COMMUNITY FINANCIAL SYSTEM, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2025

NOTE A: BASIS OF PRESENTATION

The interim financial data as of and for the three and nine months ended September 30, 2025 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, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2025.

NOTE B: ACQUISITIONS

Pending Acquisition

On June 25, 2025, the Company, through its subsidiary Community Bank, N.A. (“CBNA”), entered into an agreement with Santander Bank, N.A. (“Santander”) to acquire seven branch locations in the Allentown, Pennsylvania area, including certain branch-related loans and deposits. In addition, CBNA’s wholly-owned subsidiary, Nottingham Investment Services, Inc., has agreed to purchase related wealth management relationships from Santander’s affiliate, Santander Securities LLC. Based on the most current available information, the Company is expected to acquire approximately $32.0 million of loans and assume approximately $570.0 million of deposits, excluding purchase accounting adjustments. Total cash consideration will include a deposit premium of 8.0%, or approximately $45.6 million. The acquisition is expected to be completed on November 7, 2025. The Company expects to incur certain one-time, transaction-related costs in connection with the pending acquisition.

Current and Prior Period Acquisitions

On September 5, 2025, the Company acquired an ownership interest in Leap Holdings, Inc., a Delaware corporation (“Leap”) for $37.4 million comprised of various classes of preferred and common stock. Leap’s wholly owned subsidiary, Leap Insurance Agency, LLC, is a tech-first managing general agent (“MGA”) providing insurance solutions for the rental housing sector. The Company determined it has the ability to exercise significant influence over the operating and financial policies of Leap and therefore accounts for its ownership interest as an equity method investment. On the acquisition date, the Company estimated its investment included embedded goodwill of$27.1 million and a customer relationship intangible asset of $7.7 million. The income from equity method investments during the three and nine months ended September 30, 2025 was immaterial.

During the third quarter of 2025, the Company, through its subsidiary OneGroup NY, Inc. (“OneGroup”), completed the acquisition of certain assets oftwo financial services companies based in Florida and Kentucky. Total aggregate consideration was $4.2 million in cash and contingent consideration with an estimated fair value of $0.6 million at the acquisition date. The contingent consideration arrangement requires additional consideration to be paid by the Company based on a percentage of net revenue over athree year period following the acquisition date, up to a maximum of $2.0 million. The fair value of the contingent consideration at the acquisition date was determined by forecasting estimated amounts of net 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 were $3.9 million of customer list intangible assets and the Company recorded $0.9 million of goodwill in conjunction with the acquisitions. Revenues and direct expenses for the three and nine months ended September 30, 2025 were immaterial.

During the first nine months of 2025, the Company, through its subsidiary Benefit Plans Administrative Services, LLC (“BPA”), completed acquisitions of certain assets ofthree financial services companies based in New York and Kansas for aggregate consideration of $0.3 million in cash and contingent consideration with a fair value at acquisition of $3.5 million. The contingent consideration arrangements require additional consideration to be paid by the Company based on a percentage of retained revenue over periods ranging fromtwo tofour years following the acquisition date. The fair value of the contingent consideration at the acquisition date was determined by forecasting estimated amounts of retained revenue for each applicable period and applying the appropriate factor to those amounts based on the purchase agreements. The effects of the acquired assets are included in the consolidated financial statements from that date. Net assets acquired included $2.2 million of customer list intangible assets and the Company recorded $1.8 million of goodwill in conjunction with the acquisitions. Revenues and direct expenses for the three and nine months ended September 30, 2025 were immaterial.

During 2024, the Company, through its subsidiary OneGroup, completed acquisitions of certain insurance agencies headquartered in New York and Florida for aggregate consideration of $9.6 million in cash plus contingent consideration with an estimated fair value of $0.7 million at the respective acquisition dates. The contingent consideration arrangements require additional consideration to be paid by the Company based on a percentage of retained revenuetwo years after the date of acquisition, up to a maximum amount of $1.4 million. The fair value of the contingent consideration of $0.7 million at the acquisition date was estimated based on projected retained revenue levels. The effects of the acquired assets and liabilities are included in the consolidated financial statements from the date of acquisition. Net assets acquired were $6.5 million, including $6.8 million of customer list intangible assets, and the Company recorded $3.8 million of goodwill in conjunction with the acquisitions. Revenues and direct expenses for the three and nine months ended September 30, 2025 and 2024 were immaterial.

On February 1, 2024, the Company, through its subsidiary BPA, completed the acquisition of certain assets of Creative Plan Designs Limited (“CPD”), a financial services company that provides employee benefit plan design, administration and consulting services. Total consideration was $5.9 million in cash plus contingent consideration with an estimated fair value of $3.0 million at acquisition date. The effects of the acquired assets are included in the consolidated financial statements from that date. Net assets acquired were $4.5 million, including $5.5 million of customer list intangible assets, and the Company recorded $4.4 million of goodwill in conjunction with the acquisition. Revenues and direct expenses for the three and nine months ended September 30, 2025 and 2024 were immaterial.

The acquisition of CPD includes contingent consideration arrangements that require additional consideration to be paid by the Company based on the future revenue levels of CPD over approximately three years and a contract holdback payment. The contract holdback will be paid upon satisfaction of certain customer retention requirements and will be prorated based on actual results. The contract holdback amount was estimated at the maximum level of $1.5 million at the acquisition date. The revenue-based contingent consideration is payable infour installments, based on future revenue levels of CPD in 2024, 2025, 2026 and the first quarter of 2027. The range of undiscounted amounts the Company could pay under the contingent consideration agreement is between zero and $2.0 million for the first three payments in total and a variable amount for the fourth payment, which is between zero and a percentage of annualized revenue above a threshold for a particular revenue stream in the first quarter of 2027. The fair value of the contingent consideration recognized on the acquisition date of $3.0 million was estimated by applying the income approach, a measure that is based on significant Level 3 inputs not readily observable in the market. Key assumptions at the date of acquisition include (1) a discount rate range of 15.1% to 19.1% to present value the payments and (2) probability of achievement of future revenue levels of 82%.

The Santander transaction accelerates CBNA’s de novo expansion in the strategic Greater Lehigh Valley and complements its existing commercial and consumer lending presence in the market. The Leap transaction adds diversification to the Company’s existing insurance services business through new exposure to a growing tech-first MGA in an expanding market focused on the rental housing sector. The OneGroup and BPA transactions generally expand the Company’s insurance services and employee benefit services presence.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed in acquisitions considered to be business combinations:

The other intangibles related to the CPD acquisition are being amortized using an accelerated method over an estimated useful life of 12 years. The other intangibles related to the OneGroup and BPA acquisitions completed through the end of the third quarter of 2025 and the OneGroup acquisitions completed in 2024 are being amortized using an accelerated method over an estimated useful life ofeight years. The goodwill, which is not amortized for book purposes, was assigned to the Employee Benefits Services segment for the BPA acquisitions completed through the end of the third quarter of 2025 and the CPD acquisition, and the Insurance Services segment for the OneGroup acquisitions completed through the end of the third quarter of 2025 and in 2024. The goodwill arising from one of the OneGroup acquisitions in 2024 is not deductible for tax purposes, while the goodwill arising from the OneGroup and BPA acquisitions completed through the end of the third quarter of 2025 and the remaining OneGroup acquisitions completed in 2024 is deductible for tax purposes.

NOTE C: ACCOUNTING POLICIES

The notes to the consolidated financial statements appearing in the Company’s 2024 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.

Contract Balances

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 September 30, 2025, $40.9 million of accounts receivable, including $8.4 million of unbilled fee revenue, and $1.9 million of unearned revenue was recorded in the consolidated statements of condition. As of December 31, 2024, $38.5 million of accounts receivable, including $8.4 million of unbilled fee revenue, and $1.1 million of unearned revenue was recorded in the consolidated statements of condition.

Equity Method Investments

The Company applies the equity method of accounting to investments in entities over which it has significant influence but does not have a controlling financial interest. Key indicators of significant influence include ownership interest, representation on the board of directors and participation in policy-making decisions. Equity method investments are initially recorded at cost on the consolidated statements of condition. The excess of the purchase price over the Company’s share of the investee’s net assets (the “basis difference”) is allocated to identifiable assets and liabilities, with any remaining excess classified as equity method goodwill. The carrying amount of equity method investments is adjusted for the Company’s share of the investee’s earnings or losses, dividends received and the amortization of basis differences other than equity method goodwill. The Company’s share of the investee’s earnings or losses and the amortization of basis differences are classified as income from equity method investments on the consolidated statements of income. Equity method investments are assessed for impairment when events or circumstances suggest that the carrying amount of the investment may not be recoverable, including sustained investee losses or other adverse developments affecting the investee’s operations.

New Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. The update requires enhancements to the rate reconciliation, including disclosure of specific categories and additional information for reconciling items meeting a quantitative threshold as well as disclosure of income taxes paid disaggregated by federal, state and foreign taxes, and individual jurisdictions meeting a quantitative threshold. The amendments in this update are effective for annual financial statements for fiscal years beginning after December 15, 2024 and early adoption is permitted. The Company will adopt this standard beginning with the December 31, 2025 consolidated financial statements and expects it to impact certain income tax disclosures.

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.

NOTE D: INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities as of September 30, 2025 and December 31, 2024 are as follows:

As of September 30, 2025, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $2.9 million and equity securities without readily determinable fair values carried at $76.0 million, including Federal Home Loan Bank of New York (“FHLB”) common stock of $36.9 million, Federal Reserve Bank (“FRB”) common stock of $33.3 million and other equity securities of $5.8 million.

As of December 31, 2024, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $2.4 million and equity securities without readily determinable fair values carried at $85.1 million; including FHLB common stock of $45.4 million, FRB common stock of $33.4 million and other equity securities of $6.3 million.

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.

The amount of upward and downward adjustments to equity securities without readily determinable fair values was not material for the three and nine months ended September 30, 2025 and 2024.

The gains and losses on equity and other securities for the three and nine months ended September 30, 2025 and 2024 are as follows:

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

As of September 30, 2025

As of December 31, 2024

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 holdsone 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 September 30, 2025 represents credit losses andno unrealized losses have been recognized in the provision for credit losses. Accordingly, there isno allowance for credit losses on the Company’s available-for-sale portfolio as of September 30, 2025. Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $8.5 million at September 30, 2025 and is excluded from the estimate of credit losses.

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 September 30, 2025, 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 isno allowance for credit losses on the Company’s held-to-maturity debt portfolio as of September 30, 2025. 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 September 30, 2025 and is excluded from the estimate of credit losses. The Company has the intent and ability to hold the securities to maturity.

The amortized cost and estimated fair value of debt securities at September 30, 2025, 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.

Investment securities with a carrying value of $2.45 billion and $2.27 billion at September 30, 2025 and December 31, 2024, respectively, were pledged to collateralize certain deposits and borrowings. Securities pledged to collateralize certain deposits and borrowings included $319.2 million and $362.1 million of U.S. Treasury securities that were pledged as collateral for securities sold under agreement to repurchase at September 30, 2025 and December 31, 2024, respectively.

NOTE E: LOANS AND ALLOWANCE FOR CREDIT LOSSES

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

The following table presents the aging of the amortized cost basis of the Company’s past due loans by segment as of September 30, 2025 and December 31, 2024:

An immaterial amount of interest income on nonaccrual loans was recognized during the three and nine months ended September 30, 2025 and 2024.

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 exposure of more than $3.0 million 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. Business lending relationships with total exposures of$3.0 million or less are generally not subject to the formal annual review process, unless the total exposure is $2.0 million or more and has a risk rating other than “pass”. 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:

The following tables show the amount of business lending loans by credit quality category at September 30, 2025 and December 31, 2024:

(1)For the nine months ended September 30, 2025.

(1)For the year ended December 31, 2024.

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.

The following tables detail the balances in all other loan categories at September 30, 2025 and December 31, 2024:

(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 nine months ended September 30, 2025.

(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, 2024.

For business lending loans on nonaccrual 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 September 30, 2025 and December 31, 2024 follows:

The average carrying balance of individually assessed loans was $20.4 million and $30.8 million for the three months ended September 30, 2025 and 2024, respectively. The average carrying balance of individually assessed loans was $43.1 million and $31.1 million for the nine months ended September 30, 2025 and 2024, respectively. An immaterial amount of interest income was recognized on individually assessed loans for the three and nine months ended September 30, 2025 and 2024.

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.

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 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.

The following tables present the amortized cost basis of loans at September 30, 2025 and 2024 that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2025 and 2024, 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.

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.

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2025:

There wereno loans modified to borrowers with financial difficulty that had a payment default subsequent to modification during the three and nine months ended September 30, 2025 and 2024.

Allowance for Credit Losses

The following presents by segment the activity in the allowance for credit losses during the three and nine months ended September 30, 2025 and 2024:

The allowance for credit losses increased to $84.9 million at September 30, 2025 compared to $79.1 million at December 31, 2024 and $76.2 million at September 30, 2024, reflective of an increase in loans outstanding, a stable economic environment and an additional qualitative factor reserve for business lending related to an increase in size and volume of new loans not captured in the quantitative reserve.

Accrued interest receivable on loans, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $36.8 million at September 30, 2025 and is excluded from the estimate of credit losses and amortized cost basis of loans.

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.

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 September 30, 2025. These forecasts were factored into the qualitative portion of the calculation of the estimated credit losses and include the impact of slowing growth in residential real estate and vehicle prices as well as continued inflationary pressures.

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

At September 30, 2025 and December 31, 2024, loans with a carrying amount of approximately $6.78 billion and $6.72 billion, respectively, were pledged for the availability to secure certain borrowings with the FHLB and FRB. There were $462.2 million and $610.0 million of borrowings outstanding under these arrangements at September 30, 2025 and December 31, 2024, respectively.

At September 30, 2025 and December 31, 2024, there were foreclosures in process of $8.3 million and $6.3 million, respectively.

During the nine months ended September 30, 2025, the Company did not purchase any loans, while the Company sold $66.7 million of secondary market eligible residential consumer mortgage loans during the period. During the nine months ended September 30, 2024, the Company did not purchase any loans and sold $39.9 million of secondary market eligible residential consumer mortgage loans.

NOTE F: GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

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

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

Shown below are the components of the Company’s goodwill at December 31, 2024 and September 30, 2025:

NOTE G: BORROWINGS

During the first quarter of 2025, the Company entered into a new parent company unsecured committed revolving line of credit facility with a commercial bank in an amount of up to$50.0 million to be available for use for general corporate purposes including potential future merger and acquisition activity by its non-Bank subsidiaries. Outstanding borrowings under the revolving line of credit facility will bear interest at either fixed rates determined at closing or floating rates at the monthly Secured Overnight Financing Rate plus 2.25% at the option of the Company. The revolving line of credit facility will mature on February 25, 2026, subject to a 364 day extension with opt-out provided for by either party to the agreement and includes certain financial covenants. The Company has determined it is in compliance with these covenants as of September 30, 2025.

During 2024, the Company secured $250.0 million of fixed rate FHLB term borrowings. The borrowings consist of: three $50.0 million advances at interest rates ranging from 4.38% to 4.47% that were putable at the option of the FHLB in June 2025 and mature in June 2027 as the option was not exercised; andone $100.0 million advance at a rate of 3.73% that included a put option that was exercised by the FHLB in August 2025.

NOTE H: EARNINGS PER SHARE

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. The Company has determined that all of its outstanding non-vested stock awards are participating securities as of September 30, 2025.

Basic earnings per share are computed based on the weighted-average of the common shares outstanding for the period. Diluted earnings per share are based on the weighted-average of the shares outstanding and the assumed exercise of stock options during the year. The dilutive effect of options is calculated using the treasury stock method of accounting. The treasury stock method determines the number of common shares that would be outstanding if all the dilutive options were exercised and the proceeds were used to repurchase common shares in the open market at the average market price for the applicable time period. There were approximately 0.2 million and 0.4 million weighted-average anti-dilutive stock options outstanding for the three and nine months ended September 30, 2025, respectively. There were approximately 0.2 million weighted-average anti-dilutive stock options outstanding for the three and nine months ended September 30, 2024.

The following is a reconciliation of basic to diluted earnings per share for the three and nine months ended September 30, 2025 and 2024:

Stock Repurchase Program

At its December 2024 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 2,628,000 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 206,054 shares of treasury stock purchases made under this authorization during the first nine months of 2025, with an average price paid per share of $53.34.

At its December 2023 meeting, the Board approved a stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,697,000 shares of the Company’s common stock, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2024. There were 1,000,000 shares of treasury stock purchases made under this authorization during the first nine months of 2024 with an average price paid per share of $45.84.

NOTE I: COMMITMENTS, CONTINGENT LIABILITIES AND RESTRICTIONS

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.

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

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 September 30, 2025, the balance of the Company’s investment in these tax credits was $4.2 million and the unfunded commitment related to the solar energy tax credit investments was $3.4 million. At December 31, 2024, the balance of the Company’s investment in these tax credits was $1.4 million and the unfunded commitment related to the solar energy tax credit investments was $1.3 million. These amounts were reflected in other assets and accrued interest and other liabilities, respectively, in the consolidated statements of condition. The Company funded $3.3 million and $6.4 million of the total commitment during the three and nine months ended September 30, 2025, respectively, and the Company expects to fund the remaining commitment by December 31, 2025 as capital calls are made. During the three and nine months ended September 30, 2025, the Company recognized $2.5 million and $5.0 million, respectively, of federal tax credits and $2.7 million and $5.5 million, respectively, of amortization of income tax credit investments in income taxes in the consolidated statements of income related to solar energy tax credits.

Legal Contingencies

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.

NOTE J: FAIR VALUE

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:

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 wereno transfers between any of the levels for the periods presented.