Pathfinder Bancorp, Inc.

Previous wording

At September 30, 2025, the Company and subsidiaries had total consolidated assets of $1.47 billion, total consolidated liabilities of $1.35 billion and shareholders' equity of $126.3 million.

Current wording

At March 31, 2026, the Company and subsidiaries had total consolidated assets of $1.42 billion, total consolidated liabilities of $1.30 billion and shareholders' equity of $123.6 million.

Previous wording

The following discussion reviews the Company's financial condition at September 30, 2025 and the results of operations for the three and nine month periods ended September 30, 2025 and 2024. Operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or any other period.

Current wording

The following discussion reviews the Company's financial condition at March 31, 2026 and the results of operations for the three month period ended March 31, 2026 and 2025. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 or any other period.

Previous wording

This report includes forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended, that involve inherent risks and uncertainties. These forward-looking statements concern the financial condition, results of operations, plans, objectives, future performance and business of Pathfinder Bancorp, Inc. and its subsidiaries, including statements preceded by, followed by or that include words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain,” “pattern” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) general economic conditions may be less favorable than expected; (2) competitive pressures among depository institutions may increase significantly; (3) changes in the interest rate environment may reduce interest margins; (4) loan origination and sale volumes, charge-offs and credit loss provisions may vary substantially from period to period; (5) the impact of a pandemic or other health crises and the government's response to such pandemic or crises on our operations as well as those of our customers and on the economy generally and in our market area specifically; (6) political developments such as the U.S. Government shutdown, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (7) legislative or regulatory changes or actions may adversely affect the businesses in which Pathfinder Bancorp, Inc. is engaged; (8) changes and trends in the securities markets may adversely impact Pathfinder Bancorp, Inc.; (9) a delayed or incomplete resolution of regulatory issues could adversely impact our planning;

Current wording

Certain statements contained herein are “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements concern the financial condition, results of operations, plans, objectives, future performance and business the Company and its subsidiaries, including, but not limited to, the Bank.

Previous wording

The ACL represents management's estimate of lifetime credit losses inherent in the loan portfolio. 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 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. In addition, an accruing substandard loan could be identified as being individually evaluated.

Current wording

The Company applies ASC 326, Financial Instruments—Credit Losses, to account for its allowance for credit losses ("ACL") 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 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

-48 - million. Of these loans, 13 loans, totaling $847,000, were valued using the present value of future cash flows method; and 36 loans, totaling $31.2 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 incurred loss for each risk-rating category.

Current wording

The Company establishes a specific allowance for all troubled credits identified through both normal and targeted credit review processes. Loans recognized within the internal review are identified as being individually evaluated and excluded from collective pools. Individually evaluated loans are considered to have unique risk characteristics when their risk profile, repayment characteristics, or loss exposure are sufficiently distinct such that inclusion in a pooled evaluation would not appropriately reflect its expected credit loss. Factors that may result in such classification include, but are not limited to, borrower-specific financial stress or credit deterioration, nonaccrual status or sustained delinquency, bankruptcy, insolvency, or restructuring proceedings, reliance on a single or materially weakened source of repayment, material adverse changes in collateral value, condition, or marketability, collateral dependency, unique or non-standard loan structures or modifications, adverse changes in guarantor support, or other circumstances indicating the loan no longer shares similar risk characteristics with the pool. For individually evaluated loans, management measures credit losses using a discounted cash flow approach, collateral-dependent valuation techniques, observable market pricing (when available), or other methods permitted under ASC 326 that reasonably estimate expected credit losses based on the specific facts and circumstances of the loan. The selected methodology is applied consistently and is based on the specific facts and circumstances of each loan. At March 31, 2026, the Bank’s position in individually evaluated loans consisted of 135 loans totaling $84.7 million. All were valued based on a collateral analysis. No loans were valued using the present value of future cash flows method or other methods permitted under ASC 326. For all other loans, the Company uses the general allocation methodology that establishes an allowance to estimate the lifetime incurred loss for each risk-rating category.

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 September 30, 2025, the Bank held $543.7 million in commercial real estate and commercial & industrial loans (collectively, commercial loans) representing 60.5% of the Bank’s entire loan portfolio. The Bank allocated $12.5 million to the ACL for these loans, including $1.6 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 $400,000, 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 September 30, 2025 in the final recorded estimation of the ACL on loans recognized on the Statements 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 March 31, 2026, the Bank held $549.5 million in commercial real estate and commercial & industrial loans (collectively, commercial loans) representing 61.4% of the Bank’s entire loan portfolio. The Bank allocated $23.3 million of the ACL to these commercial loans, which included a net qualitative adjustment that reduced the ACL by approximately $889,000 in the first quarter of 2026. 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 $222,000, 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 March 31, 2026 in the final recorded estimation of the ACL on loans recognized on the Statements of Financial Condition.

Previous wording

When the fair value of a security categorized as available-for-sale ("AFS") or held-to-maturity ("HTM") is less than its amortized cost basis, an assessment is made as to whether or not credit loss is present. Management makes a quantitative determination of potential credit loss for all HTM securities even if the risk of credit loss is considered remote and uses a best estimate threshold for securities categorized as AFS. The Company considers numerous factors when determining whether a potential credit loss exists. The principal factors considered are (1) the financial condition of the issue and (guarantor, if any) and adverse conditions specifically related to the security, industry or geographic area, (2) failure of the issuer of the security to make scheduled interest or principal payments, (3) any changes to the rating of the security by a nationally recognized statistical rating organization (“NRSRO”), and (4) the presence of contractual credit enhancements, if any, including the guarantee of the federal government or any of its agencies.

Current wording

When the fair value of a security categorized as AFS or HTM is less than its amortized cost basis, an assessment is made as to whether or not credit loss is present. Management makes a quantitative determination of potential credit loss for all HTM securities even if the risk of credit loss is considered remote and uses a best estimate threshold for securities categorized as AFS. The Company considers numerous factors when determining whether a potential credit loss exists. The principal factors considered are (1) the financial condition of the issue and (guarantor, if any) and adverse conditions specifically related to the security, industry or geographic area, (2) failure of the issuer of the security to make scheduled interest or principal payments, (3) any changes to the rating of the security by a NRSRO, and (4) the presence of contractual credit enhancements, if any, including the guarantee of the federal government or any of its agencies.

Previous wording

The Company carries all of its AFS investments at fair value with any unrealized gains or losses reported, net of tax, as an adjustment to shareholders' equity and included in accumulated other comprehensive income (loss), except for the credit-related portion of debt securities’ credit losses securities which are charged to earnings. The Company's ability to fully realize the value of its investments in various securities, including corporate debt securities, is dependent on the underlying

Current wording

The Company carries all of its AFS investments at fair value with any unrealized gains or losses reported, net of tax, as an adjustment to shareholders' equity and included in accumulated other comprehensive income (loss), except for the credit-related portion of debt securities’ credit losses securities which are charged to earnings. The Company's ability to fully realize the value of its investments in various securities, including corporate debt securities, is dependent on the underlying creditworthiness of the issuing organization. In evaluating the debt securities portfolio, for both AFS and HTM securities for credit losses, management considers (1) if we intend to sell the security; (2) if it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis; or (3) if the present value of expected cash flows is insufficient to recover the entire amortized cost basis.

Previous wording

Management performs an annual evaluation of our goodwill for possible impairment at each of our reporting units. Management has determined that the carrying value of goodwill was not impaired as of September 30, 2025. Management will continuously evaluate all relevant economic and operational factors potentially affecting the Bank or the fair value of its assets, including goodwill. Should future economic consequences require a significant and sustained change in the operations of the Bank, re-evaluations of the Bank’s goodwill valuation will be conducted on a more frequent basis.

Current wording

Management performs an annual evaluation of our goodwill for possible impairment at each of our reporting units. Based on the December 31, 2025 evaluation, management has determined that the carrying value of goodwill was not impaired as of that date. Management will continuously evaluate all relevant economic and operational factors potentially affecting the Bank or the fair value of its assets, including goodwill. Should future economic consequences require a significant and sustained change in the operations of the Bank, re-evaluations of the Bank’s goodwill valuation will be conducted on a more frequent basis.

Previous wording

Net interest income before the provision for credit losses decreased $132,000, or 1.1%, to $11.6 million for the three months ended September 30, 2025, as compared to the same three month period in 2024. This decrease was predominately the result of a decrease in interest and dividend income of $1.5 million, partially offset by a decrease in interest expense of $1.3 million.

Current wording

Net interest income before the provision for credit losses decreased $1.1 million, or 9.4%, to $10.3 million for the three months ended March 31, 2026, as compared to the same three month period in 2025. This decrease was predominately the result of a decrease in interest and dividend income of $1.9 million, partially offset by a decrease in interest expense of $868,000.

Previous wording

For the third quarter of 2025, annualized noninterest expense represented 2.40% of average assets in the third quarter of 2025, compared to 2.75% in the year-ago period. The efficiency ratio was 68.78%, for the third quarter of 2025, compared to 75.78% in the year-ago period. For the nine months ended September 30, 2025, annualized noninterest expense represented 2.30% of average assets in the first nine months of 2025, compared to 2.39% in the year-ago period. The efficiency ratio was 67.24%, for the nine months ended September 30, 2025, compared to 73.01% in the year-ago period. The efficiency ratio, which is not a financial metric under GAAP, is a measure that the Company believes is helpful to understanding its level of non-interest expense as a percentage of total revenue.

Current wording

For the first quarter of 2026, annualized noninterest expense represented 2.48% of average assets in the first quarter of 2026, compared to 2.33% in the year-ago period. The efficiency ratio was 75.65%, for the first quarter of 2026, compared to 67.19% in the year-ago period. The efficiency ratio, which is not a financial metric under GAAP, is a measure that the Company believes is helpful to understanding its level of non-interest expense as a percentage of total revenue.

Previous wording

Net interest income is the Company's primary source of operating income for payment of operating expenses and providing for credit losses. It is the amount by which interest earned on loans, interest-earning deposits, and investment securities, exceeds the interest paid on deposits and other interest-bearing liabilities. Changes in net interest income and net interest margin result from the interaction between the volume and composition of interest-earning assets, interest-bearing liabilities, related yields, and associated funding costs.

Current wording

Net interest income is the Company's primary source of operating income for payment of operating expenses and providing for credit losses. It is the amount by which interest earned on loans, interest-earning deposits, and investment securities, exceeds the interest paid on deposits and other interest-bearing liabilities. Changes in net interest income and NIM result from the interaction between the volume and composition of interest-earning assets, interest-bearing liabilities, related yields, and associated funding costs.

Previous wording

The following tables set forth information concerning average interest-earning assets and interest-bearing liabilities and the average yields and rates thereon for the periods indicated. Interest income and resultant yield information in the tables have not been adjusted for tax equivalency. Averages are computed on the daily average balance for each month in the period divided by the number of days in the period. Nonaccrual loans have been included in interest-earning assets for purposes of these calculations.

Current wording

The following table sets forth information concerning average interest-earning assets and interest-bearing liabilities and the average yields and rates thereon for the periods indicated. Interest income and resultant yield information in the table has not been adjusted for tax equivalency. Averages are computed on the daily average balance for each month in the period divided by the number of days in the period. Nonaccrual loans have been included in interest-earning assets for purposes of these calculations.

Previous wording

The Company’s deposit base is drawn from eleven full-service branches and one motor bank in its market area. The deposit base consists of demand deposits, money management and money market deposit accounts, savings, and time deposits. Total deposits increased by $20.6 million, or 1.7% from December 31, 2024. The increase in deposits during the nine months ended September 30, 2025, reflected the Bank’s increased market penetration among both non-business and business customers.

Current wording

The Company’s deposit base is drawn from eleven full-service branches and one motor bank in its market area. The deposit base consists of demand deposits, money management and money market deposit accounts, savings, and time deposits. Total deposits increased by $27.9 million, or 2.4% from December 31, 2025. The increase in deposits during the three months ended March 31, 2026, reflects growth in MMDA deposits and both interest- and noninterest-bearing demand deposits, partially offset by runoff of higher-cost time deposits.

Previous wording

At September 30, 2025, 78.4% of the Company's deposit base of $1.23 billion consisted of core deposits. Core deposits, which exclude brokered deposits and certificates of deposit of $250,000 or more, are considered to be more stable and generally provide the Company with a lower cost of funds than time deposits of $250,000 or more. The Company will continue to emphasize retail and business core deposits in the future by providing depositors with a full range of deposit product offerings and will maintain its recent focus on deposit gathering within the Syracuse market.

Current wording

At March 31, 2026, 82.0% of the Company's deposit base of $1.21 billion consisted of core deposits. Core deposits, which exclude brokered deposits and certificates of deposit of $250,000 or more, are considered to be more stable and generally provide the Company with a lower cost of funds than time deposits of $250,000 or more. The Company will continue to emphasize retail and business core deposits in the future by providing depositors with a full range of deposit product offerings and will maintain its recent focus on deposit gathering within the Syracuse market.

Previous wording

The Company recorded $3.5 million in provision for credit losses for the three month period ended September 30, 2025, as compared to $9.0 million for the three month period ended September 30, 2024. The provisioning in the third quarter of 2025 and 2024 reflects management’s determination of the appropriate level of additions to reserves, the composition of the loan portfolio, changes in quantifiable econometric data statistically correlated to historical charge-off rates, subjective qualitative assessments of changes in a broad array of factors including changes to underwriting criteria, loan staffing and local market conditions, and changes in the levels of delinquent and nonaccrual loans. This represents a $5.5 million decrease in provision for credit losses in the third quarter of 2025, as compared to the same period in 2024. This decrease can be primarily attributed to lower net charge offs of $670,000 in the quarter, compared to $8.7 million from a year ago period. The Bank's credit sensitive portfolios continue to be carefully monitored, and the Bank will consistently apply its loan classification and reserve building methodologies to the analysis of these portfolios. In addition, the Company continued to undertake proactive measures in the third quarter of 2025 to mitigate credit risk and enhance asset quality metrics for the long term, including the initiation of a comprehensive loan portfolio review in September 2025, encompassing performing and nonperforming loans of $500,000 or more, representing approximately 90% of all outstanding loans. This review is expected to be completed by the end of 2025. Please refer to the asset quality section below for a further discussion of asset quality as it relates to the allowance for credit losses.

Current wording

Provision for credit losses was a benefit of $168,000 for the three month period ended March 31, 2026, as compared to a $457,000 provision for credit losses expense for the three month period ended March 31, 2025. The provisioning in the first quarter of 2026 and 2025 reflects management’s determination of the appropriate level of additions to reserves, the composition of the loan portfolio, changes in quantifiable econometric data statistically correlated to historical charge-off rates, subjective qualitative assessments of changes in a broad array of factors including changes to underwriting criteria, loan staffing and local market conditions, and changes in the levels of delinquent and nonaccrual loans. The $625,000 decrease in provision for credit losses in the first quarter of 2026, as compared to the same period in 2025, was primarily attributed to lower net charge offs and overall credit performance that resulted in a small reserve release in the first three months of this year. The Bank's credit sensitive portfolios continue to be carefully monitored, and the Bank will consistently apply its loan classification and reserve building methodologies to the analysis of these portfolios. Please refer to the asset quality section below for a further discussion of asset quality as it relates to the allowance for credit losses.

Previous wording

The Company measures delinquency based on the amount of past due loans (defined as loans equal to or greater than 30 days past due) as a percentage of total loans. The ratio of delinquent loans to total loans was 4.1% and 3.8% at September 30, 2025, and December 31, 2024, respectively. Delinquent loans (numerator) increased $1.8 million from December 31, 2024 to September 30, 2025. Total loan balances (denominator) decreased $20.7 million from December 31, 2024 to September 30, 2025. The increase in delinquent loans from December 31, 2024 to September 30, 2025 was driven by loans delinquent 30-59 days and loans delinquent 90 days and over, which increased by $761,000 and $1.2 million, respectively, partially offset by a decrease of $189,000 in loans delinquent 60-89 days.

Current wording

The Company measures delinquency based on the amount of past due loans (defined as loans equal to or greater than 30 days past due) as a percentage of total loans. The ratio of delinquent loans to total loans was 5.4% and 5.9% at March 31, 2026, and December 31, 2025, respectively. Delinquent loans (numerator) decreased $4.9 million from December 31, 2025 to March 31, 2026. Total loan balances (denominator) decreased $1.5 million from December 31, 2025 to March 31, 2026. The decrease in delinquent loans from December 31, 2025 to March 31, 2026 was driven by loans delinquent 30-59 days and loans delinquent 60-89 days, which decreased by $7.4 million and $8.1 million, respectively, partially offset by an increase of $10.6 million in loans delinquent 90 days and over.

Previous wording

Income tax expense increased $1.2 million to $46,000, with an effective tax rate of 6.8%, for the quarter ended September 30, 2025, as compared to an income tax benefit of $1.2 million with an effective tax rate of 20.3% for the same three month period in 2024. The increase in income tax expense for the quarter ended September 30, 2025, as compared to the same quarter in 2024, was primarily driven by an increase of $6.5 million in income before taxes. The effective income tax rate decreased 13.5% to 6.8% for the three months ended September 30, 2025 as compared to 20.3% for the same three month period in 2024. The decrease in the tax rate in the third quarter of 2025, as compared to the same quarter in 2024, was primarily related to a decrease in income and fluctuations in permanent tax differences.

Current wording

Income tax expense decreased $214,000 to $530,000 for the quarter ended March 31, 2026, as compared to $744,000 for the same three month period in 2025. The decrease in income tax expense for the quarter ended March 31, 2026, as compared to the same quarter in 2025, was primarily driven by a decrease of $775,000 in income before taxes. The effective income tax rate decreased 200 basis points to 18.0% for the three months ended March 31, 2026 as compared to 20.0% for the same three month period in 2025. The decrease in the tax rate in the first quarter of 2026, as compared to the same quarter in 2025, was primarily related to a decrease in income and fluctuations in permanent tax differences.

Previous wording

Basic and diluted earnings per Voting and Series A Non-Voting share were $0.10 per share for the third quarter of 2025, as compared to $(0.75) for the same prior year period. The increase in earnings per share between the third quarter of 2025 and 2024 was due to the increase of net income between the two periods. Third quarter 2024 results included a $9.0 million provision for credit losses due to $8.7 million of net charge offs resulting from a comprehensive loan portfolio review and $1.6 million in one-time transaction-related expenses for the previously announced July 2024 East Syracuse branch acquisition.

Current wording

Basic and diluted earnings per Voting and Series A Non-Voting share were $0.38 per share for the first quarter of 2026, as compared to $0.48 and $0.47, respectively, for the same prior year period. The decrease in earnings per share between the first quarter of 2026 and 2025 was due to the decrease of net income between the two periods. Further information on earnings per share can be found in Note 3 of the unaudited consolidated financial statements of this Form 10-Q.

Previous wording

Total assets decreased $2.6 million, or 0.2%, to $1.47 billion at September 30, 2025 as compared to December 31, 2024. This decrease was due primarily to decreases in residential and consumer loans, partially offset by increases in investment securities, bank owned life insurance, commercial loans, and total cash and cash equivalents.

Current wording

Total assets decreased $4.7 million, or 0.3%, to $1.42 billion at March 31, 2026 as compared to December 31, 2025. This decrease was primarily attributable to declines in residential and consumer loan balances and investment securities, partially offset by increases in commercial loan balances and total cash and cash equivalents.

Previous wording

Loans, net of deferred fees, totaled $898.5 million on September 30, 2025, resulting in a decrease of $20.5 million or 2.2% from December 31, 2024. Consumer and residential loans totaled $356.2 million on September 30, 2025, decreasing $24.7

Current wording

Loans, net of deferred fees, totaled $895.2 million on March 31, 2026, resulting in a decrease of $1.5 million or 0.2% from December 31, 2025. Consumer and residential loans totaled $347.0 million on March 31, 2026, decreasing $7.3 million or 2.1% from December 31, 2025. Commercial loans totaled $549.5 million on March 31, 2026, increasing $5.8 million, or 1.1% from December 31, 2025.

Previous wording

Total investment securities, including investment in FHLB-NY stock, totaled $445.8 million at September 30, 2025, an increase of $9.2 million, or 2.1%, compared to $436.7 million at December 31, 2024. This increase was due to an increase of $25.1 million in available-for-sale securities, and a $1.3 million increase in marketable equity securities. This increase was partially offset by a $16.1 million decrease in held-to-maturity securities due to calls and maturities, and a $1.1 million decrease in FHLB-NY stock.

Current wording

Total investment securities, including investment in FHLB-NY stock, totaled $403.8 million at March 31, 2026, a decrease of $12.0 million, or 2.9%, compared to $415.7 million at December 31, 2025. This decrease reflected a decrease of $7.9 million in held-to-maturity securities and a $3.8 million decrease in available-for-sale securities due to calls and maturities. In addition, FHLB-NY stock decreased $391,000, offset partially by a $173,000 increase in marketable equity securities during the period.

Previous wording

Total liabilities decreased $7.5 million, or 0.6%, to $1.35 billion at September 30, 2025 as compared to December 31, 2024. This decrease was due primarily to decreases in total borrowings, offset partially by increases in total deposits.

Current wording

Total liabilities decreased $5.8 million, or 0.4%, to $1.30 billion at March 31, 2026 as compared to December 31, 2025. This decrease was primarily attributable to lower total borrowings. In addition, the year-end tax provision resulted in the reclassification of $3.9 million of taxes payable from other liabilities to deferred tax assets. These decreases were partially offset by increases in total deposits.

Previous wording

Total borrowings decreased $31.4 million, or 35.6%, from $88.1 million at December 31, 2024 to $56.7 million at September 30, 2025. This decrease was due to a $23.0 million decrease in short-term borrowed funds from FHLB-NY, and an $8.4 million decrease in long-term borrowed funds from FHLB-NY.

Current wording

Total borrowings decreased $30.7 million, or 52.9%, from $58.1 million at December 31, 2025 to $27.4 million at March 31, 2026. This decrease was due to a $29.0 million decrease in short-term borrowed funds from FHLB-NY and FRB-NY, and a $1.7 million decrease in long-term borrowed funds from FHLB-NY, as excess liquidity provided in the first quarter of 2026 by cash flows from investment securities and a seasonal increase in municipal deposits enabled the Company to reduce borrowings.

Previous wording

Total deposits increased $20.6 million, or 1.7%, to $1.23 billion at September 30, 2025 as compared to December 31, 2024. The change in deposits from the prior period was due to an increase of $38.0 million in interest-bearing deposits, driven by changes in the deposit mix, including higher money market deposit accounts, partially offset by lower time deposit balances. The increase in interest-bearing deposits was also partially offset by a $17.4 million decrease in noninterest-bearing deposits.

Current wording

Total deposits increased $27.9 million, or 2.4%, to $1.21 billion at March 31, 2026 as compared to December 31, 2025. The change in deposits from the prior period was driven by a $17.6 million increase in interest-bearing deposits, reflecting higher balances in money market deposit accounts and both interest- and noninterest-bearing demand deposit accounts, partially offset by lower time deposit balances. In addition, noninterest-bearing deposits increased $10.3 million during the period.

Previous wording

Shareholders' equity increased by $4.8 million, or 4.0%, from $121.5 million at December 31, 2024, to $126.3 million at September 30, 2025. This increase was primarily due to the Company’s recorded net income of $3.6 million, an increase in additional paid in capital of $1.2 million, and a decrease in accumulated other comprehensive loss of $1.9 million, partially reduced by declared dividends to shareholders of $1.9 million during the nine months ended September 30, 2025.

Current wording

Shareholders' equity increased by $1.1 million, or 0.9%, from $122.5 million at December 31, 2025 to $123.6 million at March 31, 2026. This increase was primarily due to the Company’s recorded net income of $2.4 million, an increase in additional paid in capital of $705,000, partially reduced by an increase of $1.3 million in accumulated other comprehensive loss, and $639,000 of declared dividends to shareholders during the three months ended March 31, 2026.

Previous wording

Capital adequacy is evaluated primarily by the use of ratios which measure capital against total assets, as well as against total assets that are weighted based on defined risk characteristics. The Company’s goal is to maintain a strong capital position, consistent with the risk profile of its banking operations. This strong capital position serves to support growth and expansion activities while at the same time exceeding regulatory standards. At September 30, 2025, the Bank met the regulatory definition of a “well-capitalized” institution, i.e. a leverage capital ratio exceeding 5%, a Tier 1 risk-based capital ratio exceeding 8%, Tier 1 common equity exceeding 6.5%, and a total risk-based capital ratio exceeding 10%.

Current wording

Capital adequacy is evaluated primarily by the use of ratios which measure capital against total assets, as well as against total assets that are weighted based on defined risk characteristics. The Company’s goal is to maintain a strong capital position, consistent with the risk profile of its banking operations. This strong capital position serves to support growth and expansion activities while at the same time exceeding regulatory standards. At March 31, 2026, the Bank met the regulatory definition of a “well-capitalized” institution, i.e. a total risk-based capital ratio exceeding 10%, a Tier 1 risk-based capital ratio exceeding 8%, common equity Tier 1 capital ("CET1") risk-based capital ratio exceeding 6.5%, and a Tier 1 capital to average assets ratio (known as the "leverage ratio") exceeding 5%.

Previous wording

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The buffer is separate from the capital ratios required under the Prompt Corrective Actions (“PCA”) standards. In order to avoid these restrictions, the capital conservation buffer effectively increases the minimum levels of the following capital to risk-weighted assets ratios: (1) Core Capital, (2) Total Capital and (3) Common Equity. At September 30, 2025, the Bank exceeded all regulatory required minimum capital ratios, including the capital buffer requirements.

Current wording

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of CET1 to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The buffer is separate from the capital ratios required under the Prompt Corrective Actions (“PCA”) standards. In order to avoid these restrictions, the capital conservation buffer effectively increases the minimum levels of the following capital to risk-weighted assets ratios: (1) Total Capital, (2) Tier 1 Capital and (3) CET1. At March 31, 2026, the Bank exceeded all regulatory required minimum capital ratios, including the capital buffer requirements.

Previous wording

As indicated in the table above, nonperforming assets at September 30, 2025 were $23.4 million, and were $1.3 million greater than the $22.1 million reported at December 31, 2024 and $7.2 million greater than the $16.2 million reported at September 30, 2024. The increase in the nonperforming loans on September 30, 2025, as compared to December 31, 2024, was the result of loans associated with two local commercial relationships that moved to nonperforming status.

Current wording

As indicated in the table above, nonperforming assets at March 31, 2026 were $38.3 million, and were $10.6 million greater than the $27.7 million reported at December 31, 2025 and $25.1 million greater than the $13.2 million reported at March 31, 2025. The increase from December 31, 2025 primarily reflected certain legacy loans associated with two commercial relationships that may have been less than 90 days delinquent but were identified as having unique risk characteristics through the Company’s 2025 portfolio review. Specific reserves for these exposures were established as appropriate prior to the first quarter of 2026.

Previous wording

The allowance for credit losses on loans represents management’s estimate of the lifetime losses inherent in the loan portfolio as of the date of the statement of condition. The allowance for credit losses was $18.7 million and $17.2 million at September 30, 2025 and December 31, 2024, respectively. The ratio of the allowance for credit losses to total loans was 2.08% as of September 30, 2025, as compared to 1.88% at December 31, 2024 and 1.87% at September 30, 2024. Management performs a quarterly evaluation of the allowance for credit losses based on quantitative and qualitative factors and has determined that the current level of the allowance for credit losses is adequate to absorb the losses in the loan portfolio as of September 30, 2025.

Current wording

The allowance for credit losses on loans represents management’s estimate of the lifetime losses inherent in the loan portfolio as of the date of the statement of condition. The allowance for credit losses was $29.0 million and $29.4 million at March 31, 2026 and December 31, 2025, respectively. The ratio of the allowance for credit losses to total loans was 3.24% as of March 31, 2026, as compared to 3.28% at December 31, 2025 and 1.91% at March 31, 2025. The ACL increased by $10.8 million in the fourth quarter of 2025 as part of the previously disclosed risk-based reserve build for potential exposures to commercial credits identified as having unique risk characteristics through the comprehensive portfolio review completed last year. Management performs a quarterly evaluation of the allowance for credit losses based on quantitative and qualitative factors and has determined that the current level of the allowance for credit losses is adequate to absorb the losses in the loan portfolio as of March 31, 2026.

Previous wording

-65 - losses is adjusted, through the provision for credit losses, for expected loss experience, over the projected life of the loans. The expected credit loss experience is determined at the time of purchase and is modified, to the extent necessary, during the life of the purchased loan pools. The Bank does not initially increase the allowance for credit losses on the purchase date of the loan pools.

Current wording

The projected credit losses related to purchased loan pools are evaluated prior to purchase and the performance of those loans against expectations are analyzed at least monthly. Over the life of the purchased loan pools, the allowance for credit losses is adjusted, through the provision for credit losses, for expected loss experience, over the projected life of the loans. The expected credit loss experience is determined at the time of purchase and is modified, to the extent necessary, during the life of the purchased loan pools. The Bank does not initially increase the allowance for credit losses on the purchase date of the loan pools.

Previous wording

At September 30, 2025 and December 31, 2024, the Company had $32.1 million and $20.0 million in loans, respectively, which were individually analyzed, having established specific reserves of $5.5 million and $2.5 million, respectively, on these loans. The $12.1 million increase in specifically identified loans between these two dates primarily reflects four large commercial loan relationships totaling $20.1 million, offset by 2025 year-to-date net charge offs of $3.6 million and $6.5 million in balances from the July 2025 sale of nonperforming and classified loans associated with one local commercial relationship.

Current wording

At March 31, 2026 and December 31, 2025, the Company had $84.7 million and $89.4 million in loans, respectively, which were individually analyzed, having established specific reserves of $18.5 million and $18.1 million, respectively, on these loans. The $4.7 million decrease in specifically identified loans between these two dates primarily reflects the payoff of a single large commercial loan relationship totaling $5.0 million in the first quarter of 2026.

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 totaled $66.0 million at September 30, 2025, an increase of $9.6 million, as 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 specifically-identified.

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 totaled $76.4 million at March 31, 2026, as compared to $77.2 million at December 31, 2025. Of these loans which have been internally classified as special mention, substandard, or doubtful, $71.3 million were individually evaluated for expected credit losses, while the remaining $5.1 million were collectively evaluated at March 31, 2026.

Previous wording

-66 - offset by a $397,000 decrease in net investment activity, and an $987,000 decrease in premises and equipment. The Company reported net cash outflows from financing activities of $12.2 million, primarily due to a $20.6 million increase in net deposit balances, a $31.4 million decrease in net borrowings, and an aggregate decrease of $1.4 million in net cash from all other financing sources, including dividends paid to common voting and non-voting shareholders and warrant holders of $1.9 million.

Current wording

Through the first three months of 2026, as indicated in the consolidated statement of cash flows, the Company reported net cash outflow from operating activities of $240,000 and net cash inflow of $11.2 million related to investing activities. The net cash inflows from investing activities was generated principally by an increase of $1.3 million in net loan activity, a $10.1 million increase in net investment activity, partially offset by a $248,000 decrease in premises and equipment. The Company reported net cash outflows from financing activities of $3.0 million, primarily due to a $27.9 million increase in net deposit balances, a $30.7 million decrease in net borrowings, and an aggregate decrease of $185,000 in net cash from all other financing sources, including dividends paid to common voting and non-voting shareholders and warrant holders of $631,000.

Previous wording

The Bank’s management monitors liquidity on a continuous basis through a broad range of internal programs and considers effective liquidity management to be one of its primary objectives. At September 30, 2025 the Bank had deposits of $1.23 billion, of which a portion were nominally uninsured, as they were above the insurance limits established by the Federal Deposit Insurance Corporation (“FDIC”) on that date. Of the nominally uninsured deposits at September 30, 2025, $95.6 million were insured through a long-standing reciprocal deposit program managed by a third-party entity. In addition, $118.1 million in municipal deposits are fully protected against principal loss by a collateral program whereby the Bank places high-quality securities with an independent custodian as collateral. The Bank had $152.2 million in deposits, representing 13.7% of all deposits that were considered to be uninsured at September 30, 2025. At December 31, 2024, the Bank had $149.0 million in deposits, representing 14.0% of all deposits that were considered to be uninsured.

Current wording

The Bank’s management monitors liquidity on a continuous basis through a broad range of internal programs and considers effective liquidity management to be one of its primary objectives. At March 31, 2026 the Bank had deposits of $1.21 billion, of which a portion were nominally uninsured, as they were above the insurance limits established by the Federal Deposit Insurance Corporation (“FDIC”) on that date. Of the nominally uninsured deposits at March 31, 2026, $83.6 million were insured through a long-standing reciprocal deposit program managed by a third-party entity. In addition, $136.7 million in municipal deposits are fully protected against principal loss by a collateral program whereby the Bank places high-quality securities with an independent custodian as collateral. The Bank had $174.7 million in deposits, representing 15.6% of all deposits, that were considered to be uninsured at March 31, 2026. At December 31, 2025, the Bank had $161.1 million in deposits, representing 14.9% of all deposits, that were considered to be uninsured.

Previous wording

The Company has a number of existing credit facilities available to it. At September 30, 2025, total credit available under the existing lines of credit was approximately $248.3 million at FHLB-NY, FRB-NY, and two other correspondent banks. At September 30, 2025, the Company had $56.7 million of the available lines of credit utilized on its existing lines of credit with the remainder of $191.6 million available.

Current wording

The Company has a number of existing credit facilities available to it. At March 31, 2026, total credit available under the existing lines of credit was approximately $225.8 million at FHLB-NY, FRB-NY, and two other correspondent banks. At March 31, 2026, the Company had $27.4 million of the available lines of credit utilized on its existing lines of credit with the remainder of $198.4 million available.

Previous wording

The Company is also a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. At September 30, 2025, the Company had $219.2 million in outstanding commitments to extend credit and standby letters of credit.

Current wording

The Company is also a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. At March 31, 2026, the Company had $191.4 million in outstanding commitments to extend credit and standby letters of credit.

Previous wording

The Company's exposure to credit loss in the event of nonperformance related to off-balance sheet arrangements is proportional to the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless such commitments are unconditionally cancelable, through the provision for credit losses expense. The allowance for credit losses on off-balance sheet credit exposures as of September 30, 2025 was $686,000 and is included in other liabilities on the Company's consolidated Statements of Condition.

Current wording

The Company's exposure to credit loss in the event of nonperformance related to off-balance sheet arrangements is proportional to the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless such commitments are unconditionally cancelable, through the provision for credit losses expense. The allowance for credit losses on off-balance sheet credit exposures as of March 31, 2026 was $598,000 and is included in other liabilities on the Company's consolidated Statements of Condition.