Pathfinder Bancorp, Inc.

Previous wording

On October 16, 2014, Pathfinder Bancorp, MHC converted from the mutual holding company form of organization to the stock holding company form of organization (the “Conversion”). Following the completion of the Conversion, the Company was created substantially in its current form and Pathfinder Bancorp, MHC ceased to exist. The Company had 6,125,649 and 6,099,571 shares of voting and non-voting common stock in aggregate outstanding at December 31, 2024 and December 31, 2023, respectively.

Current wording

On October 16, 2014, Pathfinder Bancorp, MHC converted from the mutual holding company form of organization to the stock holding company form of organization (the “Conversion”). Following the completion of the Conversion, the Company was created substantially in its current form and Pathfinder Bancorp, MHC ceased to exist. The Company had 6,185,644 and 6,125,649 shares of voting and non-voting common stock in aggregate outstanding at December 31, 2025 and December 31, 2024, respectively.

Previous wording

On May 8, 2019, the Company filed Articles Supplementary with the Maryland Department of Assessments and Taxation to issue 1,155,283 shares of Series B Preferred Stock to Castle Creek. Each share of the Series B Preferred Stock was convertible on a one-for-one basis into either (i) Common Stock under certain circumstances or (ii) non-voting common stock, par value $0.01 per share (which will also be convertible into Common Stock), subject to approval of the creation of such class of non-voting common stock by the Company’s stockholders.

Current wording

On May 8, 2019, the Company filed Articles Supplementary with the Maryland Department of Assessments and Taxation to issue 1,155,283 shares of Series B Preferred Stock to Castle Creek. Each share of the Series B Preferred Stock was convertible on a one-for-one basis into either (i) Common Stock under certain circumstances or (ii) non-voting common stock, par value $0.01 per share (which was also convertible into Common Stock), subject to approval of the creation of such class of non-voting common stock by the Company’s stockholders.

Previous wording

-27 - non-voting convertible common stock. Castle Creek will need the approval or non-objection of the Board of Governors of the Federal Reserve System and the New York State Department of Financial Services if it seeks to increase its ownership of shares of Common Stock in excess of 9.9% of the outstanding shares of Common Stock.

Current wording

-26 - non-voting convertible common stock. Castle Creek will need the approval or non-objection of the Board of Governors of the Federal Reserve System and the New York State Department of Financial Services if it seeks to increase its ownership of shares of Common Stock in excess of 9.9% of the outstanding shares of Common Stock.

Previous wording

As discussed above, pursuant to the Securities Purchase Agreement, on May 8, 2019, the Company issued a Warrant to Castle Creek to purchase 125,000 shares of non-voting common stock at an exercise price equal to $14.25 per share. At the same time, the Company entered into a Warrant Agreement with Castle Creek, to, among other things, authorize and establish the terms of the Warrant. The Warrant is exercisable at any time after May 8, 2019, and from time to time, in whole or in part, until May 8, 2026. However, the exercise of such Warrant remains subject to certain contractual provisions, and regulatory approval if Castle Creek’s ownership of Common Stock would exceed 9.9%. At December 31, 2024, Castle Creek owned approximately 9.9% of the Company’s common voting stock. The Warrant will receive dividends equal to the amount paid on the Company’s common stock. The dividend payment shall be calculated on (1) the unexercised portion of the 125,000 notional shares encompassed within the terms of the Warrant, less (2) any exercised portion of the 125,000 shares, times (3) the amount of the quarterly dividend paid to common shareholders. Dividend payments, if declared on the Company’s common stock, will be made on the Warrant until its expiration date.

Current wording

As discussed above, pursuant to the Securities Purchase Agreement, on May 8, 2019, the Company issued a Warrant to Castle Creek to purchase 125,000 shares of non-voting common stock at an exercise price equal to $14.25 per share. At the same time, the Company entered into a Warrant Agreement with Castle Creek, to, among other things, authorize and establish the terms of the Warrant. The Warrant is exercisable at any time after May 8, 2019, and from time to time, in whole or in part, until May 8, 2026. However, the exercise of such Warrant remains subject to certain contractual provisions, and regulatory approval if Castle Creek’s ownership of Common Stock would exceed 9.9%. At December 31, 2025, Castle Creek owned approximately 9.7% of the Company’s common voting stock. The Warrant will receive dividends equal to the amount paid on the Company’s common stock. The dividend payment shall be calculated on (1) the unexercised portion of the 125,000 notional shares encompassed within the terms of the Warrant, less (2) any exercised portion of the 125,000 shares, times (3) the amount of the quarterly dividend paid to common shareholders. Dividend payments, if declared on the Company’s common stock, will be made on the Warrant until its expiration date.

Previous wording

As a result of the Exchange Agreement, on November 13, 2020, the Company issued to Castle Creek 225,000 shares of its Series B Preferred Stock in exchange for an equivalent number of shares of Company Common Stock held by Castle Creek in a transaction exempt from registration under Section 3(a)(9) of the Securities Act of 1933, as amended. Castle Creek was the only stockholder of the Series B Preferred Stock. The Company received no cash proceeds as a result of the exchange. In addition, the Company did not pay any commission or remuneration for the solicitation of the exchange.

Current wording

On November 13, 2020, the Company entered into an agreement (the “Exchange Agreement”) with Castle Creek providing for the exchange of 225,000 shares of the Company’s Common stock owned by Castle Creek for 225,000 shares of the Company’s Series B Preferred Stock. The exchange was consummated simultaneously with the execution and delivery of the Exchange Agreement. The Company and Castle Creek entered into the Exchange Agreement to enable the equity ownership of Castle Creek to comply with applicable banking laws and regulations. As a result of the Exchange Agreement, on November 13, 2020, the Company issued to Castle Creek 225,000 shares of its Series B Preferred Stock in exchange for an equivalent number of shares of Company Common Stock held by Castle Creek in a transaction exempt from registration under Section 3(a)(9) of the Securities Act of 1933, as amended. Castle Creek was the only stockholder of the Series B Preferred Stock. The Company received no cash proceeds as a result of the exchange. In addition, the Company did not pay any commission or remuneration for the solicitation of the exchange.

Previous wording

Conversion: Each share of Non-Voting Common Stock will be convertible into one share of the Company’s Common Stock (i) at any time and from time to time at the request of the holder thereof or at the written request of the Company; provided that upon such conversion, the holder, together with all affiliates of the holder, will not own or control in the aggregate more than 9.9% of the Company’s Common Stock (or of any class of the Company’s voting securities), excluding for the purpose of this calculation any reduction in the ownership resulting from transfers by such holder of voting securities (which, for the avoidance of doubt, does not included the Non-Voting Common Stock); or (ii) automatically, without any further action of the part of the holder, on the date that the holder transfers such share of Non-Voting Common Stock to a non-affiliate of the holder in a permissible transfer.

Current wording

Conversion: Each share of Non-Voting Common Stock will be convertible into one share of the Company’s Common Stock (i) at any time and from time to time at the request of the holder thereof or at the written request of the Company; provided that upon such conversion, the holder, together with all affiliates of the holder, will not own or control in the aggregate more than 9.9% of the Company’s Common Stock (or of any class of the Company’s voting securities), excluding for the purpose of this calculation any reduction in the ownership resulting from transfers by such holder of voting securities (which, for the avoidance of doubt, does not include the Non-Voting Common Stock); or (ii) automatically, without any further action of the part of the holder, on the date that the holder transfers such share of Non-Voting Common Stock to a non-affiliate of the holder in a permissible transfer.

Previous wording

Allowance for Credit Losses. On January 1, 2023 the Company adopted the Current Expected Credit Loss ("CECL") model, as required under Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Company adopted the standard, which replaced the incurred loss methodology with CECL for financial instruments measured at amortized cost and other commitments to extend credit. The allowance for credit losses on loans and unfunded commitments is a valuation allowance for management’s estimate of expected credit losses in the loan portfolio and commitments to extend credit. Determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires

Current wording

Allowance for Credit Losses. On January 1, 2023 the Company adopted ASC 326, Financial Instruments—Credit Losses, and accounts for its allowance for credit losses on loans in accordance with the Current Expected Credit Loss ("CECL") methodology. The allowance for credit losses on loans and unfunded commitments is a valuation allowance for management’s estimate of expected credit losses in the loan portfolio and commitments to extend credit. Determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires significant judgment on the use of estimates related to the amount and timing of expected future

Previous wording

-33 - significant judgment on the use of estimates related to the amount and timing of expected future cash flows on individually evaluated loans, estimated losses on pools of homogeneous loans based on historical loss experience, and environmental factors, all of which may be susceptible to significant change. The Company establishes a specific allowance for all commercial loans in excess of the total related credit threshold of $100,000 and single borrower residential mortgage loans in excess of the total related credit threshold of $300,000 identified as being individually evaluated which are on nonaccrual and have been risk rated under the Company’s risk rating system as substandard, doubtful, or loss. The Company also establishes a specific allowance, regardless of the size of the loan, for modified loans due to borrowers experiencing financial difficulties. In addition, an accruing substandard loan could be identified as being individually evaluated. The measurement of individually evaluated loans is generally based upon the present value of future cash flows discounted at the historical effective interest rate, except that all collateral-dependent loans are measured based on the fair value of the collateral, less costs to sell. At December 31, 2024, the Bank’s position in individually evaluated loans consisted of 45 loans totaling $20.0 million. Of these loans, 15 loans, totaling $3.0 million, were valued using the present value of future cash flows method; and 30 loans, totaling $17.0 million, were valued based on a collateral analysis. For all other loans, the Company uses the general allocation methodology that establishes an allowance to estimate the lifetime loss for each risk-rating category. Note 1 to the consolidated financial statements describes the methodology used to determine the allowance for credit losses and a discussion of the factors driving changes in the amount of the allowance for credit losses is included in this report.

Current wording

-32 - cash flows on individually evaluated loans, estimated losses on pools of homogeneous loans based on historical loss experience, and environmental factors, all of which may be susceptible to significant change.

Previous wording

As noted above, the allowance for credit losses (“ACL”) represents management’s estimate of lifetime losses in the Bank’s loan portfolio. Determining the amount of the ACL requires significant judgment on the part of management and the use of estimates related to the amount and timing of expected future cash flows on individually evaluated loans, estimated losses on pools of homogeneous loans based on historical loss experience, as correlated to historical economic metrics and in consideration of current economic trends and conditions, and other qualitative factors, all of which may be susceptible to significant change.

Current wording

As noted above, the ACL represents management’s estimate of lifetime losses in the Bank’s loan portfolio. Determining the amount of the ACL requires significant judgment on the part of management and the use of estimates related to the amount and timing of expected future cash flows on individually evaluated loans, estimated losses on pools of homogeneous loans based on historical loss experience, as correlated to historical economic metrics and in consideration of current economic trends and conditions, and other qualitative factors, all of which may be susceptible to significant change.

Previous wording

In estimating the ACL on loans, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate. At December 31, 2024, the Bank held $535.0 million in commercial real estate and commercial & industrial loans (collectively, commercial loans) representing 58.2% of the Bank’s entire loan portfolio. The Bank allocated $10.4 million to the ACL for these loans, including $4.3 million derived from the use of qualitative factors in the calculation. Given the concentration of ACL allocation to the total commercial loan portfolio and the significant judgments made by management in deriving the qualitative loss factors, management considers the impact that changes in judgments could have on the ACL. The ACL could increase (or decrease) by approximately $1.1 million, assuming a 25% negative (or positive) change within the group of qualitative factors used to determine the ACL for commercial loans. The sensitivity and related range of impacts for various judgments on the ACL is a hypothetical analysis and is used to determine management’s judgments or assumptions of qualitative loss factors that were utilized at December 31, 2024 in the final recorded estimation of the ACL on loans recognized on the Statement of Financial Condition.

Current wording

In estimating the ACL on loans, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate. At December 31, 2025, the Bank held $536.9 million in commercial real estate and commercial & industrial loans (collectively, commercial loans) representing 59.9% of the Bank’s entire loan portfolio. The Bank allocated $23.3 million to the ACL for these loans, including $326,000 derived from the use of qualitative factors in the calculation. Given the concentration of ACL allocation to the total commercial loan portfolio and the significant judgments made by management in deriving the qualitative loss factors, management considers the impact that changes in judgments could have on the ACL. The ACL could increase (or decrease) by approximately $82,000, assuming a 25% negative (or positive) change within the group of qualitative factors used to determine the ACL for commercial loans. The sensitivity and related range of impacts for various judgments on the ACL is a hypothetical analysis and is used to determine management’s judgments or assumptions of qualitative loss factors that were utilized at December 31, 2025 in the final recorded estimation of the ACL on loans recognized on the Consolidated Statements of Financial Condition.

Previous wording

Deferred Income Tax Assets and Liabilities. Deferred income tax assets and liabilities are determined using the liability method. Under this method, the net deferred tax asset or liability is recognized for the future tax consequences. This is attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income tax expense in the period that includes the enactment date. If current available evidence about the future raises doubt about the likelihood of a deferred tax asset being realized, a valuation allowance is established. The

Current wording

-33 - between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income tax expense in the period that includes the enactment date. If current available evidence about the future raises doubt about the likelihood of a deferred tax asset being realized, a valuation allowance is established. The judgment about the level of future taxable income, including that which is considered capital, is inherently subjective and is reviewed on a continual basis as regulatory and business factors change. For additional information regarding the Company's deferred income taxes, see Note 17 to the consolidated financial statements.

Previous wording

Estimation of Fair Value. The estimation of fair value is significant to several of our assets; including investment securities available-for-sale, interest rate derivative (discussed in detail in Note 22 of the consolidated financial statements), intangible assets, foreclosed real estate, and the value of loan collateral when valuing loans. These are all recorded at either fair value, or the lower of cost or fair value. Fair values are determined based on third party sources, when available. Furthermore, accounting principles generally accepted in the United States require disclosure of the fair value of financial instruments as a part of the notes to the consolidated financial statements. Fair values on our available-for-sale securities may be influenced by a number of factors; including market interest rates, prepayment speeds, discount rates, and the shape of yield curves.

Current wording

Estimation of Fair Value. The estimation of fair value is significant to several of our assets; including AFS investment securities, interest rate derivatives (discussed in detail in Note 22 of the consolidated financial statements), intangible assets, foreclosed real estate, and the value of loan collateral when valuing loans. These are all recorded at either fair value, or the lower of cost or fair value. Fair values are determined based on third party sources, when available. Furthermore, accounting principles generally accepted in the United States require disclosure of the fair value of financial instruments as a part of the notes to the consolidated financial statements. Fair values on our AFS securities may be influenced by a number of factors; including market interest rates, prepayment speeds, discount rates, and the shape of yield curves.

Previous wording

Fair values for securities available-for-sale are obtained from an independent third party pricing service. Where available, fair values are based on quoted prices on a nationally recognized securities exchange. If quoted prices are not available, fair values are measured using quoted market prices for similar benchmark securities. Management made no adjustments to the fair value quotes that were provided by the pricing source. The fair values of foreclosed real estate and the underlying collateral value of individually analyzed loans are typically determined based on evaluations by third parties, less estimated costs to sell. When necessary, appraisals are updated to reflect changes in market conditions.

Current wording

Fair values for AFS securities are obtained from an independent third party pricing service. Where available, fair values are based on quoted prices on a nationally recognized securities exchange. If quoted prices are not available, fair values are measured using quoted market prices for similar benchmark securities. Management made no adjustments to the fair value quotes that were provided by the pricing source. The fair values of foreclosed real estate and the underlying collateral value of individually analyzed loans are typically determined based on evaluations by third parties, less estimated costs to sell. When necessary, appraisals are updated to reflect changes in market conditions.

Previous wording

Return on average assets decreased 44 basis points to 0.23% in 2024 from 0.67% in 2023. Return on average equity decreased 534 basis points to 2.75% in 2024 as compared to 8.09% in 2023. The decreases in return on average assets and return on average equity in 2024, as compared to the previous year, were both primarily due to the aforementioned decrease in net income. Average assets increased in 2024 by $60.7 million, or 4.4%, as the Company grew its total assets by $9.1 million from December 31, 2023 to $1.47 billion at December 31, 2024.

Current wording

Return on average assets decreased 36 basis points to negative 0.13% in 2025 from 0.23% in 2024. Return on average equity decreased 429 basis points to negative 1.54% in 2025 as compared to 2.75% in 2024. The decreases in return on average assets and return on average equity in 2025, as compared to the previous year, were both primarily due to the aforementioned decrease in net income. Average assets increased in 2025 by $17.6 million, or 1.2%.

Previous wording

The Company recorded a provision for credit losses of $11.0 million in 2024 as compared to $2.9 million in the prior year. The $8.1 million year-over-year increase in provision for credit losses primarily resulted from a comprehensive loan portfolio review during 2024 that the Bank elected to undertake as part of its commitment to continuously improve its credit risk management approach. Additionally, the provision for credit losses in 2024 reflected an increase in nonperforming loans of $4.9 million at December 31, 2024, as compared to December 31, 2023. The Company recorded $10.2 million in total loan charge-offs in 2024 as compared to $4.2 million in 2023. The increase in charge-off activity in 2024, as compared to the previous year, was primarily related to the aforementioned comprehensive loan portfolio review during the third quarter. The charge-offs in 2024 involved loans for which the charged-off amounts had been fully reserved for in prior periods.

Current wording

The Company recorded a provision for credit losses of $16.3 million in 2025 as compared to $11.0 million in the prior year. The $5.3 million year-over-year increase in provision for credit losses primarily reflects a risk-based reserve build from the comprehensive loan portfolio review of all commercial loan relationships with exposures of $500,000 or more, representing approximately 90% of the commercial portfolio, which was announced in October 2025 and completed in December 2025. Additionally, the provision for credit losses in 2025 reflected an increase in nonperforming loans of $5.5 million at December 31, 2025 as compared to December 31, 2024. The Company recorded $4.2 million in net charge-offs in 2025 as compared to $9.8 million in net charge-offs in 2024. The elevated loan charge-offs for 2024 were related to the loan portfolio review conducted in the third quarter of 2024.

Previous wording

Salaries and employee benefits, constituting the largest component of noninterest expenses, saw a year-over-year increase of $1.9 million, primarily attributed to increased headcount including staff associated with the East Syracuse branch acquired in July 2024, higher salaries and benefits costs associated with merit increases, and wage inflation. Professional and other services expense increased $1.7 million in 2024, as compared to 2023. This increase was primarily attributed to branch acquisition-related expenses, as well as an increase in technology project implementation services and other outsourced consulting services. An increase of $555,000 in occupancy and equipment expenses contributed to the annual increase in overall noninterest expenses, reflecting the Bank's investment in physical infrastructure and branch network expansion. Other increases in overall noninterest expense included a $453,000 increase in data processing primarily related to the opening of the new East Syracuse branch, and a $248,000 increase in insurance agency expense primarily associated with transaction-related expenses related to the Company's insurance agency assets sale in October 2024.

Current wording

Noninterest expense totaled $34.6 million and $34.4 million for the years ended December 31, 2025 and December 31, 2024, respectively. Salaries and employee benefits, constituting the largest component of noninterest expense, increased $1.1 million to $18.9 million in 2025. The increase from 2024 was primarily attributed to higher salaries and benefits costs associated with merit increases and wage inflation, as well as higher costs related to stock-based compensation. Building and occupancy costs increased $1.2 million or 29.0% in 2025 from the prior year, reflecting a full year of expenses associated with operating the East Syracuse branch acquired in July 2024. Professional and other services expenses decreased $936,000 from the previous year, when the Company incurred transaction-related expenses associated with the East Syracuse branch acquisition and consulting services costs related to technology enhancements, both in 2024. Additionally, noninterest expense was reduced $1.3 million in 2025 as compared to 2024 due to the absence of costs associated with the Company's insurance agency asset sold in October 2024.

Previous wording

Net loan charge-offs to average loans were 1.09% for 2024, as compared to 0.43% for 2023. Nonperforming loans to total loans increased to 2.40% at December 31, 2024, compared to 1.92% at December 31, 2023. The allowance for credit losses to non-performing loans at December 31, 2024 was 78.08%, compared with 92.73% at December 31, 2023. Total nonperforming assets increased $4.7 million, or 27.1%, between December 31, 2023 and December 31, 2024, largely driven by an increase of $5.9 million in nonperforming commercial and commercial real estate loans, in addition to an increase of $1.4 million in nonperforming residential real estate loans, offset by a decrease in nonperforming consumer loans of $2.4 million.

Current wording

Net loan charge-offs to average loans were 0.46% for 2025, as compared to 1.09% for 2024. Total past due loans measured as a percentage of total loans, increased from 3.81% at December 31, 2024 to 5.91% at December 31, 2025, primarily due to increases of $16.6 million in past due commercial loans and $1.6 million in past due residential loans. Nonperforming loans to total loans increased to 3.07% at December 31, 2025, compared to 2.40% at December 31, 2024. Total nonperforming assets increased $5.6 million, or 25.4%, between December 31, 2024 and December 31, 2025, largely driven by an increase of $6.7 million in nonperforming commercial real estate and commercial and industrial loans, offset by a decrease in nonperforming residential loans of $1.2 million. Commensurate with the increase in nonperforming loans to year end loans, the ratio of nonperforming assets to total assets increased to 1.94% at December 31, 2025 from 1.50% at December 31, 2024. The allowance for credit losses to non-performing loans at December 31, 2025 was 106.80%, compared with 78.08% at December 31, 2024.

Previous wording

Management monitors its loan portfolio closely and has incorporated our current estimate of the ultimate collectability of all loans into the reported allowance for credit losses at December 31, 2024. Overall, the ratio of the allowance for credit losses to year end loans increased to 1.88% at December 31, 2024 from 1.78% at December 31, 2023.

Current wording

Management monitors its loan portfolio closely and has incorporated our current estimate of the ultimate collectability of all loans into the reported allowance for credit losses at December 31, 2025. Overall, the ratio of the allowance for credit losses to year end loans increased to 3.28% at December 31, 2025 from 1.88% at December 31, 2024.

Previous wording

The Company’s shareholders’ equity increased $2.0 million, or 1.7%, to $121.5 million at December 31, 2024 from $119.5 million at December 31, 2023. This increase was due to a $1.8 million increase in retained earnings, a $461,000 decrease in accumulated other comprehensive loss, a decrease of $364,000 in additional paid in capital, and an increase of $135,000 of ESOP shares earned. The increase in retained earnings resulted from $3.4 million in net income recorded in 2024, and $863,000 from the deconsolidation of a subsidiary related to the insurance agency assets sale. Partially offsetting these increases in retained earnings were $1.9 million for cash dividends declared on our voting common stock, $552,000 for cash dividends declared on our non-voting common stock and $50,000 for cash dividends declared on our issued warrant. Comprehensive loss decreased primarily as the result of a $363,000 gain on derivatives and hedging activities, an $82,000 adjustment to pension and post-retirement benefits, and a gain of $16,000 on available-for-sale securities.

Current wording

The Company’s shareholders’ equity increased $968,000 or 0.8%, to $122.5 million at December 31, 2025 from $121.5 million at December 31, 2024. This increase was primarily due to a $3.8 million decrease in accumulated other comprehensive loss, and an increase of $1.6 million in additional paid in capital, offset by a $4.5 million decrease in retained earnings. Comprehensive loss decreased primarily due to net unrealized gains on pension and post-retirement benefits and AFS securities. The increase of $1.6 million for additional paid in capital was due to increased stock option exercise activity during the year. The decrease in retained earnings resulted from a $1.9 million net loss recorded for the year ended December 31, 2025, $1.9 million for cash dividends declared on voting common stock, $552,000 for cash dividends declared on non-voting common stock and $50,000 for cash dividends declared on issued warrants.

Previous wording

Net interest income, before provision for credit losses, increased $2.1 million, or 5.3%, to $41.0 million in 2024 as compared to $38.9 million in the previous year. Our net interest margin for the year ended December 31, 2024 increased to 2.98% from 2.95% for the comparable prior year. The increase in net interest income was primarily due to an increase in interest and dividend income of $10.7 million, or 15.8%, offset by a lesser increase in interest expense of $8.6 million, or 30.0%. The $1.2 million increase in interest and dividend income was primarily driven by the $21.8 million increase in loan balances, combined with a 57 basis points increase in average yield. The increase in interest expense was the result of an increase in average balances of deposit accounts, as well as an increase in average cost of deposits resulting from the high interest rate environment and increased competition.

Current wording

Net interest income, before provision for credit losses, increased $3.3 million, or 8.2%, to $44.3 million in 2025 as compared to $41.0 million in the previous year. Our net interest margin for the year ended December 31, 2025 increased to 3.21% from 2.98% compared to the prior year. The increase in net interest income was primarily due to lower interest expense of $5.1 million, or 13.5%, partially offset by lower interest and dividend income of $1.7 million or 2.2%. The $1.7 million decrease in interest and dividend income was driven by lower average taxable investment securities balances of $2.6 million, combined with lower average yield of taxable investment securities of 45 basis points. The decrease in interest expense was a result of the lower interest rate environment in 2025, which reduced cost of funds on MMDA accounts, time deposits, and borrowings, of 40 basis points, 46 basis points, and 63 basis points, respectively. Additionally, interest expense decreased due to lower average balances of time deposits of $31.4 million and borrowings of $50.0 million for the year ended December 31, 2025.

Previous wording

The Company recorded a provision for credit losses of $11.0 million in 2024 as compared to $2.9 million in the prior year. The $8.1 million year-over-year increase in provision for credit losses was primarily due to a comprehensive loan portfolio review during 2024 that the Bank elected to undertake as part of its commitment to continuously improve its credit risk management approach. The Company recorded $9.8 million in net charge-offs in 2024 as compared to $4.2 million in net charge-offs in 2023. The ratio of net charge-offs to average loans therefore increased to 1.09% in 2024 from 0.47% in 2023. Further information on earnings per share can be found in Note 1 to the consolidated financial statements of this Form 10-K.

Current wording

The Company recorded $4.2 million in net charge-offs in 2025 as compared to $9.8 million in net charge-offs in 2024. The ratio of net charge-offs to average loans therefore decreased to 0.46% in 2025 from 1.09% in 2024. Further information on earnings per share can be found in Note 1 to the consolidated financial statements of this Form 10-K.

Previous wording

Nonperforming loans to total loans increased to 2.40% at December 31, 2024 as compared to 1.92% at December 31, 2023. The allowance for credit losses to non-performing loans at December 31, 2024 was 78.1%, compared with 92.7% at December 31, 2023.

Current wording

Nonperforming loans to total loans increased to 3.07% at December 31, 2025 as compared to 2.40% at December 31, 2024. The allowance for credit losses to non-performing loans at December 31, 2025 was 106.80%, compared with 78.1% at December 31, 2024.

Previous wording

Basic and diluted earnings per share for the year ended December 31, 2024 were both $0.54, as compared to basic and diluted earnings per share of $1.51 for the year ended December 31, 2023. The decrease in earnings per share between these two years was due to the decrease in net income available to common shareholders between these two time periods. Further information on earnings per share can be found in Note 3 to the consolidated financial statements of this Form 10-K.

Current wording

Basic and diluted earnings per share for the year ended December 31, 2025 were both ($0.31), as compared to basic and diluted earnings per share of $0.54 for the year ended December 31, 2024. The decrease in earnings per share between these two years was due to the decrease in net income available to common shareholders between these two time periods. Further information on earnings per share can be found in Note 3 to the consolidated financial statements of this Form 10-K.

Previous wording

The Company's total assets were $1.47 billion at December 31, 2024, an increase of $9.1 million, or 0.6% from December 31, 2023. The increase was primarily the result of a $20.5 million increase in loans receivable, net, a $12.6 million increase in finance lease right-of-use assets, and a $10.6 million increase in available-for-sale securities, partially offset by a $20.6 million decrease in held-to-maturity securities, and a $18.8 million decrease in interest-earning deposits. All other asset categories had a net decrease of $4.8 million.

Current wording

The Company's total assets were $1.43 billion at December 31, 2025, a decrease of $48.2 million, or 3.3% from December 31, 2024. The decrease was primarily the result of a decrease of $28.4 million in HTM securities, as well as a $34.5 million decrease in loans receivable, net, that reflects the reclassification of $5.9 million in loans to held-for-sale status. These decreases were partially offset by increases of $7.5 million in AFS securities and $6.6 million in bank owned life insurance. All other asset categories had a net increase of $499,000.

Previous wording

The average balance of the investment portfolio represented 33.1% of the Company’s average interest-earning assets in 2024 and is designed to generate a favorable rate of return in consideration of all risk factors associated with debt securities while assisting the Company in meeting its liquidity needs and interest rate risk strategies. All of the Company’s investments, with the exception of marketable equity securities, are classified as either available-for-sale or held-to-maturity. The Company does not hold any trading securities. The Company invests in securities issued by United States Government agencies and sponsored enterprises (“GSE”), mortgage-backed securities, collateralized mortgage obligations, state and municipal obligations, mutual funds, equity securities, investment grade corporate debt instruments, and common stock issued by the FHLBNY. By investing in these types of assets, the Company reduces the credit risk of its asset base through geographical and collateral-type diversification but must accept lower yields than would typically be available on loan products. Our mortgage-backed securities and collateralized mortgage obligation portfolios include privately-issued but substantially collateralized pass-through securities as well as pass-through securities guaranteed by GSEs.

Current wording

The average balance of the investment portfolio, which represented 33.0% of the Company’s average interest-earning assets in 2025, is designed to generate a favorable rate of return in consideration of all risk factors associated with debt securities while assisting the Company in meeting its liquidity needs and interest rate risk strategies. All of the Company’s investments, with the exception of marketable equity securities, are classified as either AFS or HTM. The Company does not hold any trading securities. The Company invests in securities issued by United States Government agencies and sponsored enterprises (“GSE”), mortgage-backed securities, collateralized mortgage obligations, state and municipal obligations, mutual funds, equity securities, investment grade corporate debt instruments, and common stock issued by the FHLB-NY. By investing in these types of assets, the Company reduces the credit risk of its asset base through geographical and collateral-type diversification but must accept lower yields than would typically be available on loan products. Our mortgage-backed securities and collateralized mortgage obligation portfolios include privately-issued but substantially collateralized pass-through securities as well as pass-through securities guaranteed by GSEs.

Previous wording

At December 31, 2024, available-for-sale investment securities increased 4.1% to $269.3 million and held-to-maturity investment securities decreased 11.5% to $158.7 million as compared to December 31, 2023. There were no securities that exceeded 10% of consolidated shareholders’ equity.

Current wording

At December 31, 2025, AFS investment securities increased 2.8% to $276.8 million and HTM investment securities decreased 17.9% to $130.3 million as compared to December 31, 2024. There were four securities that exceeded 10% of consolidated shareholders’ equity.

Previous wording

Our available-for-sale investment securities are carried at fair value and our held-to-maturity investment securities are carried at amortized cost.

Current wording

Our AFS investment securities are carried at fair value and our HTM investment securities are carried at amortized cost.

Previous wording

Average loans receivable represented 65.8% of the Company’s average interest earning assets in 2024 and accounted for the greatest portion of total interest income.

Current wording

Average loans receivable represented 65.9% of the Company’s average interest earning assets in 2025 and accounted for the greatest portion of total interest income.

Previous wording

Total loans receivable, including net deferred costs, increased $21.8 million to $919.0 million at December 31, 2024 when compared to $897.2 million at December 31, 2023, due to increases in commercial real estate and home equity and junior liens of $19.1 million and $16.1 million, respectively. These increases in outstanding loan balances were partially offset by decreases in consumer loans, commercial and tax exempt loans, and residential real estate of $7.1 million, $3.4 million, and $2.9 million, respectively.

Current wording

Total loans receivable, including net deferred costs, decreased $22.3 million to $896.7 million at December 31, 2025 when compared to $919.0 million at December 31, 2024, due to decreases in residential mortgages of $14.7 million, consumer loans of $9.9 million, offset by an increase in commercial loans of $3.8 million.

Previous wording

The outstanding balance of commercial real estate loans increased as the Bank continued to benefit from the expanding relationship-derived business activity within the markets that the Bank serves. The increase in home equity and junior liens was primarily the result of such loans acquired from the purchase of the East Syracuse branch in July 2024. The decrease in residential real estate was primarily the result of decreases in the percentage of originated loans allocated to the Bank's portfolio as rates remained elevated throughout 2024.

Current wording

In 2025, the outstanding balance of commercial real estate loans increased as the Bank continued to benefit from the expanding relationship-derived business activity within the markets that the Bank serves. The decrease in residential real estate and consumer loans was primarily the result of decreases in newly originated loans.

Previous wording

Management monitors its loan portfolios closely and has incorporated our current estimate of the ultimate collectability of all loans into the reported allowance for credit losses at December 31, 2024. The ratio of the allowance for credit losses to year end loans was 1.88% and 1.78% at December 31, 2024 and December 31, 2023, respectively.

Current wording

Management monitors its loan portfolios closely and has incorporated our current estimate of the ultimate collectability of all loans into the reported allowance for credit losses at December 31, 2025. The ratio of the allowance for credit losses to year end loans was 3.28% and 1.88% at December 31, 2025 and December 31, 2024, respectively.

Previous wording

Management believes that the value of the collateral properties underlying the loans is sufficient to preclude any significant losses related to these loans. Management continues to monitor and react to national and local economic trends as well as general portfolio conditions which may impact the quality of the portfolio, and considers these environmental factors in support of the allowance for credit loss reserve. Management believes that the current level of the allowance for credit losses, at $17.2 million at December 31, 2024, adequately addresses the current level of risk within the loan portfolio, particularly considering the types and levels of collateralization supporting the substantial majority of the portfolio. The Company maintains strict loan underwriting standards and carefully monitors the performance of the loan portfolio. See Note 1: Summary of Significant Accounting Policies contained in the financial statements herein.

Current wording

Management believes that the value of the collateral properties underlying the loans is sufficient to preclude any significant losses related to these loans. Management continues to monitor and react to national and local economic trends, as well as general portfolio conditions which may impact the quality of the portfolio, and considers these environmental factors in support of the allowance for credit loss reserve. Management believes that the current level of the allowance for credit losses, at $29.4 million at December 31, 2025, adequately addresses the current level of risk within the loan portfolio, particularly considering the types and levels of collateralization supporting the substantial majority of the portfolio. The Company maintains strict loan underwriting standards and carefully monitors the performance of the loan portfolio. See Note 1: Summary of Significant Accounting Policies contained in the financial statements herein.

Previous wording

The Company generally places a loan on nonaccrual status and ceases accruing interest when loan payment performance is deemed unsatisfactory and the loan is past due 90 days or more. There are no loans that are past due 90 days or more and still accruing interest as set forth in the table above. The Company considers a loan as individually evaluated when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan. Had the loans in nonaccrual status performed in accordance with their original terms, additional interest income of $2.4 million and $989,000 would have been recorded for the years ended December 31, 2024 and December 31, 2023, respectively.

Current wording

The Company generally places a loan on nonaccrual status and ceases accruing interest when loan payment performance is deemed unsatisfactory and the loan is past due 90 days or more. There are no loans that are past due 90 days or more and still accruing interest as set forth in the table above. Had the loans in nonaccrual status performed in accordance with their original terms, additional interest income of $1.8 million and $2.4 million would have been recorded for the years ended December 31, 2025 and December 31, 2024, respectively.

Previous wording

Management has identified certain loans with potential credit profiles that may result in the borrowers not being able to comply with the current loan repayment terms and which may result in possible future identified loan reporting. Potential problem loans increased $13.3 million to $56.4 million at December 31, 2024, compared to $43.1 million at December 31, 2023. These loans have been internally classified as special mention, substandard, or doubtful, yet are not currently considered individually evaluated. The increase in potential problem loans was primarily due to a $8.2 million increase in potential problem commercial real estate loans, a $5.4 million increase in potential problem commercial lines of credit, and a $2.3 million increase in potential problem commercial and industrial loans. These increases were partially offset by a decrease of $1.9 million in potential problem residential mortgage loans.

Current wording

Management has identified certain loans with potential credit profiles that may result in the borrowers not being able to comply with the current loan repayment terms and which may result in possible future identified loan reporting. Potential problem loans increased $19.5 million to $75.9 million at December 31, 2025, compared to $56.4 million at December 31, 2024. These loans have been internally classified as special mention, substandard, or doubtful, yet are not currently considered individually evaluated. The $19.5 million

Previous wording

Total potential problem loans, including individually evaluated loans, were $58.0 million at December 31, 2024, and were comprised of special mention, substandard and doubtful loans of $32.8 million, $23.1 million and $2.1 million, respectively. Total potential problem loans, including individually evaluated loans, were $43.1 million at December 31, 2023, and were comprised of special mention, substandard and doubtful loans of $20.7 million, $20.3 million and $2.1 million, respectively.

Current wording

Total potential problem loans, including individually evaluated loans, were $77.2 million at December 31, 2025, and were comprised of special mention, substandard and doubtful loans of $45.4 million, $28.7 million and $3.1 million, respectively. Total potential problem loans, including individually evaluated loans, were $58.0 million at December 31, 2024, and were comprised of special mention, substandard and doubtful loans of $32.8 million, $23.1 million and $2.1 million, respectively.

Previous wording

The Company measures delinquency based on the amount of past due loans as a percentage of total loans. The ratio of delinquent loans to total loans increased to 3.81% at December 31, 2024 as compared to 3.79% at December 31, 2023. This increase was due to an increase of $2.0 million in past due commercial loans, a $728,000 increase in past due residential loans, partially offset by a $1.7 million decrease in past due consumer loans. At December 31, 2024, there were $35.1 million in loans past due including $8.8 million, $4.2 million and $22.1 million in loans 30-59 days, 60-89 days, and 90 days and over past due, respectively. At December 31, 2023, there were $34.0 million in loans past due including $13.6 million, $3.2 million and $17.2 million in loans 30-59 days, 60-89 days, and 90 days and over past due, respectively.

Current wording

The Company measures delinquency based on the amount of past due loans as a percentage of total loans. The ratio of delinquent loans to total loans increased to 5.91% at December 31, 2025 as compared to 3.81% at December 31, 2024. This increase was due to an increase of $16.6 million in past due commercial loans, and a $1.6 million increase in past due residential loans, partially offset by a $235,000 decrease in past due consumer loans. At December 31, 2025, there were $53.0 million in loans past due including $13.9 million, $11.5 million and $27.6 million in loans 30-59 days, 60-89 days, and 90 days and over past due, respectively. At December 31, 2024, there were $35.1 million in loans past due including $8.8 million, $4.2 million and $22.1 million in loans 30-59 days, 60-89 days, and 90 days and over past due, respectively.

Previous wording

Loans purchased outside of the Bank’s general market area are subject to substantial pre-purchase due diligence. Homogenous pools of purchased loans are subject to pre-purchase analyses led by a team of the Bank’s senior executives and credit analysts. In each case, the Bank’s analytical processes consider the types of loans being evaluated, the underwriting criteria employed by the originating entity, the historical performance of such loans, especially in the most recent deeply recessionary period, the offered collateral enhancements and other credit loss mitigation factors offered by the seller and the capabilities and financial stability of the servicing entities involved. From a credit risk perspective, these loan pools also benefit from broad diversification, including wide geographic dispersion, the readily-verifiable historical performance of similar loans issued by the originators, as well as the overall experience and skill of the underwriters and servicing entities involved as counterparties to the Bank in these transactions. The performance of all purchased loan pools are monitored regularly from detailed reports and remittance reconciliations provided at least monthly by the external servicing entities.

Current wording

Loans purchased outside of the Bank’s general market area are subject to substantial pre-purchase due diligence. Homogenous pools of purchased loans are subject to pre-purchase analyses led by a team of the Bank’s senior executives and credit analysts. In each case, the Bank’s analytical processes consider the types of loans being evaluated, the underwriting criteria employed by the originating entity, the historical performance of such loans, especially in the most recent deeply recessionary period, the offered collateral enhancements and other credit loss mitigation factors offered by the seller and the capabilities and financial stability of the servicing entities involved. From a credit risk perspective, these loan pools also benefit from broad diversification, including wide geographic dispersion, the readily-verifiable historical performance of similar loans issued by the originators, as well as the overall experience and skill of the underwriters and servicing entities involved as counterparties to the Bank in these transactions. The performance of all purchased loan pools is monitored regularly from detailed reports and remittance reconciliations provided at least monthly by the external servicing entities.

Previous wording

The allowance for credit losses (ACL) is established through provision for credit losses and reduced by loan charge-offs net of recoveries. The allowance for credit losses represents the amount available for lifetime credit losses in the Company’s loan portfolio as estimated by management.

Current wording

The ACL is established through provision for credit losses and reduced by loan charge-offs net of recoveries. The allowance for credit losses represents the amount available for lifetime credit losses in the Company’s loan portfolio as estimated by management.

Previous wording

The allowance for credit losses and the allowance for loan losses at December 31, 2024 and 2023 was $17.2 million and $16.0 million, respectively, or 1.87% and 1.78% of total year end loans on those dates, respectively. The Company recorded $9.8 million in net charge-offs in 2024, as compared to $4.2 million in net charge-offs in 2023. The ratio of net charge-offs to average loans increased to 1.09% in 2024 from 0.47% in 2023. The increase in charge-off activity in 2024, as compared to the previous year, was primarily related to a comprehensive loan portfolio review that the Bank elected to undertake as part of its ongoing commitment to continuously improve its credit risk management approach.

Current wording

The Company recorded $4.2 million in net charge-offs in 2025, as compared to $9.8 million in net charge-offs in 2024. The ratio of net charge-offs to average loans decreased to 0.46% in 2025 from 1.09% in 2024. The decrease in charge-off activity in 2025, as compared to the previous year, was due to elevated loan charge-offs for 2024 that were related to the loan portfolio review conducted in the third quarter of 2024.

Previous wording

The Company held $24.7 million and $24.6 million in bank owned life insurance ("BOLI") at December 31, 2024 and 2023, respectively. Bank owned life insurance increased $85,000, or 0.3%, to $24.7 million at December 31, 2024, as compared to December 31, 2023. The increase of $85,000 included earnings and gains on BOLI and in addition, the Company recorded a net death benefit of $175,000.

Current wording

The Company held $31.4 million and $24.7 million in bank owned life insurance ("BOLI") at December 31, 2025 and 2024, respectively. Bank owned life insurance increased $6.7 million, or 26.9%, to $31.4 million at December 31, 2025, as compared to December 31, 2024. The increase of $6.7 million was primarily attributable to the Company's $6.0 million purchase of new life insurance policies during the second quarter of 2025, in addition to earnings and gains on BOLI.