Community Financial System CBU Form 10-Q filing Q1 FY2026

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Part I. Financial Information

Item 1. Financial Statements (Unaudited)

Item 1. Financial Statements

COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)

(In Thousands, Except Share Data)

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See accompanying notes to consolidated financial statements (unaudited).

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COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In Thousands, Except Per-Share Data)

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See accompanying notes to consolidated financial statements (unaudited).

COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In Thousands)

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See accompanying notes to consolidated financial statements (unaudited).

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COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

Three months ended March 31, 2026 and 2025

(In Thousands, Except Share Data)

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See accompanying notes to consolidated financial statements (unaudited).

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COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In Thousands)

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See accompanying notes to consolidated financial statements (unaudited).

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COMMUNITY FINANCIAL SYSTEM, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2026

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NOTE A: BASIS OF PRESENTATION

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The interim financial data as of and for the three months ended March 31, 2026 is unaudited; however, in the opinion of Community Financial System, Inc. (the “Company”), the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results for the interim periods in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and Article 10 of Regulation S-X. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. The Company’s unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2026.

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NOTE B: ACQUISITIONS

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Pending Acquisition

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On January 15, 2026, the Company, through its subsidiary Community Bank, N.A. (“CBNA”), entered into an agreement to acquire ClearPoint Federal Bank & Trust for approximately $40.0 million in cash, subject to potential purchase price adjustments. The transaction is expected to expand the wealth management services revenue and offerings of the Company. The Company has received the necessary regulatory approvals, including from the Office of the Comptroller of the Currency and a waiver from filing an application with the Federal Reserve Bank of New York. The Company expects the acquisition to close on June 1, 2026, subject to customary closing conditions. The Company expects to incur certain one-time transaction-related costs in connection with the pending acquisition.

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Current and Prior Period Acquisitions

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During the first quarter of 2026, the Company, through its subsidiary OneGroup NY, Inc. (“OneGroup”), completed the acquisitions of two insurance agencies based in New York and Florida. Total aggregate consideration was $3.8 million in cash and contingent consideration with an estimated fair value of $0.2 million at the acquisition date. The contingent consideration arrangements require additional consideration to be paid by the Company based on a percentage of revenue over a period of three years following the acquisition date. The fair value of the contingent consideration at the acquisition date was determined by forecasting estimated amounts of revenue for each applicable period and applying the appropriate factor to those amounts based on the purchase agreement. The effects of the acquired assets are included in the consolidated financial statements from that date. Net assets acquired included $3.5 million of customer list intangible assets and the Company recorded $1.2 million of goodwill in conjunction with the acquisitions. Revenues and direct expenses for the three months ended March 31, 2026 were immaterial.

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On November 7, 2025, the Company, through its subsidiary CBNA, completed the acquisition of seven branch locations in the Allentown, Pennsylvania area from Santander Bank, N.A. (“Santander”), including certain branch-related loans and deposits, acquiring $31.8 million of loans and $543.7 million of deposits. The assumed deposits consist primarily of core deposits (checking, savings and money market accounts) and the purchased loans consist of in-market performing loans, primarily residential real estate loans. Total consideration was $80.9 million, including a deposit premium of 8%, or $43.5 million, and the Company recorded core deposit intangibles of $11.9 million and goodwill of $32.1 million. The effects of the acquired assets and liabilities for the acquisitions have been included in the consolidated financial statements since that date.

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During 2025, the Company, through its subsidiaries Nottingham Investment Services, Inc. (“NISI”), OneGroup, Benefit Plans Administrative Services, LLC (“BPA”) and Benefit Plans Administrative Services, Inc. (“BPAS”), completed the acquisitions of certain assets of financial services companies based in Pennsylvania, Florida, Kentucky, New York, Kansas, Minnesota and Missouri. Total aggregate consideration was $4.5 million in cash and contingent consideration with an estimated fair value of $6.7 million at the acquisition date. The contingent consideration arrangements require additional consideration to be paid by the Company based on a percentage of revenue over periods ranging from one to four years following the acquisition date. The fair value of the contingent consideration at the acquisition date was determined by forecasting estimated amounts of revenue for each applicable period and applying the appropriate factor to those amounts based on the purchase agreement. The effects of the acquired assets are included in the consolidated financial statements from that date. Net assets acquired included $8.4 million of customer list intangible assets and the Company recorded $2.9 million of goodwill in conjunction with the acquisitions. Revenues and direct expenses for the three months ended March 31, 2026 and 2025 were immaterial.

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The assets and liabilities assumed in the acquisitions were recorded at their estimated fair values based on management’s best estimates using information available at the dates of the acquisitions.

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The Santander transaction accelerates CBNA’s overall expansion in the strategic Greater Lehigh Valley and complements its existing commercial and consumer lending presence in the market. The NISI, OneGroup, BPA and BPAS transactions generally expand the Company’s wealth management services, insurance services and employee benefit services presence. Management expects that the Company will benefit from greater geographic diversity and the advantages of other synergistic business development opportunities.

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The following table summarizes the estimated fair value of the assets acquired and liabilities assumed in acquisitions considered to be business combinations after considering the measurement period adjustment described above:

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(1) Includes amounts for OneGroup acquisitions completed as of March 31, 2026.

(2) Includes amounts for NISI, OneGroup, BPA and BPAS acquisitions completed in 2025.

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The Company acquired loans from Santander for which there was no evidence of a more-than-insignificant deterioration in credit quality since origination (purchased seasoned loans) with an unpaid principal balance of $31.8 million at the acquisition date. Total fair value adjustments for these loans resulted in an immaterial net discount, comprised of a noncredit premium of $0.5 million and an allowance for credit losses of $0.5 million. There were no acquired purchased credit deteriorated (“PCD”) loans.

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The fair value of checking, savings and money market deposit accounts acquired were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Certificate of deposit accounts were valued at the present value of the certificates’ expected contractual payments discounted at market rates for similar certificates, which resulted in a premium of $0.5 million. Core deposit intangibles were valued using the cost savings approach, which is variant of an income approach, where the spread between the cost of deposits and an alternative funds rate is calculated and the cost savings are discounted to present value using a risk adjusted discount rate. The total core deposit intangible was $11.9 million.

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The other intangibles related to the OneGroup, NISI, BPA and BPAS acquisitions, as well as the core deposit intangibles and other intangibles related to the Santander acquisition, are being amortized using an accelerated method over an estimated useful life of eight years. The goodwill, which is not amortized for book purposes, was assigned to the Insurance Services segment for the OneGroup acquisitions. The goodwill was assigned to the Banking and Corporate segment for the Santander acquisition, the Wealth Management Services segment for the NISI acquisition and the Employee Benefits Services segment for the BPA and BPAS acquisitions. The goodwill arising from the acquisitions completed in 2026 and 2025 is deductible for tax purposes.

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Disclosure of the proforma revenue and earnings assuming the Santander acquisition had been completed as of January 1, 2024 is not considered practicable. Retrospective application to that date would require assumptions about management's intent in prior periods that cannot be independently substantiated. It is not possible to objectively distinguish information about significant estimates of amounts that provide evidence of circumstances that existed on the dates at which those amounts would be recognized, measured, or disclosed under retrospective application and would have been available when the financial statements for that prior period were issued.

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NOTE C: ACCOUNTING POLICIES

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The notes to the consolidated financial statements appearing in the Company’s 2025 Annual Report on Form 10-K, which include descriptions of significant accounting policies, as updated by the information contained in this report, should be read in conjunction with these interim consolidated financial statements.

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Contract Balances

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A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of March 31, 2026, $38.1 million of accounts receivable, including $9.6 million of unbilled fee revenue, and $2.5 million of unearned revenue was recorded in the consolidated statements of condition. As of December 31, 2025, $44.0 million of accounts receivable, including $8.5 million of unbilled fee revenue, and $1.1 million of unearned revenue was recorded in the consolidated statements of condition.

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Hedging

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The Company enters into certain derivative instruments to manage exposure to variability in future expected cash flows related to financial items. Cash flow hedges are designated and accounted for in accordance with FASB ASC 815, Derivatives and Hedging. The Company may use interest rate swaps or other qualifying derivative instruments to hedge exposure to variability in cash flows attributable to changes in interest rates on financial items. All derivative instruments designated as cash flow hedges are recognized on the balance sheet at fair value on the trade date. At inception, the Company formally documents (1) the hedging relationship; (2) the risk management objective and strategy; (3) the hedged forecasted transaction; (4) the nature of the risk being hedged; and (5) the method to assess hedge effectiveness.

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Derivatives designated as hedging relationships are remeasured at fair value at each reporting date. Changes in fair value of the effective portion of the hedge is recorded in accumulated other comprehensive income or loss (“AOCI”), while the ineffective portion is recognized immediately in earnings. Hedge effectiveness is assessed at inception and on a quarterly basis thereafter. The Company uses a qualitative or quantitative effectiveness assessment method, as appropriate, to conclude that the hedge is expected to be highly effective in offsetting changes in cash flows attributable to the hedged risk. Amounts deferred in AOCI are reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings. Reclassifications are recorded in the same income statement line item as the hedged item. Hedge accounting is discontinued prospectively if (1) the hedging instrument expires or is terminated; (2) the hedge no longer meets effectiveness criteria; or (3) the forecasted transaction is no longer probable. Upon discontinuance, amounts in AOCI remain until the forecasted transaction impacts earnings, unless the transaction is no longer probable, in which case amounts are immediately recognized in earnings.

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Reclassifications

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Certain reclassifications have been made to prior period balances to conform to the current period’s presentation.

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New Accounting Pronouncements

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In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, to enhance the disclosure of expenses by requiring further disaggregation of relevant expense captions as well as disclosures about selling expenses. ASU 2024-03 is applicable to all public business entities for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact this will have on the consolidated financial statements but does not expect it will have a material impact on the Company’s consolidated financial statements.

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In November 2025, the FASB issued ASU 2025-09, Hedge Accounting Improvements, which amends certain aspects of the existing hedge accounting guidance to more closely align hedge accounting with the economics of an entity's risk management activities. ASU 2025-09 is applicable to all public business entities for annual reporting periods beginning after December 15, 2026 and for interim periods within those annual reporting periods, with early adoption permitted. The amendments are required to be applied prospectively, with certain transition provisions available for existing hedging relationships. The Company is evaluating the impact this will have on the consolidated financial statements but does not expect it will have a material impact on the Company’s consolidated financial statements.

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NOTE D: INVESTMENT SECURITIES

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The amortized cost and estimated fair value of investment securities as of March 31, 2026 and December 31, 2025 are as follows:

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As of March 31, 2026, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $4.0 million and investment securities without readily determinable fair values carried at $77.6 million, including Federal Home Loan Bank of New York (“FHLB”) common stock of $32.6 million, Federal Reserve Bank (“FRB”) common stock of $33.3 million, equity securities of $6.6 million and other investment securities of $5.1 million.

As of December 31, 2025, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $4.4 million and equity securities without readily determinable fair values carried at $72.8 million; including FHLB common stock of $33.2 million, FRB common stock of $33.3 million and other equity securities of $6.3 million.

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The investment in FRB stock represents approximately half of the total required subscription, and the remaining half is unpaid and remains subject to call by the FRB.

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The amount of upward and downward adjustments to equity securities without readily determinable fair values was not material for the three months ended March 31, 2026 and 2025.

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The gains and losses on equity and other securities for the three months ended March 31, 2026 and 2025 are as follows:

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A summary of investment securities that have been in a continuous unrealized loss position is as follows:

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As of March 31, 2026

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As of December 31, 2025

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The unrealized losses reported pertaining to available-for-sale securities issued by the U.S. government and its sponsored entities include treasuries, agencies, and mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, which are currently rated Aa1 by Moody’s Investor Services, AA+ by Standard & Poor’s, AA+ by Fitch and are guaranteed by the U.S. government. The majority of the obligations of state and political subdivisions carry a credit rating of A or better. Additionally, a portion of the obligations of state and political subdivisions carry a secondary level of credit enhancement. The Company holds one corporate debt security in an unrealized loss position and, based on an analysis of the financial position of the issuer including financial performance, liquidity and regulatory capital ratios, the issuer of the security shows a remote risk of default. Timely interest payments continue to be made on the security. The unrealized losses in the portfolios are primarily attributable to changes in interest rates. As such, management does not believe any individual unrealized loss as of March 31, 2026 represents credit losses and no unrealized losses have been recognized in the provision for credit losses. Accordingly, there is no allowance for credit losses on the Company’s available-for-sale portfolio as of March 31, 2026. Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $8.4 million at March 31, 2026 and is excluded from the estimate of credit losses.

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Securities classified as held-to-maturity are included under the Current Expected Credit Loss (“CECL”) methodology. Calculation of expected credit loss under CECL is done on a collective (“pooled”) basis, with assets grouped when similar risk characteristics exist. The Company notes that at March 31, 2026, all securities in the held-to-maturity classification are U.S. Treasury securities and government agency mortgage-backed securities, therefore they share the same risk characteristics and can be evaluated on a collective basis. The expected credit loss on these securities is evaluated based on historical credit losses of this security type and the expected possibility of default in the future as these securities are guaranteed by the U.S. government. U.S. Treasury securities and government agency mortgage-backed securities often receive the highest credit rating by rating agencies and the Company has concluded that the possibility of default is considered remote. The U.S. Treasury securities and government agency mortgage-backed securities held by the Company in the held-to-maturity category carry an Aa1 rating from Moody’s Investor Services, AA+ rating from Standard & Poor’s, and AA+ from Fitch. The Company concludes that the long history with no credit losses for these securities (adjusted for current conditions and reasonable and supportable forecasts) indicates an expectation that nonpayment of the amortized cost basis is zero. Management has concluded that the prepayment risk associated with these securities is insignificant and it is expected to recover the recorded investment. Accordingly, there is no allowance for credit losses on the Company’s held-to-maturity debt portfolio as of March 31, 2026. Accrued interest receivable on held-to-maturity debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $4.1 million at March 31, 2026 and is excluded from the estimate of credit losses. The Company has the intent and ability to hold the securities to maturity.

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The amortized cost and estimated fair value of debt securities at March 31, 2026, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, including government agency mortgage-backed securities and government agency collateralized mortgage obligations, are shown separately.

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Investment securities with a carrying value of $2.44 billion and $2.06 billion at March 31, 2026 and December 31, 2025, respectively, were pledged to collateralize certain deposits and borrowings. Securities pledged to collateralize certain deposits and borrowings included $317.2 million and $319.5 million of U.S. Treasury securities that were pledged as collateral for securities sold under agreement to repurchase at March 31, 2026 and December 31, 2025, respectively.

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NOTE E: LOANS AND ALLOWANCE FOR CREDIT LOSSES

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The segments of the Company’s loan portfolio are summarized as follows:

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The following table presents the aging of the amortized cost basis of the Company’s past due loans by segment as of March 31, 2026 and December 31, 2025:

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Interest income on nonaccrual loans of $0.4 million and $0.1 million was recognized during the three months ended March 31, 2026 and 2025, respectively.

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The Company uses several credit quality indicators to assess credit risk in an ongoing manner. The Company’s primary credit quality indicator for its business lending portfolio is an internal credit risk rating system that categorizes loans as “pass”, “special mention”, “substandard”, or “doubtful”. Credit risk ratings are applied to loans individually based on a case-by-case evaluation. Business lending loans under $250,000 are assigned either a “pass” or “substandard” risk rating. Business lending relationships with total exposures above management-defined thresholds are subject to a formal annual review to affirm the appropriate risk rating. Quarterly credit evaluations may also be completed based on the borrower’s risk rating. For all business lending relationships regardless of exposure size, risk ratings are refreshed when a borrower makes a new loan request, a loan is renewed or automated tools indicate a possible change in a borrower’s credit risk profile. In general, the following are the definitions of the Company’s credit quality indicators.

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Pass ​ ​ ​ The condition of the borrower and the performance of the loans are satisfactory or better.

Special Mention ​ The condition of the borrower has deteriorated and the loan has potential weaknesses, although the loan performs as agreed. Loss may be incurred at some future date if conditions deteriorate further.

Substandard ​ The condition of the borrower has significantly deteriorated and the loan has a well-defined weakness or weaknesses. The performance of the loan could further deteriorate and incur loss if deficiencies are not corrected.

Doubtful ​ The condition of the borrower has deteriorated to the point that collection of the balance is improbable based on current facts and conditions and loss is likely.

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The following tables show the amount of business lending loans by credit quality category at March 31, 2026 and December 31, 2025:

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(1) For the three months ended March 31, 2026.

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(1) For the year ended December 31, 2025.

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All other loans are underwritten and structured using standardized criteria and characteristics, primarily payment performance, and are monitored collectively on a monthly basis. These are typically loans to individuals in the consumer categories and are delineated as either performing or nonperforming. Performing loans include loans classified as current as well as those classified as 30 - 89 days past due. Nonperforming loans include 90+ days past due and still accruing and nonaccrual loans.

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The following tables detail the balances in all other loan categories at March 31, 2026 and December 31, 2025:

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(1) FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720.

(2) FICO CDE refers to loans with FICO scores less than 720 and potentially higher risk.

(3) For the three months ended March 31, 2026.

(4) Includes overdraft gross charge-offs.

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(1) FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720.

(2) FICO CDE refers to loans with FICO scores less than 720 and potentially higher risk.

(3) For the year ended December 31, 2025. ​

For nonaccrual business lending loans greater than $500,000 that do not share the same risk characteristics with a pool of loans, the company establishes individually assessed reserves using methods prescribed by GAAP. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. A summary of individually assessed business loans as of March 31, 2026 and December 31, 2025 follows:

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The average carrying balance of individually assessed loans was $15.4 million and $39.8 million for the three months ended March 31, 2026 and 2025, respectively. An immaterial amount of interest income was recognized on individually assessed loans for the three months ended March 31, 2026 and 2025.

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Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, payment delay, or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

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In some cases, the Company provides multiple types of modifications on one loan. Typically, one type of modification, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification, such as principal forgiveness, may be granted. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The estimate of the allowance for credit losses includes historical losses from loans that were modified due to borrower financial difficulty, therefore a charge to the allowance for credit losses is generally not recorded upon modification.

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There were no loans that were both experiencing financial difficulty and modified during the three months ended March 31, 2026. The following table presents the amortized cost basis of loans at March 31, 2025 that were both experiencing financial difficulty and modified during the three months ended March 31, 2025, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below.

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The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified in the last 12 months.

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There were no loans modified to borrowers with financial difficulty that had a payment default subsequent to modification during the three months ended March 31, 2026 and 2025.

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Allowance for Credit Losses

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The following presents by segment the activity in the allowance for credit losses during the three months ended March 31, 2026 and 2025:

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(1) Includes overdraft charge-offs and recoveries.

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The allowance for credit losses increased to $90.2 million at March 31, 2026 compared to $87.9 million at December 31, 2025 and $82.8 million at March 31, 2025, reflective of an increase in loans outstanding and improvement in credit quality metrics.

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Accrued interest receivable on loans, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $38.5 million at March 31, 2026 and is excluded from the estimate of credit losses and amortized cost basis of loans.

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The Company utilizes the historical loss rate on its loan portfolio as the initial basis for the estimate of credit losses using the cumulative loss, vintage loss and line loss methods, which is derived from the Company’s historical loss experience. To address changes and trends in current period credit metrics, qualitative adjustments to historical loss experience were made for differences in current loan-specific risk characteristics and to address current period delinquencies, charge-off rates, risk ratings, lack of loan level data through an entire economic cycle, changes in loan sizes and underwriting standards as well as the addition of acquired loans which were not underwritten by the Company. The Company considered historical losses immediately prior, through and following the Great Recession compared to the historical period used for modeling to adjust the historical information to account for longer-term expectations for loan credit performance. Under CECL, the Company is required to consider future economic conditions to determine current expected credit losses. Management selected an eight-quarter reasonable and supportable forecast period with a four-quarter reversion to the historical mean to use as part of the economic forecast and utilizes a two-quarter lag adjustment for economic factors that are not dependent on collateral values, and no lag for factors that utilize collateral values. Management determined that these qualitative adjustments were needed to adjust historical information for expected losses and to reflect changes as a result of current conditions.

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For qualitative macroeconomic adjustments, the Company uses third-party forecasted economic data scenarios utilizing a base scenario and two alternative scenarios that are weighted, with forecasts available as of March 31, 2026. The results of these forecasts are applied to the quantitative loss history to calculate the qualitative economic adjustment component of the allowance for credit losses. The scenarios utilized forecast stable unemployment levels, and modest growth in GDP, real household income, and housing prices, offset by some declines in auto and commercial real estate prices.

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Management developed expected loss estimates considering factors for segments as outlined below:

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• Business lending – non real estate: The Company selected projected unemployment and GDP as indicators of forecasted losses related to business lending and utilize both factors in an even weight for the calculation. The Company also considered delinquencies, risk rating changes, recent charge-off history and acquired loans as part of the review of estimated losses.

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• Business lending – real estate: The Company selected projected unemployment and commercial real estate values as indicators of forecasted losses related to commercial real estate loans and utilize both factors in an even weight for the calculation. For office properties, the Company selected projected office-specific commercial real estate values and vacancy rates and utilize both factors in an even weight for the calculation. The Company also considered the factors noted in business lending – non real estate.

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• Consumer mortgages and home equity: The Company selected projected unemployment and residential real estate values as indicators of forecasted losses related to mortgage lending and utilize both factors in an even weight for the calculation. In addition, current delinquencies, charge-offs and acquired loans were considered.
• Consumer indirect: The Company selected projected unemployment and vehicle valuation indices as indicators of forecasted losses related to indirect lending and utilize both factors in an even weight for the calculation. In addition, current delinquencies, charge-offs and acquired loans were considered.

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• Consumer direct: The Company selected projected unemployment and inflation-adjusted household income as indicators of forecasted losses related to consumer direct lending and utilize both factors in an even weight for the calculation. In addition, current delinquencies, charge-offs and acquired loans were considered.

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At March 31, 2026 and December 31, 2025, loans with a carrying amount of approximately $7.01 billion and $6.83 billion, respectively, were pledged for the availability to secure certain borrowings with the FHLB and FRB. There were $437.7 million and $450.0 million of borrowings outstanding under these arrangements at March 31, 2026 and December 31, 2025, respectively.

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At March 31, 2026 and December 31, 2025, the carrying amount of residential real estate property in the process of foreclosure was $11.3 million and $9.4 million, respectively.

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During the three months ended March 31, 2026 and 2025, the Company did not purchase any loans, while the Company sold $17.6 million of secondary market eligible residential consumer mortgage loans in each period.

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NOTE F: GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

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The gross carrying amount and accumulated amortization for each type of identifiable intangible asset are as follows:

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The estimated aggregate amortization expense for each of the five succeeding fiscal years ended December 31 is as follows:

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A reconciliation of the carrying amount of the Company’s goodwill at December 31, 2025 and March 31, 2026 is as follows:

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NOTE G: EARNINGS PER SHARE

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The two-class method is used in the calculations of basic and diluted earnings per share. Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared and participation rights in undistributed earnings. Basic earnings per share are computed based on the weighted-average number of common shares outstanding for the period. Diluted earnings per share are based on the weighted-average number of shares outstanding, adjusted for the effect of potentially dilutive common shares such as the assumed exercise of stock options and the assumed issuance of restricted stock units (“RSUs”) and performance stock units (“PSUs”), which is calculated using the treasury stock method. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive.

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The following is a reconciliation of basic to diluted earnings per share for the three months ended March 31, 2026 and 2025:

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(1) Represents the amount of stock options, RSUs, and PSUs that were excluded from the calculation of diluted earnings per share as the impact would have been anti-dilutive.

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Stock Repurchase Program

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At its December 2025 meeting, the Board of Directors of the Company (the “Board”) approved a new stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,633,000 shares of the Company’s common stock, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2026. Any repurchased shares will be used for general corporate purposes, including those related to stock plan activities. The timing and extent of repurchases will depend on market conditions and other corporate considerations as determined at the Company’s discretion. There were 250,000 shares of treasury stock purchases made under this authorization during the first three months of 2026, with an average price paid per share of $61.87.

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At its December 2024 meeting, the Board approved a new stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,628,000 shares of the Company’s common stock, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2025. Any repurchased shares will be used for general corporate purposes, including those related to stock plan activities. The timing and extent of repurchases will depend on market conditions and other corporate considerations as determined at the Company’s discretion. There were no shares of treasury stock purchases made under this authorization during the first three months of 2025.

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NOTE H: COMMITMENTS, CONTINGENT LIABILITIES AND RESTRICTIONS

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The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit and standby letters of credit. Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. These commitments consist principally of unused commercial and consumer credit lines. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of an underlying contract with a third party. The credit risks associated with commitments to extend credit and standby letters of credit are essentially the same as that involved with extending loans to customers and are subject to the Company’s normal credit policies. The Company’s liability for off-balance sheet credit exposures related to commitments to extend credit is included in accrued interest and other liabilities on the consolidated statements of condition and detailed in Note E. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness. The fair value of the standby letters of credit is immaterial for disclosure.

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The contract amounts of these commitments and contingencies are as follows:

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The Company entered into agreements to invest a total of $10.0 million and $8.5 million in investment tax credits generated by a solar energy producing company during the third quarter of 2024 and second quarter of 2025, respectively. The Company has elected to account for the investments using the proportional amortization method. At March 31, 2026, the balance of the Company’s investment in these tax credits was $2.5 million and the unfunded commitment related to the solar energy tax credit investments was $1.5 million. At December 31, 2025, the balance of the Company’s investment in these tax credits was $3.4 million and the unfunded commitment related to the solar energy tax credit investments was $1.5 million. These amounts were reflected in other assets and accrued interest and other liabilities, respectively, in the consolidated statements of condition. The Company funded the remaining commitment during the second quarter of 2026. During the three months ended March 31, 2026, the Company recognized $0.4 million of federal tax credits and $0.9 million of amortization of income tax credit investments in income taxes in the consolidated statements of income related to solar energy tax credits.

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Legal Contingencies

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On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with pending or threatened legal proceedings or other matters in which claims for monetary damages are asserted. For those matters where it is probable that the Company will incur losses and the amounts of the losses are reasonably estimable, the Company records an expense and corresponding liability in its consolidated financial statements. To the extent such matters could result in exposure in excess of that liability, the amount of such excess is not currently estimable. The range of losses that are reasonably possible for matters where an exposure is not currently estimable or considered probable is not believed to be material in the aggregate. This is based on information currently available to the Company and involves elements of judgment and significant uncertainties.

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NOTE I: FAIR VALUE

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Accounting standards establish a framework for measuring fair value and require certain disclosures about such fair value instruments. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. exit price). Inputs used to measure fair value are classified into the following hierarchy:

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• Level 1 - Quoted prices in active markets for identical assets or liabilities.
• Level 2 - Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
• Level 3 - Significant valuation assumptions not readily observable in a market.

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A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis. There were no transfers between any of the levels for the periods presented.

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The valuation techniques used to measure fair value for the items in the table above are as follows:

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• Available-for-sale investment securities and equity securities – The fair values of available-for-sale investment securities are based upon quoted prices, if available. If quoted prices are not available, fair values are measured using quoted market prices for similar securities or model-based valuation techniques. Level 1 securities include U.S. Treasury obligations and marketable equity securities that are traded by dealers or brokers in active over-the-counter markets. Level 2 securities include U.S. agency securities, mortgage-backed securities issued by government-sponsored entities, municipal securities and corporate debt securities that are valued by reference to prices for similar securities or through model-based techniques in which all significant inputs, such as reported trades, trade execution data, interest rate swap yield curves, market prepayment speeds, credit information, market spreads, and the security’s terms and conditions, are observable. See Note D for further disclosure of the fair value of investment securities.

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• Mortgage loans held for sale – The Company has elected to value loans held for sale at fair value in order to more closely match the gains and losses associated with loans held for sale with the gains and losses on forward sales contracts. Accordingly, the impact on the valuation is recognized in the Company’s consolidated statements of income. All mortgage loans held for sale are current and in performing status. The fair value of mortgage loans held for sale is determined using quoted secondary-market prices of loans with similar characteristics and, as such, has been classified as a Level 2 valuation. The unpaid principal value of mortgage loans held for sale was approximately $0.1 million at March 31, 2026 and December 31, 2025. Mortgage loans held for sale are included in other assets in the consolidated statements of condition. The unrealized gain on mortgage loans held for sale is recognized in mortgage banking revenues in the consolidated statements of income and is immaterial.

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• Commitments to originate real estate loans for sale – The Company enters into various commitments to originate residential real estate loans for sale. Such commitments are considered to be derivative financial instruments and therefore are carried at estimated fair value in the other asset or other liability section of the consolidated statements of condition. The estimated fair value of these commitments is determined using quoted secondary market prices obtained from certain government-sponsored entities. Additionally, accounting guidance requires the expected net future cash flows related to the associated servicing of the loan to be included in the fair value measurement of the derivative. The expected net future cash flows are based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. Such assumptions include estimates of the cost of servicing loans, appropriate discount rate and prepayment speeds. The determination of expected net cash flows is considered a significant unobservable input contributing to the Level 3 classification of commitments to originate real estate loans for sale.

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• Forward sales commitments – The Company enters into forward sales commitments to sell certain residential real estate loans. Such commitments are considered to be derivative financial instruments and, therefore, are carried at estimated fair value in the other asset or other liability section of the consolidated statements of condition. The fair value of these forward sales commitments is primarily measured by obtaining pricing from certain government-sponsored entities and reflects the underlying price the entity would pay the Company for an immediate sale on these mortgages. As such, these instruments are classified as Level 2 in the fair value hierarchy.

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• Interest rate swaps – The interest rate swaps are reported at their fair value utilizing Level 2 inputs from a third-party provider. The fair value measurement of the interest rate swap is determined by calculating the difference between the discounted fixed rate cash flows and the discounted variable rate cash flows. Variable cash flows are based on the expectation of future interest rates derived from observed market interest rate curves.

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The changes in Level 3 assets measured at fair value on a recurring basis are immaterial.

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The fair value information of assets and liabilities measured on a non-recurring basis presented below is not as of the period-end, but rather as of the date the fair value adjustment was recorded closest to the date presented.

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Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans calculated when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using independent appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace, adjusted for non-observable inputs. Thus, the resulting nonrecurring fair value measurements are generally classified as Level 3. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and, therefore, such valuations classify as Level 3.

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Other real estate owned (“OREO”) is valued at the time the loan is foreclosed upon and the asset is transferred to OREO. The value is based primarily on third-party appraisals, less estimated costs to sell, and may be further discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the customer and customer’s business. Such non-observable assumptions result in a Level 3 classification of the inputs for determining fair value. The carrying value of OREO may be limited by the contractual balance of the related former loan and when this occurs OREO is not considered to be carried at fair value or included in the fair value hierarchy disclosures. OREO is reviewed and evaluated on at least an annual basis for additional impairment and adjusted accordingly, based on the same factors identified above. The Company recovers the carrying value of OREO through the sale of the property. The ability to affect future sales prices is subject to market conditions and factors beyond the Company’s control and may impact the estimated fair value of a property.

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Originated mortgage servicing rights are recorded at their fair value at the time of sale of the underlying loan, and are amortized in proportion to and over the estimated period of net servicing income. The fair value of mortgage servicing rights is based on a valuation model incorporating inputs that market participants would use in estimating future net servicing income. Such inputs include estimates of the cost of servicing loans, appropriate discount rate and prepayment speeds and are considered to be unobservable and contribute to the Level 3 classification of mortgage servicing rights. In accordance with GAAP, the Company records impairment charges, on a nonrecurring basis, when the carrying value of a stratum exceeds its estimated fair value. Impairment is recognized through a valuation allowance. There was a valuation allowance of approximately $0.3 million at March 31, 2026 and December 31, 2025.

The Company has recorded contingent consideration liabilities that arise from acquisition activity. The contingent consideration is recorded at fair value at the date of acquisition. The valuation of contingent consideration is calculated using an income approach method, which provides an estimation of the fair value of an asset or liability based on future cash flows over a discrete projection period, discounted to present value using an appropriate rate of return. The assumptions used in the valuation calculation are based on significant unobservable inputs, therefore such valuations classify as Level 3.

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During 2025, the Company made the final required payment for the Creative Plan Designs Limited (“CPD”) contract holdback contingent consideration of $0.1 million, the first required payment for the CPD revenue-based contingent consideration arrangement of $0.6 million and aggregate payments of $1.0 million for contingent consideration arrangements related to OneGroup acquisitions in 2023 and 2024, and BPA acquisitions made in 2025.

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During the first quarter of 2026, the Company made aggregate payments of $2.0 million for contingent consideration arrangements related to prior period BPAS and NISI acquisitions.

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The Company evaluates goodwill for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. The Company did not recognize an impairment charge during the three months ended March 31, 2026 and 2025. See Note F for more detail.

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The Company determines fair values based on quoted market values, where available, estimates of present values, or other valuation techniques. Those techniques are significantly affected by the assumptions used, including, but not limited to, the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in immediate settlement of the instrument. The significant unobservable inputs used in the determination of fair value of assets classified as Level 3 on a recurring or non-recurring basis are as follows:

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The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that, if changed, could result in higher or lower fair value measurements of these assets as of the reporting date. The weighted average of the estimated cost of disposal/market adjustment for individually assessed loans was calculated by dividing the total of the book value of the collateral of the individually assessed loans classified as Level 3 by the total of the fair value of the collateral of the individually assessed loans classified as Level 3. The weighted average of the estimated cost of disposal/market adjustment for other real estate owned was calculated by dividing the total of the differences between the appraisal values of the real estate and the book values of the real estate divided by the totals of the appraisal values of the real estate. The weighted average of the constant prepayment rate for mortgage servicing rights was calculated by adding the constant prepayment rates used in each loan pool weighted by the balance in each loan pool. The weighted average of the discount rate for mortgage servicing rights was calculated by adding the discount rates used in each loan pool weighted by the balance in each loan pool. The weighted average of the discount rate for the contingent consideration was calculated by adding the discount rates used for the calculation of the fair value of each payment of contingent consideration, weighted by the amount of the payment as part of the total fair value of contingent consideration. The weighted average of the probability of achievement was determined by calculating the proportion of the probability-weighted payment of the total maximum payment, weighted by the amount of the payment as part of the total fair value of contingent consideration.

Certain financial instruments and all nonfinancial instruments are excluded from fair value disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The carrying amounts and estimated fair values of the Company’s other financial instruments that are not accounted for at fair value at March 31, 2026 and December 31, 2025 are presented below. The table presented below excludes other financial instruments for which the carrying value approximates fair value including cash and cash equivalents, accrued interest receivable and accrued interest payable.

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The following is a further description of the principal valuation methods used by the Company to estimate the fair values of its financial instruments.

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Loans have been classified as a Level 3 valuation. Fair values for variable rate loans that reprice frequently are based on carrying values. Fair values for fixed rate loans are estimated using discounted cash flows and interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

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The fair values of held-to-maturity U.S. Treasury investment securities are based upon quoted prices, if available. If quoted prices are not available, fair values are measured using quoted market prices for similar securities or model-based valuation techniques. Held-to-maturity U.S. Treasury securities have been classified as a Level 1 valuation. Held-to-maturity government agency mortgage-backed securities have been classified as a Level 2 valuation. The fair values of held-to-maturity government agency mortgage-backed securities are based on current market rates for similar products.

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Deposits have been classified as a Level 2 valuation. The fair value of demand deposits, interest-bearing checking deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date. The fair value of time deposit obligations are based on current market rates for similar securities.

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Borrowings have been classified as a Level 2 valuation. The fair value of overnight borrowings and securities sold under agreement to repurchase, short-term, is the amount payable on demand at the reporting date. Fair values for other FHLB borrowings are estimated using discounted cash flows and interest rates currently being offered on similar securities.

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Other financial assets and liabilities: cash and cash equivalents have been classified as a Level 1 valuation, while accrued interest receivable and accrued interest payable have been classified as a Level 2 valuation. The fair values of each approximate the respective carrying values because the instruments are payable on demand or have short-term maturities and present relatively low credit risk and interest rate risk.

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NOTE J: DERIVATIVE INSTRUMENTS

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The Company is party to derivative financial instruments in the normal course of business to meet the financing needs of its customers and to manage its exposure to fluctuation in interest rates and credit risk. These financial instruments have been limited to interest rate swap agreements and risk participation agreements. The Company does not hold or issue derivative financial instruments for trading or other speculative purposes.

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Interest Rate Swaps

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The Company enters into certain interest rate swaps to hedge the exposure to variability in forecasted cash flows from floating-rate loans. These swaps are considered derivatives and are designated as cash flow hedges. Interest rate swaps are recorded within other assets or accrued interest and other liabilities in the consolidated statements of condition at their estimated fair value. For qualifying cash flow hedges, changes in the fair value of the derivatives are recorded in other comprehensive income and recognized in the consolidated statements of income as the hedged item affects net income. Derivative amounts affecting net income are recognized in the consolidated statements of income consistent with the classification of the hedged item in net interest income. If the hedge relationship is terminated, then the change in value of the derivative recorded in accumulated other comprehensive loss is recognized in net income when the cash flows that were hedged affect net income. For hedge relationships that are discontinued because a forecasted transaction is expected to not occur according to the original hedge forecast, any related derivative values recorded in accumulated other comprehensive loss are immediately recognized in net income. There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for the periods presented.

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The Company enters into certain interest rate swaps to assist customers in managing their interest rate risk. These swaps are considered derivatives, but are not designated as hedging relationships. These instruments have associated interest rate and credit risk. To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties, which are also considered derivatives and are not designated as hedging relationships. Interest rate swaps are recorded within other assets or accrued interest and other liabilities on the consolidated statements of condition at their estimated fair value. The terms of the interest rate swaps with the customer and the counterparties offset each other, with the only difference being counterparty credit risk. Any changes in the fair value of the underlying derivative contracts are reported in other banking services noninterest revenue in the consolidated statements of income.

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Risk Participation Agreements

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The Company may enter into a risk participation agreement (“RPA”) with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed, referred to as an “RPA sold”. In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Company has provided a loan structured with a derivative, the Company may purchase an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared, referred to as an “RPA purchased”.

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Forward Sales Commitments

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The Company enters into forward sales commitments for the future delivery of residential mortgage loans, and interest rate lock commitments to fund loans at a specified interest rate. The forward sales commitments are utilized to reduce interest rate risk associated with interest rate lock commitments and loans held for sale. Changes in the estimated fair value of the forward sales commitments and interest rate lock commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. At inception and during the life of the interest rate lock commitment, the Company includes the expected net future cash flows related to the associated servicing of the loan as part of the fair value measurement of the interest rate lock commitments.

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Notional values and fair values of derivative instruments as of March 31, 2026 and December 31, 2025 are as follows:

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The notional amount for interest rate swaps represents the underlying principal amount used to calculate interest payments that are exchanged periodically. The notional amount for risk participation agreements represents the amount of exposure assumed or shared in case of borrower default. The notional amount for commitments to originate real estate loans for sale represents the unpaid principal amount of loans that have been committed to originate.

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The following table presents derivative instruments, by contract type, used in cash flow hedge accounting relationships, and the amounts reclassified from accumulated other comprehensive loss (“AOCI”) to income and amounts recorded in other comprehensive income (“OCI”) for the three months ended March 31, 2026.

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(1) Gains and losses on cash flow hedging relationships are recorded in interest income.

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Over the next 12 months, the Company expects that approximately $0.6 million of after-tax net loss recorded in accumulated other comprehensive loss at March 31, 2026 related to cash flow hedges will be recognized in net income. No cash flow hedges have been terminated.

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Fee income earned on interest rate swaps and risk participation agreements is recognized in other banking services noninterest revenues in the consolidated statements of income during the period the derivative instrument is executed. During the three months ended March 31, 2026 and March 31, 2025, the Company recognized $1.0 million and $0.3 million of fee income associated with interest rate swaps and RPAs, respectively.

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Cash collateral is posted by the Company with counterparties to secure certain derivatives, which is restricted cash and is included in cash and cash equivalents on the consolidated statements of condition. The amount of such collateral was $14.8 million at March 31, 2026 and December 31, 2025.

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The Company assessed its counterparty risk at March 31, 2026 and determined any credit risk inherent in the derivative contracts was not material. Further information about the fair value of derivative financial instruments can be found in Note I to these consolidated financial statements.

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NOTE K: SEGMENT INFORMATION

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Operating segments are components of an enterprise, which are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM is the President and Chief Executive Officer of the Company. The Company has identified (1) Banking and Corporate, (2) Employee Benefit Services, (3) Insurance Services, and (4) Wealth Management Services as its reportable segments and determined that segment adjusted income before income taxes is the reported measure of segment profit or loss. See “Note A Summary of Significant Accounting Policies” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC on February 27, 2026, for further detail on the factors used to identify the Company’s reportable segments and reported measure of segment profit or loss.

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CBNA operates the Banking and Corporate segment that 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, Vermont, Western Massachusetts and Southern 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 includes certain corporate overhead-related expenses.

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The Employee Benefit Services segment, which includes the operating subsidiaries of BPA, BPAS Actuarial & Pension Services, LLC, BPAS Trust Company of Puerto Rico, Northeast Retirement Services, LLC, Global Trust Company, Inc., Hand Benefits & Trust Company and Hand Securities Inc., provides employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, health and welfare consulting services and introducing broker-dealer services.

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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, as well as the Company’s equity method investment in Leap.

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The Wealth Management Services segment is comprised of wealth management services including trust services provided by the Nottingham Trust division within the Bank, broker-dealer and investment advisory services provided by NISI and Nottingham Wealth Partners, Inc., as well as asset management services provided by Nottingham Advisors, Inc.

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The accounting policies used in the disclosure of business segments are the same as those described in “Note A Summary of Significant Accounting Policies” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC on February 27, 2026, except as follows. Segment operating revenues exclude certain items considered non-core to the operating performance of the business including realized and unrealized gains or losses on investment securities. Significant segment expenses are the expense categories significant to the segment, regularly provided to or easily computed from information regularly provided to the CODM and included in segment adjusted income before income taxes. Segment adjusted income before income taxes also excludes certain items considered non-core to the operating performance of the business including amortization of intangible assets, acquisition expenses and litigation accrual. Both segment operating revenues and significant segment expenses include certain intersegment activity associated with transactions between the segments and are eliminated in consolidation. Segment assets include certain segment cash balances held as deposits with CBNA and are eliminated in consolidation.

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The CODM uses segment adjusted income before income taxes to measure performance and allocate resources, including employees, property and financial or capital resources, for all of the Company’s segments. The CODM considers current period actual-to-current period budget and current period actual-to-prior period actual variances on a monthly basis for each of the Company’s segments along with comparisons of the actual segment results with one another. Segment adjusted income before income taxes is also used as a factor in the determination of incentive compensation for key employees of the segments including the segment leaders.

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There are no transactions with a single customer that result in revenues that exceed 10 percent of consolidated total revenues.

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Information about reportable segments and reconciliation of the information to the consolidated financial statements follows:

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(a)Other revenues includes $401 of unrealized loss on equity securities.

(b) The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.

(c)Other segment items for each reportable segment includes:

Banking and Corporate – FDIC insurance expense, office supplies and postage expense, fraud losses and other writedowns, education, recruiting and travel expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

Employee Benefit Services – Certain intersegment technology and rent related overhead expense allocations, education, recruiting and travel expense, office supplies and postage expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

Insurance Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

Wealth Management Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

(d)The amount of depreciation disclosed by reportable segment is included within the data processing and communications and occupancy and equipment expense captions.

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(a)Other revenues includes $245 of unrealized gain on equity securities.

(b) The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.

(c)Other segment items for each reportable segment includes:

Banking and Corporate – FDIC insurance expense, office supplies and postage expense, fraud losses and other writedowns, education, recruiting and travel expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

Employee Benefit Services – Certain intersegment technology and rent related overhead expense allocations, education, recruiting and travel expense, office supplies and postage expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

Insurance Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

Wealth Management Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

(d)The amount of depreciation disclosed by reportable segment is included within the data processing and communications and occupancy and equipment expense captions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) primarily reviews the financial condition and results of operations of Community Financial System, Inc. (the “Company” or “CFSI”) as of and for the three months ended March 31, 2026 and 2025, although in some circumstances the fourth quarter of 2025 is also discussed in order to more fully explain recent trends. The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and related notes that appear on pages 3 through 35. All references in the discussion of the financial condition and results of operations refer to the consolidated position and results of the Company and its subsidiaries taken as a whole. Unless otherwise noted, the term “this year” and equivalent terms refers to results in calendar year 2026, “last year” and equivalent terms refer to calendar year 2025, “first quarter” refers to the three months ended March 31, 2026, and earnings per share (“EPS”) figures refer to diluted EPS.

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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 set herein under the caption “Forward-Looking Statements” on page 58.

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Critical Accounting Policies and Estimates

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

Allowance for Credit Losses

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The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses on outstanding loans at the balance sheet date. This is estimated using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The determination of the appropriateness of the ACL is complex and applies significant and highly subjective estimates. The ACL is measured on a collective (pooled) basis for loan segments that share similar risk characteristics, including collateral type, credit ratings/scores, size, duration, interest rate structure, origination vintage and payment structure. The Company utilizes three methods for calculating the ACL: cumulative loss, vintage loss and line loss. Historical credit loss experience provides the basis for the estimation of expected future credit losses in all three methodologies. Qualitative adjustments are made for differences in portfolio risk characteristics such as differences in underwriting standards, portfolio mix, acquisition status, current levels of delinquencies, net charge-offs and risk ratings, as well as actual and forecasted macroeconomic variables. Macroeconomic data includes unemployment rates, changes in collateral values such as home prices, commercial real estate prices including office property-specific price forecasts, office property-specific vacancy rates, automobile prices, gross domestic product, and median household income net of inflation. Management utilizes judgment in determining and applying the qualitative factors and weighting the economic scenarios used, which include baseline, upside and downside forecasts. During the first quarter of 2026, the Company updated the ACL model to add 2025 data into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures. With the update, the quantitative reserve in the first quarter of 2026 now includes loss history for business loans that previously was not captured in the historical quantitative loss data and was instead addressed through the use of qualitative overlays. As a result, the Company decreased the additional qualitative reserve for business loans related to size and volume of the loans in that portfolio during the first quarter of 2026. The decrease in the business lending qualitative factor decreased the ACL by $4.8 million as compared to the prior factor in use at December 31, 2025. The update to the historical quantitative loss data increased the ACL by $3.2 million as compared to the quantitative loss rates in use at December 31, 2025.

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One of the most significant estimates and judgments influencing the results of the ACL calculation is the macroeconomic forecasts. Changes in these economic forecasts could significantly affect the estimated expected credit losses and lead to materially different amounts from one period to the next. To illustrate the sensitivity of the ACL calculation to these economic forecasts, management performed a hypothetical sensitivity analysis using a weighting of 100% to the downside forecast, rather than the existing weighting of baseline, upside and downside of 40%, 20% and 40%, respectively. The scenario-weighted average unemployment rate and GDP growth forecasts used in the ACL model at March 31, 2026 were 5.4% and 1.6%, respectively, compared to 5.5% and 1.3%, respectively, at December 31, 2025. The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, rising energy prices, a peak unemployment rate of 8.5% and an average unemployment rate of 7.1%. The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the three months ended March 31, 2026 by approximately $4.2 million, and decrease net income by $3.1 million (net of tax). This change is reflective of the sensitivity of the various economic factors used in the ACL model. The resulting difference is not intended to represent an expected increase in allowance levels, as future conditions are uncertain and there are several other quantitative and qualitative factors that will also fluctuate at the same time that economic conditions are changing, which would affect the results of the ACL calculation. The impact that the economic factors have on the model is affected by the upside or downside severity of the scenarios used, the product type mix, and the interaction of the economic factors with other quantitative and qualitative factors in the model, as changes in any particular factor or input may not occur at the same rate or be directionally consistent across all loan segments. Improvements in one factor may offset deterioration in other factors, both qualitative and quantitative. The third-party downside economic forecast used in the hypothetical scenario described does not predict a severe economic downturn, but rather a moderate recessionary environment. The Company’s geographic distribution of loans being primarily outside of major metropolitan areas, combined with low statistical correlation between its historical losses and national economic indicators, is reflected in the current methodology that would produce changes to the allowance that are less significant as compared to economic metric-based modeling that is more directly correlated, and therefore sensitive, to fluctuations in historical and projected national economic activity.

Supplemental Reporting of Non-GAAP Results of Operations

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

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Executive Summary

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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 services, and wealth management services, to retail, commercial, institutional, 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 administration, 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 Nottingham Financial Group operating unit and insurance services through its OneGroup NY, Inc. (“OneGroup”) subsidiary.

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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) increase the noninterest component of total revenues through both organic and acquisition strategies, (iii) optimize the branch network and digital banking delivery systems, primarily through disciplined acquisition strategies, de novo expansions and divestitures/consolidations, (iv) build profitable loan and deposit bases 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.

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Significant factors reviewed by management to evaluate achievement of the Company’s operating objectives, 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.

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The Company reported net income of $57.2 million for the first quarter that was $7.6 million, or 15.3%, above the prior year’s first quarter, while earnings per share of $1.08 for the first quarter was $0.15, or 16.1%, above the prior year. The increases in net income and earnings per share were primarily driven by increases in net interest income and noninterest revenues and a decrease in the provision for credit losses, partially offset by increases in noninterest expenses and income taxes.

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Net interest income increased to $134.7 million in the first quarter, a $14.5 million, or 12.1%, increase from the prior year. The increase was primarily due to increases in the yield on average interest-earning assets and average loan balances, along with lower funding costs. The provision for credit losses of $5.6 million in the first quarter decreased $1.1 million, or 15.8%, from last year’s first quarter reflective of improvements 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.

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

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

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

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

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

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Net Income and Profitability

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

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

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

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

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

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

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A condensed income statement is as follows:

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Table 1: Condensed Income Statements

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Net Interest Income

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Net interest income is the amount by which interest, dividends 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.

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Net interest income totaled $134.7 million for the first quarter of 2026 compared to $120.2 million for the first quarter of 2025. As shown in Table 2, fully tax-equivalent net interest income, a non-GAAP measure, for the first quarter was $135.6 million, an increase of $14.5 million from the prior year first quarter. The increase was driven by a 9 basis point increase in the yield on average interest-earning assets, a $774.9 million increase in average interest-earning asset balances and a 16 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $583.4 million increase in average interest-bearing liability balances in comparison to the first quarter of 2025. As reflected in Table 3 for the quarter, the favorable net interest income impacts of the volume increase in average interest-earning asset balances of $8.7 million, the increase in the yield on average interest-earning assets of $3.6 million and the decrease in the rate paid on average interest-bearing liabilities of $4.7 million were partially offset by the volume increase in average interest-bearing liability balances of $2.5 million. Net interest margin of 3.43% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.45% for the first quarter of 2026 increased 22 and 21 basis points, respectively, compared to the prior year period.

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

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

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The rate paid on average interest-bearing liabilities decreased 16 basis points compared to the prior year quarter as the average rate paid on interest-bearing deposits decreased 12 basis points and the average rate paid on external borrowings decreased 8 basis points from the comparable prior period. The decreases in the rates paid on average interest-bearing deposits and on average borrowings were due to market-related interest rate changes between the periods, as well as a change in the proportion of overnight borrowings and term borrowings to total borrowings.

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

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Table 2 below sets forth information related to average interest-earning assets and interest-bearing liabilities and their associated yields and rates for the periods indicated. Interest income and yields are on an FTE basis using a marginal income tax rate of 25.2% in 2026 and 25.1% in 2025. Average balances are computed by totaling the daily ending balances in a period and dividing by the number of days in that period. Loan interest income and yields include amortization of deferred loan income and costs, loan prepayments, late and other fees and the amortization or accretion of acquired loan purchase discounts and premiums, which decreased loan interest income by $6.9 million for the first quarter and $5.9 million for the prior first quarter. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.

Table 2: Quarterly Average Balance Sheet

(1) Averages for investment securities are based on amortized cost basis and the yields do not give effect to changes in fair value that is reflected as a component of noninterest-earning assets, shareholders’ equity and deferred taxes.

(2) Includes nonaccrual loans. The impact of interest and fees not recognized on nonaccrual loans was immaterial.

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

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As discussed above and disclosed in Table 3 below, the change in net interest income (FTE basis) may be analyzed by segregating the volume and rate components of the changes in interest income and interest expense for each underlying category.

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Table 3: Rate/Volume

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(1) The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of such change in each component.

(2) Changes due to volume and rate are computed from the respective changes in average balances and rates of the totals; they are not a summation of the changes of the components.

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Noninterest Revenues

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

Table 4: Noninterest Revenues

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(1) Operating noninterest revenues, a non-GAAP measure, excludes unrealized (loss) gain on equity securities from total noninterest revenues. Operating revenues, a non-GAAP measure, is defined as net interest income on a FTE basis plus noninterest revenues, excluding unrealized (loss) gain on equity securities. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

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As displayed in Table 4, noninterest revenues totaled $78.6 million for the first quarter of 2026. This represents an increase of $2.5 million, or 3.3%, for the quarter in comparison to the equivalent 2025 period. Operating noninterest revenues, a non-GAAP measure as defined in the table above, totaled $79.0 million for the first quarter of 2026, an increase of $3.2 million, or 4.2%, from the prior year’s first quarter.

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

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Insurance services revenues decreased $1.6 million, or 11.4%, primarily due to changes in the timing of collections of contingent commission revenues.

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

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Banking noninterest revenues increased $2.7 million, or 14.2%, between the first quarter of 2025 and 2026. Deposit service charges and fees increased $1.1 million, or 14.0%, compared to the prior year. Other banking revenues increased $1.0 million, or 26.1%, driven by increases in customer interest rate swap fee revenues. Debit interchange and ATM fees increased $0.5 million, or 7.9%, and mortgage banking revenues increased $0.1 million, or 10.2%.

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

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

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Noninterest Expenses

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

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Table 5: Noninterest Expenses

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(1) Operating noninterest expenses, a non-GAAP measure, is calculated as total noninterest expenses less litigation accrual, acquisition expenses, and amortization of intangible assets. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

(2) Operating efficiency ratio, a non-GAAP measure, is calculated as operating noninterest expenses as defined in footnote (1) above divided by net interest income on a FTE basis plus noninterest revenues excluding unrealized (loss) gain on equity securities. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

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

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

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

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

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

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Income Taxes

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

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Investment Securities

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

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

The following table sets forth the carrying value of the Company’s investment securities portfolio:

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Table 6: Investment Securities

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Loans

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

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Mortgages on commercial property combined with general-purpose business lending to commercial, industrial, non-profit and governmental customers is characterized as the Company’s business lending activity. The business lending portfolio increased $343.4 million, or 7.6%, from March 31, 2025, and $149.6 million, or 3.2%, from December 31, 2025, driven by organic growth over both periods. As compared to December 31, 2025, multifamily increased $2.6 million, or 0.3% and business non-real estate loans, including commercial and industrial lending, increased $22.8 million, or 1.8%, while non-owner occupied CRE increased $116.4 million, or 7.0%, and owner occupied CRE increased $7.7 million, or 0.9%. The Company’s non-owner occupied CRE exposure (including multifamily) remains diverse both geographically and by property type, and remains relatively low at 15% of total assets, 24% of total loans and 194% of total bank-level regulatory capital. CRE lending represents 73.4% of the total business lending portfolio at March 31, 2026, compared to 73.1% at December 31, 2025 and 74.0% at March 31, 2025. Other commercial and industrial lending represents the remaining 26.6% of total business lending at March 31, 2026, compared to 26.9% at December 31, 2025 and 26.0% at March 31, 2025. The Company’s largest non-owner occupied CRE lending concentration by property type is multifamily at 25.7% of total CRE lending, followed by office and lodging, at 10.9% and 10.1%, respectively. The Company’s largest owner occupied lending concentration by industry is retail trade at 7.6% of total CRE lending, followed by manufacturing and real estate rental and leasing that comprise 2.6% and 2.4%, respectively, of total CRE lending. These levels demonstrate the Company’s diversity in the lending portfolio, as there are no significant industry or geographic concentrations, no metropolitan statistical area (“MSA”) accounting for more than 13% of the CRE portfolio and a very low level of CRE lending being conducted in major metropolitan areas. See Table 7 below for concentrations of CRE lending by borrower type and Table 8 below for concentrations of CRE by property location.

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

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

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Table 7: Concentrations of CRE Lending by Borrower Type

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

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Table 8: Concentrations of CRE by Property Location

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(1) The MSAs within these captions are individually less than 2% of total CRE exposure.

(2) The MSAs within these captions include certain counties in adjacent states with a high degree of economic and social integration with the respective core city in New York or Pennsylvania.

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

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

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Asset Quality

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

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Table 9: Allowance for Credit Losses by Loan Type

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

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Allowance for credit losses and loan net charge-off ratios are as follows:

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Table 10: Loan Ratios

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(1) Excludes overdraft net charge-offs.

(2) Includes overdraft net charge-offs.

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

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

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

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

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The Company’s asset quality metrics, including net charge-offs and delinquent and nonperforming loans, remain relatively favorable compared to the banking industry, reflecting the Company’s robust risk management practices and disciplined credit quality standards.

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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 letters 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.

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

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

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As of March 31, 2026, the net purchase discount related to the $733.0 million of remaining non-PCD loan balances acquired through acquisition transactions was approximately $13.6 million, or 1.9% of that portfolio.

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Deposits

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As shown in Table 11, average deposits of $14.57 billion in the first quarter were $1.00 billion, or 7.4%, higher than the first quarter of 2025 and increased $262.9 million, or 1.8%, from the fourth quarter of last year. On an ending basis, total deposits increased $483.0 million, or 3.4%, from December 31, 2025 and were $978.1 million, or 7.0%, higher than one year prior. Average non-governmental deposits for the first quarter of 2026 increased $245.9 million, or 2.0%, versus the fourth quarter of 2025 and increased $1.06 billion, or 9.3%, versus the year-earlier period. The increase from the end of the prior year’s fourth quarter was primarily driven by higher average balances of individual non-time deposits and the increase from the end of the prior year’s first quarter was driven by higher average balances of individual and business non-time deposits, as well as additional deposit accounts assumed as part of the Santander branch acquisition. Average reciprocal deposits for the first quarter of 2026 increased $0.9 million versus the fourth quarter of 2025 and increased $146.7 million from the first quarter of 2025, primarily driven by an expansion of the Company’s reciprocal deposit relationship base and certain governmental customers moving from standard deposit products and customer repurchase agreements, a non-deposit product categorized as borrowings, to reciprocal deposit products. Average governmental deposits for the first quarter increased $16.1 million, or 0.8%, from the fourth quarter of 2025, driven by seasonal inflows of governmental deposits, and decreased $203.0 million, or 9.4%, from the first quarter of 2025. Average governmental deposits as a percentage of total average deposits decreased from 15.9% in the first quarter of 2025 to 13.4% in the first quarter of 2026. The decrease in average governmental deposits from the prior year’s first quarter is reflective of lower average governmental money market and time deposit balances.

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Average noninterest checking deposits as a percentage of average total deposits was 25.4% in the first quarter compared to 25.9% in both the first and fourth quarters of 2025. Average non-maturity deposits represented 85.0% of the Company’s average deposit funding base in the first quarter of 2026 and time deposits represented 15.0% of total average deposits. In comparison, time deposits represented 15.9% of total average deposits during the first quarter of 2025 and 14.9% of total average deposits during the fourth quarter of last year.

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The quarterly average cost of deposits was 1.10% for the first quarter of 2026, compared to 1.17% in the first quarter of 2025 and 1.15% at the end of 2025, reflective of the decrease in certain deposit interest rates, as well as the decrease in proportion of relatively higher-cost time deposits. The Company continues to focus on expanding its deposit relationship base through its competitive product offerings, high-quality customer service and market expansion initiatives.

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The Company’s deposit base is well diversified across customer segments, which as of March 31, 2026 is comprised of approximately 58% consumer, 28% business and 14% governmental, and broadly dispersed with an average consumer deposit balance per account of approximately $13,000 and average business deposit relationship of approximately $81,000, while the Company’s total average deposit balance per account is under $20,000. In addition, at the end of the quarter, 64% of the Company’s total deposit balances were in checking and predominantly low-rate savings accounts and the weighted-average age of the Company’s non-maturity deposit accounts was approximately 15 years.

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The total estimated amount of deposits that exceeded the $250,000 insured limit provided by the FDIC, net of collateralized and intercompany deposits, was approximately $2.76 billion at March 31, 2026. This amount is determined by adjusting the amounts reported in the Bank Call Report by intercompany deposits, which are not external customers and are therefore eliminated in consolidation, and governmental deposits whose uninsured balances are collateralized by certain pledged investment securities. The Bank Call Report estimated uninsured deposit balances at March 31, 2026, reported gross, totaled $4.94 billion, which includes intercompany account balances of $300.6 million, and collateralized deposits of $1.88 billion. Estimated insured deposits, net of collateralized and intercompany deposits, represent 81% of ending total deposits at March 31, 2026. These estimates are based on the determination of known deposit account balances of each depositor and the insurance guidelines provided by the FDIC.

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Table 11: Quarterly Average Deposits

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Borrowings

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Borrowings, excluding securities sold under agreement to repurchase, at the end of the first quarter of 2026 totaled $446.3 million. This was $12.5 million, or 2.7%, lower than borrowings at December 31, 2025 and $149.1 million, or 25.0%, below the balance at March 31, 2025. The decreases between both periods were attributable to decreases in FHLB and other borrowings reflective of the scheduled paydowns of amortizing advances. The decrease from March 31, 2025 also included the impact of the FHLB exercising their put option on a $100.0 million advance with a rate of 3.73% in August 2025.

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Securities sold under agreement to repurchase, also referred to as customer repurchase agreements, represent collateralized governmental and commercial funding from customers that price and operate similar to a governmental deposit instrument, including the requirement to collateralize uninsured balances. Customer repurchase agreements were $201.0 million at the end of the first quarter of 2026, $30.1 million, or 13.0%, lower than December 31, 2025, and $65.6 million, or 24.6%, lower than March 31, 2025, driven by lower governmental balances due in part to certain customers transferring funds to the Company’s reciprocal deposit product offerings that generally do not require collateralization.

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Shareholders’ Equity and Regulatory Capital

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Total shareholders’ equity of $2.02 billion at the end of the first quarter of 2026 represents an increase of $18.0 million, or 0.9%, from the balance at December 31, 2025. The increase was primarily driven by net income of $57.2 million, partially offset by common stock dividends declared of $24.7 million and common stock repurchased as part of the Company’s publicly announced stock repurchase program of $15.5 million. Over the past 12 months, total shareholders’ equity increased $189.9 million, or 10.4%, as net income, an increase in the after-tax market value adjustment on investments, the issuance of common stock in association with the employee stock plans and adjustments to the overfunded status of the Company’s employee retirement plans more than offset common stock dividends declared and common stock repurchased.

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The dividend payout ratio (dividends declared divided by net income) for the first quarter of 2026 was 43.2%, compared to 49.0% for the first quarter of 2025. The decrease in the dividend payout ratio was due to the 15.3% growth in first quarter net income versus one year prior significantly exceeding the percentage increase of dividends declared for the same periods. First quarter dividends declared increased 1.7% compared to one year earlier, as the Company’s quarterly dividend per share was raised from $0.46 to $0.47 in the third quarter of 2025, while total shares outstanding decreased 0.6% due to common stock repurchases between the periods, partially offset by issuances from the Company’s employee stock plans. The 1 cent, or 2.2%, increase in the quarterly common stock dividend to $0.47 per share on its common stock declared in the third quarter of 2025 marked the 33rd consecutive year of dividend increases for the Company.

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The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s dividend paying ability and financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets and certain liabilities and off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

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The Company and the Bank are required to maintain a “capital conservation buffer”, composed entirely of common equity Tier 1 capital, in addition to minimum risk-based capital ratios. The required capital conservation buffer is 2.5% as of March 31, 2026, December 31, 2025 and March 31, 2025. Therefore, to satisfy both the minimum risk-based capital ratios and the capital conservation buffer as of those dates, the Company and the Bank must maintain:

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(i) Common equity Tier 1 capital to total risk-weighted assets (“Common equity tier 1 capital ratio”) of at least 7.0%,

(ii) Tier 1 capital to total risk-weighted assets (“Tier 1 risk-based capital ratio”) of at least 8.5%, and

(iii) Total capital (Tier 1 capital plus Tier 2 capital) to total risk-weighted assets (“Total risk-based capital ratio”) of at least 10.5%.

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In addition, the Company and Bank must maintain a ratio of ending Tier 1 capital to adjusted quarterly average assets (“Tier 1 leverage ratio”) of at least 5.0% to be considered “well capitalized” under the regulatory framework for prompt corrective action.

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As of March 31, 2026, December 31, 2025 and March 31, 2025, the Company and Bank meet all applicable capital adequacy requirements to be considered “well capitalized”. As of March 31, 2026, December 31, 2025 and March 31, 2025, the regulatory capital ratios for the Company and Bank are presented below.

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Table 12: Regulatory Ratios

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The Company’s tier 1 leverage ratio was 9.20% at the end of the first quarter, a decrease of 1 basis point from December 31, 2025 and 9 basis points below its level one year earlier. The decrease in the Tier 1 leverage ratio in comparison to December 31, 2025 was the result of ending shareholders’ equity, excluding intangibles net of deferred tax liabilities associated with intangibles (“net intangibles”) and other comprehensive income or loss items, increasing 1.4%, while average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, increased a greater 1.6%. The Tier 1 leverage ratio also decreased compared to the prior year’s first quarter as shareholders’ equity, excluding net intangibles and other comprehensive income or loss items, increased 4.3%, while average assets, excluding net intangibles and the market value adjustment, increased a greater 5.4%. The increases in shareholders’ equity, excluding net intangibles and other comprehensive income or loss items, were primarily a result of net earnings retention while the increases in average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, were primarily driven by organic deposit growth.

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The shareholders’ equity-to-assets ratio was 11.41% at the end of the first quarter of 2026 compared to 11.59% at December 31, 2025 and 10.94% at March 31, 2025. The tangible equity-to-tangible assets ratio, a non-GAAP measure, of 6.68% decreased 7 basis points from December 31, 2025 and increased 53 basis points from March 31, 2025. The increase in the tangible equity-to-tangible assets ratio, a non-GAAP measure, from one year prior was driven by a $146.0 million, or 14.9%, increase in tangible equity, a non-GAAP measure, while tangible assets, a non-GAAP measure, increased $936.7 million, or 5.9%. The decrease in the tangible equity-to-tangible assets ratio, a non-GAAP measure, from December 31, 2025 was driven by a $440.8 million, or 2.7%, increase in tangible assets, a non-GAAP measure, while tangible equity, a non-GAAP measure, increased $17.2 million, or 1.6%. Over the past twelve months, the increase in tangible equity, a non-GAAP measure, was mainly due to net earnings retention and a decrease in accumulated other comprehensive loss related to the investment securities portfolio in the declining rate environment, while the increase in tangible assets, a non-GAAP measure, was reflective of organic loan growth and the Santander branch acquisition. During the first quarter, the increase in tangible equity, a non-GAAP measure, was primarily due to net earnings retention that was partially offset by an increase in the unrealized loss in the investment portfolio and common share repurchases, while the increase in tangible assets, a non-GAAP measure, was driven by organic loan growth and an increase in cash and cash equivalents due to net deposit inflows. See Table 14 for Reconciliation of Quarterly GAAP to Non-GAAP Measures.

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Liquidity

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Liquidity risk is a measure of the Company’s ability to raise cash when needed at a reasonable cost and minimize any loss. The Company maintains appropriate liquidity levels in both normal operating conditions as well as stressed environments. The Company must be capable of meeting all obligations to its customers at any time and, therefore, the active management of its liquidity position remains an important management objective. The Bank has appointed the Asset Liability Committee (“ALCO”) to manage liquidity risk using policy guidelines and limits on indicators of potential liquidity risk. The indicators are monitored using a scorecard with three risk level limits. These risk indicators measure core liquidity and funding needs, capital at risk and change in available funding sources. The risk indicators are monitored using such metrics as the core basic surplus ratio, unencumbered securities to average assets, free loan collateral to average assets, loans to deposits, deposits to total funding and borrowings to total funding ratios.

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Given the uncertain nature of the Company’s customers' demands, as well as the Company's desire to take advantage of earnings enhancement opportunities, the Company must have adequate sources of on and off-balance sheet funds available that can be utilized when needed. Accordingly, in addition to the liquidity provided by balance sheet cash flows, liquidity must be supplemented with additional sources such as borrowings from the FHLB and the FRB and credit lines from correspondent banks. Other funding alternatives may also be appropriate from time to time, including wholesale and retail repurchase agreements, large certificates of deposit, and the brokered CD market. The primary sources of funds are deposits, which totaled $14.87 billion at March 31, 2026. The primary sources of non-deposit funds are customer repurchase agreements, FHLB and FRB term borrowings and overnight advances. At March 31, 2026, there were $201.0 million of customer repurchase agreements, $438.1 million of FHLB term borrowings outstanding, and no overnight borrowings.

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The Company’s primary sources of available liquidity include unrestricted cash and cash equivalents, borrowing capacity at the FHLB and FRB, as well as net unpledged investment securities that could be sold, subject to market conditions, or used to collateralize additional funding. Table 13 below details the available sources of liquidity at March 31, 2026. In addition, there was $75.0 million available in unsecured lines of credit with correspondent banks at March 31, 2026. The Company’s sources of immediately available liquidity of $6.83 billion as of March 31, 2026 represent approximately 248% of the Company’s estimated uninsured deposits (deposits in excess of FDIC limits), net of collateralized and intercompany deposits (“net estimated uninsured deposits”), estimated to be approximately $2.76 billion.

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Table 13: Sources of Liquidity

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To measure intermediate risk over the next twelve months, the Company reviews a sources and uses projection. As of March 31, 2026, there is sufficient liquidity available during the next year to cover projected cash outflows. In addition, stress tests on the cash flows are performed for various scenarios ranging from high probability events with a low impact on the liquidity position to low probability events with a high impact on the liquidity position. The results of the stress tests as of March 31, 2026 indicate the Company has sufficient sources of liquidity for the next year in all simulated stressed scenarios.

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To measure longer-term liquidity, a baseline projection of growth in interest-earning assets and interest-bearing liabilities for five years is made to reflect how liquidity levels could change over time. This five-year measure reflects ample liquidity for loan and other asset growth over the next five years.

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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 which disrupts orderly short-term funding operations or from a significant tightening of monetary policy that limits the national money supply. Accordingly, management has addressed this issue by formulating a Liquidity Contingency Plan, which has been reviewed and approved by both the Board and the Company’s ALCO. The plan addresses the actions that the Company would take in response to both a short-term and long-term funding crisis. Triggers within the plan and liquidity risk monitor are not by themselves definitive indicators of insufficient liquidity, but rather a mechanism for management to monitor conditions and possibly provide advance warning which could avert or reduce the impact of a crisis. Liquidity triggers are set based on a variety of factors, including Company history, trends, and current operating performance, industry observations, and, as warranted, changes in internal and external economic factors. Indicators include: core liquidity and funding needs such as the core basic surplus, unencumbered securities to average assets, and free FHLB and FRB loan collateral to average assets; heightened funding needs indicators such as average loans to average deposits, average governmental and nongovernmental deposits to total funding, and average borrowings to total funding; capital at risk indicators including regulatory ratios; asset quality indicators; and decrease in funds availability indicators which are a combination of internal and external factors such as increased restrictions on borrowing or downturns in the credit market. The Company has established three risk levels for these liquidity triggers that inform the response based on the severity of the circumstances. Responses vary from an assessment of possible funding deficiencies with no impact on normal business operations to immediate action required due to impending funding problems. For more information regarding the risk factor associated with the possibility of a funding crisis, refer to the discussion under the heading “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the SEC on February 27, 2026.

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Reconciliation of GAAP to Non-GAAP Measures

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Table 14: GAAP to Non-GAAP Reconciliations

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