Pathfinder Bancorp, Inc.

Previous wording

The Company is a Maryland corporation headquartered in Oswego, New York. The Company is 100% owned by public shareholders. The primary business of the Company is its investment in Pathfinder Bank (the "Bank"), a New York State chartered commercial bank, which is 100% owned by the Company. The Bank has two wholly owned operating subsidiaries, Pathfinder Risk Management Company, Inc. (“PRMC”) and Whispering Oaks Development Corp. All significant inter-company accounts and activity have been eliminated in consolidation.

Current wording

The Company is a Maryland corporation headquartered in Oswego, New York. The Company is 100% owned by public shareholders. The primary business of the Company is its investment in the Bank, a New York State chartered commercial bank, which is 100% owned by the Company. The Bank has two wholly owned operating subsidiaries, PRMC and Whispering Oaks. All significant inter-company accounts and activity have been eliminated in consolidation.

Previous 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.

Current wording

At June 30, 2026, the Company and subsidiaries had total consolidated assets of $1.49 billion, total consolidated liabilities of $1.37 billion and shareholders' equity of $125.7 million.

Previous 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.

Current wording

The following discussion reviews the Company's financial condition at June 30, 2026 and the results of operations for the three and six month periods ended June 30, 2026 and 2025. Operating results for the three and six months ended June 30, 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

The following material under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" is written with the presumption that the users of the interim financial statements have read, or have access to, the Company's latest audited financial statements and notes thereto, together with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 2025 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2026 (“the consolidated annual financial statements”) as of December 31, 2025 and 2024 and for the two years then ended. Therefore, only material changes in financial condition and results of operations are discussed in the remainder of Item 2.

Current wording

The following material under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" is written with the presumption that the users of the interim financial statements have read, or have access to, the Company's latest audited financial statements and notes thereto, together with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 2025 Annual Report filed with the SEC on March 30, 2026 (“the consolidated annual financial statements”) as of December 31, 2025 and 2024 and for the two years then ended. Therefore, only material changes in financial condition and results of operations are discussed in the remainder of Item 2.

Previous 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.

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 of the Company and its subsidiaries, including, but not limited to, the Bank.

Previous wording

Actual results may differ materially from those expressed or implied by the forward-looking statements as a result of numerous factors. Although it is not possible to identify all factors that may cause actual results to differ materially from those described in forward-looking statements, factors that may cause actual results to differ materially include, but are not limited to: (i) risks related to the real estate and economic environment, particularly in the market areas in which the Company and the Bank operate; (ii) fiscal and monetary policies of the U.S. Government; (iii) inflation; (iv) changes in prevailing interest rates; (v) changes in government regulations affecting financial institutions, including regulatory compliance costs and capital requirements; (vi) the risk that actual credit losses, borrower performance, collateral values, or loan migration patterns differ from management’s forward-looking estimates or assumptions; (vii) fluctuations in the adequacy of the allowance for credit losses; (viii) decreases in deposit levels or changes in deposit mix that may necessitate increased borrowing to fund loans and investments; (ix) access to wholesale or other funding sources; (x) operational risks including, cybersecurity threats, fraud, model risk and natural disasters; (xi) credit risk management; (xii) political developments, wars or other hostilities that may disrupt financial markets or economic conditions; (xiii) volatility or adverse trends in the securities markets that could affect the value of the Company’s investment portfolio or broader financial conditions; (xiv) delays or incomplete resolution of regulatory matters or supervisory issues that could impact the Company’s planning or operations; (xv) the outcome of regulatory or legal investigations, proceedings or other matters that may arise from time to time; and (xvi) the risk that the Company may not be successful in the implementation of its business strategy.

Current wording

Actual results may differ materially from those expressed or implied by the forward-looking statements as a result of numerous factors. Although it is not possible to identify all factors that may cause actual results to differ materially from those described in forward-looking statements, factors that may cause actual results to differ materially include, but are not limited to: (i) risks related to the real estate and economic environment, particularly in the market areas in which the Company and the Bank operate; (ii) fiscal and monetary policies of the U.S. Government; (iii) inflation; (iv) changes in prevailing interest rates; (v) changes in government regulations affecting financial institutions, including regulatory compliance costs and capital requirements; (vi) the risk that actual credit losses, borrower performance, collateral values, or loan migration patterns differ from management’s forward-looking estimates or assumptions; (vii) fluctuations in the adequacy of the ACL; (viii) decreases in deposit levels or changes in deposit mix that may necessitate increased borrowing to fund loans and investments; (ix) access to wholesale or other funding sources; (x) operational risks including, cybersecurity threats, fraud, model risk and natural disasters; (xi) credit risk management; (xii) political developments, wars or other hostilities that may disrupt financial markets or economic conditions; (xiii) volatility or adverse trends in the securities markets that could affect the value of the Company’s investment portfolio or broader financial conditions; (xiv) delays or incomplete resolution of regulatory matters or supervisory issues that could impact the Company’s planning or operations; (xv) the outcome of regulatory or legal investigations, proceedings or other matters that may arise from time to time; and (xvi) the risk that the Company may not be successful in the implementation of its business strategy.

Previous wording

Additional factors that could cause actual results to differ materially are described in other periodic filings with the Securities and Exchange Commission (“SEC”), which are available at the SEC’s website, www.sec.gov. While the Company believes it has identified and discussed the material risks affecting its business, there may be additional risks and uncertainties not currently known or considered immaterial that could affect the forward-looking statements made herein.

Current wording

Additional factors that could cause actual results to differ materially are described in other periodic filings with the SEC, which are available at the SEC’s website, www.sec.gov. While the Company believes it has identified and discussed the material risks affecting its business, there may be additional risks and uncertainties not currently known or considered immaterial that could affect the forward-looking statements made herein.

Previous wording

Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictions of future results. Any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by applicable law.

Current wording

-42 - results. Any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by applicable law.

Previous wording

The most significant accounting policies followed by the Company are presented in Note 1 to the annual audited consolidated financial statements. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the consolidated quarterly financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the allowance for credit losses, deferred income taxes, pension obligations, the evaluation of investment securities for credit losses, the estimation of fair values for accounting and disclosure purposes, and the evaluation of goodwill for impairment to be the accounting areas that require the most subjective and complex judgments. These areas could be the most subject to revision as new information becomes available.

Current wording

The most significant accounting policies followed by the Company are presented in Note 1 to the annual audited consolidated financial statements. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the consolidated quarterly financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the ACL, deferred income taxes, pension obligations, the evaluation of investment securities for credit losses, the estimation of fair values for accounting and disclosure purposes, and the evaluation of goodwill for impairment to be the accounting areas that require the most subjective and complex judgments. These areas could be the most subject to revision as new information becomes available.

Previous 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.

Current wording

The Company applies ASC 326, Financial Instruments—Credit Losses, to account for its ACL on loans in accordance with CECL methodology. The ACL 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

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.

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 DCF 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 June 30, 2026, the Bank had 117 individually evaluated loans totaling $78.6 million. Each of these loans was evaluated using a collateral-dependent methodology. No individually evaluated loans were measured using the present value of expected future cash flows or another methodology permitted under ASC 326. For all other loans, the Company applies a collective evaluation methodology designed to estimate lifetime expected credit losses for pools of loans that share similar risk characteristics.

Previous wording

The Company utilizes the DCF method for its pooled segment calculation. The DCF method implements a probability of default and loss given default and loss exposure at default estimation. The probability of default and loss given default are applied to future cash flows that are adjusted to present value and these discounted expected losses become the Allowance for Credit Losses.

Current wording

The Company utilizes the DCF method for its pooled segment calculation. The DCF method implements a probability of default and loss given default and loss exposure at default estimation. The probability of default and loss given default are applied to future cash flows that are adjusted to present value and these discounted expected losses become the ACL.

Previous wording

Management also considers Qualitative Factors (“QF”) that are likely to cause estimated credit losses with the Company’s existing portfolio to differ from historical loss experience, including but not limited to: national and local economic trends and conditions, levels and trends in delinquencies, non-accrual loans and classified assets, trends in volume, terms and concentrations of loans, changes in lending policies and procedures, quality of credit review function and administration, and changes in regulatory environment, management, markets and product offerings. On a quarterly basis, the Company assesses the magnitude of QF adjustments necessary to be applied to the quantitatively-derived ACL in order to incorporate forward-looking projections in its final evaluation of current expected credit losses.

Current wording

Management also considers Qualitative Factors that are likely to cause estimated credit losses with the Company’s existing portfolio to differ from historical loss experience, including but not limited to: national and local economic trends and conditions, levels and trends in delinquencies, non-accrual loans and classified assets, trends in volume, terms and concentrations of loans, changes in lending policies

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 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.

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 June 30, 2026, the Bank held $544.6 million in commercial real estate and commercial & industrial loans (collectively, commercial loans) representing 61.3% of the Bank’s entire loan portfolio. The Bank allocated $21.5 million of the ACL to these commercial loans, which included a net qualitative adjustment that reduced the ACL by approximately $899,000 in the first half 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 $225,000, 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 June 30, 2026 in the final recorded estimation of the ACL on loans recognized on the Statements of Financial Condition.

Previous wording

The Company’s effective tax rate typically differs from the 21% federal statutory tax rate due primarily to New York State income taxes, partially offset by tax-exempt income from specific types of investment securities and loans, bank owned life insurance, and to a much lesser degree, the utilization of low income housing tax credits. In addition, the tax effects of certain incentive stock option activity may reduce the Company’s effective tax rate on a sporadic basis.

Current wording

The Company’s effective tax rate typically differs from the 21% federal statutory tax rate due primarily to New York State income taxes, partially offset by tax-exempt income from specific types of investment securities and loans, BOLI, and to a much lesser degree, the utilization of low income housing tax credits. In addition, the tax effects of certain incentive stock option activity may reduce the Company’s effective tax rate on a sporadic basis.

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 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.

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 AOCI, 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. 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.

Current wording

Management performs an annual evaluation of our goodwill for possible impairment. 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

On March 30, 2026, the Company announced that its Board of Directors declared a cash dividend of $0.10 per share on the Company's voting common and non-voting common stock, and a cash dividend of $0.10 per notional share for the issued warrant relating to the fiscal quarter ended March 31, 2026. The dividends were payable to all shareholders of record on April 17, 2026 and were paid on May 8, 2026.

Current wording

On June 29, 2026, the Company announced that its Board of Directors declared a cash dividend of $0.10 per share on the Company's voting common and non-voting common stock relating to the fiscal quarter ended June 30, 2026. The dividends were payable to all shareholders of record on July 17, 2026 and were paid on August 7, 2026.

Previous 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.

Current wording

Net interest income before PCL decreased $278,000, or 2.6%, to $10.5 million for the three months ended June 30, 2026, as compared to the same period in 2025. This decrease was primarily the result of a decrease in interest and dividend income of $1.1 million, partially offset by a decrease in interest expense of $836,000.

Previous wording

Net interest margin ("NIM") was 3.10% for the first three months ended March 31, 2026, compared to 3.31% in the year-ago period. The decrease of 21 basis points primarily reflected lower earning asset yields that more than offset the reduction in the cost of interest bearing deposits and other liabilities. In addition, approximately 10 basis points of net interest margin in the year-ago period reflected 2024 interest recovered from loans removed from nonaccrual status and income from prepayment fees in the first quarter of 2025.

Current wording

NIM was 3.08% for the three months ended June 30, 2026, compared to 3.11% in the year-ago period. The decrease of 3 bps primarily reflected lower earning asset yields that more than offset the reduction in the cost of interest-bearing deposits and other liabilities.

Previous wording

Provision for credit losses was a benefit of $168,000 in the first quarter of 2026, reflecting lower net charge offs and overall credit performance that resulted in a small reserve release in the first three months of this year. Provision expense was $457,000 in the year-ago period. See the “Provision for Credit Losses” and “Loan and Asset Quality and Allowance for Credit Losses” sections of this Management’s Discussion and Analysis for further discussion.

Current wording

PCL was a benefit of $155,000 in the second quarter of 2026, attributed to the level of average loans outstanding in the period and the risk-based reserve build undertaken in the second half of 2025 to absorb future loss resolution activity related to commercial IALs, resulting in a modest reserve release during the period. Provision expense was $1.2 million in the year-ago quarter. See the “Provision for Credit Losses” and “Loan and Asset Quality and Allowance for Credit Losses” sections of this Management’s Discussion and Analysis for further discussion.

Previous 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.

Current wording

For the second quarter of 2026, annualized noninterest expense represented 2.39% of average assets, compared to 2.18% in the year-ago period. The efficiency ratio was 74.26% for the second quarter of 2026, compared to 65.66% in the year-ago period. As the Company continues to maintain well-controlled noninterest expenses, the efficiency ratio was elevated during the second quarter of 2026 due to reduced revenues, which the Company views as temporary. In addition, the absence of FDIC assessment expense in the second quarter of 2025, due to modest over-accruals in prior periods, contributed to a lower efficiency ratio in the year-ago quarter. 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 noninterest expense as a percentage of total revenue.

Previous wording

Total interest expense decreased $868,000 to $7.2 million from $8.0 million for the three months ended March 31, 2026 and 2025 respectively. The decrease was primarily attributed to a 22 basis point decline in the average cost of total interest-bearing liabilities, which includes a reduction of 31 basis points in the average cost of interest-bearing deposits that was partially offset by an increase of 34 basis points in the average cost of borrowings, as well as an increase of 230 basis points in the average cost of subordinated loans that reset from fixed-rate to floating-rate interest after October 15, 2025. Total average interest-bearing liabilities decreased by $38.5 million from the same period one year-ago. This decrease reflects lower average balances of $57.6 million of time deposits and $30.6 million of borrowings, offset by higher average balances of $42.4 million of MMDA deposits.

Current wording

Total interest expense decreased $836,000 to $7.5 million from $8.4 million for the three months ended June 30, 2026 and 2025, respectively. The decrease was primarily attributed to a 22 bps decline in the average cost of total interest-bearing liabilities, which included a reduction of 33 bps in the average cost of interest-bearing deposits. This was partially offset by an increase of 7 bps in the average cost of borrowings, as well as 218 bps in the average cost of subordinated debt that reset from fixed-rate to floating-rate after October 15, 2025. Total average interest-bearing liabilities decreased $32.8 million from the same period one year ago. This decrease was driven by lower average balances of time deposits, savings deposits, and money market accounts, which declined $71.4 million, $3.1 million, and $1.8 million, respectively, partially offset by increases in average MMDA deposits, NOW deposits, and borrowings of $20.9 million, $9.2 million, and $13.4 million, respectively.

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 $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.

Current wording

The Company’s deposit base is primarily 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 decreased by $9.6 million, or 0.8% from December 31, 2025. The decrease in deposits during the six months ended June 30, 2026, reflects intentional runoff of higher-cost brokered deposits and non-relationship time deposits, partially offset by growth in MMDA deposits and both interest- and noninterest-bearing demand deposits.

Previous 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.

Current wording

At June 30, 2026, 81.9% of the Company's deposit base of $1.17 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

We establish a provision for credit losses, which is charged to operations, at a level management believes is appropriate to absorb lifetime credit losses in the loan portfolio. In evaluating the level of the allowance for credit losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. The provision for credit losses represents management’s estimate of the amount necessary to maintain the allowance for credit losses at an adequate level.

Current wording

We establish a PCL, which is charged to operations, at a level management believes is appropriate to absorb lifetime credit losses in the loan portfolio. In evaluating the level of the ACL, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. The PCL represents management’s estimate of the amount necessary to maintain the ACL at an adequate level.

Previous 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.

Current wording

PCL was a benefit of $155,000 for the three month period ended June 30, 2026, as compared to a $1.2 million PCL expense for the three month period ended June 30, 2025. The provisioning in the second 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 $1.4 million decrease in PCL for the second quarter of 2026, as compared to the same period in 2025, was primarily attributed to the level of average loans outstanding in the period and the risk-based reserve build undertaken in the second half of 2025 to absorb future loss resolution activity associated with commercial IALs, and continued improvement in asset quality metrics. 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 ACL.

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 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.

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 4.8% and 5.9% at June 30, 2026, and December 31, 2025, respectively. Delinquent loans (numerator) decreased $10.1 million from December 31, 2025 to June 30, 2026. Total loan balances (denominator) decreased $8.2 million from December 31, 2025 to June 30, 2026. The decrease in delinquent loans from December 31, 2025 to June 30, 2026 was driven by loans delinquent 30-59 days and loans delinquent 60-89 days, which decreased by $8.6 million and $9.7 million, respectively, partially offset by an increase of $8.2 million in loans delinquent 90 days and over.

Previous wording

Noninterest expense totaled $8.7 million in the first quarter of 2026, compared to $8.4 million in the first quarter of 2025.

Current wording

Noninterest expense totaled $8.7 million in the second quarter of 2026, increasing $601,000, or 7.5%, from $8.1 million in the second quarter of 2025.

Previous wording

Data processing expense was $733,000 in the first quarter of 2026, increasing $67,000 from the year-ago period. The increases from the year-ago quarter reflected higher costs primarily associated with data, ATM, and other technology maintenance costs.

Current wording

Building and occupancy expense was $1.4 million in the second quarter of 2026, increasing $150,000 from the year-ago quarter. The increases reflected higher facility-related maintenance and repair expenses, including ATM servicing, branch maintenance and various property improvement activities. Data processing expense was $774,000 in the second quarter of 2026, increasing $107,000 from the year-ago period. The increases reflected higher costs primarily associated with data, ATM, and other technology maintenance costs.

Previous 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.

Current wording

Income tax expense increased to $585,000 for the quarter ended June 30, 2026, as compared to $7,000 for the same three month period in 2025. The increase in income tax expense for the quarter ended June 30, 2026, as compared to the same quarter in 2025, was primarily driven by an increase of $3.2 million in income before taxes. The effective income tax rate decreased 40 bps to 18.0% for the three months ended June 30, 2026 as compared to 18.4% for the same three month period in 2025. The decrease in the tax rate in the second quarter of 2026, as compared to the same quarter in 2025, was primarily related to an increase in income and fluctuations in permanent tax differences.

Previous wording

The Company’s tax liability is a function of the 21% statutory federal tax rate, the level of pretax income, the varying effects of New York State income taxes, and is partially reduced by tax-exempt income from specific types of investment securities and loans, bank owned life insurance, and, to a much lesser degree, the utilization of historic and low income housing tax credits. In addition, the tax effects of certain incentive stock option activity may reduce the Company’s effective tax rate on a sporadic basis.

Current wording

The Company’s tax liability is a function of the 21% statutory federal tax rate, the level of pretax income, the varying effects of New York State income taxes, and is partially reduced by tax-exempt income from specific types of investment securities and loans, BOLI, and, to a much lesser degree, the utilization of historic and low income housing tax credits. In addition, the tax effects of certain incentive stock option activity may reduce the Company’s effective tax rate on a sporadic basis.

Previous 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.

Current wording

Basic and diluted earnings per Voting and Series A Non-Voting share were $0.42 per share for the second quarter of 2026, as compared to less than $0.01 per share for the same prior year period. The increase in EPS primarily reflected higher net income in the second quarter of 2026.

Previous 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.

Current wording

Total borrowings increased $75.3 million, or 129.7%, from $58.1 million at December 31, 2025 to $133.4 million at June 30, 2026. This increase was due to an $81.0 million increase in short-term borrowings from FHLB-NY and FRB-NY, partially offset by a $5.7 million decrease in long-term borrowings from FHLB-NY. Borrowings were utilized in the second quarter of 2026 to fund purchases of AFS securities at rates below those of wholesale funding alternatives, including brokered deposits.

Previous 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.

Current wording

Shareholders' equity increased by $3.3 million, or 2.7%, from $122.5 million at December 31, 2025 to $125.7 million at June 30, 2026. This increase was primarily attributable to the Company’s recorded net income of $5.1 million, a $1.2 million increase in additional paid-in-capital, partially reduced by a decrease of $1.7 million in AOCI, and $1.3 million of declared dividends to shareholders during the six months ended June 30, 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 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%.

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 June 30, 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%, 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 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.

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 RWA above the amount necessary to meet its minimum risk-based capital requirements. The buffer is separate from the capital ratios required under PCA standards. In order to avoid these restrictions, the capital conservation buffer effectively increases the minimum levels of the following capital to RWA ratios: (1) Total Capital, (2) Tier 1 Capital and (3) CET1. At June 30, 2026, the Bank exceeded all regulatory required minimum capital ratios, including the capital buffer requirements.

Previous wording

Regulation G, a rule adopted by the Securities and Exchange Commission (SEC), applies to certain SEC filings, including earnings releases, made by registered companies that contain “non-GAAP financial measures.” GAAP is generally accepted accounting principles in the United States of America. Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure (if a comparable GAAP measure exists) and a statement of the Company’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures. The SEC has exempted from the definition of “non-GAAP financial measures” certain commonly used financial measures that are not based on GAAP. When these exempted measures are included in public disclosures, supplemental information is not required. Financial institutions like the Company and its subsidiary bank are subject to an array of bank regulatory capital measures that are financial in nature but are not based on GAAP. The Company follows industry practice in disclosing its financial condition under these various regulatory capital measures, including period-end regulatory capital ratios for its subsidiary bank, in its periodic reports filed with the SEC. The Company provides, below, an explanation of the calculations, as supplemental information, for non-GAAP measures included in the consolidated annual financial statements. In addition, the Company provides a reconciliation of its subsidiary bank’s disclosed regulatory capital measures, below.

Current wording

Regulation G, a rule adopted by the SEC, applies to certain SEC filings, including earnings releases, made by registered companies that contain “non-GAAP financial measures.” GAAP is generally accepted accounting principles in the United States of America. Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure (if a comparable GAAP measure exists) and a statement of the Company’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures. The SEC has exempted from the definition of “non-GAAP financial measures” certain commonly used financial measures that are not based on GAAP. When these exempted measures are included in public disclosures, supplemental information is not required. Financial institutions like the Company and its subsidiary bank are subject to an array of bank regulatory capital measures that are financial in nature but are not based on GAAP. The Company follows industry practice in disclosing its financial condition under these various regulatory capital measures, including period-end regulatory capital ratios for its subsidiary bank, in its periodic reports filed with the SEC. The Company provides, below, an explanation of the calculations, as supplemental information, for non-GAAP measures included in the consolidated annual financial statements. In addition, the Company provides a reconciliation of its subsidiary bank’s disclosed regulatory capital measures below.

Previous wording

Nonperforming assets include nonaccrual loans, and foreclosed real estate (‘‘FRE”).

Current wording

Nonperforming assets include nonaccrual loans, and FRE.

Previous 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.

Current wording

As indicated in the table above, nonperforming assets at June 30 2026 were $35.8 million, and were $8.1 million greater than the $27.7 million reported at December 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 prior to 2026.