NBT BANCORP INC

Previous wording

The purpose of this discussion and analysis is to provide a concise description of the consolidated financial condition and results of operations of NBT Bancorp Inc. (“NBT”) and its wholly-owned subsidiaries, including NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”) and NBT Holdings, Inc. (“NBT Holdings”) (collectively referred to herein as the “Company”). When references to “NBT,” “we,” “our,” “us,” and “the Company” are made in this report, we mean NBT Bancorp Inc. and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, NBT Bancorp Inc. When we refer to the “Bank” in this report, we mean our only bank subsidiary, NBT Bank, National Association, and its subsidiaries. This discussion will focus on results of operations, financial condition, capital resources and asset/liability management. Reference should be made to the Company’s consolidated financial statements and footnotes thereto included in this Form 10‑Q as well as to the Company’s Annual Report on Form 10‑K for the year ended December 31, 2024 for an understanding of the following discussion and analysis. Operating results for the three month period ending March 31, 2025 are not necessarily indicative of the results of the full year ending December 31, 2025 or any future period.

Current wording

The purpose of this discussion and analysis is to provide a concise description of the consolidated financial condition and results of operations of NBT Bancorp Inc. (“NBT”) and its wholly-owned subsidiaries, including NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”) and NBT Holdings, Inc. (“NBT Holdings”) (collectively referred to herein as the “Company”). When references to “NBT,” “we,” “our,” “us,” and “the Company” are made in this report, we mean NBT Bancorp Inc. and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, NBT Bancorp Inc. When we refer to the “Bank” in this report, we mean our only bank subsidiary, NBT Bank, National Association, and its subsidiaries. This discussion will focus on results of operations, financial condition, capital resources and asset/liability management. Reference should be made to the Company’s consolidated financial statements and footnotes thereto included in this Form 10‑Q as well as to the Company’s Annual Report on Form 10‑K for the year ended December 31, 2024 for an understanding of the following discussion and analysis.Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results of the full year ending December 31, 2025 or any future period.

Previous wording

Certain statements in this filing and future filings by the Company with the SEC, in the Company’s press releases or other public or stockholder communications or in oral statements made with the approval of an authorized executive officer, contain forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of phrases such as “anticipate,” “believe,” “expect,” “forecasts,” “projects,” “will,” “can,” “would,” “should,” “could,” “may,” or other similar terms. There are a number of factors, many of which are beyond the Company’s control, that could cause actual results to differ materially from those contemplated by the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) local, regional, national and international economic conditions, including actual or potential stress in the banking industry, and the impact they may have on the Company and its customers, and the Company’s assessment of that impact; (2) changes in the level of nonperforming assets and charge-offs; (3) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (4) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the FRB and international trade disputes (including threatened or implemented tariffs imposed by the U.S. and threatened or implemented tariffs imposed by foreign countries in retaliation); (5) inflation, interest rate, securities market and monetary fluctuations; (6) political instability; (7) acts of war, including international military conflicts, or terrorism; (8) the timely development and acceptance of new products and services and the perceived overall value of these products and services by users; (9) changes in consumer spending, borrowing and saving habits; (10) changes in the financial performance and/or condition of the Company’s borrowers; (11) technological changes; (12) acquisition and integration of acquired businesses; (13) the possibility that NBT may be unable to achieve expected synergies and operating efficiencies in the merger within the expected timeframes or at all or to successfully integrate Evans operations and those of NBT; (14) the ability to increase market share and control expenses; (15) changes in the competitive environment among financial holding companies; (16) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiaries must comply, including those under the Dodd-Frank Act, and the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018; (17) the effect of changes in accounting policies and practices, as may be adopted by the re…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain statements in this filing and future filings by the Company with the SEC, in the Company’s press releases or other public or stockholder communications or in oral statements made with the approval of an authorized executive officer, contain forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of phrases such as “anticipate,” “believe,” “expect,” “forecasts,” “projects,” “will,” “can,” “would,” “should,” “could,” “may,” or other similar terms. There are a number of factors, many of which are beyond the Company’s control, that could cause actual results to differ materially from those contemplated by the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) local, regional, national and international economic conditions, including actual or potential stress in the banking industry, and the impact they may have on the Company and its customers, and the Company’s assessment of that impact; (2) changes in the level of nonperforming assets and charge-offs; (3) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (4) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board (“FRB”) and international trade disputes (including threatened or implemented tariffs imposed by the U.S. and threatened or implemented tariffs imposed by foreign countries in retaliation); (5) inflation, interest rate, securities market and monetary fluctuations; (6) political instability; (7) acts of war, including international military conflicts, or terrorism; (8) the timely development and acceptance of new products and services and the perceived overall value of these products and services by users; (9) changes in consumer spending, borrowing and saving habits; (10) changes in the financial performance and/or condition of the Company’s borrowers; (11) technological changes; (12) acquisition and integration of acquired businesses; (13) the possibility that NBT may be unable to achieve expected synergies and operating efficiencies in the Evans merger within the expected timeframes or at all or to successfully integrate Evans operations and those of NBT; (14) the ability to increase market share and control expenses; (15) changes in the competitive environment among financial holding companies; (16) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiaries must comply, including those under the Dodd-Frank Act, and the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018; (17) the effect of changes in accounting policies and practi…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. The Company follows financial accounting and reporting policies that are in accordance with GAAP. The more significant of these policies are summarized in Note 1 to the consolidated financial statements presented in our 2024 Annual Report on Form 10-K. Refer to Note 3 to the unaudited interim consolidated financial statements in this Quarterly Report on Form 10-Q for recently adopted accounting standards. The allowance for credit losses and unfunded commitments policies are deemed to meet the SEC’s definition of a critical accounting estimate.

Current wording

SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. The Company follows financial accounting and reporting policies that are in accordance with GAAP. Management has reviewed the application of these estimates with the Audit Committee of NBT's Board of Directors. The more significant of these policies are summarized in Note 1 to the consolidated financial statements presented in our 2024 Annual Report on Form 10-K. The allowance for credit losses and unfunded commitments policies are deemed to meet the SEC’s definition of a critical accounting estimate.

Previous wording

One of the most significant judgments involved in estimating the Company’s allowance for credit losses relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period. As of March 31, 2025, the quantitative model incorporated a baseline economic outlook along with an alternative downside scenario sourced from a reputable third-party to accommodate other potential economic conditions in the model. At March 31, 2025, the weightings were 75% and 25% for the baseline and downside economic forecasts, respectively. The baseline outlook reflected an economic environment where the unemployment rate increases from 4.1% to 4.4% during the forecast period. Northeast GDP’s annualized growth (on a quarterly basis) is expected to start the second quarter of 2025 at approximately 5% and decrease to 3.9% before increasing to 4.1% by the end of the forecast period. Key assumptions in the baseline economic outlook included the Federal Reserve cutting rates with two 25 basis point cuts at the September and December meetings, the economy remaining at full employment and continued tapering of the Federal Reserve balance sheet. The alternative downside scenario assumed deteriorated economic conditions from the baseline outlook. Under this scenario, national unemployment rises from 4.1% in the first quarter of 2025 to a peak of 7.6% in the second quarter of 2026. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of March 31, 2025. Additional qualitative adjustments were made for factors not incorporated in the forecasts or the model, such as loss rate expectations for certain loan pools and recent trends in asset value indices. Additional monitoring for industry concentrations, loan growth and policy exceptions was also conducted.

Current wording

One of the most significant judgments involved in estimating the Company’s allowance for credit losses relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period. As of June 30, 2025, the quantitative model incorporated a baseline economic outlook along with an alternative upside and two equally weighted downside scenarios, recessionary conditions and stagflation, sourced from a reputable third-party to accommodate other potential economic conditions in the model. At June 30, 2025, the weightings were 70%, 5% and 25% for the baseline, upside and downside economic forecasts, respectively. The baseline outlook reflected an economic environment where the Northeast unemployment rate increases from 4.3% to 4.8% during the forecast period. National GDP’s annualized growth (on a quarterly basis) is expected to start the third quarter of 2025 at approximately 0.6% and increase to 1.6% by the end of the forecast period. Key assumptions in the baseline economic outlook included the Federal Reserve cutting rates with two 25 basis point cuts at the September and December meetings and the economy remaining at full employment. The alternative upside scenario assumes improved economic conditions from the baseline outlook. Under this scenario, Northeast unemployment falls from 4.3% in the second quarter of 2025 to 3.7% in the fourth quarter of 2025 and eventually settles at 4.1% by the end of the forecast period. The alternative downside scenario with recessionary conditions assumes deteriorated economic conditions from the baseline outlook. Under this scenario, Northeast unemployment rises from 4.3% in the second quarter of 2025 to a peak of 7.7% in the third quarter of 2026. The alternative downside stagflation scenario assumes deteriorated economic conditions from the baseline outlook. Under this scenario, Northeast unemployment rises from 4.3% in the second quarter of 2025 to 5.8% by the end of the forecast period in the fourth quarter of 2026, with a peak Northeast unemployment rate of 8.1% in the third quarter of 2027. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of June 30, 2025. Additional qualitative adjustments were made for factors not incorporated in the forecasts or the model, such as loss rate expectations for certain loan pools, reversion adjustments for the stagflation scenario and recent trends in asset value indices. Additional monitoring for industry concentrations, loan growth and policy exceptions was also conducted.

Previous wording

To demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of March 31, 2025, the Company attributed the change in scenario weightings to the change in the allowance for credit losses, with a 10% decrease to the downside scenario and a 10% increase to the baseline scenario causing a 4% decrease in the overall estimated allowance for credit losses. To further demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of March 31, 2025, the Company increased the downside scenario to 100% which resulted in a 30% increase in the overall estimated allowance for credit losses.

Current wording

To demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of June 30, 2025, the Company changed the scenario weightings, with a 10% increase to the downside scenarios, equally weighted, and a 10% decrease to the baseline scenario causing a 4% increase in the overall estimated allowance for credit losses. If instead the upside scenario was increased 10% and the baseline scenario was decreased 10%, the overall estimated allowance for credit losses decreased 1%. To further demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of June 30, 2025, the Company increased the downside scenarios, equally weighted, to 100% which resulted in a 29% increase in the overall estimated allowance for credit losses.

Previous wording

The Company’s policies on the CECL methodology for allowance for credit losses are disclosed in Note 1 to the consolidated financial statements presented in our 2024 Annual Report on Form 10-K. All accounting policies are important and as such, the Company encourages the reader to review each of the policies included in Note 1 to the consolidated financial statements presented in our 2024 Annual Report on Form 10-K to obtain a better understanding of how the Company’s financial performance is reported. Refer to Note 3 to the unaudited interim consolidated financial statements in this Quarterly Report on Form 10-Q for recently adopted accounting standards.

Current wording

The Company’s policies on the CECL methodology for allowance for credit losses are disclosed in Note 1 to the consolidated financial statements presented in our 2024 Annual Report on Form 10-K. All accounting policies are important and as such, the Company encourages the reader to review each of the policies included in Note 1 to the consolidated financial statements presented in our 2024 Annual Report on Form 10-K to obtain a better understanding of how the Company’s financial performance is reported. The Company’s critical accounting policies are described in detail in Part II Item 7. in the 2024 Annual Report on Form 10-K and there have been no material changes in such policies since the date of that report. Refer to Note 3 to the unaudited interim consolidated financial statements in this Quarterly Report on Form 10-Q for recently adopted accounting standards.

Previous wording

The Company incurred acquisition expenses related to the Merger of $1.2 million for the three months ended March 31, 2025.

Current wording

The Company incurred acquisition expenses related to the merger of $17.2 million and $18.4 million for the three and six months ended June 30, 2025, respectively.

Previous wording

Net income for the three months ended March 31, 2025 was $36.7 million, up $0.7 million from the fourth quarter of 2024 and up $2.9 million from the first quarter of 2024. Diluted earnings per share were $0.77 for the three months ended March 31, 2025, up $0.01 from the fourth quarter of 2024 and up $0.06 from the first quarter of 2024.

Current wording

Net income for the three months ended June 30, 2025 was $22.5 million, down $14.2 million from the first quarter of 2025 and down $10.2 million from the second quarter of 2024. Diluted earnings per share were $0.44 for the three months ended June 30, 2025, down $0.33 from the first quarter of 2025 and down $0.25 from the second quarter of 2024. Net income for the six months ended June 30, 2025 was $59.3 million, or $1.21 per diluted common share, down $7.3 million from $66.5 million, or $1.40 per diluted common share for the six months ended June 30, 2024.

Previous wording

Operating net income(1), a non-GAAP measure, was $37.8 million, or $0.80 per diluted common share, for the three months ended March 31, 2025, compared to $0.77 per diluted common share for the fourth quarter of 2024 and $0.68 per diluted common share for the first quarter of 2024.

Current wording

Operating net income(1), a non-GAAP measure, was $44.9 million, or $0.88 per diluted common share, for the three months ended June 30, 2025, compared to $0.80 per diluted common share for the first quarter of 2025 and $0.69 per diluted common share for the second quarter of 2024. Operating net income(1), for the six months ended June 30, 2025 was $83.4 million, or $1.70 per diluted common share, up $18.5 million from $64.9 million, or $1.37 per diluted common share for the six months ended June 30, 2024.

Previous wording

The following information should be considered in connection with the Company’s results for the three months ended March 31, 2025:

Current wording

The following information should be considered in connection with the Company’s results for the three and six months ended June 30, 2025:

Previous wording

Net interest income was $107.2 million for the first quarter of 2025, up $12.0 million, or 12.7%, from the first quarter of 2024. FTE NIM was 3.44% for the three months ended March 31, 2025, an increase of 30 bps from the first quarter of 2024. Interest income increased $7.4 million, or 5.0%, as the yield on average interest-earning assets increased 11 bps from the same period in 2024 to 4.95%, while average interest-earning assets increased $427.5 million, or 3.5%, from the first quarter of 2024, primarily due to organic loan growth and an increase in securities. Interest expense decreased $4.6 million, or 8.9%, as the cost of interest-bearing liabilities decreased 29 bps to 2.23% for the three months ended March 31, 2025, primarily due to a 21 bps decrease in interest-bearing deposit costs, a $511.7 million increase in interest-bearing deposits and lower average balances of short-term borrowings. Included in net interest income was $2.2 million of acquisition-related net accretion for the three months ended March 31, 2025 and $2.5 million of acquisition-related net accretion for the three months ended March 31, 2024.

Current wording

Net interest income was $124.2 million for the second quarter of 2025, up $27.0 million, or 27.8%, from the second quarter of 2024. The FTE NIM was 3.59% for the three months ended June 30, 2025, an increase of 41 bps from the second quarter of 2024. Interest income increased $26.8 million, or 17.8%, as the yield on average interest-earning assets increased 20 bps from the same period in 2024 to 5.12%, while average interest-earning assets increased $1.59 billion, or 12.9%, from the second quarter of 2024 primarily due to the addition of $1.95 billion in interest-earning assets in May 2025 from the Evans acquisition and organic earning asset growth. Interest expense decreased $0.2 million, or 0.4%, as the cost of interest-bearing liabilities decreased 34 bps to 2.24% for the quarter ended June 30, 2025, primarily due to a 29 bps decrease in interest-bearing deposit costs and lower average balances of short-term borrowings. The decrease in interest expense was partially offset by the addition of $1.62 billion in interest-bearing liabilities, primarily due to the Evans acquisition and organic growth. Included in net interest income was $5.0 million of acquisition-related net accretion for the three months ended June 30, 2025 compared to $2.6 million of acquisition-related net accretion for the three months ended June 30, 2024.

Previous wording

The following table includes the condensed consolidated average balance sheet, an analysis of interest income/expense and average yield/rate for each major category of earning assets and interest-bearing liabilities on a taxable equivalent basis.

Current wording

The following tables include the condensed consolidated average balance sheet, an analysis of interest income/expense and average yield/rate for each major category of earning assets and interest-bearing liabilities on a taxable equivalent basis.

Previous wording

Noninterest income for the three months ended March 31, 2025 was $47.5 million, up $5.0 million, or 11.8%, from the prior quarter and up $2.1 million, or 4.5%, from the first quarter of 2024. Excluding net securities gains (losses), noninterest income for the three months ended March 31, 2025 was $47.6 million, up $5.4 million, or 12.7%, from the prior quarter and up $4.3 million, or 10.1%, from the first quarter of 2024. The increase from the prior quarter was primarily driven by an increase in retirement plan administration fees, insurance services and bank owned life insurance income. The increase in retirement plan administration fees from the prior quarter was primarily due to higher seasonal activity-based fees in the first quarter, organic growth and the additional revenue from the acquisition of a small third party administrator (“TPA”) in the fourth quarter of 2024. Insurance services increased from the prior quarter due to organic growth, higher levels of policy renewals and first quarter seasonality. Bank owned life insurance income increased from the prior quarter due to a $1.3 million gain recognized from a claim. The increase from the first quarter of 2024 was driven by an increase in retirement plan administration fees, wealth management fees and bank owned life insurance income. The increase in retirement plan administration fees from the first quarter of 2024 was driven by the additional revenues from new customer plans, the TPA acquisition and higher market values of assets under administration. Wealth management fees increased from the first quarter of 2024 driven by performance and growth in new customer accounts. Bank owned life insurance income increased from the first quarter of 2024 due to a $1.3 million gain recognized from a claim.

Current wording

Noninterest income for the three months ended June 30, 2025 was $46.9 million, down $0.5 million, or 1.1%, from the prior quarter and up $3.7 million, or 8.6%, from the second quarter of 2024. Excluding net securities gains (losses), noninterest income for the three months ended June 30, 2025 was $46.8 million, down $0.7 million, or 1.5%, from the prior quarter and up $3.5 million, or 8.1%, from the second quarter of 2024. The decrease from the prior quarter was primarily driven by the decrease in bank owned life insurance income and insurance services income, partially offset by increases in card services income. Bank owned life insurance income decreased from the prior quarter due to a $1.3 million gain recognized in the first quarter of 2025. Insurance services decreased from the prior quarter due to the seasonally higher income in the first quarter. Card services income increased from the prior quarter driven by the Evans acquisition and increased volumes. The increase from the second quarter of 2024 was driven by an increase in card services income, retirement plan administration fees and wealth management fees. Card services income increased from the second quarter of 2024, driven by the Evans acquisition and increased volumes. Retirement plan administration fees increased from the second quarter of 2024, driven by higher market values of assets under administration and the acquisition of a small third-party administrator ("TPA") business in the fourth quarter of 2024. Wealth management fees increased from the second quarter of 2024, driven by market performance and growth in new customer accounts.

Previous wording

Noninterest expense for the three months ended March 31, 2025 was $99.9 million, down $0.9 million, or 0.9%, from the prior quarter and up $8.1 million, or 8.9%, from the first quarter of 2024. Excluding acquisition expenses, noninterest expense for the three months ended March 31, 2025 was $98.7 million, down $1.1 million, or 1.1%, from the prior quarter and up $6.9 million, or 7.5%, from the first quarter of 2024. The decrease from the prior quarter was driven by lower salaries and employee benefits due to lower medical and other benefit costs, lower levels of incentive compensation and lower salaries due to two fewer payroll days in the quarter, partially offset by seasonally higher payroll taxes and stock-based compensation expenses. In addition, other expenses decreased $1.6 million due primarily to timing of expenses and Company initiatives in the fourth quarter of 2024. These costs were partially offset by the increase in occupancy costs which was driven by seasonal maintenance and utilities costs. The increase from the first quarter of 2024 was driven by higher salaries and employee benefits driven by merit pay increases which were effective annually in March, an increase in employees supporting growth in our markets and higher medical and other benefit costs. In addition, occupancy costs increased $0.9 million primarily due to higher seasonal maintenance and utilities given the harsher winter and higher facilities costs related to new banking locations.

Current wording

Noninterest expense for the three months ended June 30, 2025 was $122.6 million, up $22.7 million, or 22.7%, from the prior quarter and up $33.0 million, or 36.9%, from the second quarter of 2024. Excluding acquisition expenses, noninterest expense for the three months ended June 30, 2025 was $105.4 million, up $6.8 million, or 6.8%, from the prior quarter and up $15.8 million, or 17.7%, from the second quarter of 2024. The increase from the prior quarter was primarily driven by the Evans acquisition. Salaries and benefits increased from the prior quarter driven by the Evans acquisition, a full quarter of merit pay increases and higher medical costs which were partially offset by lower payroll taxes and stock-based compensation expenses which are seasonally higher in the first quarter. Technology and data services increased over the prior quarter due to the Evans acquisition, the timing of planned initiatives and continued investment in digital platform solutions. The increase in amortization of intangible assets was due to the amortization of the core deposit intangible asset related to the Evans acquisition. The increase from the second quarter of 2024 was driven by higher salaries and employee benefits due to the impact of the Evans acquisition, merit pay increases, higher medical and other benefit costs. Technology and data services increased from the second quarter of 2024 primarily due to the Evans acquisition, timing of planned initiatives and continued investment in digital platform solutions. In addition, the increase in occupancy expense was impacted by additional expenses from the Evans acquisition, higher utilities and higher facilities costs related to new banking locations. Amortization of intangible assets increased due to the Company recording a core deposit intangible of $33.2 million related to the Evans acquisition.

Previous wording

Income tax expense for the three months ended March 31, 2025 was $10.5 million, up $0.9 million from the prior quarter and up $1.1 million from the first quarter of 2024. The effective tax rate was 22.2% for the first quarter of 2025 compared to 20.9% for the prior quarter and 21.7% for the first quarter of 2024. The increase in the effective tax rate from the prior quarter and the first quarter of 2024 was due to a lower level of tax-exempt income as a percentage of total taxable income.

Current wording

Income tax expense for the three months ended June 30, 2025 was $8.2 million, down $2.3 million from the prior quarter and down $1.0 million from the second quarter of 2024. The effective tax rate was 26.7% for the second quarter of 2025 compared to 22.2% for the prior quarter and 22.0% for the second quarter of 2024. The increase in the effective tax rate from the prior quarter and the second quarter of 2024 was primarily due to the estimated impact of acquisition expenses related to the Evans acquisition and a lower level of tax-exempt income as a percentage of total taxable income.

Previous wording

Total securities increased $123.1 million, or 5.0%, from December 31, 2024 to March 31, 2025. The securities portfolio represented 18.6% of total assets as of March 31, 2025 as compared to 17.8% of total assets as of December 31, 2024.

Current wording

Total securities increased $125.8 million, or 5.1%, from December 31, 2024 to June 30, 2025. The securities portfolio represented 16.1% of total assets as of June 30, 2025 as compared to 17.8% of total assets as of December 31, 2024.

Previous wording

Total loans were $9.98 billion and $9.97 billion at March 31, 2025 and December 31, 2024, respectively. Excluding the other consumer and residential solar portfolios that are in a planned run-off status, period end loans increased $40.5 million, or 1.8% annualized. C&I loans increased $10.5 million to $1.44 billion; CRE loans increased $13.4 million to $3.89 billion; and total consumer loans decreased $13.6 million to $4.65 billion. Total loans represent approximately 72.0% of assets as of March 31, 2025, as compared to 72.3% as of December 31, 2024.

Current wording

Total loans were $11.62 billion and $9.97 billion at June 30, 2025 and December 31, 2024, respectively. Period end loans increased by $1.65 billion from December 31, 2024 to June 30, 2025, which included $1.67 billion of loans acquired from Evans. Excluding the other consumer and residential solar portfolios, which are in a planned run-off status and the loans acquired from Evans, period end loans increased $38.3 million from December 31, 2024 and increased $221.0 million from June 30, 2024. C&I loans increased $265.9 million to $1.69 billion; CRE loans increased $923.8 million to $4.80 billion; and total consumer loans increased $465.1 million to $5.13 billion. Total loans represent approximately 72.6% of assets as of June 30, 2025, as compared to 72.3% as of December 31, 2024.

Previous wording

Within the CRE portfolio, approximately 81% comprises Non-Owner Occupied CRE, with the remaining 19% being Owner-Occupied CRE. Non-Owner Occupied CRE includes diverse sectors across the Company’s markets such as residential rental properties (43%) and office spaces (17%), along with retail, manufacturing, mixed use, hotels and others. Notably, office CRE loans account for 5% of the total outstanding loans, predominantly serving suburban medical and professional tenants across suburban and small urban markets. These loans carry an average size of $1.9 million, with 9% maturing over the next two years. As of March 31, 2025 and December 31, 2024, the total CRE construction and development loans amounted to $316.4 million and $314.8 million, respectively.

Current wording

Within the CRE portfolio, approximately 79% are comprised of Non-Owner Occupied CRE, with the remaining 21% being Owner-Occupied CRE. Non-Owner Occupied CRE includes diverse sectors across the Company’s markets such as residential rental properties (45%), and office spaces (12%), along with retail, manufacturing, mixed use, hotels and others. Notably, office CRE loans account for 4% of the total outstanding loans, predominantly serving suburban medical and professional tenants across suburban and small urban markets. These loans carry an average size of $1.7 million, with 12% maturing over the next two years. As of June 30, 2025 and December 31, 2024, the total CRE construction and development loans amounted to $423.3 million and $314.8 million, respectively.

Previous wording

During the quarter, the Company performed an annual update to its econometric, PD/LGD models. Segment specific, multi-variate regression model inputs and assumptions were updated and recent period observed losses and behavior were incorporated into the models (“model refreshment”). The incorporation of recent observations did not have a material impact on most loan class segments except for the Auto class segment which resulted in an improvement in PD/LGD outcomes. The total allowance decreased by approximately 3% as of March 31, 2025 due to the model refreshment.

Current wording

During the first quarter of 2025, the Company performed an annual update to its econometric, PD/LGD models. Segment specific, multi-variate regression model inputs and assumptions were updated and recent period observed losses and behavior were incorporated into the models (“model refreshment”). The incorporation of recent observations did not have a material impact on most loan class segments except for the Auto class segment which resulted in an improvement in PD/LGD outcomes. The total allowance decreased by approximately 3% as of March 31, 2025 due to the model refreshment. During the second quarter of 2025, the Company included an additional downside scenario with stagflation conditions, which is characterized as an economic environment where inflation rises alongside unemployment. Stagflation was identified as an emerging risk as tariff policies begin to impact the economy.

Previous wording

The allowance for credit losses totaled $117.0 million at March 31, 2025, compared to $116.0 million at December 31, 2024. The allowance for credit losses as a percentage of loans was 1.17% at March 31, 2025, compared to 1.16% at December 31, 2024. The allowance for credit losses as of March 31, 2025 increased compared to the allowance estimates as of December 31, 2024 primarily due to deterioration in the economic forecast including the change in the forecast scenario and the change in forecast scenario weightings from 80% baseline and 20% downside to 75% baseline and 25% downside. The increase to the allowance for credit losses were partially offset by model refreshment and the shift in loan composition driven by other consumer and residential solar portfolios that are in a planned run-off status.

Current wording

The allowance for credit losses totaled $140.2 million at June 30, 2025, as compared to $117.0 million at March 31, 2025 and $120.5 million at June 30, 2024. The allowance for credit losses as a percentage of loans was 1.21% at June 30, 2025, compared to 1.17% at March 31, 2025 and 1.22% at June 30, 2024. The increase in the allowance for credit losses from March 31, 2025 to June 30, 2025 was primarily due to the recording of $20.7 million of allowance for acquired Evans loans as of the acquisition date, which included both the $13.0 million of non-PCD allowance recognized through the provision for loan losses and the $7.7 million of PCD allowance reclassified from loans. In addition, the allowance for credit losses increased due to a modest deterioration in the economic forecast. The increase in the allowance for credit losses from June 30, 2024 to June 30, 2025 was primarily due to the $20.7 million of allowance for acquired Evans loans and a deterioration in the economic forecast, which was partially offset by model refreshment and the shift in loan composition driven by other consumer and residential solar portfolios that are in a planned run-off status.

Previous wording

The allowance for credit losses was 245.33% of nonperforming loans at March 31, 2025, compared to 224.73% at December 31, 2024. The allowance for credit losses was 260.99% of nonaccrual loans at March 31, 2025, compared to 253.17% of nonaccrual loans at December 31, 2024. The increase in the coverage of the allowance to nonperforming and nonaccrual loans from December 31, 2024 to March 31, 2025 largely relates to the increase in allowance primarily due to deterioration in economic conditions during the quarter and the $2.1 million charge-off on a nonperforming relationship that is individually evaluated for purposes of the allowance for credit losses.

Current wording

The allowance for credit losses was 302.21% of nonperforming loans at June 30, 2025, compared to 245.33% at March 31, 2025 and 316.37% at June 30, 2024. The increase in the coverage of the allowance to nonperforming and nonaccrual loans from March 31, 2025 to June 30, 2025 was due to the increase in the allowance relating to acquired Evans loans. The decrease in the coverage of the allowance to nonperforming loans from June 30, 2024 to June 30, 2025 was due to an increase in nonaccrual loans which was partially offset by the increase in the allowance relating to acquired Evans loans.

Previous wording

The provision for loan losses was $7.6 million for the three months ended March 31, 2025, compared to $2.2 million in the prior quarter and $5.6 million for the same period in the prior year. Provision expense increased from the prior quarter due to an increase in net charge-offs and an increase in the March 31, 2025 allowance due primarily to a deterioration in economic forecasts. The increase in provision expense from March 31, 2024, was driven largely due to higher net charge-offs and a deterioration in economic forecasts. Net charge-offs totaled $6.6 million during the three months ended March 31, 2025, compared to net charge-offs of $5.7 million during the fourth quarter of 2024 and $4.7 in the first quarter of 2024. Net charge-offs to average loans were 27 bps for the three months ended March 31, 2025, compared to 23 bps for the fourth quarter of 2024 and 19 bps for the three months ended March 31, 2024.

Current wording

The provision for loan losses was $17.8 million for the three months ended June 30, 2025, compared to $7.6 million in the prior quarter and $8.9 million for the same period in the prior year. Provision expense increased from the prior quarter and the second quarter of 2024 primarily due to $13.0 million of acquisition-related provision for loan losses for non-PCD loans acquired from Evans and a deterioration in economic forecasts, which was partially offset by a decrease in net charge-offs in the current quarter. Net charge-offs totaled $2.4 million during the three months ended June 30, 2025, compared to net charge-offs of $6.6 million during the first quarter of 2025 and $3.7 million in the second quarter of 2024. Net charge-offs to average loans were 9 bps for the three months ended June 30, 2025, compared to 27 bps for the first quarter of 2025 and 15 bps for the three months ended June 30, 2024.

Previous wording

As of March 31, 2025, the unfunded commitment reserve totaled $4.5 million, compared to $4.4 million as of December 31, 2024.

Current wording

As of June 30, 2025, the unfunded commitment reserve totaled $6.2 million, compared to $4.5 million as of March 31, 2025 and $4.3 million as of June 30, 2024. The increase in unfunded reserve was caused by increases in pipeline exposure and $0.5 million of acquisition-related provision for unfunded commitments established for unfunded commitments acquired in the Evans acquisition.

Previous wording

Nonperforming assets consist of nonaccrual loans, loans over 90 days past due and still accruing, troubled loans modifications, OREO and nonperforming securities. Loans are generally placed on nonaccrual when principal or interest payments become 90 days past due, unless the loan is well secured and in the process of collection. Loans may also be placed on nonaccrual when circumstances indicate that the borrower may be unable to meet the contractual principal or interest payments. The threshold for evaluating classified, commercial and CRE loans risk graded substandard or doubtful, and nonperforming loans individually evaluated for credit loss is $1.0 million. OREO represents property acquired through foreclosure and is valued at the lower of the carrying amount or fair value, less any estimated disposal costs.

Current wording

Nonperforming assets consist of nonaccrual loans, loans over 90 days past due and still accruing, troubled loans modifications, OREO and nonperforming securities. Loans are generally placed on nonaccrual when principal or interest payments become 90 days past due, unless the loan is well secured and in the process of collection. Loans may also be placed on nonaccrual when circumstances indicate that the borrower may be unable to meet the contractual principal or interest payments. The threshold for evaluating classified, C&I and CRE loans risk graded substandard or doubtful, and nonperforming loans specifically evaluated for individual credit loss is $1.0 million. OREO represents property acquired through foreclosure and is valued at the lower of the carrying amount or fair value, less any estimated disposal costs.

Previous wording

Total nonperforming assets were $48.0 million at March 31, 2025, compared to $51.8 million at December 31, 2024. Nonperforming loans at March 31, 2025 were $47.7 million or 0.48% of total loans, compared with $51.6 million or 0.52% of total loans at December 31, 2024. The decrease in nonperforming assets from December 31, 2024 to March 31, 2025 was attributable to the previously mentioned $2.1 million charge-off in the first quarter of 2025 on an individually evaluated CRE relationship in which NBT is a participant. This relationship is being actively managed and its current carrying value is supported by recent appraised values. Total nonaccrual loans were $44.8 million or 0.45% of total loans at March 31, 2025, compared to $45.8 million or 0.46% of total loans at December 31, 2024. Past due loans as a percentage of total loans was 0.32% at March 31, 2025, down from 0.34% at December 31, 2024.

Current wording

Total nonperforming assets were $46.7 million at June 30, 2025, compared to $51.8 million at December 31, 2024 and $38.2 million at June 30, 2024. Nonperforming loans at June 30, 2025 were $46.4 million or 0.40% of total loans, compared with $51.6 million or 0.52% of total loans at December 31, 2024 and $38.1 million or 0.39% of total loans at June 30, 2024. The increase in nonperforming assets from the same period in the prior year was attributable to the addition of nonperforming loans acquired from the Evans acquisition, partially offset by payoffs of nonperforming commercial real estate loans. The decrease from December 31, 2024 is attributable to the payoff of two nonaccrual loans in the second quarter of 2025, partly offset by the addition of nonperforming loans from the Evans acquisition. Total nonaccrual loans were $43.2 million or 0.37% of total loans at June 30, 2025, compared to $45.8 million or 0.46% of total loans at December 31, 2024 and $34.8 million or 0.35% of total loans at June 30, 2024. Past due loans as a percentage of total loans was 0.38% at June 30, 2025, up from 0.34% at December 31, 2024 and up from 0.30% at June 30, 2024.

Previous wording

In addition to nonperforming loans discussed above, the Company has also identified approximately $125.2 million in potential problem loans at March 31, 2025 as compared to $116.1 million at December 31, 2024. Potential problem loans are loans that are currently performing, with a possibility of loss if weaknesses are not corrected. Such loans may need to be disclosed as nonperforming at some time in the future. Potential problem loans are classified by the Company’s loan rating system as “substandard.” Potential problem loans have increased to more normalized levels and the increase primarily relates to a few CRE relationships reflecting changing conditions in certain CRE markets including construction delays, rising costs and delays in leasing up spaces. The increase in potential problem loans from December 31, 2024, is primarily due to the net migration of $8.8 million in commercial loan balances to substandard. Management cannot predict the extent to which economic conditions may worsen or other factors, which may impact borrowers and the potential problem loans. Accordingly, there can be no assurance that other loans will not become over 90 days past due, be placed on nonaccrual, become troubled loans modifications or require increased allowance coverage and provision for loan losses. To mitigate this risk the Company maintains a diversified loan portfolio, has no significant concentration in any particular industry and originates loans primarily within its footprint.

Current wording

In addition to nonperforming loans discussed above, the Company has also identified approximately $195.3 million in potential problem loans at June 30, 2025 as compared to $116.1 million at December 31, 2024 and $125.2 million at June 30, 2024. Potential problem loans are loans that are currently performing, with a possibility of loss if weaknesses are not corrected. Such loans may need to be disclosed as nonperforming at some time in the future. Potential problem loans are classified by the Company’s loan rating system as “substandard.” Potential problem loans have increased to more normalized levels and the increase primarily relates to a few CRE relationships reflecting changing conditions in certain CRE markets including construction delays, rising costs and delays in leasing up spaces. The increase in potential problem loans at June 30, 2025 compared to December 31, 2024 and June 30, 2024 is primarily due to the addition of $60.5 million in acquired commercial loans from Evans during the second quarter of 2025 and additional migration of commercial loan balances to substandard, the majority of which are adequately secured by the underlying real estate collateral. Most of the increase involves commercial real estate and reflects changing conditions in commercial markets including delays in construction, rising costs and delays in leasing spaces. Management cannot predict the extent to which economic conditions may worsen or other factors, which may impact borrowers and the potential problem loans. Accordingly, there can be no assurance that other loans will not become over 90 days past due, be placed on nonaccrual, become troubled loans modifications or require increased allowance coverage and provision for loan losses. To mitigate this risk the Company maintains a diversified loan portfolio, has no significant concentration in any particular industry and originates loans primarily within its footprint.

Previous wording

Total deposits were $11.71 billion at March 31, 2025, up $161.8 million, or 1.4%, from December 31, 2024. As of March 31, 2025 there were $294.7 million of brokered time deposits, down from $295.8 million as of December 31, 2024. The Company continues to experience some incremental migration from noninterest bearing and low interest checking and savings accounts into higher cost money market and time deposit instruments. The increase in deposits was primarily due to the inflow of seasonal municipal deposits during the first quarter of 2025. The Company’s composition of total deposits is diverse and granular with over 561,000 accounts with an average per account balance of $20,834 as of March 31, 2025. As of March 31, 2025 and December 31, 2024 the estimated amounts of uninsured deposits based on the same methodologies and assumptions used for the bank regulatory reporting were $4.85 billion and $4.73 billion, respectively. Total average deposits increased $540.1 million, or 4.9%, from the same period last year.

Current wording

Total deposits were $13.52 billion at June 30, 2025, up $1.97 billion, or 17.0%, from December 31, 2024, which included $1.86 billion in deposits acquired from Evans. Excluding deposits acquired from Evans, deposits increased $104.4 million from December 31, 2024. As of June 30, 2025, there were $219.7 million of brokered time deposits, down from $295.8 million as of December 31, 2024. The Deposit mix characteristics also improved with an increase in demand deposits, interest-bearing checking and money market accounts offset by a decrease in time deposits. The Company’s composition of total deposits is diverse and granular with nearly 615,000 accounts with an average per account balance of $21,979 as of June 30, 2025. As of June 30, 2025 and December 31, 2024 the estimated amounts of uninsured deposits based on the methodologies and assumptions used for the bank regulatory reporting were $5.80 billion and $4.73 billion, respectively. Total average deposits increased $1.09 billion, or 9.8%, from the same period last year due to the $1.86 billion in deposits acquired from Evans in the second quarter of 2025.

Previous wording

The Company’s borrowed funds consist of short-term borrowings and long-term debt. Short-term borrowings totaled $85.6 million at March 31, 2025 compared to $162.9 million at December 31, 2024. Long-term debt was $4.6 million at March 31, 2025, compared to $29.6 million at December 31, 2024. The decrease in long-term debt was due to a maturity of a $25.0 million borrowing that matured in the first quarter of 2025.

Current wording

The Company’s borrowed funds consist of short-term borrowings and long-term debt. Short-term borrowings totaled $113.0 million at June 30, 2025 compared to $162.9 million at December 31, 2024. Long-term debt was $44.8 million at June 30, 2025 compared to $29.6 million at December 31, 2024. The increase in long-term debt was due to a $40.0 million borrowing acquired in the Evans acquisition, partially offset by the maturity of a $25.0 million borrowing that matured in the first quarter of 2025. As of the acquisition date, the fair value discount was $0.3 million for the acquired long-term debt which is being accreted into interest expense over the life of the debt instrument.

Previous wording

On June 23, 2020, the Company issued $100.0 million of 5.00% fixed-to-floating rate subordinated notes due 2030. The subordinated notes, which qualify as Tier 2 capital, bear interest at an annual rate of 5.00%, payable semi-annually in arrears commencing on January 1, 2021, and a floating rate of interest equivalent to the three-month SOFR plus a spread of 4.85%, payable quarterly in arrears commencing on October 1, 2025. The subordinated debt issuance cost of $2.2 million is being amortized on a straight-line basis into interest expense over five years. The Company repurchased $2.0 million of the subordinated notes in 2022 at a discount of $0.1 million.

Current wording

On June 23, 2020, the Company issued $100.0 million of 5.00% fixed-to-floating rate subordinated notes due 2030. The subordinated notes, which qualify as Tier 2 capital, bear interest at an annual rate of 5.00%, payable semi-annually in arrears commencing on January 1, 2021, and a floating rate of interest equivalent to the three-month SOFR plus a spread of 4.85%, payable quarterly in arrears commencing on October 1, 2025. The subordinated debt issuance cost of $2.2 million is being amortized on a straight-line basis into interest expense over five years. The Company repurchased $2.0 million of the subordinated notes in 2022 at a discount of $0.1 million. Subsequent to quarter end, on July 1, 2025, the Company redeemed these subordinated notes in full using existing liquidity sources.

Previous wording

Subordinated notes assumed in connection with the Salisbury acquisition included $25.0 million of 3.50% fixed-to-floating rate subordinated notes due 2031. The subordinated notes, which qualify as Tier 2 capital, bear interest at an annual rate of 3.50%, payable quarterly in arrears commencing on June 30, 2021, and a floating rate of interest equivalent to the three-month SOFR plus a spread of 2.80%, payable quarterly in arrears commencing on June 30, 2026. As of the acquisition date, the fair value discount was $3.0 million, which is being amortized into interest expense over the expected call or maturity date.

Current wording

Subordinated notes assumed in connection with the Salisbury acquisition included $25.0 million of 3.50% fixed-to-floating rate subordinated notes due 2031. The subordinated notes, which qualify as Tier 2 capital, bear interest at an annual rate of 3.50%, payable quarterly in arrears commencing on June 30, 2021, and a floating rate of interest equivalent to the three-month SOFR plus a spread of 2.80%, payable quarterly in arrears commencing on June 30, 2026. As of the acquisition date, the fair value discount was $3.0 million, which will be amortized into interest expense over the expected call or maturity date.

Previous wording

As of March 31, 2025 and December 31, 2024 the subordinated debt net of unamortized issuance costs and fair value discount was $121.6 million and $121.2 million, respectively.

Current wording

As of June 30, 2025 and December 31, 2024 the subordinated debt net of unamortized issuance costs and fair value discount was $141.9 million and $121.2 million, respectively.

Previous wording

Stockholders’ equity of $1.57 billion represented 11.29% of total assets at March 31, 2025 compared with $1.53 billion, or 11.07% of total assets, as of December 31, 2024. Stockholders’ equity increased $39.6 million from December 31, 2024 driven by net income of $36.7 million for the three months ended March 31, 2025 and a $20.3 million decrease in accumulated other comprehensive loss, partially offset by dividends declared of $16.1 million.

Current wording

Stockholders’ equity of $1.81 billion represented 11.27% of total assets at June 30, 2025 compared with $1.53 billion, or 11.07% of total assets, as of December 31, 2024. Stockholders’ equity increased $279.0 million from December 31, 2024 driven by the Evans acquisition adding $221.8 million of capital, net income generation of $59.3 million for the six months ended June 30, 2025 and a decrease of $32.6 million in accumulated other comprehensive loss due primarily to the change in the fair value of securities available for sale, partially offset by dividends declared of $33.9 million.

Previous wording

The Company did not purchase shares of its common stock during the three months ended March 31, 2025. Under its share repurchase program, the Company may repurchase shares of its common stock from time to time to mitigate the potential dilutive effects of stock-based incentive plans and other potential uses of common stock for corporate purposes. As of March 31, 2025, there were 1,992,400 shares available for repurchase under this program authorized on December 18, 2023, which is set to expire on December 31, 2025.

Current wording

The Company did not purchase shares of its common stock during the three and six months ended June 30, 2025. Under its share repurchase program, the Company may repurchase shares of its common stock from time to time to mitigate the potential dilutive effects of stock-based incentive plans and other potential uses of common stock for corporate purposes. As of June 30, 2025, there were 1,992,400 shares available for repurchase under this plan authorized on December 18, 2023, which is set to expire on December 31, 2025.

Previous wording

The Company’s Interest Rate Sensitivity has remained in a near neutral position. In the declining rate scenarios, net interest income is projected to modestly decrease when compared to the forecasted net interest income in the flat rate scenario through the simulation period. The decrease in net interest income is a result of earning assets repricing and rolling over at lower yields at a faster pace than interest-bearing liabilities decline and/or reach their floors. In the rising rate scenarios, net interest income is near neutral, impacted by slowing prepayments speeds and increased deposit reactivity; the magnitude of potential impact on earnings may be affected by the ability to lag deposit repricing on NOW, savings, MMDA and time accounts. Net interest income for the next twelve months in the +300/+200/+100/-100/-200/-300 bps scenarios, as described above, is within the internal policy risk limits of not more than a 5.0% reduction in net interest income in the +100/-100 bps scenarios, of not more than a 7.5% reduction in net interest income in the +200/-200 bps scenarios and of not more than a 12.0% reduction in net interest income in the +300/-300 bps scenarios. The following table summarizes the percentage change in net interest income in the rising and declining rate scenarios over a 12-month period from the forecasted net interest income in the flat rate scenario using the March 31, 2025 balance sheet position:

Current wording

The Company’s Interest Rate Sensitivity has remained in a near neutral position. In the declining rate scenarios, net interest income is projected to modestly decrease when compared to the forecasted net interest income in the flat rate scenario through the simulation period. The decrease in net interest income is a result of earning assets repricing and rolling over at lower yields at a faster pace than interest-bearing liabilities decline and/or reach their floors. Conversely in the rising rate scenarios, net interest income increases modestly, impacted by slowing prepayments speeds and increased deposit reactivity; the magnitude of potential impact on earnings may be affected by the ability to lag deposit repricing on interest-bearing checking, savings, MMDA and time accounts. Net interest income for the next twelve months in the +300/+200/+100/-100/-200/-300 bps scenarios, as described above, is within the internal policy risk limits of not more than a 5.0% reduction in net interest income in the +100/-100 bps scenarios, of not more than a 7.5% reduction in net interest income in the +200/-200 bps scenarios and of not more than a 12.0% reduction in net interest income in the +300/-300 bps scenarios. The following table summarizes the percentage change in net interest income in the rising and declining rate scenarios over a 12-month period from the forecasted net interest income in the flat rate scenario using the June 30, 2025 balance sheet position:

Previous wording

The primary liquidity measurement the Company utilizes is called “Basic Surplus,” which captures the adequacy of its access to reliable sources of cash relative to the stability of its funding mix of average liabilities. This approach recognizes the importance of balancing levels of cash flow liquidity from short and long-term securities with the availability of dependable borrowing sources, which can be accessed when necessary. At March 31, 2025, the Company’s Basic Surplus measurement was 16.9% of total assets, or $2.34 billion, as compared to the December 31, 2024 Basic Surplus of 17.0%, or $2.34 billion, and was above the Company’s minimum of 5% (calculated at $693.2 million and $689.3 million of period end total assets as of March 31, 2025 and December 31, 2024, respectively) set forth in its liquidity policies.

Current wording

The primary liquidity measurement the Company utilizes is called “Basic Surplus,” which captures the adequacy of its access to reliable sources of cash relative to the stability of its funding mix of average liabilities. This approach recognizes the importance of balancing levels of cash flow liquidity from short and long-term securities with the availability of dependable borrowing sources, which can be accessed when necessary. At June 30, 2025, the Company’s Basic Surplus measurement was 16.4% of total assets, or $2.63 billion, as compared to the December 31, 2024 Basic Surplus of 17.0%, or $2.34 billion, and was above the Company’s minimum of 5% (calculated at $800.7 million and $689.3 million of period end total assets as June 30, 2025 and December 31, 2024, respectively) set forth in its liquidity policies.

Previous wording

At March 31, 2025 and December 31, 2024, FHLB advances outstanding totaled $4.6 million and $45.6 million, respectively. At March 31, 2025 and December 31, 2024, the Bank had $204.0 million and $199.0 million, respectively, of collateral encumbered by municipal letters of credit. The Bank is a member of the FHLB system and had additional borrowing capacity from the FHLB of approximately $1.70 billion at March 31, 2025 and $1.71 billion at December 31, 2024. In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $1.01 billion and $957.3 million at March 31, 2025 and December 31, 2024, respectively, or used to collateralize other borrowings, such as repurchase agreements. The Company also has the ability to issue brokered time deposits and to borrow against established borrowing facilities with other banks (federal funds), which could provide additional liquidity of $2.02 billion at March 31, 2025 and $2.01 billion at December 31, 2024. In addition, the Bank has a “Borrower-in-Custody” program with the FRB with the addition of the ability to pledge automobile and residential solar loans as collateral. At March 31, 2025 and December 31, 2024, the Bank had the capacity to borrow $1.16 billion and $1.13 billion, respectively, from this program. The Company’s internal policies authorize borrowing up to 25% of assets. Under this policy, remaining available borrowing capacity totaled $3.44 billion at March 31, 2025 and $3.38 billion at December 31, 2024.

Current wording

At June 30, 2025 and December 31, 2024, FHLB advances outstanding totaled $44.6 million and $45.6 million, respectively. At June 30, 2025 and December 31, 2024, the Bank had $388.8 million and $199.0 million, respectively, of collateral encumbered by municipal letters of credit. The Bank is a member of the FHLB system and had additional borrowing capacity from the FHLB of approximately $1.83 billion at June 30, 2025 and $1.71 billion at December 31, 2024. In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $1.00 billion and $957.3 million at June 30, 2025 and December 31, 2024, respectively, or used to collateralize other borrowings, such as repurchase agreements. The Company also has the ability to issue brokered time deposits and to borrow against established borrowing facilities with other banks (federal funds), which could provide additional liquidity of $2.42 billion at June 30, 2025 and $2.01 billion at December 31, 2024. In addition, the Bank has a “Borrower-in-Custody” program with the FRB with the addition of the ability to pledge automobile and residential solar loans as collateral. At June 30, 2025 and December 31, 2024, the Bank had the capacity to borrow $1.17 billion and $1.13 billion, respectively, from this program. The Company’s internal policy authorizes borrowing up to 25% of assets. Under this policy, remaining available borrowing capacity totaled $3.94 billion at June 30, 2025 and $3.38 billion at December 31, 2024.

Previous wording

Certain restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends. The approval of the OCC is required to pay dividends when a bank fails to meet certain minimum regulatory capital standards or when such dividends are in excess of a subsidiary bank’s earnings retained in the current year plus retained net profits for the preceding two years as specified in applicable OCC regulations. At March 31, 2025, approximately $70.2 million of the total stockholders’ equity of the Bank was available for payment of dividends to the Company without approval by the OCC. The Bank’s ability to pay dividends also is subject to the Bank being in compliance with regulatory capital requirements. The Bank is currently in compliance with these requirements. Under the State of Delaware General Corporation Law, the Company may declare and pay dividends either out of accumulated net retained earnings or capital surplus.

Current wording

Certain restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends. The approval of the OCC is required to pay dividends when a bank fails to meet certain minimum regulatory capital standards or when such dividends are in excess of a subsidiary bank’s earnings retained in the current year plus retained net profits for the preceding two years as specified in applicable OCC regulations. At June 30, 2025, approximately $66.5 million of the total stockholders’ equity of the Bank was available for payment of dividends to the Company without approval by the OCC. The Bank’s ability to pay dividends is also subject to the Bank being in compliance with regulatory capital requirements. The Bank is currently in compliance with these requirements. Under the State of Delaware General Corporation Law, the Company may declare and pay dividends either out of accumulated net retained earnings or capital surplus.