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 and nine months ended September 30, 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 and financial condition, including 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, 2025 for an understanding of the following discussion and analysis. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results of the full year ending December 31, 2026 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 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 ability to increase market share and control expenses; (14) changes in the competitive environment among financial holding companies; (15) 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; (16) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; (17) changes in the Company’s organiz…

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 any 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 ability to increase market share and control expenses; (14) changes in the competitive environment among financial holding companies; (15) 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; (16) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; (17) changes in the Company’s organiz…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made, and advises readers that various factors, including, but not limited to, those described above and other factors discussed in the Company’s annual and quarterly reports previously filed with the SEC, could affect the Company’s financial performance and could cause the Company’s actual results or circumstances for future periods to differ materially from those anticipated or projected.

Current wording

The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made, and advises readers that various factors, including, but not limited to, those described above and other factors discussed in the Company’s annual and quarterly reports previously filed with the SEC, could affect the Company’s financial performance and could cause the Company’s actual results or circumstances for future periods to differ materially from those anticipated or projected.

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. 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.

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. The more significant of these policies are summarized in Note 1 to the consolidated financial statements presented in our 2025 Annual Report on Form 10-K. Management has reviewed the application of these estimates with the Audit Committee of NBT’s Board of Directors. 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 September 30, 2025, the quantitative model incorporated a baseline economic outlook along with an alternative upside scenario 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 September 30, 2025, the weightings were 65%, 5% and 30% for the baseline, upside and downside economic forecast scenarios, respectively. The baseline outlook reflected an economic environment where the Northeast unemployment rate increases from 4.4% in the fourth quarter of 2025 to 4.8% by the end of the forecast period, with a peak Northeast unemployment rate of 4.9% in the fourth quarter of 2026. National GDP’s annualized growth (on a quarterly basis) is expected to start the fourth quarter of 2025 at approximately 0.8% and increase to 1.7% 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 third quarter of 2025 to 3.8% in the first quarter of 2026 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 third quarter of 2025 to a peak of 7.8% in the fourth 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 third quarter of 2025 to 6% by the end of the forecast period in the first quarter of 2027, with a peak Northeast unemployment rate of 8.2% in the fourth quarter of 2027. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of September 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.

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 March 31, 2026, the weightings were 60%, 5%, and 35% for the baseline, upside and downside economic forecast scenarios, respectively. The baseline outlook reflected an economic environment where the northeast unemployment rate decreases from 4.6% in the second quarter of 2026 to 4.56% by the end of the forecast period, with a peak northeast unemployment rate of 4.6% in the third quarter of 2026. National GDP annualized growth (on a quarterly basis) is expected to start the second quarter of 2026 at approximately 2.75% and decrease to 1.72% 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 June and September 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 4.6% in the first quarter of 2026 to 3.7% in the second quarter of 2027 and eventually settles at 3.8% 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 4.6% in the first quarter of 2026 to a peak of 7.8% in the second quarter of 2027. The alternative downside stagflation scenario was removed in the first quarter of 2026 following a recalibration of the scenario’s narrative and model by the reputable third-party, which no longer provided a relevant stagflation scenario. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of March 31, 2026. 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.

Previous wording

To demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of September 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 3% 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 September 30, 2025, the Company increased the downside scenarios, equally weighted, to 100% which resulted in a 26% 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 March 31, 2026, the Company changed the scenario weightings, with a 10% increase to the downside scenario and a 10% decrease to the baseline scenario causing a 3.6% 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 0.8%. To further demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of March 31, 2026, the Company increased the downside scenario to 100% which resulted in a 24.1% increase in the overall estimated allowance for credit losses.

Previous wording

Net income for the three months ended September 30, 2025 was $54.5 million, up $32.0 million from the second quarter of 2025 and up $16.4 million from the third quarter of 2024. Diluted earnings per share were $1.03 for the three months ended September 30, 2025, up $0.59 from the second quarter of 2025 and up $0.23 from the third quarter of 2024. Net income for the nine months ended September 30, 2025 was $113.7 million, or $2.26 per diluted common share, up $9.1 million from $104.6 million, or $2.21 per diluted common share for the nine months ended September 30, 2024.

Current wording

Net income for the three months ended March 31, 2026 was $51.1 million, down $4.4 million from the fourth quarter of 2025 and up $14.4 million from the first quarter of 2025. Diluted earnings per share was $0.98 for the three months ended March 31, 2026, down $0.08 from the fourth quarter of 2025 and up $0.21 from the first quarter of 2025.

Previous wording

Operating net income(1), a non-GAAP measure, was $55.3 million, or $1.05 per diluted common share, for the three months ended September 30, 2025, compared to $0.88 per diluted common share for the second quarter of 2025 and $0.80 per diluted common share for the third quarter of 2024. Operating net income(1) for the nine months ended September 30, 2025 was $138.7 million, or $2.76 per diluted common share, up $35.6 million from $103.1 million, or $2.17 per diluted common share for the nine months ended September 30, 2024.

Current wording

Operating net income(1), a non-GAAP measure, was $50.8 million, or $0.97 per diluted common share, for the three months ended March 31, 2026, compared to $1.05 per diluted common share for the fourth quarter of 2025 and $0.80 per diluted common share for the first quarter of 2025.

Previous wording

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

Current wording

The following information should be considered in connection with the Company’s results for the three months ended March 31, 2026:

Previous wording

Net interest income was $134.7 million for the third quarter of 2025, up $33.0 million, or 32.5%, from the third quarter of 2024. The FTE NIM was 3.66% for the three months ended September 30, 2025, an increase of 39 bps from the third quarter of 2024. Interest income increased $34.2 million, or 21.9%, as the yield on average interest-earning assets increased 17 bps from the same period in 2024 to 5.18%, while average interest-earning assets increased $2.20 billion, or 17.6%, from the third 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 increased $1.2 million, or 2.3%, primarily due to the addition of $1.62 billion in interest-bearing liabilities from the Evans acquisition and organic growth. The increase in interest expense was partially offset by the redemption of $118 million of subordinated debt in the third quarter of 2025. Included in net interest income was $6.3 million of acquisition-related net accretion for the three months ended September 30, 2025, compared to $2.7 million of acquisition-related net accretion for the three months ended September 30, 2024.

Current wording

Net interest income was $134.3 million for the first quarter of 2026, up $27.1 million, or 25.3%, from the first quarter of 2025. FTE NIM was 3.72% for the three months ended March 31, 2026, an increase of 28 bps from the first quarter of 2025. Interest income increased $28.2 million, or 18.2%, as the yield on average interest-earning assets increased 11 bps from the same period in 2025 to 5.06%, while average interest-earning assets increased $1.99 billion, or 15.7%, from the first quarter of 2025, 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 increased $1.1 million, or 2.4%, for the three months ended March 31, 2026 primarily due to the addition of $1.62 billion in interest-bearing liabilities from the Evans acquisition, partially offset by a decrease in the cost of interest-bearing liabilities. Included in net interest income was $6.7 million of acquisition-related net accretion for the three months ended March 31, 2026 and $2.2 million of acquisition-related net accretion for the three months ended March 31, 2025.

Previous 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.

Current 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.

Previous wording

The increase from the third quarter of 2024 was driven by an increase in retirement plan administration fees and bank owned life insurance income. Retirement plan administration fees increased from the third 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. Bank owned life insurance income increased from the third quarter of 2024 due to a $0.9 million gain recognized in the third quarter of 2025. Service charges on deposit accounts, card services income and other noninterest income increased from the third quarter of 2024 primarily due to the Evans acquisition. Included in other noninterest income for the three months ended September 30, 2025 was a $0.6 million gain related to the finalization of a third-party contractual arrangement.

Current wording

The increase from the first quarter of 2025 was driven by an increase in service charges on deposit accounts and card services income due to the Evans acquisition. In addition, noninterest income increased from the first quarter of 2025 due to an increase in retirement plan administration fees which were partially offset by a decrease in bank owned life insurance income. The increase in retirement plan administration fees from the first quarter of 2025 was due to higher activity-based fees, increase in market values of assets under administration and the additional revenue from new customer relationships. Bank owned life insurance income decreased from the first quarter of 2025 due to lower gains recognized.

Previous wording

The increase from the third quarter of 2024 was driven by the Evans acquisition. Salaries and benefits increased from the third quarter of 2024 driven by the impact of the Evans acquisition, merit pay increases, higher medical expenses and higher incentive compensation expenses. Technology and data services increased from the third quarter of 2024 primarily due to the Evans acquisition, timing of planned activities and ongoing investment in enterprise technology initiatives. 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. Professional fees and outside services increased from the third quarter of 2024 primarily due to the Evans acquisition and the timing of various initiatives. Amortization of intangible assets increased due to the Company recording a core deposit intangible of $33.2 million related to the Evans acquisition.

Current wording

The increase from the first quarter of 2025 was driven by the Evans acquisition. Salaries and benefits increased from the first quarter of 2025 driven by the impact of the Evans acquisition, annual merit pay increases, higher medical expenses and stock-based compensation expenses. Technology and data services increased from the first quarter of 2025 primarily due to the Evans acquisition, timing of planned activities and ongoing investment in enterprise technology initiatives. In addition, the increase in occupancy expense was impacted by additional expenses from the Evans acquisition, higher seasonal maintenance and utilities, and higher facilities costs related to new branch banking locations. Professional fees and outside services increased from the first quarter of 2025 primarily due to the Evans acquisition and the timing of various initiatives. 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 September 30, 2025 was $17.4 million, up $9.2 million from the prior quarter and up $6.7 million from the third quarter of 2024. The effective tax rate was 24.2% for the third quarter of 2025, compared to 26.7% for the prior quarter and 21.9% for the third quarter of 2024. The decrease in the effective tax rate from the prior quarter and the increase from the third quarter of 2024 was primarily due to the impact of nondeductible acquisition expenses related to the Evans acquisition and the level of tax-exempt income as a percentage of total pretax income.

Current wording

Income tax expense for the three months ended March 31, 2026 was $15.5 million, up $1.4 million from the prior quarter and up $5.1 million from the first quarter of 2025. The effective tax rate was 23.3% for the first quarter of 2026, compared to 20.3% for the prior quarter and 22.2% for the first quarter of 2025. The increase in the effective tax rate from the prior quarter was primarily due to the assessment of the deductibility of merger-related expenses incurred in 2025 and the associated impact on the full year effective tax rate in the fourth quarter of 2025. The increase in the effective tax rate from the first quarter of 2025 was primarily due to the increase in fully taxable pre-tax income.

Previous wording

Total securities increased $174.3 million, or 7.1%, from December 31, 2024 to September 30, 2025. The securities portfolio represented 16.3% of total assets as of September 30, 2025 as compared to 17.8% of total assets as of December 31, 2024.

Current wording

Total securities increased $40.0 million, or 1.5%, from December 31, 2025 to March 31, 2026. The securities portfolio represented 16.8% of total assets as of March 31, 2026 as compared to 16.7% of total assets as of December 31, 2025.

Previous wording

Total loans were $11.60 billion and $9.97 billion at September 30, 2025 and December 31, 2024, respectively. Period end loans increased by $1.63 billion from December 31, 2024 to September 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 $38.2 million from December 31, 2024 and increased $132.4 million from September 30, 2024. From December 31, 2024 to September 30, 2025 C&I loans increased $217.7 million to $1.64 billion; CRE loans increased $954.1 million to $4.83 billion; and total consumer loans increased $453.4 million to $5.12 billion. Total loans represent approximately 72.0% of assets as of September 30, 2025, as compared to 72.3% as of December 31, 2024.

Current wording

Total loans were $11.55 billion and $11.60 billion at March 31, 2026 and December 31, 2025, respectively. Period end loans decreased by $50.9 million from December 31, 2025 to March 31, 2026, which included a $25.9 million decrease in the other consumer and residential solar portfolios, which are in a planned run-off status. Total loans represent approximately 71.3% of assets as of March 31, 2026, as compared to 72.5% as of December 31, 2025.

Previous 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 (13%), along with retail, manufacturing, mixed use, hotels and others. As of September 30, 2025 and December 31, 2024, the total CRE construction and development loans amounted to $427.0 million and $314.8 million, respectively.

Current wording

Within the CRE portfolio, approximately 78% are comprised of Non-Owner Occupied CRE, with the remaining 22% being Owner-Occupied CRE. Non-Owner Occupied CRE includes diverse sectors across the Company’s markets such as residential rental properties (44%) and office spaces (13%), along with retail, manufacturing, mixed use, hotels and others. As of March 31, 2026 and December 31, 2025, the total CRE construction and development loans amounted to $430.9 million and $405.3 million, respectively.

Previous wording

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Upon adoption of CECL, management revised the manner in which loans were pooled for similar risk characteristics. Management developed segments for estimating loss based on type of borrower and collateral which is generally based upon federal call report segmentation and have been combined or subsegmented as needed to ensure loans of similar risk profiles are appropriately pooled.

Current wording

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Consistent with CECL guidance, management has pooled loans with similar risk characteristics and identified segments for estimating loss based on type of borrower and collateral which is generally based upon federal call report segmentation and have been combined or subsegmented as needed to ensure loans of similar risk profiles are appropriately pooled.

Previous wording

The allowance for credit losses totaled $139.0 million at September 30, 2025, as compared to $140.2 million at June 30, 2025 and $119.5 million at September 30, 2024. The allowance for credit losses as a percentage of loans was 1.20% at September 30, 2025, compared to 1.21% at June 30, 2025 and 1.21% at September 30, 2024. The decrease in the allowance for credit losses from June 30, 2025 to September 30, 2025 was primarily driven by portfolio mix changes resulting from the run-off of the other consumer and residential solar portfolios which were partially offset by a modest deterioration in economic forecasts. The increase in the allowance for credit losses from September 30, 2024 to September 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 $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 and a modest deterioration in the economic forecast. This increase 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.

Current wording

The allowance for credit losses totaled $138.6 million at March 31, 2026, compared to $138.0 million at December 31, 2025 and $117.0 million at March 31, 2025. The allowance for credit losses as a percentage of loans was 1.20% at March 31, 2026, compared to 1.19% at December 31, 2025 and 1.17% at March 31, 2025. The allowance for credit losses as of March 31, 2026 increased compared to the allowance estimates as of December 31, 2025 primarily due to the change in forecast scenario weightings and the establishment of specific reserves for newly identified individually evaluated loans. These increases to the allowance for credit losses were partially offset by improvements in the economic forecast, model adjustments, and changes in loan composition and balances, including reductions driven by other consumer and residential solar portfolios that are in a planned run-off status. First quarter 2026 model adjustments lowered the allowance, as updates from the annual model review and recalibration process incorporated recent delinquency and loss experience which reflected improved default estimates across most portfolio segments. The increase in the allowance for credit losses from March 31, 2025 to March 31, 2026 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. This increase was partially offset by 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 260.22% of nonperforming loans at September 30, 2025, compared to 302.21% at June 30, 2025 and 320.21% at September 30, 2024. The decrease in the coverage of the allowance to nonperforming and nonaccrual loans from June 30, 2025 to September 30, 2025 was due to the increase in nonaccrual loans. The decrease in the coverage of the allowance to nonperforming loans from September 30, 2024 to September 30, 2025 was due to an increase in nonaccrual loans, partially offset by the increase in the allowance relating to acquired Evans loans.

Current wording

The allowance for credit losses was 226.27% of nonperforming loans at March 31, 2026, compared to 266.81% at December 31, 2025 and to 245.33% at March 31, 2025. The decrease in the coverage of the allowance to nonperforming and nonaccrual loans from December 31, 2025 to March 31, 2026 was due to the increase in nonaccrual loans. The decrease in the coverage of the allowance to nonperforming loans from March 31, 2025 to March 31, 2026 was due to an increase in nonaccrual loans, partially offset by the increase in the allowance relating to the acquired Evans loans.

Previous wording

The provision for loan losses was $3.1 million for the three months ended September 30, 2025, compared to $17.8 million in the prior quarter and $2.9 million for the same period in the prior year. Provision expense decreased from the prior quarter due to the $13.0 million of acquisition-related provision for loan losses recorded in the second quarter of 2025. Provision expense increased from the third quarter of 2024 due to a slight increase in net charge-offs. Net charge-offs totaled $4.3 million during the three months ended September 30, 2025, compared to net charge-offs of $2.4 million during the second quarter of 2025 and $3.9 million in the third quarter of 2024. Net charge-offs to average loans were 15 bps for the three months ended September 30, 2025, compared to 9 bps for the second quarter of 2025 and 16 bps for the three months ended September 30, 2024.

Current wording

The provision for loan losses was $5.6 million for the three months ended March 31, 2026, compared to $3.8 million in the prior quarter and $7.6 million for the same period in the prior year. Provision expense increased from the prior quarter primarily due to an increase in net charge-offs during the quarter and a higher level of allowance for loan losses. The decrease in provision expense from March 31, 2025, was driven largely due to lower net charge-offs. Net charge-offs totaled $5.0 million during the three months ended March 31, 2026, compared to net charge-offs of $4.8 million during the fourth quarter of 2025 and $6.6 million in the first quarter of 2025. Net charge-offs to average loans were 17 bps for the three months ended March 31, 2026, compared to 16 bps for the fourth quarter of 2025 and 27 bps for the three months ended March 31, 2025.

Previous wording

As of September 30, 2025, the unfunded commitment reserve totaled $5.9 million, compared to $6.2 million as of June 30, 2025 and $4.6 million as of September 30, 2024. The decrease in the unfunded reserve from the prior quarter was caused by a slight decline in pipeline exposure. The increase from the same period in the prior year was caused by an increase in pipeline exposure and $0.5 million of acquisition-related provision for unfunded commitments established for unfunded commitments acquired in the Evans acquisition.

Current wording

As of March 31, 2026, the unfunded commitment reserve totaled $5.5 million, compared to $5.8 million as of December 31, 2025 and $4.5 million as of March 31, 2025. The increase from the same period in the prior year was caused by an increase 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, 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.

Current wording

Nonperforming assets consist of nonaccrual loans, loans over 90 days past due and still accruing, troubled loan 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 commercial 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 $53.7 million at September 30, 2025, compared to $51.8 million at December 31, 2024 and $37.4 million at September 30, 2024. Nonperforming loans at September 30, 2025 were $53.4 million or 0.46% of total loans, compared with $51.6 million or 0.52% of total loans at December 31, 2024 and $37.3 million or 0.38% of total loans at September 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 increase from December 31, 2024 is primarily attributable to the addition of nonperforming loans from the Evans acquisition. These increases were partially offset by the payoff of two nonaccrual loans in the second quarter of 2025. Total nonaccrual loans were $46.5 million or 0.40% of total loans at September 30, 2025, compared to $45.8 million or 0.46% of total loans at December 31, 2024 and $33.3 million or 0.34% of total loans at September 30, 2024. Past due loans as a percentage of total loans were 0.38% at September 30, 2025, up from 0.34% at December 31, 2024 and up from 0.36% at September 30, 2024.

Current wording

Total nonperforming assets were $61.3 million at March 31, 2026, compared to $52.1 million at December 31, 2025 and $48.0 million at March 31, 2025. Nonperforming loans at March 31, 2026 were $61.3 million or 0.53% of total loans, compared with $51.7 million or 0.45% of total loans at December 31, 2025 and $47.7 million or 0.48% of total loans at March 31, 2025. The increase in nonperforming assets and nonperforming loans from the prior period was attributable to an increase in nonaccrual loans including three newly identified commercial relationships identified for individual credit loss evaluation, partially offset by a decrease in accruing loans past due over 90 days. The increase from March 31, 2025 is primarily attributable to the addition of nonperforming loans from the Evans acquisition. Total nonaccrual loans were $57.9 million or 0.50% of total loans at March 31, 2026, compared to $44.6 million or 0.38% of total loans at December 31, 2025 and $44.8 million or 0.45% of total loans at March 31, 2025. Past due loans as a percentage of total loans was 0.40% at March 31, 2026, up from 0.38% at December 31, 2025 and up from 0.32% at March 31, 2025.

Previous wording

In addition to nonperforming loans discussed above, the Company has also identified approximately $211.3 million in potential problem loans at September 30, 2025, as compared to $116.1 million at December 31, 2024 and $119.9 million at September 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.” The increase in potential problem loans at September 30, 2025, compared to December 31, 2024 and September 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.

Current wording

In addition to nonperforming loans discussed above, the Company has also identified approximately $278.5 million in potential problem loans at March 31, 2026 as compared to $271.8 million at December 31, 2025. 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, 2025 is primarily due to the net migration of $5.3 million in commercial loan balances to substandard, primarily attributable to acquired commercial loans from Evans. 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 loan 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 $13.66 billion at September 30, 2025, up $2.11 billion, or 18.3%, from December 31, 2024, which included $1.86 billion in deposits acquired from Evans. Excluding deposits acquired from Evans, deposits increased $250.1 million from December 31, 2024. As of September 30, 2025, there were $173.9 million of brokered time deposits, down from $295.8 million as of December 31, 2024. Excluding deposits acquired from Evans, demand, interest-bearing checking and money market accounts increased, partially offset by a decrease in time deposits. The Company’s composition of total deposits is diverse and granular with over 616,000 accounts with an average per account balance of $22,161 as of September 30, 2025. As of September 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 $5.96 billion and $4.73 billion, respectively. Total average deposits increased $1.47 billion, or 13.2%, from the same period last year due to the $1.86 billion in deposits acquired from Evans in the second quarter of 2025.

Current wording

Total deposits were $13.74 billion at March 31, 2026, up $243.8 million, or 1.8%, from December 31, 2025. As of March 31, 2026 there were $25.0 million of brokered time deposits, down from $98.9 million as of December 31, 2025. Demand, interest-bearing checking and money market accounts increased, partially offset by a decrease in time deposits. The Company continues to experience growth within all business lines, consumer, municipal and commercial, including the inflow of seasonal municipal deposits during the first quarter of 2026. The Company’s composition of total deposits is diverse and granular with over 611,000 accounts with an average per account balance of $22,467 as of March 31, 2026. As of March 31, 2026 and December 31, 2025 the estimated amounts of uninsured deposits based on the same methodologies and assumptions used for the bank regulatory reporting were $6.04 billion and $5.86 billion, respectively. Total average deposits increased $1.94 billion, or 16.7%, 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 $138.7 million at September 30, 2025 compared to $162.9 million at December 31, 2024. Long-term debt was $44.8 million at September 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.

Current wording

The Company’s borrowed funds consist of short-term borrowings and long-term debt. Short-term borrowings totaled $117.8 million at March 31, 2026 compared to $148.1 million at December 31, 2025. Long-term debt was $43.1 million at March 31, 2026 compared to $43.2 million at December 31, 2025.

Previous wording

As of September 30, 2025 and December 31, 2024 the subordinated debt net of unamortized issuance costs and fair value discount was $24.2 million and $121.2 million, respectively.

Current wording

As of March 31, 2026 and December 31, 2025 the subordinated debt net of fair value discount was $24.8 million and $24.5 million, respectively.

Previous wording

Stockholders’ equity of $1.85 billion represented 11.50% of total assets at September 30, 2025 compared with $1.53 billion, or 11.07% of total assets, as of December 31, 2024. Stockholders’ equity increased $327.0 million from December 31, 2024 driven by the Evans acquisition adding $221.8 million of capital, net income generation of $113.7 million for the nine months ended September 30, 2025 and a decrease of $43.2 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 $53.3 million.

Current wording

Stockholders’ equity of $1.91 billion represented 11.81% of total assets at March 31, 2026 compared with $1.90 billion, or 11.85% of total assets, as of December 31, 2025. Stockholders’ equity increased $18.2 million from December 31, 2025 driven by net income of $51.1 million for the three months ended March 31, 2026, partially offset by dividends declared of $19.2 million, the repurchase of common stock of $11.0 million and a $4.7 million increase in accumulated other comprehensive loss due primarily to the change in the fair value of securities available for sale.

Previous wording

The Company did not purchase shares of its common stock during the three and nine months ended September 30, 2025. As of September 30, 2025, there were 1,992,400 shares available for repurchase under the Company’s stock repurchase plan authorized on December 18, 2023 and set to expire on December 31, 2025. On October 27, 2025, the Company’s Board of Directors authorized and approved an amendment to the Company’s stock repurchase program. Pursuant to the amended stock repurchase program, the Company may repurchase up to 2,000,000 shares of the Company’s common stock with all repurchases under the stock repurchase program to be made by December 31, 2027. The Company may repurchase shares of its common stock from time to time to mitigate the potential dilutive effect of stock-based incentive plans and other potential uses of common stock for corporate purposes.

Current wording

The Company purchased 250,000 shares of its common stock during the three months ended March 31, 2026, for a total of $11.0 million at an average price of $44.06 per share under its previously announced stock repurchase program. Under its stock 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, 2026, there were 1,500,000 shares available for repurchase under this program authorized on October 27, 2025, which is set to expire on December 31, 2027.

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. 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 September 30, 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 prepayment 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 March 31, 2026 balance sheet position:

Previous wording

The Company anticipates that the trajectory of net interest income will continue to depend significantly on the timing and path of short to mid-term interest rates which are heavily driven by inflationary pressures and FOMC monetary policy. Post-pandemic, inflationary pressures resulted in a higher overall yield curve with federal funds increases of 425 bps in 2022 with an additional 100 bps of increases in 2023. However, the tightening cycle ended in September of 2024, when the FRB lowered the federal funds rate by 50 bps, followed by consecutive 25 bps reductions in November and December of 2024 for a total of 100 bps of federal funds rate reductions by the end of 2024. Additionally, one rate cut of 25 bps occured in 2025, signaling a continuation of the cutting cycle. While deposit rates increased meaningfully in 2023 and continued to increase in early 2024 in conjunction with elevated short-term interest rates, the federal funds rate reductions of 2024 and expectations for continued reductions in 2025 and 2026 have provided the catalyst for the Company to begin reducing deposit rates. The Company continues to focus on managing deposit expense in an environment of still elevated but declining short-term interest rates while allowing assets to reprice upward in relation to existing portfolio asset yields.

Current wording

The Company anticipates that the trajectory of net interest income will continue to depend significantly on the timing and path of short to mid-term interest rates which are heavily driven by inflationary pressures and FOMC monetary policy. In 2025, the FOMC shifted to an easing cycle, cutting the federal funds rate three times (September, October and December) by 25 bps each, bringing the target range down from 4.25-4.50% towards a more neutral stance of 3.50-3.75% as inflation pressures eased but growth softened. Actions included rate cuts, open market operations to manage liquidity, and adjustments to reinvestment policies for Treasury and mortgage-backed securities. The Fed remains committed to its 2% inflation target and maximum employment goals. The recent federal funds rate reductions and initial expectations for continued reductions in 2026 provided the catalyst for the Company to begin reducing deposit rates in late 2025 and early 2026. However, the onset of the Iran War in 2026 has contributed to higher interest rates and an expectation for an elevated yield curve in the near term. The Company continues to focus on managing deposit expense in an environment of still elevated short-term interest rates (compared to recent years) while maintaining lending spreads in an effort to allow new and repricing asset yields to remain above existing portfolio asset yields where possible.

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 September 30, 2025, the Company’s Basic Surplus measurement was 17.2% of total assets, or $2.78 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 $805.6 million and $689.3 million of period end total assets as September 30, 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 March 31, 2026, the Company’s Basic Surplus measurement was 19.2% of total assets, or $3.10 billion, as compared to the December 31, 2025 Basic Surplus of 18.7%, or $2.98 billion, and was above the Company’s minimum of 5% (calculated at $810.2 million and $799.8 million of period end total assets as of March 31, 2026 and December 31, 2025, respectively) set forth in its liquidity policies.

Previous wording

At September 30, 2025 and December 31, 2024, FHLB advances outstanding totaled $44.5 million and $45.6 million, respectively. At September 30, 2025 and December 31, 2024, the Bank had $356.0 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 $1.98 billion at September 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 $913.6 million and $957.3 million at September 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 $2.48 billion at September 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 September 30, 2025 and December 31, 2024, the Bank had the capacity to borrow $1.18 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 $3.97 billion at September 30, 2025 and $3.38 billion at December 31, 2024.

Current wording

At March 31, 2026 and December 31, 2025, FHLB advances outstanding totaled $43.0 million. At March 31, 2026 and December 31, 2025, the Bank had $435.0 million and $353.0 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 $2.02 billion at March 31, 2026 and $2.10 billion at December 31, 2025. In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $1.08 billion and $1.11 billion at March 31, 2026 and December 31, 2025, 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 $2.64 billion at March 31, 2026 and $2.53 billion at December 31, 2025. 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, 2026 and December 31, 2025, the Bank had the capacity to borrow $1.19 billion and $1.18 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 $3.99 billion at March 31, 2026 and $3.94 billion at December 31, 2025.

Previous wording

This Basic Surplus approach enables the Company to appropriately manage liquidity from both operational and contingency perspectives. By tempering the need for cash flow liquidity with reliable borrowing facilities, the Company is able to operate with a more fully invested and, therefore, higher interest income generating securities portfolio. The makeup and term structure of the securities portfolio is, in part, impacted by the overall interest rate sensitivity of the balance sheet. Investment decisions and deposit pricing strategies are impacted by the liquidity position. The Company considers its Basic Surplus position to be strong. However, certain events may adversely impact the Company’s liquidity position in 2025. While short-term interest rates have declined, they remain elevated relative to recent history, which could result in deposit declines as depositors have alternative opportunities for yield on their excess funds. In the current economic environment, draws against lines of credit could drive asset growth higher. Disruptions in wholesale funding markets could spark increased competition for deposits. These scenarios could lead to a decrease in the Company’s Basic Surplus measure below the minimum policy level of 5%. Note, enhanced liquidity monitoring was put in place to quickly respond to the changing environment during the pandemic including increasing the frequency of monitoring and adding additional sources of liquidity. While the pandemic has come to an end, this enhanced monitoring continues as elevated interest rates and the bank failures of 2023 have led to a deposit decline in the banking system and increased volatility to liquidity risk.

Current wording

This Basic Surplus approach enables the Company to appropriately manage liquidity from both operational and contingency perspectives. By tempering the need for cash flow liquidity with reliable borrowing facilities, the Company is able to operate with a more fully invested and, therefore, higher interest income generating securities portfolio. The makeup and term structure of the securities portfolio is, in part, impacted by the overall interest rate sensitivity of the balance sheet. Investment decisions and deposit pricing strategies are impacted by the liquidity position. The Company considers its Basic Surplus position to be strong. However, certain events may adversely impact the Company’s liquidity position in 2026. While short-term interest rates have declined, they remain elevated relative to recent history, which could result in deposit declines as depositors continue to have alternative opportunities for yield on their excess funds. In the current economic environment, draws against lines of credit could drive asset growth higher. Disruptions in wholesale funding markets could spark increased competition for deposits. These scenarios could lead to a decrease in the Company’s Basic Surplus measure below the minimum policy level of 5%.

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 September 30, 2025, approximately $91.8 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.

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 March 31, 2026 and December 31, 2025, approximately $100.5 million and $115.9 million, respectively, 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.