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 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.

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 and six months ended June 30, 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 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.

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 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 organization, compensation and be…

Excerpt shortened here; the source contains the full paragraph.

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, 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.

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. At June 30, 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 increases from 4.46% in the second quarter of 2026 to 4.65% by the end of the forecast period, with a peak northeast unemployment rate of 4.69% in the second quarter of 2027. National GDP annualized growth (on a quarterly basis) is expected to start the third quarter of 2026 at approximately 1.95% and decrease to 1.93% by the end of the forecast period. Key assumptions in the baseline economic outlook included the Federal Reserve keeping their policy rate in the current range of 3.50%-3.75% 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 4.46% in the second quarter of 2026 to 3.85% in the third quarter of 2027 and eventually settles at 3.90% 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 4.46% in the second quarter of 2026 to a peak of 7.81% 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, 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.

Previous 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.

Current wording

To demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of June 30, 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 June 30, 2026, the Company increased the downside scenario to 100% which resulted in a 23.8% increase in the overall estimated allowance for credit losses.

Previous 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.

Current wording

Net income for the three months ended June 30, 2026 was $53.0 million, up $1.9 million from the first quarter of 2026 and up $30.5 million from the second quarter of 2025. Diluted earnings per share were $1.02 for the three months ended June 30, 2026, up $0.04 from the first quarter of 2026 and up $0.58 from the second quarter of 2025. Net income for the six months ended June 30, 2026 was $104.2 million, or $1.99 per diluted common share, up $44.9 million from $59.3 million, or $1.21 per diluted common share for the six months ended June 30, 2025.

Previous 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.

Current wording

Operating net income(1), a non-GAAP measure, was $52.9 million, or $1.01 per diluted common share, for the three months ended June 30, 2026, compared to $0.97 per diluted common share for the first quarter of 2026 and $0.88 per diluted common share for the second quarter of 2025. Operating net income(1) for the six months ended June 30, 2026 was $103.7 million, or $1.98 per diluted common share, up $20.3 million from $83.4 million, or $1.70 per diluted common share for the six months ended June 30, 2025.

Previous wording

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

Current wording

The following information should be considered in connection with the Company’s results for the three and six months ended June 30, 2026:

Previous wording

Net interest income was $134.3 million for the first quarter of 2026, down $1.1 million, or 0.8%, from the previous quarter. FTE NIM was 3.72% for the three months ended March 31, 2026, an increase of 7 bps from the previous quarter. Interest income decreased $5.9 million, or 3.1%, as the yield on average interest-earning assets decreased 2 bps from the prior quarter to 5.06%, while average interest-earning assets of $14.69 billion decreased $73.6 million from the prior quarter. The decrease in interest income was primarily due to two fewer days in the first quarter of 2026 compared to the fourth quarter of 2025 and lower yields on loans and short-term interest-bearing accounts due to the fourth quarter Federal Reserve interest rate cuts, partially offset by loans originating at higher rates than portfolio yields. Interest expense decreased $4.8 million, or 9.1%, as the cost of interest-bearing liabilities decreased 14 bps to 1.95% for the three months ended March 31, 2026 as compared to the prior quarter, primarily due to a 14 bps decrease in interest-bearing deposit costs. Included in net interest income was $6.7 million of acquisition-related net accretion for the three months ended March 31, 2026, compared to $7.4 million of acquisition-related net accretion for the three months ended December 31, 2025.

Current wording

Net interest income was $137.0 million for the second quarter of 2026, up $2.6 million, or 1.9%, from the previous quarter. The FTE NIM was 3.73% for the three months ended June 30, 2026, an increase of 1 bp from the previous quarter. Interest income increased $3.1 million, or 1.7%, as average interest-earning assets of $14.80 billion increased $109.8 million from the prior quarter, while the yield on average interest-earning assets decreased 1 bp from the prior quarter to 5.05%. The increase in interest income was primarily due to one additional day in the second quarter of 2026 and organic growth in interest-earning assets. Interest expense increased $0.5 million, or 1.0%, as the cost of interest-bearing liabilities decreased 1 bp to 1.94% for the three months ended June 30, 2026 as compared to the prior quarter, primarily due to a 3 bps decrease in interest-bearing deposit costs. Included in net interest income was $5.7 million of acquisition-related net accretion for the three months ended June 30, 2026, compared to $6.7 million of acquisition-related net accretion for the three months ended March 31, 2026.

Previous 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.

Current wording

Net interest income was $137.0 million for the second quarter of 2026, up $12.7 million, or 10.3%, from the second quarter of 2025. The FTE NIM was 3.73% for the three months ended June 30, 2026, an increase of 14 bps from the second quarter of 2025. Interest income increased $8.2 million, or 4.6%, as average interest-earning assets increased $846.2 million, or 6.1%, from the second 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. The yield on average interest-earning assets decreased 7 bps from the same period in 2025 to 5.05%, primarily due to the Federal Reserve interest rates cuts in 2025. Interest expense decreased $4.6 million, or 8.5%, primarily due to the decrease in the cost of interest-bearing liabilities and the redemption of $118 million of subordinated debt in the third quarter of 2025. Included in net interest income was $5.7 million of acquisition-related net accretion for the three months ended June 30, 2026, compared to $5.0 million of acquisition-related net accretion for the three months ended June 30, 2025.

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

The following table presents changes in interest income and interest expense attributable to changes in volume (change in average balance multiplied by prior year rate), changes in rate (change in rate multiplied by prior year volume) and the net change in net interest income. The net change attributable to the combined impact of volume and rate has been allocated to each in proportion to the absolute dollar amounts of change.

Current wording

The following tables present changes in interest income and interest expense attributable to changes in volume (change in average balance multiplied by prior year rate), changes in rate (change in rate multiplied by prior year volume) and the net change in net interest income. The net change attributable to the combined impact of volume and rate has been allocated to each in proportion to the absolute dollar amounts of change.

Previous wording

Noninterest income for the three months ended March 31, 2026 was $50.1 million, up $0.4 million, or 0.9%, from the prior quarter and up $2.7 million, or 5.7%, from the first quarter of 2025. Excluding net securities gains (losses), noninterest income for the three months ended March 31, 2026 was $49.7 million, up $0.1 million, or 0.3%, from the prior quarter and up $2.1 million, or 4.5%, from the first quarter of 2025.

Current wording

Noninterest income for the three months ended June 30, 2026 was $49.7 million, down $0.4 million, or 0.8%, from the prior quarter and up $2.8 million, or 6.0%, from the second quarter of 2025. Excluding net securities gains, noninterest income for the three months ended June 30, 2026 was $49.6 million, down $0.1 million, or 0.3%, from the prior quarter and up $2.7 million, or 5.8%, from the second quarter of 2025.

Previous 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.

Current wording

The increase from the second 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 second quarter of 2025 due to an increase in retirement plan administration fees driven by higher activity-based fees, additional fees from new customer relationships and increased market values of assets under administration.

Previous wording

The increase from the prior quarter was primarily due to an increase in salaries and employee benefits and occupancy expenses, partially offset by a decrease in other noninterest expense. Salaries and employee benefits increased from the prior quarter driven by seasonally higher payroll taxes and stock-based compensation expenses, partially offset by lower medical expenses. Occupancy costs increased from the prior quarter due to seasonal maintenance and utilities costs due to harsh winter conditions across the footprint. Other expenses decreased from the prior quarter due to seasonally lower levels of travel, training and charitable contributions and loan-servicing related expenses.

Current wording

The decrease from the prior quarter was primarily driven by a decrease in occupancy costs due to the first quarter of 2026 having higher seasonal maintenance and utilities costs due to harsh winter conditions across the footprint. The decrease from the prior quarter was partially offset by an increase in salaries and employee benefits driven by a full quarter of merit pay increases, one additional payroll day and higher medical expenses, which were partially offset by lower payroll taxes and stock-based compensation expenses which are seasonally higher in the first quarter.

Previous 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.

Current wording

The increase from the second quarter of 2025 was driven by the Evans acquisition. Salaries and employee benefits increased from the second quarter of 2025 driven by the impact of the Evans acquisition, annual merit pay increases and higher medical expenses. Technology and data services increased from the second 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 and higher facilities costs related to new banking locations. Professional fees and outside services increased from the second quarter of 2025 primarily due to the Evans acquisition and the timing of various initiatives. Other expense decreased from the second quarter of 2025 primarily due to the $1.7 million reserve for unfunded loan commitments for the three months ended June 30, 2025 including $0.5 million of acquisition-related provision for unfunded loan commitments due to the Evans acquisition.

Previous 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.

Current wording

Income tax expense for the three months ended June 30, 2026 was $16.1 million, up $0.6 million from the prior quarter and up $7.9 million from the second quarter of 2025. The effective tax rate was 23.3% for the second quarter of 2026, which was consistent with the prior quarter and down from 26.7% for the second quarter of 2025. The decrease in the effective tax rate from the second quarter of 2025 was primarily due to the second quarter of 2025 estimated impact of nondeductible acquisition expenses related to the Evans acquisition and a lower level of tax-exempt income as a percentage of total pretax income.

Previous 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.

Current wording

Total securities increased $137.7 million, or 5.1% from December 31, 2025 to June 30, 2026. The securities portfolio represented 17.3% of total assets as of June 30, 2026 as compared to 16.7% of total assets as of December 31, 2025.

Previous 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.

Current wording

Total loans were $11.87 billion and $11.60 billion at June 30, 2026 and December 31, 2025, respectively. Period end loans increased by $276.0 million from December 31, 2025 to June 30, 2026, which included a $52.4 million decrease in the other consumer and residential solar portfolios, which are in a planned run-off status. From December 31, 2025 to June 30, 2026 C&I loans increased $83.1 million to $1.76 billion; CRE loans increased $94.6 million to $4.89 billion; and total consumer loans increased $98.2 million to $5.23 billion. Total loans represent approximately 73.2% of assets as of June 30, 2026, as compared to 72.5% as of December 31, 2025.

Previous 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.

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 (13%), along with retail, manufacturing, mixed use, hotels and others. As of June 30, 2026 and December 31, 2025, the total CRE construction and development loans amounted to $431.1 million and $405.3 million, respectively.

Previous 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.

Current wording

The allowance for credit losses totaled $140.5 million at June 30, 2026, compared to $138.6 million at March 31, 2026 and $140.2 million at June 30, 2025. The allowance for credit losses as a percentage of loans was 1.18% at June 30, 2026, compared to 1.20% at March 31, 2026 and 1.21% at June 30, 2025. The allowance for credit losses was 215.13% of nonperforming loans at June 30, 2026, compared to 226.27% at March 31, 2026 and to 302.21% at June 30, 2025. The allowance for credit losses as of June 30, 2026 increased compared to the allowance estimates as of March 31, 2026, primarily due to providing for loan growth and slight deterioration in the economic forecast. These increases to the allowance for credit losses were partially offset by accelerated prepayment speeds and the change in loan composition and balances including reductions driven by other consumer and residential solar portfolios that are in a planned run-off status.

Previous 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.

Current wording

The provision for loan losses was $6.1 million for the three months ended June 30, 2026, compared to $5.6 million in the prior quarter and $17.8 million for the same period in the prior year. Provision expense increased from the prior quarter primarily due to providing for the second quarter of 2026 loan growth, which was partially offset by a decrease in net charge-offs in the current quarter. Provision expense decreased from the same period in the prior year primarily due to $13.0 million of acquisition-related provision for loan losses for non-PCD loans acquired from Evans recorded in the second quarter of 2025. Net charge-offs totaled $4.2 million during the three months ended June 30, 2026, compared to net charge-offs of $5.0 million during the first quarter of 2026 and $2.4 million in the second quarter of 2025. Net charge-offs to average loans were 15 bps for the three months ended June 30, 2026, compared to 17 bps for the first quarter of 2026 and 9 bps for the three months ended June 30, 2025.

Previous 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.

Current wording

As of June 30, 2026 and March 31, 2026, the unfunded commitment reserve totaled $5.5 million, compared to $6.2 million as of June 30, 2025. The decrease from the same period in the prior year was caused by a decrease in expected loss rates, partially offset by a slight increase in pipeline exposure.

Previous 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.

Current wording

Total nonperforming assets were $65.3 million at June 30, 2026, compared to $52.1 million at December 31, 2025 and $46.7 million at June 30, 2025. Nonperforming loans at June 30, 2026 were $65.3 million or 0.55% of total loans, compared with $51.7 million or 0.45% of total loans at December 31, 2025 and $46.4 million or 0.40% of total loans at June 30, 2025. The increase in nonperforming assets and nonperforming loans from the prior period was attributable to an increase in commercial nonaccrual loans, partially offset by a decrease in residential and consumer accruing loans past due over 90 days. The increase from June 30, 2025 is attributable to an increase in commercial nonaccrual loans. Total nonaccrual loans were $62.9 million or 0.53% of total loans at June 30, 2026, compared to $44.6 million or 0.38% of total loans at December 31, 2025 and $43.2 million or 0.37% of total loans at June 30, 2025. Past due loans as a percentage of total loans was 0.63% at June 30, 2026, up from 0.38% at December 31, 2025 and up from 0.38% at June 30, 2025.

Previous 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.

Current wording

In addition to nonperforming loans discussed above, the Company has also identified approximately $228.7 million in potential problem loans at June 30, 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.” The decrease in potential problem loans from December 31, 2025 is primarily due to the net migration of $26.0 million in commercial loan balances to pass status, due to improved borrower performance and an increase in commercial nonaccrual loan balances. 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 $13.74 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.

Current wording

Total deposits were $13.54 billion at June 30, 2026, up $38.1 million, or 0.3%, from December 31, 2025. As of June 30, 2026, there were $25.0 million of brokered time deposits, down from $98.9 million as of December 31, 2025. Demand, interest-bearing checking, savings and money market deposits increased, partially offset by a decrease in time deposits. The Company continues to experience growth within consumer and municipal business lines. The Company’s composition of total deposits is diverse and granular with over 611,000 accounts with an average per account balance of $22,129 as of June 30, 2026. As of June 30, 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 $5.82 billion and $5.86 billion, respectively. Total average deposits increased $1.35 billion, or 11.1%, from the same period last year.

Previous 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.

Current wording

The Company’s borrowed funds consist of short-term borrowings and long-term debt. Short-term borrowings totaled $316.4 million at June 30, 2026 compared to $148.1 million at December 31, 2025. Long-term debt was $43.0 million at June 30, 2026 compared to $43.2 million at December 31, 2025.

Previous wording

The 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 qualified as Tier 2 capital, bore 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.

Current wording

The subordinated notes assumed in connection with the Salisbury Bancorp, Inc. acquisition included $25.0 million of 3.50% fixed-to-floating rate subordinated notes due 2031. The subordinated notes, which qualified as Tier 2 capital, bore 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. On June 30, 2026, the Company redeemed these subordinated notes in full using existing liquidity sources.

Previous 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.

Current wording

As of December 31, 2025 the subordinated debt net of fair value discount was $24.5 million.

Previous 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.

Current wording

Stockholders’ equity of $1.94 billion represented 11.99% of total assets at June 30, 2026 compared with $1.90 billion, or 11.85% of total assets, as of December 31, 2025. Stockholders’ equity increased $47.7 million from December 31, 2025 driven by net income generation of $104.2 million for the six months ended June 30, 2026, partially offset by dividends declared of $38.5 million, the repurchase of common stock of $14.0 million and a $6.5 million increase in accumulated other comprehensive loss reflecting the change in fair value securities available for sale.

Previous 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.

Current wording

The Company purchased 68,595 shares of its common stock during the three months ended June 30, 2026, for a total of $3.0 million at an average price of $43.96 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 June 30, 2026, there were 1,431,405 shares available for repurchase under this program authorized on October 27, 2025, which is set to expire on December 31, 2027.

Previous wording

As the capital ratios in the following table indicate, the Company remained “well capitalized” at March 31, 2026 under applicable bank regulatory requirements. Capital measurements are well in excess of regulatory minimum guidelines and meet the requirements to be considered well capitalized for all periods presented. To be considered well capitalized, tier 1 leverage, common equity tier 1 capital, tier 1 capital and total risk-based capital ratios must be 5%, 6.5%, 8% and 10%, respectively.

Current wording

As the capital ratios in the following table indicate, the Company remained “well capitalized” at June 30, 2026 under applicable bank regulatory requirements. Capital measurements are well in excess of regulatory minimum requirements and meet the standard to be considered well capitalized for all periods presented. To be considered well capitalized, tier 1 leverage, common equity tier 1 capital, tier 1 capital and total risk-based capital ratios must be 5%, 6.5%, 8% and 10%, respectively.

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. 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.

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, employment levels 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 2025 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 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.

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, 2026, the Company’s Basic Surplus measurement was 17.1% of total assets, or $2.77 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 $810.7 million and $799.8 million of period end total assets as June 30, 2026 and December 31, 2025, respectively) set forth in its liquidity policies.

Previous 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.

Current wording

At June 30, 2026 and December 31, 2025, FHLB advances outstanding totaled $199.9 million and $43.0 million, respectively. At June 30, 2026 and December 31, 2025, the Bank had $379.0 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 $1.94 billion at June 30, 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 $1.31 billion and $1.11 billion at June 30, 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 $2.60 billion at June 30, 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 June 30, 2026 and December 31, 2025, the Bank had the capacity to borrow $1.12 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 $3.79 billion at June 30, 2026 and $3.94 billion at December 31, 2025.

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, 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.

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, 2026 and December 31, 2025, approximately $110.0 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 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.