FINANCIAL INSTITUTIONS INC
For the period ended Mar 31, 2026. Filed May 4, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 4, 2026
FISI$39.73+0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-03.
0001193125-25-262535
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-04.
0001193125-26-203962
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 225 previous paragraphs and 208 current paragraphs.
137 unchanged; 55 reworded; 15 added; 29 removed; 4 previous and 1 current paragraphs rearranged.
Tables are not compared: 20 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
We offer financial services to a limited number of New York State-licensed cannabis businesses under New York State’s regulatory framework, with supporting policy and procedures, enhanced due diligence, monitoring, and required regulatory reporting. While federal law continues to classify cannabis as illegal, the risk of strict federal enforcement remains uncertain. Any significant change in federal enforcement posture could affect our ability to continue services to these customers and could increase our legal, regulatory, or compliance-related obligations.
Current report
Summary of 2026 First Quarter Results
Current report
Noninterest income totaled $10.7 million in the first quarter of 2026, compared to $10.4 million in the first quarter of 2025. The increase primarily consisted of a $328 thousand net gain on sale of securities, and an increase of $324 thousand from investment advisory income, partially offset by a $481 thousand net loss on the sale of other assets, and a $191 thousand decrease in investment in limited partnership income. Refer to the “Noninterest Income” section of this Management’s Discussion and Analysis for further discussion regarding these variances.
Current report
Noninterest expense totaled $35.6 million in the first quarter of 2026, compared to $33.7 million in the first quarter of 2025. The increase in noninterest expense for the first quarter of 2026 was primarily attributable to a $1.7 million increase in salaries and employee benefits, a $724 thousand increase in computer and data processing expenses, and a $403 thousand increase in deposit-related charged-off items, partially offset by a $546 thousand decrease in other noninterest expense, and a $341 thousand decrease in professional services expense. Refer to the “Noninterest Expense” section of this Management’s Discussion and Analysis for further discussion regarding these variances.
Current report
Provision for Credit Losses
Current report
Investment advisory income of $3.1 million for the first quarter of 2026 increased $324 thousand, or 12%, compared to $2.7 million for the first quarter of 2025, reflecting both new business and market-driven gains.
Current report
Net loss on sale of other assets of $481 thousand for the first quarter of 2026 comprised of the net loss on the write-down of two branch locations that were held for sale as of March 31, 2026.
Current report
Salaries and employee benefits expense increased $1.7 million, or 10%, to $18.6 million for the first quarter of 2026, compared to $16.9 million for the first quarter of 2025, reflecting a combination of factors, including annual merit increases, incentive compensation and investments in personnel.
Current report
Professional services expense decreased $341 thousand, or 20%, to $1.4 million for the first quarter of 2026 compared to $1.7 million for the first quarter of 2025. The decline was primarily due to lower audit-related expenses and lower other professional and consulting fees.
Current report
Computer and data processing expense increased $724 thousand, or 13%, to $6.2 million for the first quarter of 2026, compared to $5.5 million for the first quarter of 2025. The increase was due in part to the termination of a vendor relationship during the first quarter of 2026.
Current report
Deposit-related charged-off items expense was $109 thousand for the first quarter of 2026, compared to deposit-related recoveries of $294 thousand for the first quarter of 2025. The recoveries in the first quarter of 2025 were primarily related to insurance proceeds related to a post commercial deposit charged-off item.
Current report
Other expense decreased $546 thousand, or 12%, to $3.9 million for the first quarter of 2026, compared to $4.4 million for the first quarter of 2025. The decline was primarily attributed to lower corporate insurance premiums and a reduction in bank charges associated with swap collateral accounts due to lower interest rates.
Current report
Other Debt Securities
Current report
We also hold subordinated debt of bank holding companies with a maturity of 10 years, with a call in 5 years. As of March 31, 2026, there were 14 corporate bonds with an aggregate fair value of $31.5 million, in an unrealized loss position for less than 12 months of $459 thousand.
Current report
FHLB and FRB Stock
Removed paragraphs (29)
Previous report
We have implemented a program to provide financial products and services to customers that do business in the cannabis industry and the strict enforcement of federal laws and regulations regarding cannabis could result in our inability to continue to provide financial products and services to these customers and we could have legal action taken against us by the federal government and exposure to additional liabilities and regulatory compliance costs.
Previous report
On April 1, 2024, the Company announced and closed the sale of the assets of its wholly owned subsidiary, SDN Insurance Agency, LLC (“SDN”), which provided a broad range of insurance services to personal and business clients, to NFP Property & Casualty Services, Inc. (“NFP”), a subsidiary of NFP Corp. The sale generated $27 million in proceeds, or a pre-tax gain of $13.7 million, after selling costs, of which $13.5 million was recognized in the second quarter of 2024. The all-cash transaction value represented approximately four times our 2023 insurance revenue. Following the sale of the assets of SDN, we changed the name of the entity to Five Star Advisors LLC and expect to utilize it to serve as a conduit to refer insurance business to NFP.
Previous report
On September 16, 2024, we announced our intent to begin an orderly wind down of our BaaS offerings, following a careful review by the Company’s executive management and Board of Directors (“Board”) undertaken in conjunction with its annual strategic planning process. As expected, the majority of BaaS-related deposits were off the balance sheet as of September 30, 2025. We expect the remaining balance to flow out in early 2026.
Previous report
Stock Repurchase Program
Previous report
Summary of 2025 Third Quarter Results
Previous report
Noninterest income totaled $12.1 million in the third quarter of 2025, compared to $9.4 million in the third quarter of 2024. The increase primarily consisted of $1.4 million from higher income from company-owned life insurance (“COLI”), a $703 thousand net gain on sale of securities, and $635 thousand of income from derivatives, net. The net gain on sale of securities was primarily related to the sale of $22.3 million of 30-year fixed rate mortgage-backed securities with higher than expected pre-payment speeds in September 2025, the proceeds of which were reinvested into investment grade corporate bonds.
Previous report
Noninterest expense totaled $35.9 million in the third quarter of 2025, compared to $32.5 million in the third quarter of 2024. The increase in noninterest expense for the third quarter of 2025 was primarily attributable to a $2.6 million increase in salaries and employee benefits, reflecting an increase in health insurance benefit expense due to continued higher medical claims under our self-insured plan, and the impact of annual merit increases.
Previous report
Analysis of Net Interest Income for the Nine Months Ended September 30, 2025 and 2024
Previous report
Net interest income on a taxable equivalent basis for the nine months ended September 30, 2025, was $147.9 million, an increase of $25.8 million versus the comparable period in 2024 of $122.2 million. Net interest margin for the nine months ended September 30, 2025 was 3.50%, 65-basis points higher than 2.85% for the same period in 2024. The increase in net interest income and net interest margin was primarily due to an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024, partially offset by a decrease in market interest rates due to the federal funds interest rate cuts that occurred in the latter part of 2024 as previously mentioned.
Previous report
For the nine months ended September 30, 2025, the average yield on average interest earning assets of 5.87% was 38-basis points higher than the nine months ended September 30, 2024 of 5.49%. The average yield on investment securities increased 221-basis points to 4.35% for the nine months ended September 30, 2025 compared to 2.14% for the nine months ended September 30, 2024, while the average yield on loans decreased 14-basis points during the nine months ended September 30, 2025, to 6.25% from 6.39% for the comparable period last year.
Previous report
Average interest-earning assets were $5.65 billion for the nine months ended September 30, 2025 compared to $5.73 billion for the nine months ended September 30, 2024, a decrease of $73.9 million, or 1%, reflective of a decrease in investment securities of $102.8 million from $1.17 billion for the nine months ended September 30, 2024 to $1.07 billion for the nine months ended September 30, 2025, and a $66.3 million decrease in average Federal Reserve interest-earning cash, while average loans were up $95.3 million from $4.44 billion for the nine months ended September 30, 2024 to $4.44 billion for the nine months ended September 30, 2025. Average investment securities represented 19% of average interest-earning assets during the nine months ended September 30, 2025 compared to 21% during the nine months ended September 30, 2024, and average loans comprised 80% of average interest-earning assets during the nine months ended September 30, 2025 compared to 78% during the nine months ended September 30, 2024. The increase in average loans was primarily due to organic growth in commercial mortgages during the first nine months of 2025. Overall, the increase in interest income of $13.2 million was reflective of the higher average interest rates on average investment securities and the increase in average loans, partially offset by the decrease in average loan yields.
Previous report
For the nine months ended September 30, 2025, the average cost of average interest-bearing liabilities of 3.00% was 34-basis points lower than the average cost of 3.34% for the nine months ended September 30, 2024, with the average cost of average interest-bearing deposits of 2.95% decreasing 36-basis points from 3.31% for the nine months ended September 30, 2024, due to the repricing of deposits and borrowings at lower rates given the federal funds interest rate cuts that occurred in the latter part of 2024 as previously mentioned.
Previous report
Average interest-bearing liabilities of $4.49 billion in the nine months ended September 30, 2025 were $33.1 million, or 1%, lower than the nine months ended September 30, 2024. The decrease was driven by a decrease in average total borrowings of $58.3 million, partially offset by a $25.2 million increase in average interest-bearing deposits. Average short-term borrowings decreased to $97.2 million, down $52.4 million from the nine months ended September 30, 2024, and average long-term borrowings decreased to $118.7 million, down $5.9 million, reflective of the previously disclosed $10 million call in April 2025 of the fixed-to-floating subordinated debt that was originally issued in April 2015. On average, interest-bearing deposits increased $25.2 million for the current period, while noninterest-bearing demand deposits (a principal component of net free funds) decreased $18.6 million to $936.9 million for the nine months ended September 30, 2025. The increase in average interest bearing deposits reflected growth in public, reciprocal and non-public deposits, partially offset by decreases in reciprocal deposits. For further discussion of the reciprocal deposit programs, refer to the “Funding Activities–Deposits” section of this Management’s Discussion and Analysis. Overall, the $12.6 million decrease in interest expense during the nine months ended September 30, 2025 was primarily due to average deposit rate changes, reflective of the interest rate cuts previously mentioned.
Previous report
(3)Annualized.
Previous report
Provision (Benefit) for Credit Losses
Previous report
The decrease in insurance income for the nine months ended September 30, 2025, was reflective of the sale of our insurance subsidiary, SDN, on April 1, 2024.
Previous report
Income from company owned life insurance increased $1.4 million, to $2.8 million for the third quarter of 2025, compared to $1.4 million for the third quarter of 2024. For the first nine months of 2025, income from company owned life insurance increased $4.5 million, to $8.6 million. The increase in both periods was reflective of the surrender and redeployment of a portion of our life insurance into a higher-yielding credit fund in January 2025.
Previous report
Income from derivative instruments, net of $847 thousand for the third quarter of 2025, increased $635 thousand, compared to $212 thousand for the third quarter of 2024. For the first nine months of 2025, income from derivative instruments, net increased $673 thousand to $1.4 million. Income from derivative instruments, net is based on the number and value of interest rate swap transactions executed during the period combined with the impact of changes in the fair value of borrower-facing trades.
Previous report
Net gain on sale or call of securities for the third quarter of 2025, and the first nine months of 2025 primarily reflect the gain on sale of $22.3 million of 30-year fixed mortgage-backed securities with higher than expected pre-payment speeds in September 2025, the proceeds of which were reinvested into investment grade corporate bonds.
Previous report
Net gain on sale and disposal of other assets for the first nine months of 2024 was comprised of the net gain generated from the sale of SDN.
Previous report
Salaries and employee benefits expense increased $2.6 million, or 17%, to $18.5 million for the third quarter of 2025, compared to $15.9 million for the third quarter of 2024, reflecting an increase in health insurance benefits due to elevated medical claims under the Company’s self-insured plan. For the first nine months of 2025, salaries and employee benefits expense increased $4.5 million, or 9%, to $53.5 million, compared to the first nine months of 2024, due to the aforementioned higher health insurance benefit expense, as well as the impact of annual merit increases, partially offset by lower salaries and wages as a result of the sale of SDN on April 1, 2024.
Previous report
Occupancy and equipment expense increased $444 thousand, or 13%, to $3.8 million for the third quarter of 2025, compared to $3.4 million for the third quarter of 2024. For the first nine months of 2025, occupancy and equipment expense increased $816 thousand, or 8%, to $11.4 million, compared to the first nine months of 2024. The increases were due, in part, to costs associated with our ongoing ATM conversion and upgrade project.
Previous report
Professional services expense decreased $277 thousand, or 14%, to $1.7 million for the third quarter of 2025 compared to $2.0 million for the third quarter of 2024. For the first nine months of 2025, professional services expense decreased $1.3 million, or 21%, to $4.8 million, compared to $6.1 million for the first nine months of 2024. The decreases for both periods were primarily due to higher legal expenses in 2024.
Previous report
Computer and data processing expense increased $436 thousand, or 8%, to $5.8 million for the third quarter of 2025, compared to $5.4 million for the third quarter of 2024. For the first nine months of 2025, computer and data processing expense increased $1.1 million, or 7%, to $17.2 million compared to $16.1 million for the first nine months of 2024. The increases in both periods were impacted by the timing of expenses for in-process technology enhancement and upgrade initiatives.
Previous report
Deposit-related charged-off items expense of $20.0 million for the first nine months of 2024 included an $18.4 million loss associated with the previously disclosed deposit-related fraud event.
Previous report
On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act” (the “OBBB Act”), into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The OBBB Act also made certain changes to the deductibility of the cost of meals and charitable contributions that are effective for tax years beginning after December 31, 2025. We are currently evaluating the provisions of the OBBB Act and do not expect it to have a material impact on our consolidated financial statements.
Previous report
Other Investments
Previous report
On December 13, 2024, we completed an underwritten public offering of 4,600,000 shares of common stock, including 600,000 shares as result of the underwriters exercising their overallotment option, at $25.00 per share. We received net proceeds of $108.6 million after deducting underwriting discounts and commissions and offering expenses from the sale of our common stock. As intended, a portion of the net proceeds was used to fund losses associated with a strategic investment securities restructuring, which was completed in late December 2024. The proceeds may also be used for general corporate purposes which may include the repayment of indebtedness.
Previous report
We have elected to apply the 2020 Current Expected Credit Losses (“CECL”) transition provision related to the impact of the CECL accounting standard on regulatory capital, as provided by the US banking agencies’ March 2020 interim final rule. Under the 2020 CECL transition provision, the regulatory capital impact of the Day 1 adjustment to the allowance for credit losses (after-tax) upon the January 1, 2020 CECL adoption date has been deferred and has begun to phase into regulatory capital at 25% per year commencing January 1, 2022. For the ongoing impact of CECL, we were allowed to defer the regulatory capital impact of the allowance for credit losses in an amount equal to 25% of the change in the allowance for credit losses (pre-tax) recognized through earnings for each period between January 1, 2020, and December 31, 2021. The cumulative adjustment to the allowance for credit losses between January 1, 2020, and December 31, 2021, also began to phase into regulatory capital at 25% per year commencing January 1, 2022.
Reworded paragraphs (55)
Previous wording
This Quarterly Report on Form 10-Q should be read in conjunction with the more detailed and comprehensive disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2024. In addition, please read this section in conjunction with our Consolidated Financial Statements and Notes to Consolidated Financial Statements contained herein.
Current wording
This Quarterly Report on Form 10-Q should be read in conjunction with the more detailed and comprehensive disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2025. In addition, please read this section in conjunction with our Unaudited Interim Consolidated Financial Statements and Notes to Consolidated Financial Statements contained herein. When necessary, prior year information has been reclassified to conform to the current-year presentation.
Previous wording
Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act, and Office of Foreign Asset Control sanction requirements, amount other laws and regulations, could subject us to fines, sanctions, or other negative actions;
Current wording
Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act, Office of Foreign Asset Control sanction requirements, or other applicable state and federal laws could subject us to fines, penalties, or other regulatory actions;
Previous wording
We have evolved to meet changing customer needs by offering complementary physical, digital and virtual channels. We focus on technology to provide solutions that fit our customers’ preferences for transacting business with us. Branches are staffed by certified personal bankers who are trained to meet a broad array of customer needs. Our digital banking capabilities, interactive teller machine (“ITM”) functionality and Customer Contact Center provide additional self-serve and phone options through which customer needs are met effectively.
Current wording
We have evolved to meet changing customer needs by offering complementary physical, digital and virtual channels. We focus on technology to provide solutions that fit our customers’ preferences for transacting business with us. Branches are staffed by certified personal bankers who are trained to meet a broad array of customer needs. Our digital banking capabilities and Customer Contact Center provide additional self-serve and phone options through which customer needs are met effectively.
Previous wording
We will continue to explore market expansion opportunities that complement current market areas as opportunities arise. Our primary focus will be on increasing the Bank’s market share within existing markets, while taking advantage of potential growth opportunities within our noninterest income lines of business by acquiring businesses that can be incorporated into existing operations. We believe our capital position remains strong enough to support an active merger and acquisition strategy and the expansion of our core financial service businesses. Consequently, we continue to explore acquisition opportunities in these activities. When evaluating acquisition opportunities, we will balance the potential for earnings accretion with maintaining adequate capital levels, which could result in our common stock being the predominant form of consideration and/or the need for us to raise capital.
Current wording
We will continue to explore market expansion opportunities that complement current market areas as opportunities arise. Our primary focus is on organic growth, as well as evaluating potential growth opportunities within our non-interest income line of business by acquiring business that can be incorporated into existing operations. While organic growth remains our primary focus, we beleive our capital position remains strong enough to support selective merger and acquisition activity in support of expansion of our core financial service businesses. Consequently, we will contine to evaluate acquisition opportunities in these activities. When evaluating acquisition opportunities, we will balance the potential for earnings accretion with maintaining adequate capital levels, which could result in our common stock being the predominant form of consideration and/or the need for us to raise capital.
Previous wording
Conversations with potential strategic partners occur on a regular basis. The evaluation of any potential opportunity will favor a transaction that complements our core competencies and strategic intent, with a lesser emphasis being placed on geographic location or size. Additionally, we remain committed to maintaining a diversified revenue stream. Our senior management team has experience in acquisitions and post-acquisition integration of operations and is prepared to act promptly should a potential opportunity arise but will remain disciplined with its approach. We believe this experience positions us to successfully acquire and integrate additional financial services and banking businesses.
Current wording
Conversations with potential strategic partners occur on a regular basis. The evaluation of any potential opportunity will favor a transaction that complements our core competencies and strategic intent. Additionally, we remain committed to maintaining a diversified revenue stream. Our senior management team has experience in acquisitions and post-acquisition integration of operations and is prepared to act promptly should a potential opportunity arise but will remain disciplined with its approach. We believe this experience positions us to successfully acquire and integrate additional financial services and banking businesses.
Previous wording
Net income increased $7.0 million to $20.5 million for the third quarter of 2025 compared to $13.5 million for the third quarter of 2024. Net income available to common shareholders for the third quarter of 2025 was $20.1 million, or $0.99 per diluted share, compared with $13.1 million, or $0.84 per diluted share, for the third quarter of 2024. Return on average common equity was 13.45% and return on average assets was 1.32% for the third quarter of 2025 compared to 11.08% and 0.89%, respectively, for the third quarter of 2024.
Current wording
Net income increased $4.1 million to $21.0 million for the first quarter of 2026 compared to $16.9 million for the first quarter of 2025. Net income available to common shareholders for the first quarter of 2026 was $20.6 million, or $1.04 per diluted share, compared with $16.5 million, or $0.81 per diluted share, for the first quarter of 2025. Return on average common equity was 13.57% and return on average assets was 1.37% for the first quarter of 2026 compared to 11.92% and 1.10%, respectively, for the first quarter of 2025.
Previous wording
Net interest income totaled $51.8 million in the third quarter of 2025, an increase of $11.1 million compared to $40.7 million in the third quarter of 2024. Average interest-earning assets for the third quarter of 2025 were $45.2 million higher than the third quarter of 2024 primarily due to a $151.0 million increase in average loans, partially offset by an $87.8 million decrease in average investment securities, and an $18.0 million decrease in the average balance of Federal Reserve interest-earning cash. Average interest-bearing liabilities for the third quarter of 2025 were $37.8 million higher than the third quarter of 2024 due to a $127.6 million increase in average time deposits, partially offset by a $57.5 million decrease in average savings and money market account deposits, a $19.1 million decrease in average short-term borrowings, and a $9.7 million decrease in average long-term borrowings. The wind-down of the BaaS platform that the Bank initiated in September 2024 was the primary driver of the reduction in average savings and money market deposits and also contributed to the increase in average time deposits, given the increase in brokered deposits as compared to the third quarter of 2024.
Current wording
Net interest income totaled $52.0 million in the first quarter of 2026, an increase of $5.1 million compared to $46.9 million in the first quarter of 2025. Average interest-earning assets for the first quarter of 2026 were $73.3 million higher than the first quarter of 2025 primarily due to a $145.1 million increase in average loans, partially offset by a $41.5 million decrease in the average balance of Federal Reserve interest-earning cash and a $30.3 million decrease in average investment securities. Average interest-bearing liabilities for the first quarter of 2026 were $6.7 million higher than the first quarter of 2025 primarily due to a $118.2 million increase in average time deposits and a $12.9 million increase in average short-term borrowings, partially offset by a $70.0 million decrease in average savings and money market account deposits, a $28.8 million decrease in average interest-bearing demand deposits, and a $25.6 million decrease in average long-term borrowings. The wind-down of the Banking-as-a-Service (“BaaS”) platform that the Bank initiated in September 2024 was the primary driver of the reduction in average savings and money market deposits.
Previous wording
Net interest margin was 3.65% for the third quarter of 2025 compared to 2.89% in the third quarter of 2024, primarily driven by lower interest-bearing liability costs and an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024, which supported an increase in the average yield on interest-earning assets.
Current wording
Net interest margin was 3.67% for the first quarter of 2026 compared to 3.35% in the first quarter of 2025, primarily driven by lower interest-bearing liability costs.
Previous wording
The provision for credit losses was $2.7 million in the third quarter of 2025 compared to $3.1 million in the third quarter of 2024. Net charge-offs during the recent quarter were $2.1 million, representing 0.18% of average loans on an annualized basis, compared to $1.7 million, or an annualized 0.15% of average loans, in the third quarter of 2024. See the “Allowance for Credit Losses–Loans” and “Non-Performing Assets and Potential Problem Loans” sections of this Management’s Discussion and Analysis for further discussion regarding the provision for credit losses and net charge-offs.
Current wording
The provision for credit losses was $2.2 million in the first quarter of 2026 compared to $2.9 million in the first quarter of 2025. Net charge-offs during the recent quarter were $5.1 million, representing 0.44% of average loans on an annualized basis, compared to $2.4 million, or an annualized 0.21% of average loans, in the first quarter of 2025. See the “Provision for Credit Losses,” “Allowance for Credit Losses–Loans” and “Non-Performing Assets and Potential Problem Loans” sections of this Management’s Discussion and Analysis for further discussion regarding the provision for credit losses and net charge-offs.
Previous wording
The regulatory Tier 1 Capital Ratio was 11.48% and 10.87%, respectively, and Total Risk-Based Capital Ratio was 13.60% and 13.25%, respectively, at September 30, 2025 and December 31, 2024. See the “Liquidity and Capital Management” section of this Management’s Discussion and Analysis for further discussion regarding regulatory capital and the Basel III capital rules.
Current wording
The regulatory Tier 1 Capital Ratio was 11.70% and 11.43%, respectively, and Total Risk-Based Capital Ratio was 14.16% and 14.90%, respectively, at March 31, 2026 and December 31, 2025. See the “Liquidity and Capital Management” section of this Management’s Discussion and Analysis for further discussion regarding regulatory capital and the Basel III capital rules.
Previous wording
Net interest income is our primary source of revenue, comprising approximately 81% of revenue during the three months ended September 30, 2025 and 2024, and 82% and 73% for the nine months ended September 30, 2025 and 2024, respectively. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities, and interest expense on interest-bearing deposits and other borrowings used to fund interest-earning and other assets or activities. Net interest income is affected by changes in interest rates and by the amount and composition of interest-earning assets and interest-bearing liabilities, as well as the sensitivity of the balance sheet to changes in interest rates, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities and repricing frequencies.
Current wording
Net interest income is our primary source of revenue, comprising approximately 83% of revenue during the first quarter of 2026 and 82% of revenue during the first quarter of 2025. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities, and interest expense on interest-bearing deposits and other borrowings used to fund interest-earning and other assets or activities. Net interest income is affected by changes in interest rates and by the amount and composition of interest-earning assets and interest-bearing liabilities, as well as the sensitivity of the balance sheet to changes in interest rates, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities and repricing frequencies.
Previous wording
Analysis of Net Interest Income for the Three Months Ended September 30, 2025 and 2024
Current wording
Analysis of Net Interest Income and Net Interest Margin
Previous wording
Net interest income on a taxable equivalent basis for the three months ended September 30, 2025, was $51.8 million, an increase of $11.1 million versus the comparable quarter last year of $40.7 million. Net interest margin for the third quarter of 2025 was 3.65%, 76-basis points higher than 2.89% for the same period in 2024. The increase in net interest income and net interest margin was primarily driven by lower interest-bearing liability costs and an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024, which supported an increase in the average yield on interest-earnings assets.
Current wording
Net interest income on a taxable equivalent basis for the first quarter of 2026, was $52.0 million, an increase of $5.1 million versus the comparable quarter last year of $46.9 million. Net interest margin for the first quarter of 2026 was 3.67%, 32-basis points higher than 3.35% for the same period in 2025. This increase was a function of a 38-basis points increase in the net interest spread, partially offset by a 6-basis point lower contribution from net free funds. The increase in interest rate spread was comprised of a 4-basis points decrease in the average yield of average interest-earning assets, and a 42-basis points decrease in the average cost of interest-bearing liabilities.
Previous wording
For the third quarter of 2025, the average yield on average interest earning assets of 5.93% was 40-basis points higher than the third quarter of 2024 of 5.53% primarily due to an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024, partially offset by a decrease in market interest rates due to the federal funds interest rate cuts that occurred in the latter part of 2024. Average yield on investment securities increased 231-basis points during the third quarter of 2025 to 4.45% from 2.14% for the third quarter of 2024, while average loan yield decreased 13-basis points during the third quarter of 2025 to 6.29% from 6.42% for the third quarter of 2024.
Current wording
For the first quarter of 2026, the average yield on average interest earning assets of 5.76% was 4-basis points lower than the first quarter of 2025 of 5.80%. The average yield on federal reserve interest-earning cash decreased 58-basis points during the first quarter of 2026 to 3.79%, decreasing interest income by $92 thousand, and average loan yield decreased 13-basis points during the first quarter of 2026 to 6.07% from 6.20% for the first quarter of 2025, decreasing net interest income $1.4 million, while the average yield on investment securities increased 23-basis points during the first quarter of 2026 to 4.48%, resulting in a $586 thousand increase in interest income.
Previous wording
Average interest-earning assets were $5.66 billion for the third quarter of 2025 compared to $5.61 billion for the third quarter of 2024, an increase of $45.2 million, or 1%, from the comparable quarter last year. The increase was primarily due to an increase of average loans of $151.0 million from $4.42 billion for the third quarter of 2024 to $4.57 billion for the third quarter of 2025, partially offset by a decrease in average investment securities of $87.8 million from $1.15 billion for the third quarter of 2024 to $1.06 billion for the third quarter of 2025, and an $18.0 million decrease in average Federal Reserve interest-earning cash. Average loans comprised 81% of average interest-earning assets during the third quarter of 2025 compared to 79% during the third quarter of 2024. The increase in average loans was primarily due to organic growth in commercial mortgages. Average investment securities represented 19% of average interest-earning assets during the third quarter of 2025 compared to 20% during the third quarter of 2024. Overall, the increase in interest income of $6.5 million was primarily due to higher average interest rates on average investment securities, reflective of the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024.
Current wording
Average interest-earning assets were $5.72 billion for the first quarter of 2026 compared to $5.65 billion for the first quarter of 2025, an increase of $73.3 million from the comparable quarter last year. The increase was primarily due to an increase of average loans of $145.1 million from $4.49 billion for the first quarter of 2025 to $4.64 billion for the first quarter of 2026, partially offset by a decrease in average investment securities of $30.3 million from $1.09 billion for the first quarter of 2025 to $1.06 billion for the first quarter of 2026, and a $41.5 million decrease in average Federal Reserve interest-earning cash. Average loans comprised 81% of average interest-earning assets during the first quarter of 2026 compared to 80% during the first quarter of 2025. The increase in average loans was primarily due to organic growth in commercial mortgages and resulted in a $2.1 million increase in interest income.
Previous wording
For the third quarter of 2025, the average cost of average interest-bearing liabilities of 2.92% was 45-basis points lower than the third quarter of 2024. The average cost of interest-bearing deposits of 2.86% was 48-basis points lower than the third quarter of 2024, while the average cost of total borrowings increased 18-basis points to 3.98% in the third quarter of 2025, compared to 3.80% in the third quarter of 2024. The reduction in the average cost of interest-bearing liabilities was primarily driven by the repricing of deposits at lower rates given the federal funds interest rate cuts that occurred in the latter part of 2024 as previously mentioned.
Current wording
For the first quarter of 2026, the average cost of average interest-bearing liabilities of 2.65% was 42-basis points lower than the first quarter of 2025 of 3.07%. The average cost of interest-bearing deposits of 2.56% was 48-basis points lower than the first quarter of 2025, primarily due to the continued repricing of deposits at lower rates, which decreased interest expense by $5.6 million. The average cost of total borrowings increased 76-basis points to 4.47% in the first quarter of 2026, compared to 3.71% in the first quarter of 2025, which decreased interest expense $577 thousand.
Previous wording
Average interest-bearing liabilities were $4.44 billion for the third quarter of 2025, compared to $4.40 billion for the third quarter of 2024, an increase of $37.8 million, or 1%, driven by a $66.7 million increase in average interest-bearing deposits, partially offset by a $28.9 million decrease in the average balance of borrowings, including a decrease of $9.7 million in average long-term borrowings, reflective of the previously disclosed $10 million call in April 2025 of the fixed-to-floating subordinated debt that was originally issued in April 2015. On average, interest-bearing deposits increased from $4.15 billion for the third quarter of 2024 to $4.21 billion for the current quarter, and noninterest-bearing demand deposits (a principal component of net free funds) increased $7.1 million to $960.1 million for the third quarter of 2025. The increase in average interest-bearing deposits was due to higher average brokered and public deposits, partially offset by lower average nonpublic and reciprocal deposits. For further discussion of deposits, refer to the “Funding Activities–Deposits” section of this Management’s Discussion and Analysis. Overall the $4.6 million decrease in interest expense was primarily due to average deposit rate changes during the third quarter of 2025 as compared to the prior year quarter, reflective of the interest rate cuts as previously mentioned.
Current wording
Average interest-bearing liabilities of $4.51 billion for the first quarter of 2026 were generally flat with the first quarter of 2025. On average, interest-bearing deposits increased $19.3 million from $4.29 billion for the first quarter of 2025 to $4.31 billion for the current quarter, and noninterest-bearing demand deposits (a principal component of net free funds) increased $23.9 million to $950.6 million for the first quarter of 2026. The modest increase in average interest-bearing deposits was primarily due to an increase in average time deposits. Compared to the year-ago period, the BaaS platform wind-down that the Bank initiated in September 2024 was the primary driver of the reduction in average savings and money market deposits. For further discussion of deposits, refer to the “Funding Activities–Deposits” section of this Management’s Discussion and Analysis.
Previous wording
The following tables set forth certain information relating to the consolidated balance sheets and reflects the average yields earned on interest-earning assets, as well as the average rates paid on interest-bearing liabilities for the periods indicated (dollars in thousands). Average balances were derived from daily balances.
Current wording
The following table sets forth certain information relating to the consolidated balance sheets and reflects the average yields earned on interest-earning assets, as well as the average rates paid on interest-bearing liabilities for the periods indicated (dollars in thousands). Average balances were derived from daily balances.
Previous wording
The table below presents the composition of the provision (benefit) for credit losses for the periods indicated (dollars in thousands):
Current wording
The table below presents the composition of the provision for credit losses for the periods indicated (dollars in thousands):
Previous wording
The provision for credit losses in the third quarter of 2025 and the nine months ended September 30, 2025 was driven by a combination of factors, including the impact of loan growth and net charge-off activity, coupled with a decrease in the forecasted loss rate for pooled loans, partially offset by an increase in qualitative factors.
Current wording
The provision for credit losses in the first quarter of 2026 was driven by a combination of factors, including the impact of loan mix and change in outstandings, coupled with the overall decrease in the both the forecasted loss rate for pooled loans and qualitative factors that are primarily qualitatively informed by historical rates.
Previous wording
Income from investments in limited partnerships of $223 thousand for the third quarter of 2025, decreased $177 thousand, compared to $400 thousand for the third quarter of 2024. For the first nine months of 2025, income from investments in limited partnerships decreased $600 thousand, to $945 thousand. Income from our investments in limited partnerships fluctuates based on the maturity and performance of the underlying investments.
Current wording
Income from investments in limited partnerships of $224 thousand for the first quarter of 2026, decreased $191 thousand, compared to $415 thousand for the first quarter of 2025. Income from our investments in limited partnerships fluctuates based on the maturity and performance of the underlying investments.
Previous wording
Our efficiency ratio for the third quarter of 2025 was 56.78%, compared with 64.70% for the third quarter of 2024. The lower efficiency ratio for the third quarter of 2025 was primarily due to the increase in interest income on our investment securities portfolio as a result of the investment securities restructuring in the fourth quarter of 2024. Our efficiency ratio for the first nine months of 2025 was 58.38%, compared with 71.75% for the first nine months of 2024. The lower efficiency ratio in 2025 was primarily due to higher interest income as a result of the investment securities restructuring. Further, the elevated efficiency ratio for the first nine months of 2024 was reflective of higher noninterest expenses, which included an $18.4 million pre-tax loss in deposit-related charged-off items. The efficiency ratio is calculated by dividing total noninterest expense by net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains on investment securities. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income, while a decrease indicates a more efficient allocation of resources. The efficiency ratio, a banking industry financial measure, is not required by GAAP. However, the efficiency ratio is used by management in its assessment of financial performance specifically as it relates to noninterest expense control. Management also believes such information is useful to investors in evaluating Company performance.
Current wording
Our efficiency ratio for the first quarter of 2026 was 57.06%, compared with 58.79% for the first quarter of 2025. The efficiency ratio is calculated by dividing total noninterest expense by net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains on investment securities. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income, while a decrease indicates a more efficient allocation of resources. The efficiency ratio, a banking industry financial measure, is not required by GAAP. However, the efficiency ratio is used by management in its assessment of financial performance specifically as it relates to noninterest expense control. Management also believes such information is useful to investors in evaluating Company performance.
Previous wording
For the third quarter of 2025, we recorded income tax expense of $4.8 million, compared to $1.1 million for the third quarter of 2024, and $12.5 million for the first nine months of 2025, compared to $6.0 million for the first nine months of 2024. The lower level of income tax expense incurred in 2024 was primarily due to a lower level of pre-tax income, reflecting the impact of the previously disclosed deposit-related fraud event. In the third quarter of 2025, we recognized federal and state tax benefits related to tax credit investments placed in service and/or amortized during the period resulting in a reduction in income tax expense of $1.1 million, compared to $1.3 million for the same period in the prior year. The first nine months of 2025 and 2024 also included related benefits of $3.3 million and $3.4 million, respectively.
Current wording
For the first quarter of 2026, we recorded income tax expense of $3.8 million, compared to $3.7 million for the first quarter of 2025. In the first quarter of 2026, we recognized federal and state tax benefits related to tax credit investments placed in service and/or amortized during the period resulting in a reduction in income tax expense of $1.0 million, compared to $1.1 million for the same period in the prior year.
Previous wording
Our effective tax rate for the third quarter of 2025 was 18.9%, versus 7.4%, for the third quarter of 2024, and 18.5% for the first nine months of 2025, compared to 12.6% for the first nine months of 2024. Effective tax rates are typically impacted by items of income and expense that are not subject to federal or state taxation. Our effective tax rates reflect the impact of these items, which include, but are not limited to, interest income from tax-exempt securities, earnings on company owned life insurance and the impact of tax credit investments. In addition, our effective tax rates for 2025 and 2024 reflect the New York State tax benefit generated by our real estate investment trust.
Current wording
Our effective tax rate for the first quarter of 2026 was 15.5%, versus 18.2%, for the first quarter of 2025. The effective tax rate typically fluctuates on a quarterly basis primarily due to the level of pre-tax earnings, and may differ from statutory rates due to the impact of items of income and expense that are not subject to federal or state taxation. Our effective tax rates reflect the impact of these items, which include, but are not limited to, interest income from tax-exempt securities, earnings on company owned life insurance and the impact of tax credit investments. In addition, our effective tax rates for 2026 and 2025 reflect the New York State tax benefit generated by our real estate investment trust.
Previous wording
Our available for sale (“AFS”) investment securities portfolio increased $12.5 million from December 31, 2024 to September 30, 2025. The AFS portfolio had a net unrealized loss of $38.9 million at September 30, 2025 and $61.6 million at December 31, 2024, respectively. The fair value of most of the investment securities in the AFS portfolio fluctuates as market interest rates change.
Current wording
Our available for sale (“AFS”) investment securities portfolio increased $81.2 million from December 31, 2025 to March 31, 2026. The AFS portfolio had a net unrealized loss of $44.0 million at March 31, 2026 and $35.7 million at December 31, 2025, respectively. The fair value of most of the investment securities in the AFS portfolio fluctuates as market interest rates change.
Previous wording
Our AFS portfolio as of September 30, 2025, reflected our strategic investment securities restructuring which occurred in December 2024 following the completion of the public common stock offering, as well as the sale of $22.3 million of 30-year fixed rate mortgage-backed securities with higher expected pre-payment speeds in September 2025, the proceeds of which were reinvested into investment grade corporate bonds. As of September 30, 2025, there were 45 securities in the AFS Agency MBS portfolio with an aggregate fair value of $337.9 million that were in an unrealized loss position with unrealized losses totaling $48.2 million. Of these, 37 were in an unrealized loss position for 12 months or longer and had an aggregate fair value of $206.2 million and unrealized losses of $45.8 million, while 8 were in an unrealized loss position for less than 12 months and had an aggregate fair value of $131.7 million and unrealized losses of $2.5 million. The unrealized loss of these securities was driven by the timing of the purchases of fixed-rate securities during the extended low-interest rate environments experienced in prior years, which has been compounded with subsequent increases in benchmark interest rates. However, these fixed-rate securities were purchased with the expectation that they will continue to prepay principal, and the proceeds will be invested at current market rates.
Current wording
As of March 31, 2026, there were 66 securities in the AFS portfolio with an aggregate fair value of $404.4 million that were in an unrealized loss position with unrealized losses totaling $48.8 million. Of these, 35 were Agency MBS in an unrealized loss position for 12 months or longer and had an aggregate fair value of $200.0 million and unrealized losses of $44.4 million, while 31 were in an unrealized loss position for less than 12 months and had an aggregate fair value of $204.3 million and unrealized losses of $4.4 million. The unrealized loss of these securities was driven by the timing of the purchases of fixed-rate securities during the extended low-interest rate environments experienced in prior years, which has been compounded with subsequent increases in benchmark interest rates. However, these fixed-rate securities were purchased with the expectation that they will continue to prepay principal, and the proceeds will be invested at current market rates.
Previous wording
As a member of the FHLB, the Bank is required to hold FHLB stock. The amount of required FHLB stock is based on the Bank’s asset size and the amount of borrowings from the FHLB. We have assessed the ultimate recoverability of our FHLB stock and believe that no impairment currently exists. As a member of the FRB system, we are required to maintain a specified investment in FRB stock based on a ratio relative to our capital. At September 30, 2025, our ownership of FHLB and FRB stock totaled $9.7 million and $9.2 million, respectively, and is included in other assets and recorded at cost, which approximates fair value.
Current wording
As a member of the FHLB, the Bank is required to hold FHLB stock. The amount of required FHLB stock is based on the Bank’s asset size and the amount of borrowings from the FHLB. We have assessed the ultimate recoverability of our FHLB stock and believe that no impairment currently exists. As a member of the FRB system, we are required to maintain a specified investment in FRB stock based on a ratio relative to our capital. At March 31, 2026, our ownership of FHLB and FRB stock totaled $10.6 million and $9.2 million, respectively, and is included in other assets and recorded at cost, which approximates fair value.
Previous wording
For AFS securities in an unrealized loss position, we first assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is affirmative, any previously recognized allowances are charged-off and the security’s amortized cost is written down to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported in our income statement as a component of credit loss expense. AFS securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met. For the three and nine months ended September 30, 2025 and 2024, no allowance for credit losses was recognized on AFS securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality.
Current wording
For AFS securities in an unrealized loss position, we first assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is affirmative, any previously recognized allowances are charged-off and the security’s amortized cost is written down to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported in our income statement as a component of credit loss expense. AFS securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met. For the three months ended March 31, 2026 and 2025, no allowance for credit losses was recognized on AFS securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality.
Previous wording
Total loans were $4.59 billion at September 30, 2025, an increase of $111.2 million from $4.48 billion at December 31, 2024. The composition of our loan portfolio, excluding loans held for sale and including net unearned income and net deferred fees and costs, is summarized as follows (dollars in thousands):
Current wording
Total loans were $4.63 billion at March 31, 2026, a decrease of $30.3 million from $4.66 billion at December 31, 2025. The composition of our loan portfolio, excluding loans held for sale and including net unearned income and net deferred fees and costs, is summarized as follows (dollars in thousands):
Previous wording
Total commercial loans of $2.99 billion represented 65% of total loans as of September 30, 2025, compared to $2.86 billion, or 64% of total loans as of December 31, 2024. Commercial business loans of $740.6 million, or 16% of total loans, were up $75.3 million, or 11%, from December 31, 2024, and total commercial mortgage loans of $2.25 billion, or 49% of total loans, were up $49.5 million, or 2% from $2.20 billion as of December 31, 2024. The increase in total commercial mortgage loans was attributable to increases in multifamily, non-owner occupied and owner occupied loans, partially offset by decreases in construction loans. As of September 30, 2025, commercial real estate (“CRE”) loans made up approximately 67% of total commercial loans, and 44% of total loans, commercial and industrial loans approximated 28% of total commercial loans, and 19% of total loans, and business banking unit loans were approximately 5% of total commercial loans and 3% of total loans. Our CRE committed credit exposure at September 30, 2025 primarily related to approximately 45% multi-family, 18% office, 9% retail, 9% land, 8% hospitality, 6% industrial property, and 2% home builder properties. Approximately 70% of our office exposure at September 30, 2025, or 12% of our total CRE exposure, related to Class B or medical office space. More than 70% of our office and 90% of our multifamily CRE loans have full or limited personal or corporate recourse.
Current wording
Total commercial loans of $3.08 billion represented 67% of total loans as of March 31, 2026, compared to $3.08 billion, or 66% of total loans as of December 31, 2025. Commercial business loans of $746.4 million, or 16% of total loans, were up $8.1 million, or 1%, from December 31, 2025, primarily due to organic growth, and total commercial mortgage loans of $2.33 billion, or 50% of total loans, were down $10.5 million, from $2.34 billion as of December 31, 2025. The decrease in total commercial mortgage loans was attributable to decreases in non-owner occupied, multifamily, and owner occupied loans, partially offset by increases in construction loans. As of March 31, 2026, commercial real estate (“CRE”) loans made up approximately 67% of total commercial loans, and 45% of total loans, commercial and industrial loans approximated 28% of total commercial loans, and 18% of total loans, and business banking unit loans were approximately 5% of total commercial loans and 3% of total loans. Our CRE committed credit exposure at March 31, 2026 primarily related to approximately 45% multi-family, 20% office, 9% retail, 8% land, 8% hospitality, 5% industrial property, and 2% home builder properties. Approximately 72% of our office exposure at March 31, 2026, or 18% of our total CRE exposure related to Class B or medical office space. More than 70% of our office and 90% of our multifamily CRE loans have full or limited personal or corporate recourse.
Previous wording
Total consumer loans of $1.60 billion, or 35% of total loans at September 30, 2025, decreased $13.6 million from December 31, 2024. Consumer loans at September 30, 2025 were comprised of residential real estate loans and lines of credit of $724.5 million, or 16% of total loans, consumer indirect loans of $838.7 million, or 18% of total loans, and other consumer loans of $37.5 million, or 1% of total loans. During the third quarter of 2025, we originated $259.5 million in indirect automobile loans with a mix of approximately 30% new automobile and 70% used automobile loans. This compares with the $170.5 million originated of indirect automobile loans with a mix of approximately 25% new automobile and 75% used automobile loans for the third quarter of 2024. Origination volumes and the mix of new and used vehicles financed fluctuate depending on general market conditions.
Current wording
Total consumer loans of $1.55 billion, or 34% of total loans at March 31, 2026, decreased $27.9 million from December 31, 2025. Consumer loans at March 31, 2026 were comprised of residential real estate loans and lines of credit of $727.6 million, or 16% of total loans, consumer indirect loans of $787.9 million, or 17% of total loans, and other consumer loans of $33.9 million, or 1% of total loans. During the first quarter of 2026, we originated $68.1 million in indirect automobile loans with a mix of approximately 27% new automobile and 73% used automobile loans. This compares with the $89.1 million originated of indirect automobile loans with a mix of approximately 27% new automobile and 73% used automobile loans for the first quarter of 2025. Origination volumes and the mix of new and used vehicles financed fluctuate depending on general market conditions.
Previous wording
Loans held for sale (not included in the loan portfolio composition table) were entirely comprised of residential real estate loans and totaled $2.3 million as of both September 30, 2025 and December 31, 2024.
Current wording
Loans held for sale (not included in the loan portfolio composition table) were entirely comprised of residential real estate loans and totaled $1.0 million and $3.4 million as of March 31, 2026 and December 31, 2025, respectively.
Previous wording
We sell certain qualifying newly originated or refinanced residential real estate loans on the secondary market. Residential real estate loans serviced for others, which are not included in the consolidated statements of financial condition, amounted to $289.2 million and $280.8 million as of September 30, 2025 and December 31, 2024, respectively.
Current wording
We sell certain qualifying newly originated or refinanced residential real estate loans on the secondary market. Residential real estate loans serviced for others, which are not included in the consolidated statements of financial condition, amounted to $297.8 million and $293.3 million as of March 31, 2026 and December 31, 2025, respectively.
Previous wording
Net charge-offs of $2.1 million for the third quarter of 2025 represented 0.18% of average loans on an annualized basis compared to net charge-offs of $1.7 million, or 0.15%, of average loans for the third quarter of 2024. For the first nine months of 2025, net charge-offs were $8.5 million, compared to $5.9 million for the first nine months of 2024. The allowance for credit losses–loans was $47.3 million at September 30, 2025, compared with $44.7 million at September 30, 2024. The increase in allowance for credit losses–loans was primarily attributed to an increase in loan balances and specific reserves. The ratio of the allowance for credit losses–loans to total loans was 1.03% at September 30, 2025 and 1.01% at September 30, 2024. The ratio of allowance for credit losses–loans to non-performing loans was 139% at September 30, 2025, compared with 110% at September 30, 2024. Non-performing loans decreased $7.5 million to $34.0 million at September 30, 2025, compared to $41.4 million at September 30, 2024. The decrease in non-performing loans reflects a reduction of approximately $3.7 million associated with the foreclosure of a participated loan secured by real estate, as well as a $1.9 million partial charge-off of a credit facility for which a specific reserve was in place. Both the aforementioned-foreclosed participated loan and the partially charged-off credit facility related to a previously disclosed commercial business relationship that was placed on nonaccrual status in the fourth quarter of 2023.
Current wording
Net charge-offs of $5.1 million for the first quarter of 2026 represented 0.44% of average loans on an annualized basis compared to net charge-offs of $2.4 million, or 0.21%, of average loans for the first quarter of 2025. The increase in net charge-offs in the first quarter of 2025 is primarily driven by the partial charge-off of a previously disclosed commercial business relationship place on nonaccrual status in 2023 for which a specific reserve was in place. The allowance for credit losses–loans was $44.7 million at March 31, 2026, compared with $49.0 million at March 31, 2025. The decrease in allowance for credit losses–loans was due to a combination of factors, including a decrease in consumer indirect loan balances, lower loss rates due to a higher prepayment assumptions and lower qualitative factors that are primarily quantitatively informed by historical data. The ratio of the allowance for credit losses–loans to total loans was 0.97% at March 31, 2026 and 1.08% at March 31, 2025. The ratio of allowance for credit losses–loans to non-performing loans was 116% at March 31, 2026, compared with 122% at March 31, 2025. Non-performing loans increased $2.7 million to $38.5 million at March 31, 2026, compared to $35.8 million at March 31, 2025. The increase in non-performing loans primarily reflects a well-collateralized commercial business loan that moved to nonaccrual status in the first quarter of 2026, offset in part by the partial charge-off of the previously disclosed commercial business relationship.
Previous wording
Non-performing assets include non-performing loans and foreclosed assets. Non-performing assets at September 30, 2025 were $34.1 million, a decrease of $7.4 million from the $41.5 million balance at December 31, 2024. The primary component of non-performing assets is non-performing loans, which were $34.0 million or 0.74% of total loans at September 30, 2025 and $41.4 million or 0.92% of total loans at December 31, 2024. The decrease in non-performing loans reflects the aforementioned foreclosed participated loan and the partially charged-off credit facility related to a previously disclosed commercial business relationship that was placed on nonaccrual status in the fourth quarter of 2023.
Current wording
Non-performing assets include non-performing loans and foreclosed assets. Non-performing assets at March 31, 2026 were $39.0 million, an increase of $3.2 million from the $35.8 million balance at December 31, 2025. The primary component of non-performing assets is non-performing loans, which were $38.5 million or 0.83% of total loans at March 31, 2026 and $35.8 million or 0.77% of total loans at December 31, 2025. The increase in non-performing loans reflects a well-collateralized commercial business loan that moved to nonaccrual status in the first quarter of 2026, offset in part by the partial charge-off of a previously disclosed commercial business relationship.
Previous wording
Approximately $1.7 million, or 5%, of the $34.0 million in non-performing loans as of September 30, 2025 were current with respect to payment of principal and interest but were classified as non-accruing because repayment in full of principal and/or interest was uncertain.
Current wording
Approximately $1.0 million, or 3%, of the $38.5 million in non-performing loans as of March 31, 2026 were current with respect to payment of principal and interest but were classified as non-accruing because repayment in full of principal and/or interest was uncertain.
Previous wording
Foreclosed assets consist of real property formerly pledged as collateral for loans, which we have acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. We had $142 thousand and $60 thousand of properties representing foreclosed asset holdings at September 30, 2025 and December 31, 2024, respectively.
Current wording
Foreclosed assets consist of real property formerly pledged as collateral for loans, which we have acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. We had $552 thousand and $94 thousand of properties representing foreclosed asset holdings at March 31, 2026 and December 31, 2025, respectively.
Previous wording
Potential problem loans are loans that are currently performing, but information known about possible credit problems of the borrowers causes us to have concern as to the ability of such borrowers to comply with the present loan payment terms and may result in disclosure of such loans as non-performing at some time in the future. These loans remain in a performing status due to a variety of factors, including payment history, the value of collateral supporting the credits, and/or personal or government guarantees. We consider loans classified as substandard, which continue to accrue interest, to be potential problem loans. We identified $27.3 million and $33.7 million in loans that continued to accrue interest which were classified as substandard as of September 30, 2025 and December 31, 2024, respectively.
Current wording
Potential problem loans are loans that are currently performing, but information known about possible credit problems of the borrowers causes us to have concern as to the ability of such borrowers to comply with the present loan payment terms and may result in disclosure of such loans as non-performing at some time in the future. These loans remain in a performing status due to a variety of factors, including payment history, the value of collateral supporting the credits, and/or personal or government guarantees. We consider loans classified as substandard, which continue to accrue interest, to be potential problem loans. We identified $32.3 million and $27.6 million in loans that continued to accrue interest which were classified as substandard as of March 31, 2026 and December 31, 2025, respectively.
Previous wording
We offer a variety of deposit products designed to attract and retain customers, with the primary focus on building and expanding long-term relationships. At September 30, 2025, total deposits were $5.36 billion, representing an increase of $253.1 million, or 5%, from December 31, 2024. The increase was primarily due to increases in public, brokered and reciprocal deposits, partially offset by a decrease in non-public deposits primarily associated with exiting BaaS deposits. While seasonality in our public deposit portfolio was a contributor, public deposits accounts maintained higher balances during typical outflow cycles while growing deposits with new and existing municipalities. Time deposits were approximately 31% and 30% of total deposits at September 30, 2025 and December 31, 2024, respectively.
Current wording
We offer a variety of deposit products designed to attract and retain customers, with the primary focus on building and expanding long-term relationships. At March 31, 2026, total deposits were $5.34 billion, representing an increase of $131.5 million, or 3%, from December 31, 2025. The increase was primarily driven by seasonally higher public deposit balances and an increase in reciprocal deposits, partially offset by a decrease in non-public deposits. Time deposits were approximately 31% and 32% of total deposits at March 31, 2026 and December 31, 2025, respectively.
Previous wording
Non-public deposits, the largest component of our funding sources, totaled $3.15 billion and $3.21 billion at September 30, 2025 and December 31, 2024, respectively, and represented 59% and 63% of total deposits as of each date, respectively. We have managed this segment of funding through a strategy of competitive pricing that minimizes the number of customer relationships that have only a single service high-cost deposit account.
Current wording
Non-public deposits, the largest component of our funding sources, totaled $3.11 billion and $3.16 billion at March 31, 2026 and December 31, 2025, respectively, and represented 58% and 61% of total deposits as of each date, respectively. We have managed this segment of funding through a strategy of competitive pricing that minimizes the number of customer relationships that have only a single service high-cost deposit account.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
On December 11, 2025, we completed a private placement of $80.0 million in aggregate principal of fixed-to-floating rate subordinated notes to qualified institutional buyers and institutional accredited investors that were subsequently exchanged for subordinated notes with substantially the same terms (the “2025 Notes”) registered under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to registration rights agreements with the purchasers of the 2025 Notes. The 2025 Notes have a maturity date of December 15, 2035, and bear interest, payable semi-annually, at the rate of 6.50% per annum until December 15, 2030. Commencing on that date, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Financial Rate (“SOFR”) plus 312 basis points, payable quarterly until maturity. We are entitled to repay the 2025 Notes, in whole or in part, at any time on or after December 15, 2030, and to prepay the 2025 Notes in whole or in part at any time upon certain other specified events. The 2025 Notes qualify as Tier 2 capital for regulatory purposes. We used the net proceeds to redeem the $65.0 million of outstanding debt issuances from 2015 and 2020, at the first call date of 2026, as well as for general corporate purposes including repurchasing shares of the Company’s common stock under our 2025 Share Repurchase Program.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
(1)Investment securities are shown at amortized cost.
Previous report — wording carried elsewhere
(2)The interest on tax-exempt securities is calculated on a tax-equivalent basis assuming a federal income tax rate of 21%.
Previous report — wording carried elsewhere
(4) Loans include net unearned income, net deferred loan fees and costs and non-accruing loans. Net deferred loan fees (costs) included in interest income were as follows (in thousands):
Previous report — wording carried elsewhere
In September 2025, the Board approved a share repurchase program for up to 1,006,379 shares of its common stock, or approximately 5% of the Company’s then outstanding common shares. The new share repurchase program replaced and terminated the prior share repurchase program authorized by the Board in June 2022. The repurchase program does not obligate us to purchase any shares and it may be extended, modified, or discontinued at any time. As of September 30, 2025, no shares have been repurchased under this program.