COMMUNITY FINANCIAL SYSTEM, INC.

Previous wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) primarily reviews the financial condition and results of operations of the Company for the past two years, although in some circumstances a period longer than two years is covered in order to comply with SEC disclosure requirements or to more fully explain long-term 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 84 through 151. All references in the discussion to the financial condition and results of operations refer to the consolidated position and results of the Company and its subsidiaries taken as a whole.

Current wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) primarily reviews the financial condition and results of operations of the Company for the past two years, although in some circumstances a period longer than two years is covered in order to comply with SEC disclosure requirements or to more fully explain long-term 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 77 through 148. All references in the discussion to the financial condition and results of operations refer to the consolidated position and results of the Company and its subsidiaries taken as a whole.

Previous wording

Unless otherwise noted, all earnings per share (“EPS”) figures disclosed in the MD&A refer to diluted EPS. The term “this year” and equivalent terms refer to results in calendar year 2024, “last year” and equivalent terms refer to calendar year 2023, and all references to income statement results correspond to full-year activity unless otherwise noted.

Current wording

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

Previous wording

This MD&A contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are provided under the caption “Forward-Looking Statements” on page 76.

Current wording

This MD&A contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are provided under the caption “Forward-Looking Statements” beginning on page 70.

Previous wording

As a result of the complex and dynamic nature of the Company’s business, management must exercise judgment in selecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with the current accounting principles generally accepted in the United States of America (“GAAP”), but also reflects management’s discretion with regard to choosing the most suitable methodology for reporting the Company’s financial performance. It is management’s opinion that the accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates affect the reported amounts of assets and liabilities as well as disclosures of revenues and expenses during the reporting period. Actual results could meaningfully differ from these estimates. Management considers its critical accounting estimates those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s financial condition or results of operations. Management believes that the critical accounting estimates include the allowance for credit losses; actuarial assumptions associated with the pension, post-retirement and other employee benefit plans; and the carrying value of goodwill and other intangible assets. A summary of the accounting policies used by management is disclosed in Note A, “Summary of Significant Accounting Policies”, starting on page 89.

Current wording

As a result of the complex and dynamic nature of the Company’s business, management must exercise judgment in selecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with the current accounting principles generally accepted in the United States of America (“GAAP”), but also reflects management’s discretion with regard to choosing the most suitable methodology for reporting the Company’s financial performance. It is management’s opinion that the accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates affect the reported amounts of assets and liabilities as well as disclosures of revenues and expenses during the reporting period. Actual results could meaningfully differ from these estimates. Management considers its critical accounting estimates those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s financial condition or results of operations. Management believes that the critical accounting estimates include the allowance for credit losses; actuarial assumptions associated with the pension, post-retirement, and other employee benefit plans; and the carrying value of goodwill and other intangible assets. A summary of the significant accounting policies used by management is disclosed in Note A, “Summary of Significant Accounting Policies,” starting on page 83.

Previous wording

The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses expected to be incurred on outstanding loans at the balance sheet date. This is estimated using relevant available information from internal and external sources relating to past events, current 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 loan-specific 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 2024, the Company updated the ACL model to add 2023 results into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures; updated the ACL model to incorporate office property-specific price forecasts and office property-specific vacancy forecasts to provide greater precision to the model; applied an additional qualitative overlay to the factor for volume and size of business lending loans and risk rating trends to capture future loss expectations in that portfolio; and utilized the current quarter levels of risk ratings in the qualitative factor calculation, rather than a four-quarter average, to more precisely capture the risk profile of the current business lending portfolio.

Current wording

The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses on outstanding loans at the balance sheet date. This is estimated using relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. The determination of the appropriateness of the ACL is complex and applies significant and highly subjective estimates. The ACL is measured on a collective (pooled) basis for loan segments that share similar risk characteristics, including collateral type, credit ratings/scores, size, duration, interest rate structure, origination vintage, and payment structure. The Company utilizes three methods for calculating the ACL: cumulative loss, vintage loss, and line loss. Historical credit loss experience provides the basis for the estimation of expected future credit losses in all three methodologies. Qualitative adjustments are made for differences in portfolio risk characteristics such as differences in underwriting standards, portfolio mix, acquisition status, current levels of delinquencies, net charge-offs, and risk ratings, as well as actual and forecasted macroeconomic variables. Macroeconomic data includes unemployment rates, changes in collateral values such as home prices, commercial real estate prices including office property-specific price forecasts, office property-specific vacancy rates, automobile prices, gross domestic product, and median household income net of inflation. Management utilizes judgment in determining and applying the qualitative factors and weighting the economic scenarios used, which include baseline, upside, and downside forecasts. During 2025, the Company updated the ACL model to add 2024 loss history results into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures; adjusted the weighting of the three economic scenarios, increasing the weight for the downside scenario from 30% to 40% and decreasing the weight of the upside scenario from 30% to 20%, to capture additional economic uncertainty; and increased reserves for business lending to capture additional risk in the portfolio due to the increase in larger individual exposures in the business lending portfolio. The change in weighting of the economic scenarios increased the ACL by $0.7 million as compared to the prior weighting in use at December 31, 2024. The additional business lending qualitative factor increased the ACL by $9.3 million as compared to the prior factor in use at December 31, 2024.

Previous wording

One of the most significant estimates and judgments influencing the results of the ACL calculation is the macroeconomic forecasts. Changes in these economic forecasts could significantly affect the estimated expected credit losses and lead to materially different amounts from one period to the next. To illustrate the sensitivity of the ACL calculation to these economic forecasts, management performed a hypothetical sensitivity analysis using a weighting of 100% to the downside forecast, rather than the existing weighting of baseline, upside, and downside of 40%, 30%, and 30%, respectively. The scenario-weighted average unemployment rate and GDP growth forecasts used in the ACL model at December 31, 2024 were 4.8% and 1.8%, respectively, compared to 4.5% and 1.7% at December 31, 2023, respectively. The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, elevated inflation, a peak unemployment rate of 8.3% and an average unemployment rate of 6.9%. The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the year ended December 31, 2024 by approximately $4.7 million, and decrease net income by $3.5 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 concurrent with changing economic conditions, 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 primarily outside of major metropolitan areas, combined with low statistical correlation between its historical losses and national economic indicators, results in 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. Further details regarding the methodologies applied to estimate the various components of the ACL are provided in Note A, “Summary of Significant Accountin…

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Current wording

One of the most significant estimates and judgments influencing the results of the ACL calculation is the macroeconomic forecasts. Changes in these economic forecasts could significantly affect the estimated expected credit losses and lead to materially different amounts from one period to the next. To illustrate the sensitivity of the ACL calculation to these economic forecasts, management performed a hypothetical sensitivity analysis using a weighting of 100% to the downside forecast, rather than the existing weighting of baseline, upside, and downside of 40%, 20%, and 40%, respectively. The scenario-weighted average unemployment rate and gross domestic product (“GDP”) growth forecasts used in the ACL model at December 31, 2025 were 5.5% and 1.3%, respectively, compared to 4.8% and 1.8% at December 31, 2024, respectively. The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, elevated inflation, a peak unemployment rate of 8.4% 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 year ended December 31, 2025 by approximately $3.8 million, and decrease net income by $2.8 million (net of tax). This change is reflective of the sensitivity of the various economic factors used in the ACL model. The resulting difference is not intended to represent an expected increase in allowance levels, as future conditions are uncertain and there are several other quantitative and qualitative factors that will also fluctuate 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. Further details regarding the methodologies applied to estimate…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The Company provides a qualified defined benefit pension to eligible employees and retirees, other post-retirement health and life insurance benefits to certain retirees, an unfunded supplemental pension plan for certain key executives and an unfunded stock balance plan for certain of its nonemployee directors. The benefit obligations for the pension and post-retirement benefits plans require significant management judgment. The assumptions used in calculating the benefit obligation include the discount rate, expected return on plan assets, rate of compensation increase and interest crediting rates. The discount rate was determined based upon the yield on high-quality fixed income investments expected to be available during the period to maturity of the pension benefits. The expected long-term rate of return was estimated by taking into consideration asset allocation, long-term capital market assumptions, reviewing historical returns on the type of assets held and current economic factors. Mortality tables are also utilized in calculating the benefit obligation, the selection of which is based on management judgment. The Company analyzed the sensitivity of the discount rate and the expected long-term rate of return on plan assets on the pension benefit obligation and net periodic pension cost. At December 31, 2024, a decrease in the discount rate of 100 basis points would increase the pension benefit obligation by $11.6 million, while an increase in the discount rate of 100 basis points would decrease the pension benefit obligation by $9.8 million. For the year ended December 31, 2024, a decrease in the discount rate of 100 basis points would reduce the net periodic pension income by $1.2 million, while an increase in the discount rate of 100 basis points would increase the net periodic pension income by $0.7 million. A decrease in the expected long-term rate of return on plan assets of 100 basis points would reduce the net periodic pension income by $2.6 million, while an increase of 100 basis points would increase net periodic pension income by $2.6 million. Further detail on the assumptions used and a comparison between 2024 and 2023 assumptions is included in Note J, “Pension and Other Benefit Plans”, starting on page 123.

Current wording

The Company provides a qualified defined benefit pension to eligible employees and retirees, other post-retirement health and life insurance benefits to certain retirees, an unfunded supplemental pension plan for certain key executives and an unfunded stock balance plan for certain of its nonemployee directors. The benefit obligations for the pension and post-retirement benefits plans require significant management judgment. The assumptions used in calculating the benefit obligation include the discount rate, expected return on plan assets, rate of compensation increase and interest crediting rates. The discount rate was determined based upon the yield on high-quality fixed income investments expected to be available during the period to maturity of the pension benefits. The expected long-term rate of return was estimated by taking into consideration asset allocation, long-term capital market assumptions, reviewing historical returns on the type of assets held and current economic factors. Mortality tables are also utilized in calculating the benefit obligation, the selection of which is based on management judgment. The Company analyzed the sensitivity of the discount rate and the expected long-term rate of return on plan assets on the pension benefit obligation and net periodic pension cost. At December 31, 2025, a decrease in the discount rate of 100 basis points would increase the pension benefit obligation by $11.3 million, while an increase in the discount rate of 100 basis points would decrease the pension benefit obligation by $9.5 million. For the year ended December 31, 2025, a decrease in the discount rate of 100 basis points would reduce the net periodic pension income by $0.7 million, while an increase in the discount rate of 100 basis points would decrease the net periodic pension income by $0.2 million. A decrease in the expected long-term rate of return on plan assets of 100 basis points would reduce the net periodic pension income by $2.7 million, while an increase of 100 basis points would increase net periodic pension income by $2.7 million. Further detail on the assumptions used and a comparison between 2025 and 2024 assumptions is included in Note K, “Pension and Other Benefit Plans”, starting on page 119.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

During 2025, the Company performed quantitative goodwill analyses for all of the Company’s operating segments. The inputs for the quantitative analyses that require management judgment include determination of the discount rate, forecasted financial performance of the business entity, macroeconomic and industry conditions, and other relevant events that affect the fair value of the reporting unit. Based on the Company’s annual impairment analysis of goodwill as of October 1, 2025, it was determined that the fair value of each reporting unit was in excess of its respective carrying value, therefore goodwill was not impaired. The Company also performs sensitivity analyses around assumptions for the discount rates in order to assess the reasonableness of the assumptions utilized. The fair value-weighted average discount rate used for the October 1, 2025 quantitative assessment was 10.4%, compared to 11.1% for the October 1, 2023 assessment. As of October 1, 2025, a 100 basis point increase in the discount rates used in each operating segment model would reduce estimated entity level fair value by approximately $361.2 million and would not result in impairment of goodwill, as each reporting unit’s fair value would still exceed its carrying value.

Previous wording

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

Current wording

The Company also provides supplemental reporting of its results on an “operating” or “tangible” basis. Results on an “operating” basis exclude the after-tax effects of acquisition expenses, acquisition-related contingent consideration adjustments, litigation accrual, restructuring expenses, gain on debt extinguishment, loss on sales of investment securities, unrealized gain (loss) on equity securities and amortization of intangible assets. Results on a “tangible” basis exclude goodwill and intangible asset balances, net of accumulated amortization and applicable deferred tax amounts. Although these items are non-GAAP measures, the Company’s management believes this information helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisition or restructuring activities. In addition, the Company provides supplemental reporting for “operating pre-tax, pre-provision net revenues,” which excludes the provision for credit losses, acquisition expenses, acquisition-related contingent consideration adjustments, litigation accrual, restructuring expenses, gain on debt extinguishment, loss on sales of investment securities, unrealized gain (loss) on equity securities and amortization of intangible assets from income before income taxes. Although operating pre-tax, pre-provision net revenue is a non-GAAP measure, the Company’s management believes this information helps investors and analysts measure and compare the Company’s performance through a credit cycle by excluding the volatility in the provision for credit losses associated with 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 20.

Previous wording

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 Wealth Management Group operating unit and insurance services through its OneGroup NY, Inc. (“OneGroup”) operating unit.

Current wording

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.

Previous wording

The Company’s core operating objectives are: (i) maintain diverse revenue streams to achieve positive operating results in all four of the Company’s business units: banking and corporate, employee benefit services, insurance services, and wealth management services, (ii) utilize technology to deliver customer-responsive products and services and improve efficiencies, (iii) increase the noninterest component of total revenues through both organic and acquisition strategies, (iv) optimize the branch network and digital banking delivery systems, primarily through disciplined acquisition strategies, de novo expansions and divestitures/consolidations, (v) build profitable loan and deposit volume using both organic and acquisition strategies, 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.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

Net interest income increased to $449.1 million in 2024, an $11.8 million, or 2.7%, increase from the prior year, marking the eighteenth consecutive year of net interest income growth. The increase in 2024 was primarily due to increases in the yield on average interest-earning assets and average loan balances, partially offset by higher funding costs. Noninterest revenues also increased in 2024, with record results in all four operating segments of banking, employee benefit services, insurance services and wealth management services.

Current wording

Net interest income increased to $506.6 million in 2025, a $57.4 million, or 12.8%, increase from the prior year, marking the nineteenth consecutive year of net interest income growth. The increase in 2025 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 $21.4 million in 2025 decreased $1.4 million, or 6.2%, from 2024 as the Company's asset quality metrics improved in 2025 compared to the slight degradation experienced in 2024 that increased the prior year's provision for credit losses. Noninterest revenues increased to $311.5 million in 2025, a $14.3 million, or 4.8%, increase from 2024, with record results in all four operating segments: banking and corporate, employee benefit services, insurance services, and wealth management services.

Previous wording

Net interest margin for full year 2024 of 3.04% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.07% both decreased seven basis points from the prior year period. The yield on average interest earning assets increased 51 basis points compared to the prior year, as the yields on average loans, investments and interest-earning cash equivalents all improved. The Company’s total cost of funds increased 61 basis points from the prior year as the rate paid on interest-bearing deposits and borrowings both increased.

Current wording

Net interest margin for full year 2025 of 3.29% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.31% increased 25 basis points and 24 basis points, respectively, from full year 2024. The yield on average interest earning assets increased 18 basis points compared to the prior year, primarily driven by higher loan yields. The Company’s total cost of funds decreased 7 basis points from the prior year as the rate paid on interest-bearing deposits and borrowings both decreased.

Previous wording

The Company’s average and ending interest-earning assets both increased year-over-year reflective of strong organic loan growth. Average and ending deposits also increased primarily driven by higher governmental deposit balances, reflective of competitive offerings and expansion of its governmental deposit relationship base due in part to the Company’s business development efforts. Average and ending external borrowings in 2024 increased from 2023 as the Company secured certain fixed rate Federal Home Loan Bank (“FHLB”) term borrowings during the year to support the funding of continued loan growth that resulted in earning asset growth that outpaced deposit growth.

Current wording

The Company’s average and ending interest-earning assets both increased year-over-year reflective of strong organic loan growth. Average and ending deposits also increased primarily driven by organic growth in non-governmental deposit balances and the $543.7 million of deposits assumed in the Santander branch acquisition. Average and ending borrowings in 2025 decreased from 2024 reflective of growth in deposit balances outpacing loan growth, including the funding provided from the Santander branch acquisition.

Previous wording

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

Current wording

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

Previous wording

Net income for 2024 was $182.5 million, an increase of $50.6 million, or 38.3%, from 2023. Earnings per share for 2024 was $3.44, an increase of $0.99, or 40.4%, from 2023’s results. Net income and earnings per share for 2023 were unfavorably impacted by certain notable non-operating items including a $52.3 million pre-tax realized loss on the sales of investment securities, a $5.8 million litigation accrual associated with a threatened collective and class action matter that was settled in 2024, $3.3 million of acquisition-related contingent consideration adjustments associated with potential future contingent consideration payments for the FBD and TGA acquisitions completed in 2021, and $1.2 million of restructuring expenses linked to a retail workforce optimization strategy. Operating net income, a non-GAAP measure, of $193.9 million, increased $1.2 million, or 0.6%, compared to the prior year, while operating earnings per share, a non-GAAP measure, of $3.65 increased $0.08, or 2.2%, from last year. Operating PPNR, a non-GAAP measure, of $273.6 million, increased $17.2 million, or 6.7%, compared to 2023, while operating PPNR per share, a non-GAAP measure, of $5.15, increased $0.39, or 8.2%, compared to the prior year demonstrating improvement in the Company’s noncredit-related operating performance between the periods. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures.

Current wording

Net income for 2025 was $210.5 million, an increase of $28.0 million, or 15.3%, from 2024. Earnings per share for 2025 was $3.97, an increase of $0.53, or 15.4%, from 2024’s results. These increases were achieved despite the impacts from certain notable non-operating items, including $3.7 million of acquisition expenses associated with the acquisition of seven branch locations from Santander and $1.5 million of restructuring expenses associated with severance payments as part of a workforce optimization plan due to planned branch consolidations and other operational initiatives. Operating net income, a non-GAAP measure, of $225.1 million, increased $31.2 million, or 16.1%, compared to the prior year, while operating earnings per share, a non-GAAP measure, of $4.24 increased $0.59, or 16.2%, from last year. Operating PPNR, a non-GAAP measure, of $315.3 million, increased $41.7 million, or 15.3%, compared to 2024, while operating PPNR per share, a non-GAAP measure, of $5.94, increased $0.79, or 15.3%, compared to the prior year demonstrating improvement in the Company’s non-credit and non-income tax-related operating performance between the periods. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures.

Previous wording

The Company operates four businesses: Banking, Employee Benefit Services, Insurance Services and Wealth Management Services. These businesses are aggregated into the following four reportable segments: Banking and Corporate, Employee Benefit Services, Insurance Services and Wealth Management Services. The Banking and Corporate segment provides a wide array of lending and depository-related products and services to individuals, businesses, and governmental units with branch locations in Upstate New York as well as Northeastern Pennsylvania, Vermont and Western Massachusetts. In addition to these general intermediation services, the Banking and Corporate segment provides treasury management solutions and payment processing services. The Banking and Corporate segment also holds and manages the Company’s investment and borrowing portfolios and includes certain banking support and corporate overhead-related expenses. Employee Benefit Services, consisting of BPAS and its subsidiaries, provides the following on a national basis: employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, and health and welfare consulting services. BPAS services more than 6,100 benefit plans with approximately 910,000 plan participants and supports $117.3 billion in employee benefit trust assets as of December 31, 2024. In addition, BPAS employs 459 professionals serving clients in every U.S. state plus the Commonwealth of Puerto Rico, and occupies 16 offices located in New York, Pennsylvania, Massachusetts, New Jersey, Texas, Minnesota, South Dakota, Washington, Florida and Puerto Rico. The Insurance Services segment includes the operating subsidiary OneGroup, a full-service insurance agency offering personal and commercial lines of insurance and other risk management products and services. The Insurance Services segment includes 267 employees and 22 customer service facilities in New York, Pennsylvania, Massachusetts, South Carolina and Florida. Wealth Management Services include trust services provided by Nottingham Trust, a division of CBNA, broker-dealer and investment advisory services provided by Community Investment Services, Inc. (“CISI”), The Carta Group, Inc. (“Carta Group”) and OneGroup Wealth Partners, Inc. (“Wealth Partners”), as well as asset management provided by Nottingham Advisors, Inc. (“Nottingham”). The Wealth Management Services segment includes 113 employees and assets under management or administration of $13.2 billion at the end of 2024. For additional financial information on the Company’s segments, refer to Note S – Segment Information in the Notes to Consolidated Financial Statements.

Current wording

The Company operates four businesses: Banking, Employee Benefit Services, Insurance Services and Wealth Management Services. These businesses are aggregated into the following four reportable segments: Banking and Corporate, Employee Benefit Services, Insurance Services and Wealth Management Services. The Banking and Corporate segment provides a wide array of lending and depository-related products and services to individuals, businesses, and governmental units with branch locations in Upstate New York as well as Northeastern Pennsylvania, 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 holds and manages the Company’s investment and borrowing portfolios and includes certain banking support and corporate overhead-related expenses. Employee Benefit Services, consisting of BPAS and its subsidiaries, provides the following on a national basis: employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, and health and welfare consulting services. BPAS services more than 10,000 benefit plans with approximately 960,000 plan participants and supports $132.1 billion in employee benefit trust assets as of December 31, 2025. In addition, BPAS employs 479 professionals serving clients in every U.S. state plus the Commonwealth of Puerto Rico, and occupies 17 offices located in New York, Pennsylvania, Massachusetts, New Jersey, Texas, Minnesota, South Dakota, Washington, Florida, and Puerto Rico. The Insurance Services segment includes the operating subsidiary OneGroup, a full-service insurance agency offering personal and commercial lines of insurance and other risk management products and services. The Insurance Services segment includes 256 employees and 23 customer service facilities in New York, Pennsylvania, Massachusetts, South Carolina, and Florida. Wealth Management Services include trust services provided by Nottingham Trust, a division of CBNA, broker-dealer and investment advisory services provided by Nottingham Investment Services, Inc. (“NISI”) and Nottingham Wealth Partners, Inc. as well as asset management provided by Nottingham Advisors, Inc. (“Nottingham”). The Wealth Management Services segment includes 109 employees and assets under management or administration of $14.0 billion at the end of 2025. For additional financial information on the Company’s segments, refer to Note U – Segment Information in the Notes to Consolidated Financial Statements.

Previous wording

As displayed in Table 2, the 2024 return on average assets ratio increased 27 basis points, while the return on average equity ratio increased 249 basis points as compared to 2023. The increase in the return on average assets was the result of an increase in net income that was impacted by a $52.3 million pre-tax realized loss on sales of investment securities in the prior year, partially offset by an increase in average assets driven by strong organic loan growth. The return on average equity ratio increased in 2024 as net income increased, which was impacted by the aforementioned loss on sales of investment securities, while average equity increased driven by an increase in retained earnings and a decrease in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio. The return on average assets ratio in 2023 decreased 34 basis points from 2022, while the return on average equity ratio decreased 258 basis points as compared to 2022, primarily as a result of a decrease in net income impacted by the aforementioned loss on sales of investment securities. This was partially offset by a decrease in average assets, primarily related to the sales and maturities of certain lower-yielding available-for-sale investment securities, partially offset by strong organic loan growth during the year. The return on average equity ratio decreased in 2023 as net income decreased, which was impacted by the aforementioned loss on sales of investment securities, which was only partially offset by a decrease in average equity due primarily to an increase in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio.

Current wording

As displayed in Table 2, the 2025 return on average assets ratio increased 12 basis points, while the return on average equity ratio increased 53 basis points as compared to 2024. The increase in the return on average assets was the result of an increase in net income primarily driven by net interest income growth, partially offset by an increase in average assets driven by organic loan and deposit growth, securities purchases, and deposit funding from the Santander acquisition. The return on average equity ratio increased in 2025 as net income increased at a higher rate than average equity. The increase in average equity was driven by an increase in retained earnings and a decrease in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio.

Previous wording

The dividend payout ratio for 2024 of 52.6% decreased from 72.4% in 2023 driven by a 38.3% increase in net income and a 0.5% increase in dividends declared. The increase in dividends declared in 2024 was a result of a 2.2% increase in the dividends declared per share, partially offset by a 1.2% decrease in common shares outstanding as a result of share repurchases during the year. The dividend payout ratio for 2023 of 72.4% increased from 49.9% in 2022 driven by a 29.9% decrease in net income, which was impacted by the aforementioned loss on sales of investment securities, and a 1.7% increase in dividends declared. The increase in dividends declared in 2023 was a result of a 2.3% increase in the dividends declared per share, partially offset by a 0.8% decrease in common shares outstanding as a result of share repurchases during the year.

Current wording

The dividend payout ratio for 2025 of 46.6% decreased from 52.6% in 2024 driven by a 15.3% increase in net income outpacing the 2.2% increase in dividends declared. The increase in dividends declared in 2025 was a result of a 2.2% increase in the dividends declared per share, while common shares outstanding were consistent as issuances associated with employee stock plans were offset by share repurchases during the year.

Previous wording

Net interest income totaled $449.1 million in 2024, an increase of $11.8 million, or 2.7%, from the prior year. As disclosed in Table 3, fully tax-equivalent net interest income, a non-GAAP measure, totaled $452.8 million in 2024, an increase of $11.3 million, or 2.6%, from the prior year. The increase is a result of a 51 basis point increase in the yield on average interest-earning assets and a $676.8 million, or 4.8%, increase in average interest-earning asset balances, partially offset by a 76 basis point increase in the rate paid on average interest-bearing liabilities and an $871.4 million, or 9.0%, increase in average interest-bearing liability balances. As reflected in Table 4, the favorable impact of the increases in the yield on average interest-earning assets ($74.4 million) and average interest-earnings asset balances ($27.2 million) were partially offset by the unfavorable impacts of the increases in the rate paid on average interest-bearing liabilities ($80.2 million) and average interest-bearing liability balances ($10.1 million).

Current wording

Net interest income totaled $506.5 million in 2025, an increase of $57.4 million, or 12.8%, from the prior year. As disclosed in Table 3, fully tax-equivalent net interest income, a non-GAAP measure, totaled $510.1 million in 2025, an increase of $57.2 million, or 12.6%, from the prior year. The increase is a result of an 18 basis point increase in the yield on average interest-earning assets, a $638.9 million, or 4.3%, increase in average interest-earning asset balances and a 10 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $546.6 million, or 5.2%, increase in average interest-bearing liability balances. As reflected in Table 4, the favorable impacts of the increase in average interest-earnings asset balances ($28.6 million), the increase in the yield on average interest-earning assets ($26.9 million) and the decrease in the rate paid on average interest-bearing liabilities ($11.5 million) were partially offset by the unfavorable impact of the increase in average interest-bearing liability balances ($9.8 million).

Previous wording

The 2024 net interest margin decreased seven basis points to 3.04% from 3.11% reported in 2023, while the fully tax-equivalent net interest margin, a non-GAAP measure, also decreased seven basis points to 3.07% from the 3.14% reported in the prior year. These decreases were the result of a 76 basis point increase in the rate paid on average interest-bearing liabilities, partially offset by a 51 basis point increase in the yield on interest-earning assets and a higher proportion of those assets being comprised of higher yielding loan balances due to strong organic loan growth. The increases in the yield on interest-earnings assets and rate on interest-bearing liabilities were primarily due to the impact of higher market rates during most of 2024. The 5.43% yield on average loans in 2024 increased 59 basis points as compared to 4.84% in 2023 reflective of higher interest rates on new and adjustable rate loans during the year. The yield on investments, including cash equivalents, of 2.15% in 2024 was 10 basis points higher than 2023 primarily due to higher yields on investment purchases during the year and the favorable impact higher market rates had on the yield earned on cash equivalents. The cost of interest-bearing liabilities was 1.84% during 2024 as compared to 1.08% for 2023. The increased cost reflects the 72 basis point increase in the rate paid on average deposits due in part to a shift in deposit mix as customers responded to changes in market interest rates by moving funds into higher yielding account types and the 83 basis point higher average rate paid on borrowings in 2024 that included the impact of $250.0 million of FHLB term borrowings secured during 2024.

Current wording

The 2025 net interest margin increased 25 basis points to 3.29% from 3.04% reported in 2024, while the fully tax-equivalent net interest margin, a non-GAAP measure, increased 24 basis points to 3.31% from the 3.07% reported in the prior year. These increases were the result of an 18 basis point increase in the yield on interest-earning assets and a 10 basis point decrease in the rate paid on average interest-bearing liabilities. The increases in the yield on interest-earnings assets and decrease in the rate on interest-bearing liabilities were primarily due to an increase in the proportion of higher rate loans originated over recent periods, the maturity of lower rate investment securities and purchase of higher rate investment securities, and a decrease in market rates on borrowings and deposits. The 5.64% yield on average loans in 2025 increased 21 basis points as compared to 5.43% in 2024, driven by the change in proportion of loan rates as discussed above. The yield on investments, including cash equivalents, of 2.13% in 2025 was 5 basis points higher than 2024 primarily due to higher yields on investment purchases during the year and maturities, pre-payments, and calls on certain lower yielding available-for-sale securities, partially offset by the impact of lower market rates on the yield earned on cash equivalents. The cost of interest-bearing liabilities was 1.74% during 2025 as compared to 1.84% for 2024. The decreased cost reflects the 4 basis point decrease in the rate paid on average deposits and the 15 basis point lower average rate paid on borrowings due primarily to changes in market interest rates as well as lower levels of overnight borrowings in 2025.

Previous wording

Total interest income increased by $102.1 million, or 18.9%, while as shown in Table 3, total FTE-basis interest income, a non-GAAP measure, increased by $101.6 million, or 18.6%, in 2024 compared to the prior year. Average loans increased $849.0 million, or 9.2%, in 2024. This increase was driven by organic growth in all of the Company’s five main portfolios - business lending, consumer mortgage, consumer indirect, home equity and consumer direct. Loan interest income and fees increased $100.6 million, or 22.6%, while FTE-basis loan interest income and fees, a non-GAAP measure, increased $100.7 million, or 22.6%, in 2024 as compared to 2023. These increases were attributable to the aforementioned higher average loan balances and the impact of a 59 basis point higher loan yield primarily due to higher interest rates on new and adjustable rate loans during the year. Investment and interest-earning cash interest income in 2024 was $1.5 million, or 1.6%, higher than the prior year as a result of a 10 basis point increase in the average investment yield including cash equivalents and a $46.8 million increase in average cash equivalent balances, partially offset by a $219.0 million decrease in the average book basis balance of investments.

Current wording

Total interest income increased by $55.7 million, or 8.7%, while as shown in Table 3 on page 47, total FTE-basis interest income, a non-GAAP measure, increased by $55.6 million, or 8.6%, in 2025 compared to the prior year. Average loans increased $524.7 million, or 5.2%, in 2025. This increase was driven primarily by organic growth in all of the Company’s five main portfolios - business lending, consumer mortgage, consumer indirect, home equity and consumer direct. Included in this increase was $31.9 million of loans acquired from Santander in the fourth quarter of 2025 as part of a branch acquisition. Loan interest income and fees increased $50.9 million, or 9.3%, while FTE-basis loan interest income and fees, a non-GAAP measure, increased $51.0 million, or 9.3%, in 2025 as compared to 2024. These increases were attributable to the aforementioned higher average loan balances and the impact of a 21 basis point higher loan yield, as the yield on new volume continued to outpace the yield on loan paydowns and maturities. Investment and interest-earning cash interest income in 2025 was $4.6 million, or 4.5%, higher than the prior year as a result of a 5 basis point increase in the average investment yield including cash equivalents, a $76.8 million increase in the average book basis balance of investments and a $37.5 million increase in average cash equivalent balances.

Previous wording

Total interest expense increased by $90.3 million to $194.4 million in 2024 from $104.1 million in 2023. As shown in Table 4, higher interest rates on interest-bearing liabilities resulted in an increase in interest expense of $80.2 million, while higher average interest-bearing liability balances resulted in a $10.1 million increase in interest expense. Interest expense as a percentage of average interest-earning assets for 2024 increased 58 basis points to 1.32% from 0.74% in the prior year. The rate on interest-bearing deposits of 1.66% was 72 basis points higher than 2023, primarily due to an increase in certain product rates in response to changes in market interest rates during the year and a higher proportion of average money market and time deposit balances that carry a higher average rate than interest checking and savings deposits. The rate on borrowings increased 83 basis points to 3.80% in 2024, primarily due to the aforementioned increase in market interest rates. Total average funding balances (deposits and borrowings) in 2024 increased $603.4 million, or 4.5%. Average deposits increased $317.4 million, driven by an increase in average time and money market deposit balances partially offset by decreases in average demand, interest checking and savings deposit balances. Average non-time deposit balances decreased $439.1 million, or 3.8%, and accounted for 84.6% of total average deposits in 2024 compared to 90.1% in 2023, reflective of shifts to higher-rate time and money market deposit accounts in the higher interest rate environment during most of 2024. Average time deposit balances increased $756.6 million year-over-year and represented 15.4% of total average deposits for 2024 compared to 9.9% in 2023. Average external borrowings increased $286.0 million, or 45.3%, in 2024 as compared to 2023, primarily due to increases in average FHLB term borrowings of $360.1 million and Federal Reserve short-term borrowings of $54.1 million, partially offset by decreases in average overnight borrowings of $97.8 million and average securities sold under agreement to repurchase (“customer repurchase agreements”) of $33.9 million. The increase in average FHLB term borrowings was due to the Company securing $250.0 million of fixed rate borrowings in the second and third quarters of 2024 to meet the Company’s funding needs, including to support strong loan growth.

Current wording

Total interest expense decreased by $1.7 million to $192.7 million in 2025 from $194.4 million in 2024. As shown in Table 4 on page 48, lower interest rates on interest-bearing liabilities resulted in a decrease in interest expense of $11.5 million, while higher average interest-bearing liability balances resulted in a $9.8 million increase in interest expense. Interest expense as a percentage of average interest-earning assets for 2025 decreased 7 basis points to 1.25% from 1.32% in the prior year. The rate on interest-bearing deposits of 1.58% was 8 basis points lower than 2024, primarily due to a decrease in certain product rates in response to changes in market interest rates during the year. The rate on borrowings decreased 15 basis points to 3.65% in 2025, primarily due to the aforementioned decrease in market interest rates. Total average funding balances (deposits and borrowings) in 2025 increased $563.4 million, or 4.0%. Average deposits increased $644.3 million, driven by increases in all deposit product types from organic growth and the Santander acquisition. Average non-time deposit balances increased $555.5 million, or 5.0%, and accounted for 84.7% of total average deposits in 2025 compared to 84.6% in 2024. Average time deposit balances increased $88.8 million year-over-year and represented 15.3% of total average deposits for 2025 compared to 15.4% in 2024. Average external borrowings decreased $80.9 million, or 8.8%, in 2025 as compared to 2024, primarily due to a decrease in average Federal Reserve short-term borrowings of $54.1 million, average securities sold under agreement to repurchase (“customer repurchase agreements”) of $46.7 million and average overnight borrowings of $20.9 million, partially offset by an increase in term FHLB borrowings of $40.8 million. The decrease in average customer repurchase agreements in 2025 was primarily driven by lower governmental balances due in part to certain customers transferring funds to the Company’s reciprocal deposit product offerings. The increase in average FHLB term borrowings was due to the timing of when the Company secured funding in 2024, as the Company secured a total of $250.0 million of FHLB term borrowings in the second and third quarters of 2024.

Previous wording

The following table sets forth information related to average interest-earning assets and average interest-bearing liabilities and their associated yields and rates for the periods indicated. Interest income and yields are on a fully tax-equivalent (“FTE”) basis using a marginal income tax rate of 25.0% for 2024, 24.4% in 2023 and 24.3% in 2022. Average balances are computed by totaling the daily ending balances in a period and dividing by the number of days in that period. Loan interest income and yields include amortization of deferred loan income and costs, loan prepayment, late and other fees and the accretion of acquired loan purchase discounts and premiums. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.

Current wording

The following table sets forth information related to average interest-earning assets and average interest-bearing liabilities and their associated yields and rates for the periods indicated. Interest income and yields are on a FTE basis using a marginal income tax rate of 25.3% for 2025, 25.0% for 2024 and 24.4% for 2023. Average balances are computed by totaling the daily ending balances in a period and dividing by the number of days in that period. Loan interest income and yields include amortization of deferred loan income and costs, loan prepayment, late and other fees and the accretion of acquired loan purchase discounts and premiums. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.

Previous wording

The Company’s sources of noninterest revenues are of four primary types: 1) general banking services related to loans, including mortgage banking, deposits, customer interest rate swap fees, commercial real estate transaction advisory and placement services, and other core customer activities typically provided through the branch network and digital banking channels (performed by CBNA); 2) employee benefit trust, collective investment fund, transfer agency, actuarial, benefit plan administration and recordkeeping services (performed by BPAS and its subsidiaries); 3) wealth management services, comprised of trust services (performed by the Nottingham Trust division within CBNA), broker-dealer and investment advisory products and services (performed by Community Investment Services Inc. (“CISI”), OneGroup Wealth Partners, Inc. and The Carta Group, Inc.) and asset management services (performed by Nottingham Advisors, Inc.); and 4) insurance and risk management products and services (performed by OneGroup). Additionally, the Company has other transactions that impact noninterest revenues, including realized and unrealized gains or losses on investment securities and gains or losses on debt extinguishment.

Current wording

The Company’s sources of noninterest revenues are of four primary types: 1) general banking services related to loans, including mortgage banking, deposits, customer interest rate swap fees, CRE financing and structuring fees, and other core customer activities typically provided through the branch network, commercial banking offices, and digital banking channels (performed by CBNA); 2) employee benefit trust, collective investment fund, transfer agency, actuarial, benefit plan administration and recordkeeping services (performed by BPAS and its subsidiaries); 3) wealth management services, comprised of trust services (performed by the Nottingham Trust 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), 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, gains or losses on debt extinguishment, realized and unrealized gains or losses on investment securities and income or losses on equity method investments.

Previous wording

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

Current wording

Noninterest revenues as a percentage of total revenues (defined as net interest income plus noninterest revenues) was 38.1% in 2025, a decrease from 39.8% in 2024. Operating noninterest revenues as a percentage of operating revenues (FTE basis), a non-GAAP measure, were 37.9% in 2025, a decrease from 39.6% in the prior year. The decrease was due to the 12.6% increase in fully tax-equivalent net interest income, a non-GAAP measure, outpacing the 4.9% increase in operating noninterest revenues, a non-GAAP measure.

Previous wording

Banking noninterest revenues, comprised of deposit service charges and fees, debit interchange and ATM fees, mortgage banking and other banking revenues, totaled $78.5 million in 2024, an increase of $8.6 million, or 12.3%, from the prior year. The increase was driven by increases in mortgage banking revenues ($3.8 million), deposit service charges and fees ($2.7 million), other banking revenues ($1.2 million) and debit interchange and ATM fees ($0.9 million). The increase in mortgage banking revenues reflected higher sales volumes of secondary market eligible residential mortgage loans and an increase in the value of mortgage servicing rights. The increases in other banking revenues were associated with higher customer interest rate swap fee revenues due to the recent implementation of this product offering and other commercial banking-related fees, including an increase in commercial real estate transaction advisory and placement revenues generated by Axiom which was acquired in March 2023.

Current wording

Banking noninterest revenues, comprised of deposit service charges and fees, debit interchange and ATM fees, mortgage banking and other banking revenues, totaled $83.9 million in 2025, an increase of $5.4 million, or 6.8%, from the prior year. The increase was driven by increases in other banking revenues ($5.2 million), deposit service charges and fees ($0.8 million), and debit interchange and ATM fees ($0.3 million), partially offset by a decrease in mortgage banking revenues ($0.9 million). The increase in other banking revenues was associated with higher customer interest rate swap fee revenues, other commercial banking-related fees, including an increase in CRE financing and structuring fees generated by Axiom Realty Group (“Axiom”), income from bank-owned life insurance and a $1.6 million income distribution received from a limited partnership investment.

Previous wording

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

Current wording

As disclosed in Table 5, noninterest revenue from non-banking financial services (noninterest revenues from employee benefit services, insurance services, and wealth management services) increased $9.6 million, or 4.4%, in 2025 to $227.4 million. Financial services revenues represented 73% of total noninterest revenues in both 2025 and 2024. Financial services revenues accounted for 73% of total operating noninterest revenues, a non-GAAP measure, in 2025 compared to 74% in 2024.

Previous wording

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

Current wording

Wealth management services revenues increased $0.4 million, or 1.1%, in 2025 due to favorable investment market conditions. Assets under management and administration within the wealth management businesses increased $0.8 billion to $14.0 billion at December 31, 2025 as compared to one year earlier. Assets under management and administration within the wealth management businesses increased $1.4 billion to $13.2 billion at December 31, 2024 as compared to one year earlier. Assets under management and administration included approximately $3.6 billion and $3.3 billion of intercompany assets under management and administration at the end of 2025 and 2024, respectively, associated with affiliated employee benefit trust accounts.

Previous wording

As shown in Table 6, noninterest expenses of $486.8 million in 2024 were $14.1 million, or 3.0%, higher than 2023, reflective of increases in salaries and employee benefits, data processing and communications expenses, occupancy and equipment expenses, business development and marketing expenses and acquisition expenses. These increases were partially offset by decreases in legal and professional fees, amortization of intangible assets, restructuring expenses, acquisition-related contingent consideration adjustments and litigation expenses.

Current wording

As shown in Table 6, noninterest expenses of $521.3 million in 2025 were $34.4 million, or 7.1%, higher than 2024, reflective of increases in salaries and employee benefits, data processing and communications expenses, occupancy and equipment expenses, acquisition expenses, other expenses, legal and professional fees and restructuring expenses. These increases were partially offset by decreases in business development and marketing expenses, amortization of intangible assets, acquisition-related contingent consideration adjustments, and litigation expenses.

Previous wording

Noninterest expenses as a percent of average assets for 2024 was 3.04%, a decrease of six basis points from 3.10% in 2023 and 31 basis points higher than 2.73% in 2022. Operating noninterest expenses (non-GAAP) as a percent of average assets, a non-GAAP measure, for 2024 was 2.95%, which was consistent with the 2023 level and 35 basis points higher than 2.60% in 2022. The changes in these ratios for 2024 were due to a 3.0% increase in noninterest expenses and a 5.4% increase in operating noninterest expenses, a non-GAAP measure, while average assets increased by 4.9%, primarily due to organic loan growth. The increases in these ratios for 2023 were due to a 11.4% increase in noninterest expenses and a 10.8% increase in operating noninterest expenses, a non-GAAP measure, while average assets declined by 2.1%, primarily due to the sales and maturities of certain lower-yielding available-for-sale investment securities.

Current wording

Noninterest expenses as a percent of average assets for 2025 was 3.11%, an increase of 7 basis points from 3.04% in 2024. Operating noninterest expenses (non-GAAP) as a percent of average assets, a non-GAAP measure, for 2025 was 3.00%, which was 5 basis points higher than 2024. The increases in these ratios for 2025 were due to a 7.1% increase in noninterest expenses and a 6.4% increase in operating noninterest expenses, a non-GAAP measure, while average assets increased by 4.7%, primarily due to organic loan growth.

Previous wording

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

Current wording

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

Previous wording

The 2024 GAAP efficiency ratio of 65.2% decreased 7.3 percentage points from the 2023 GAAP efficiency ratio as noninterest expenses increased 3.0% while total revenues increased 14.4% including the impact of the loss on sales of investment securities in 2023. The 2023 GAAP efficiency ratio of 72.5% increased 10.0 percentage points from the 2022 GAAP efficiency ratio as noninterest expenses increased 11.4% while total revenues decreased 4.0% primarily as a result of the loss on sales of investment securities in connection with the Company’s first quarter balance sheet repositioning. The 2024 operating efficiency ratio, a non-GAAP measure, of 63.0% was 0.2 percentage points lower than the 2023 non-GAAP operating efficiency ratio of 63.2% as the 5.4% increase in operating noninterest expenses, a non-GAAP measure, grew at a slower pace than the 5.8% increase in fully tax-equivalent operating revenues, a non-GAAP measure, comprised of a 2.6% increase in fully tax-equivalent net interest income, a non-GAAP measure and an 11.0% increase in operating noninterest revenues, a non-GAAP measure. The 2023 non-GAAP operating efficiency ratio of 63.2% was 4.0 percentage points higher than the 2022 non-GAAP operating efficiency ratio of 59.2% as the 10.8% increase in operating noninterest expenses, a non-GAAP measure, grew at a faster pace than the 3.7% increase in fully tax-equivalent operating revenues, a non-GAAP measure, comprised of a 4.0% increase in fully tax-equivalent net interest income, a non-GAAP measure and a 3.2% increase in operating noninterest revenues, a non-GAAP measure. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures.

Current wording

The 2025 efficiency ratio of 63.7% improved 1.5 percentage points from the 2024 efficiency ratio as noninterest expenses increased 7.1% while total revenues increased 9.6%.

Previous wording

Total non-personnel, noninterest expenses, excluding amortization of intangible assets, acquisition-related expenses, restructuring expenses and litigation accrual, increased $5.1 million, or 3.1%, in 2024, reflective of increases in data processing and communications expenses, occupancy and equipment expenses, business development and marketing expenses, partially offset by a decrease in legal and professional fees. The increase in data processing and communications expenses is reflective of the Company’s continued investment in customer-facing and back-office technologies including additional technology to enhance its detection and prevention of customer payment-related fraud. Occupancy and equipment expenses increased due to increased rent paid on leased properties, partially offset by the effects of branch consolidations undertaken in 2023 and 2024. Business development and marketing expenses increased due to the Company’s investment in digital marketing initiatives and higher levels of targeted advertisements intended to generate deposit inflows.

Current wording

Total non-personnel noninterest expenses, excluding amortization of intangible assets, acquisition-related expenses, restructuring expenses and litigation accrual, increased $17.2 million, or 10.0%, in 2025, reflective of increases in data processing and communications expenses, other expenses, legal and professional fees, and occupancy and equipment expenses, partially offset by a decrease in business development and marketing expenses. The increase in data processing and communications expenses is reflective of the Company’s continued investment in key technologies, including artificial intelligence applications, customer payment fraud and cybersecurity risk management software, credit administration software and other workflow efficiency initiatives, as well as a $1.4 million consulting expense in connection with a contract renegotiation with the Company’s banking core system provider, which is expected to result in proportionally lower future processing costs for that system infrastructure. Occupancy and equipment expenses increased due to higher property maintenance costs as well as incremental expenses associated with acquisitions and the Bank’s de novo branches opened between the periods. The increase in other expenses includes $1.7 million lower gains on the sale of properties related to the branch consolidations completed in 2025. Legal and professional fees increased due to legal expenses associated with the development of new collective investment funds.

Previous wording

The effective income tax rate for 2024 was 22.9%, compared to 21.6% in 2023 and 21.7% in 2022. The increase in the effective income tax rate for 2024 compared to the effective tax rate for 2023 is primarily attributable to an increase in pre-tax income due to the realized losses on sales of investment securities in 2023 as well as a higher proportion of income from fully taxable sources. The decrease in the effective income tax rate for 2023, compared to the effective tax rate for 2022, is primarily attributable to a decrease in pre-tax income due to the 2023 realized loss on sales of investment securities. Excluding the impact of tax benefits related to stock-based compensation activity and amortization of income tax credit investments, the effective tax rate for full year 2024 was 19.0%, down from 21.0% for full year 2023, driven by the recognition of certain solar energy income tax credits during the fourth quarter of 2024.

Current wording

The effective income tax rate for 2025 was 23.6%, compared to 22.9% in 2024 and 21.6% in 2023. The increase in the effective income tax rate for 2025 compared to the effective tax rate for 2024 is primarily attributable to a decrease in solar energy income tax credits in the current year as well as an increase in certain state income taxes. The Company recorded income tax expense associated with the amortization of income tax credit investments of $7.3 million in 2025, compared to $9.7 million in 2024 and $1.3 million in 2023. Excluding the impact of tax benefits related to stock-based compensation activity and amortization of income tax credit investments, the effective tax rate for full year 2025 was 21.3%, up from 19.0% for full year 2024, driven by a decrease in solar energy income tax credits as well as an increase in certain state income taxes.

Previous wording

Shareholders’ equity ended 2024 at $1.76 billion, up $64.9 million, or 3.8%, from the end of 2023. This increase reflects net income of $182.5 million, stock-based compensation of $8.3 million, the issuance of shares through employee stock plans of $7.1 million and a decrease in accumulated other comprehensive loss of $8.8 million, partially offset by common stock dividends declared of $96.0 million and common stock repurchased of $45.8 million. The change in accumulated other comprehensive loss was primarily driven by a positive $9.6 million adjustment in the overfunded status of the Company’s employee retirement plans, offset by $0.8 million of additional other comprehensive loss related to the Company’s available-for-sale investment portfolio. The change in the other comprehensive loss related to the Company’s available-for-sale investment portfolio includes a net decrease in the after-tax market value adjustment on the available-for-sale investment portfolio due to movements in medium to long-term interest rates and the volume and rates associated with the security purchases, sales and maturities that occurred in 2024. Shares outstanding decreased by 0.7 million during the year due to the repurchase of 1.0 million shares during 2024, partially offset by share issuances under employee stock plans and deferred compensation arrangements.

Current wording

Shareholders’ equity ended 2025 at $2.00 billion, up $243.2 million, or 13.8%, from the end of 2024. This increase reflects net income of $210.5 million, a decrease in accumulated other comprehensive loss of $129.1 million, stock-based compensation of $10.9 million, the issuance of shares through employee stock plans of $2.1 million, partially offset by common stock dividends declared of $98.2 million and common stock repurchased of $11.2 million. The change in accumulated other comprehensive loss was primarily driven by a $118.0 million decrease in other comprehensive loss related to the Company’s available-for-sale investment portfolio, as well as a positive $11.1 million adjustment in the overfunded status of the Company’s employee retirement plans. The change in the other comprehensive loss related to the Company’s available-for-sale investment portfolio includes a net increase in the after-tax market value adjustment on the available-for-sale investment portfolio due to general downward movements in medium to long-term interest rates, as well as the volume and rates associated with the securities maturities that occurred during the past 12 months. Common shares outstanding were consistent as issuances associated with employee stock plans were offset by share repurchases during the year.

Previous wording

The Company’s tier 1 leverage ratio, a primary measure for which regulators have established a 5% minimum for an institution to be considered “well-capitalized,” decreased 15 basis points from the prior year to end the year at 9.19%. The decrease in the tier 1 leverage ratio as compared to 2023 was the result of an increase in average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, of 5.4%, primarily due to organic loan growth, while shareholders’ equity, excluding intangibles and other comprehensive income or loss items, increased 3.7%, as the impact of net earnings retention outweighed share repurchases during the year. For additional financial information on the Company’s regulatory capital, refer to Note O – Regulatory Matters in the Notes to Consolidated Financial Statements. The shareholders’ equity-to-assets ratio was 10.76% at the end of 2024 compared to 10.92% at the end of 2023. The decrease was due to assets increasing by 5.3% driven primarily by organic loan growth, while shareholders’ equity increased 3.8%, as the impact of net earnings retention outweighed share repurchases during the year. The tangible equity-to-assets ratio, a non-GAAP and regulatory reporting measure, was 5.83% at the end of 2024 versus 5.75% one year earlier. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures. The increase was due to tangible common shareholders’ equity increasing by 7.2% in 2024 primarily due to a $50.6 million increase in net income and an $8.8 million decrease in accumulated other comprehensive loss, while tangible assets increased 5.6% from the prior year, reflective of organic loan growth. The Company manages organic and acquired growth in a manner that enables it to continue to maintain and grow its capital base over time and maintain its ability to take advantage of future strategic growth opportunities.

Current wording

The Company’s tier 1 leverage ratio, a primary measure for which regulators have established a 5% minimum for an institution to be considered “well-capitalized,” increased 2 basis points from the prior year to end the year at 9.21%. The increase in the tier 1 leverage ratio as compared to 2024 was the result of an increase in shareholders’ equity, excluding intangibles and other comprehensive income or loss items of 5.0%, as the impact of net earnings retention outweighed share repurchases during the year, while average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, increased 4.7%, primarily due to the Santander branch acquisition and organic loan growth. For additional financial information on the Company’s regulatory capital, refer to Note P – Regulatory Matters in the Notes to Consolidated Financial Statements. The shareholders’ equity-to-assets ratio was 11.59% at the end of 2025 compared to 10.76% at the end of 2024. The increase was due to shareholders’ equity increasing 13.8%, as the impact of net earnings retention and a decrease in accumulated other comprehensive loss due to a reduction in unrealized loss in the Company’s investment portfolio outweighed share repurchases during the year, while assets increasing by 5.6% driven primarily by organic loan growth and the Santander branch acquisition. The tangible equity-to-assets ratio, a non-GAAP and regulatory reporting measure, was 6.75% at the end of 2025 versus 5.83% one year earlier. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures. The increase was due to tangible common shareholders’ equity increasing by 22.2% in 2025 primarily due to a $129.1 million decrease in accumulated other comprehensive loss and a $112.3 million increase in retained earnings, while tangible assets increased 5.6% from the prior year, reflective of organic loan growth and the Santander branch acquisition. The Company manages organic and acquired growth in a manner that enables it to continue to maintain and grow its capital base over time and maintain its ability to take advantage of future strategic growth opportunities.