJune 31,30, 2026, due to the addition of the Penns Woods branches to our footprint and an increase of $2 million in amortization of intangible expense related to the acquisition. This was partially offset by a decrease in acquisition expenses of $6 million and a decrease in FDIC insurance premiums of $3 million related to prior period assessment rate changes.

The provision for income taxes increased by $3$6 million from the quarter ended MarchJune 31,30, 2025 dueand to$9 million for the six months ended June 30, 2025. These increases were driven by higher income before taxestaxes, asprimarily theresulting resultfrom of an increase inincreased interest income dueassociated towith the acquisitionacquisition, resultingwhich inexpanded a largerour loan portfolio.