FINANCIAL INSTITUTIONS INC

Previous wording

Net income increased $3.7 million to $21.2 million for the second quarter of 2026 compared to $17.5 million for the second quarter of 2025. Net income available to common shareholders for the second quarter of 2026 was $20.8 million, or $1.04 per diluted share, compared with $17.2 million, or $0.85 per diluted share, for the second quarter of 2025.

Current wording

Net income decreased $486 thousand to $20.0 million for the third quarter of 2026 compared to $20.5 million for the third quarter of 2025. Net income available to common shareholders for the third quarter of 2026 was $19.6 million, or $0.99 per diluted share, compared with $20.1 million, or $0.99 per diluted share, for the third quarter of 2025.

Previous wording

Net interest income totaled $53.4 million in the second quarter of 2026, an increase of $4.2 million compared to $49.1 million in the second quarter of 2025. Average interest-earning assets for the second quarter of 2026 were $134.5 million higher than the second quarter of 2025 primarily due to a $139.2 million increase in the average balance of loans and a $6.0 million increase in average investment securities, partially offset by a $10.7 million decrease in the average balance of Federal Reserve interest-earning cash. Average interest-bearing liabilities for the second quarter of 2026 were $41.1 million higher than the second quarter of 2025 primarily due to a $39.6 million increase in the average balance of total deposits, and a $39.2 million increase in average short-term borrowings, partially offset by a $37.8 million decrease in average long-term borrowings.

Current wording

Net interest income totaled $54.3 million in the third quarter of 2026, an increase of $2.5 million compared to $51.8 million in the third quarter of 2025. Average interest-earning assets for the third quarter of 2026 were $180.7 million higher than the third quarter of 2025 primarily due to a $228.2 million increase in the average balance of loans, partially offset by a $43.2 million decrease in average investment securities and a $4.3 million decrease in the average balance of Federal Reserve interest-earning cash. Average interest-bearing liabilities for the third quarter of 2026 were $135.5 million higher than the third quarter of 2025 primarily due to a $159.4 million increase in the average balance of total deposits, and a $12.3 million increase in average short-term borrowings, partially offset by a $37.2 million decrease in average long-term borrowings.

Previous wording

Net interest margin expanded to 3.70% for the second quarter of 2026 compared to 3.49% for the second quarter of 2025. The yield on interest-earnings assets was 5.76% for the second quarter of 2026, compared to 5.88% for the second quarter of 2025, while the cost of interest-bearing liabilities was 2.61%, reflecting a decrease of 39 basis points from the second quarter of 2025.

Current wording

Net interest margin expanded to 3.70% for the third quarter of 2026 compared to 3.65% for the third quarter of 2025. The cost of interest-bearing liabilities was 2.67%, reflecting a decrease of 25 basis points from the third quarter of 2025, while the yield on interest-earning assets was 5.79% for the third quarter of 2026, compared to 5.93% for the third quarter of 2025.

Previous wording

The provision for credit losses was $3.1 million in the second quarter of 2026 compared to $2.6 million in the second quarter of 2025. Net charge-offs during the recent quarter were $1.3 million, representing 0.11% of average loans on an annualized basis, compared to $4.1 million, or an annualized 0.36% of average loans, in the second quarter of 2025. See the “Provision for Credit Losses,” “Allowance for Credit Losses–Loans” and “Non-Performing Assets and Potential Problem Loans” sections of this Management’s Discussion and Analysis for further discussion regarding the provision for credit losses and net charge-offs.

Current wording

The provision for credit losses was $3.9 million in the third quarter of 2026 compared to $2.7 million in the third quarter of 2025. Net charge-offs during the recent quarter were $4.0 million, representing 0.33% of average loans on an annualized basis, compared to $2.1 million, or an annualized 0.18% of average loans, in the third quarter of 2025. See the “Provision for Credit Losses,” “Allowance for Credit Losses–Loans” and “Non-Performing Assets and Potential Problem Loans” sections of this Management’s Discussion and Analysis for further discussion regarding the provision for credit losses and net charge-offs.

Previous wording

Noninterest income totaled $11.0 million in the second quarter of 2026, compared to $10.6 million in the second quarter of 2025. The 3.2% increase was primarily due to an increase in investment advisory fee income, as the assets under management of Courier Capital surpassed $4.0 billion as of June 30, 2026. Refer to the “Noninterest Income” section of this Management’s Discussion and Analysis for further discussion regarding these variances.

Current wording

Noninterest income totaled $10.5 million in the third quarter of 2026, compared to $12.1 million in the third quarter of 2025. The 13.3% decrease was primarily due to decreased income from derivative instruments, net, or swap fees, and lower income from investments in limited partnerships. Noninterest income for the third quarter of 2025 includes a gain on sale of investment securities of $703 thousand. Refer to the “Noninterest Income” section of this Management’s Discussion and Analysis for further discussion regarding these variances.

Previous wording

Noninterest expense remained relatively flat at $35.6 million in the second quarter of 2026, compared to $35.7 million in the second quarter of 2025. Refer to the “Noninterest Expense” section of this Management’s Discussion and Analysis for further discussion regarding these variances.

Current wording

Noninterest expense was $36.8 million in the third quarter of 2026, compared to $35.9 million in the third quarter of 2025. Refer to the “Noninterest Expense” section of this Management’s Discussion and Analysis for further discussion regarding these variances.

Previous wording

The regulatory Tier 1 Capital Ratio of the Company was 11.76% and 11.43%, respectively, and Total Risk-Based Capital Ratio was 14.20% and 14.90%, respectively, at June 30, 2026 and December 31, 2025. See the “Liquidity and Capital Management” section of this Management’s Discussion and Analysis for further discussion regarding regulatory capital and the Basel III capital rules.

Current wording

The regulatory Tier 1 Capital Ratio of the Company was 11.68% and 11.43%, respectively, and Total Risk-Based Capital Ratio was 14.07% and 14.90%, respectively, at September 30, 2026 and December 31, 2025. See the “Liquidity and Capital Management” section of this Management’s Discussion and Analysis for further discussion regarding regulatory capital and the Basel III capital rules.

Previous wording

Net interest income is our primary source of revenue, comprising approximately 83% of revenue during the second quarter of 2026 and 82% of revenue during the second quarter of 2025. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities, and interest expense on interest-bearing deposits and other borrowings used to fund interest-earning and other assets or activities. Net interest income is affected by changes in interest rates and by the amount and composition of interest-earning assets and interest-bearing liabilities, as well as the sensitivity of the balance sheet to changes in interest rates, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities and repricing frequencies.

Current wording

Net interest income is our primary source of revenue, comprising approximately 84% of revenue during the third quarter of 2026 and 81% of revenue during the third quarter of 2025. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities, and interest expense on interest-bearing deposits and other borrowings used to fund interest-earning and other assets or activities. Net interest income is affected by changes in interest rates and by the amount and composition of interest-earning assets and interest-bearing liabilities, as well as the sensitivity of the balance sheet to changes in interest rates, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities and repricing frequencies.

Previous wording

Net interest income on a taxable equivalent basis for the second quarter of 2026, was $53.4 million, an increase of $4.2 million versus the comparable quarter last year of $49.2 million. Net interest margin for the second quarter of 2026 was 3.70%, 21-basis points higher than 3.49% for the same period in 2025. This increase was a function of a 27-basis points increase in the net interest spread, partially offset by a 6-basis point lower contribution from net free funds. The increase in interest rate spread was comprised of a 39-basis points decrease in the average cost of interest-bearing liabilities, partially offset by a 12-basis points decrease in the average yield of interest-earning assets.

Current wording

Net interest income on a taxable equivalent basis for the third quarter of 2026, was $54.3 million, an increase of $2.5 million versus the comparable quarter last year of $51.8 million. Net interest margin for the third quarter of 2026 was 3.70%, 5-basis points higher than 3.65% for the same period in 2025. This increase was a function of an 11-basis points increase in the net interest spread, partially offset by a 6-basis point lower contribution from net free funds. The increase in interest rate spread was comprised of a 25-basis points decrease in the average cost of interest-bearing liabilities, partially offset by a 14-basis points decrease in the average yield of interest-earning assets.

Previous wording

Average interest-earning assets were $5.79 billion for the second quarter of 2026 compared to $5.65 billion for the second quarter of 2025, an increase of $134.5 million from the comparable quarter last year. The increase was primarily due to an increase of average loans of $139.2 million from $4.54 billion for the second quarter of 2025 to $4.68 billion for the second quarter of 2026, and an increase in average investment securities of $6.0 million from $1.07 billion for the second quarter of 2025 to $1.08 billion for the second quarter of 2026, partially offset by a $10.7 million decrease in average Federal Reserve interest-earning cash. Average loans comprised 81% of average interest-earning assets during the second quarter of 2026 compared to 80% during the second quarter of 2025. The increase in average loans was primarily due to organic growth in commercial mortgages and resulted in a $2.0 million increase in interest income.

Current wording

Average interest-earning assets were $5.84 billion for the third quarter of 2026 compared to $5.66 billion for the third quarter of 2025, an increase of $180.7 million, resulting in a $2.9 million increase in net interest income. The increase was primarily due to an increase of average loans of $228.2 million from $4.57 billion for the third quarter of 2025 to $4.79 billion for the third quarter of 2026, partially offset by a decrease in average investment securities of $43.2 million from $1.06 billion for the third quarter of 2025 to $1.02 billion for the third quarter of 2026, and a $4.3 million decrease in average Federal Reserve interest-earning cash. Average loans comprised 82% of average interest-earning assets during the third quarter of 2026 compared to 81% during the third quarter of 2025. The increase in average loans was primarily due to organic growth in commercial mortgages and resulted in a $3.4 million increase in interest income, while the decrease in average investment securities of $43.2 million, resulted in a $473 thousand decrease in interest income.

Previous wording

For the second quarter of 2026, the cost of average interest-bearing liabilities of 2.61% was 39-basis points lower than the second quarter of 2025 of 3.00%. The average cost of interest-bearing deposits of 2.53% was 43-basis points lower than the second quarter of 2025, primarily due to the continued repricing of deposits at lower rates, which decreased interest expense by $4.8 million. The average cost of total borrowings increased 51-basis points to 4.31% in the second quarter of 2026, compared to 3.80% in the second quarter of 2025, which increased interest expense $620 thousand.

Current wording

For the third quarter of 2026, the cost of average interest-bearing liabilities of 2.67% was 25-basis points lower than the third quarter of 2025 of 2.92%, resulting in a $2.6 million decrease in interest expense. The average cost of interest-bearing deposits of 2.59% was 27-basis points lower than the third quarter of 2025, primarily due to the continued repricing of deposits at lower rates, which decreased interest expense by $3.0 million. The average cost of total borrowings increased 35-basis points to 4.33% in the third quarter of 2026, compared to 3.98% in the third quarter of 2025, which increased interest expense $431 thousand.

Previous wording

Average interest-bearing liabilities of $4.56 billion for the second quarter of 2026 were generally flat with the second quarter of 2025. On average, interest-bearing deposits increased $39.6 million from $4.32 billion for the second quarter of 2025 to $4.36 billion for the current quarter, and noninterest-bearing demand deposits (a principal component of net free funds) increased $20.6 million to $944.0 million for the second quarter of 2026. The increase in average interest-bearing deposits was primarily due to an increase in average time deposits. For further discussion of deposits, refer to the “Funding Activities–Deposits” section of this Management’s Discussion and Analysis.

Current wording

Average interest-bearing liabilities were $4.57 billion for the third quarter of 2026, compared to $4.44 billion for the third quarter of 2025, an increase of $135.5 million, resulting in a $697 thousand increase to interest expense. On average, interest-bearing deposits increased $159.4 million from $4.21 billion for the third quarter of 2025 to $4.37 billion for the current quarter, and noninterest-bearing demand deposits (a principal component of net free funds) decreased $1.6 million to $958.5 million for the third quarter of 2026 and resulted in a $1.2 million increase in interest expense. The increase in average interest-bearing deposits reflected growth across all deposit types. For further discussion of deposits, refer to the “Funding Activities–Deposits” section of this Management’s Discussion and Analysis. On average, total borrowings decreased $23.9 million, resulting in a $494 thousand decrease to interest expense.

Previous wording

Net interest income on a taxable equivalent basis for the six months ended June 30, 2026, was $105.4 million, an increase of $9.3 million versus the comparable period in 2025 of $96.1 million. Net interest margin for the six months ended June 30, 2026 was 3.53%, 11-basis points higher than 3.42% for the same period in 2025. This increase was a function of a 32-basis points increase in the net interest spread, partially offset by a 21-basis point lower contribution from net free funds. The increase in interest rate spread was comprised of a 40-basis points decrease in the average cost of interest-bearing liabilities, partially offset by an 8-basis points decrease in the average yield of interest-earning assets.

Current wording

Net interest income on a taxable equivalent basis for the nine months ended September 30, 2026, was $159.8 million, an increase of $11.8 million versus the comparable period in 2025 of $147.9 million. Net interest margin for the nine months ended September 30, 2026 was 3.69%, 19-basis points higher than 3.50% for the same period in 2025. This increase was a function of a 26-basis points increase in the net interest spread, partially offset by a 7-basis point lower contribution from net free funds. The increase in interest rate spread was comprised of a 36-basis points decrease in the average cost of interest-bearing liabilities, partially offset by a 10-basis points decrease in the average yield of interest-earning assets.

Previous wording

For the six months ended June 30, 2026, the average yield on average interest earning assets of 5.76% was 8-basis points lower than the six months ended June 30, 2025 of 5.84%. The average yield on Federal Reserve interest-earning cash decreased 57-basis points during the six months ended June 30, 2026 to 3.75%, decreasing interest income by $141 thousand, while average loan yield decreased 16-basis points during the six months ended June 30, 2026 to 6.07% from 6.23% for the six months ended June 30, 2025, decreasing net interest income $3.5 million, while the average yield on investment securities increased 17-basis points during the six months ended June 30, 2026 to 4.47%, resulting in an $881 thousand increase in interest income.

Current wording

For the nine months ended September 30, 2026, the average yield on average interest earning assets of 5.77% was 10-basis points lower than the nine months ended September 30, 2025 of 5.87%. The average loan yield decreased 18-basis points to 6.07% for the nine months ended September 30, 2026 from 6.25% for the same period in 2025, decreasing net interest income $5.8 million. The average yield on investment securities for the nine months ended September 30, 2026 increased 12-basis points from the comparable period in 2025, which increased interest income $893 thousand, while the average yield on Federal Reserve interest-earning cash decreased 59-basis points during the nine months ended September 30, 2026 to 3.73%, decreasing interest income by $188 thousand.

Previous wording

Average interest-earning assets were $5.76 billion for the six months ended June 30, 2026 compared to $5.65 billion for the six months ended June 30, 2025, an increase of $104.1 million. The increase was primarily due to an increase of average loans of $142.1 million to $4.66 billion for the six months ended June 30, 2026 from $4.52 billion for the six months ended June 30, 2025, partially offset by a $26.0 million decrease in average Federal Reserve interest-earning cash, and a decrease in average investment securities of $12.0 million from $1.08 billion for the six months ended June 30, 2025 to $1.07 billion for the six months ended June 30, 2026. Average loans comprised 81% of average interest-earning assets during the six months ended June 30, 2026 compared to 80% during the six months ended June 30, 2025. The increase in average loans was primarily due to organic growth in commercial mortgages and resulted in a $4.2 million increase in interest income.

Current wording

Average interest-earning assets were $5.78 billion for the nine months ended September 30, 2026 compared to $5.65 billion for the nine months ended September 30, 2025, an increase of $129.9 million. The increase was primarily due to an increase of average loans of $171.1 million to $4.70 billion for the nine months ended September 30, 2026 from $4.53 billion for the nine months ended September 30, 2025, partially offset by a decrease in average investment securities of $22.5 million from $1.07 billion for the nine months ended September 30, 2025 to $1.05 billion for the nine months ended September 30, 2026, and an $18.7 million decrease in average Federal Reserve interest-earning cash. Average loans comprised 81% of average interest-earning assets during the nine months ended September 30, 2026 compared to 80% during the nine months ended September 30, 2025. The increase in average loans was primarily due to organic growth in commercial mortgages and resulted in a $7.6 million increase in interest income, while the decreases in average investment securities and average Federal Reserve interest-earning cash resulted in decreases to interest income of $686 thousand and $543 thousand, respectively.

Previous wording

For the six months ended June 30, 2026, the average cost of interest-bearing liabilities of 2.63% was 40-basis points lower than the six months ended June 30, 2025 of 3.03%. The average cost of interest-bearing deposits of 2.55% was 45-basis points lower than the six months ended June 30, 2025, primarily due to the continued repricing of deposits at lower rates, which decreased interest expense by $10.3 million. The average cost of total borrowings increased 63-basis points to 4.44% in the six months ended June 30, 2026, compared to 3.81% in the six months ended June 30, 2025, which increased interest expense $1.2 million.

Current wording

For the nine months ended September 30, 2026, the average cost of interest-bearing liabilities of 2.64% was 36-basis points lower than the nine months ended September 30, 2025 of 3.00%. The average cost of interest-bearing deposits of 2.56% was 39-basis points lower than the nine months ended September 30, 2025, primarily due to the continued repricing of deposits at lower rates, which decreased interest expense by $13.4 million. The average cost of total borrowings increased 53-basis points to 4.40% in the nine months ended September 30, 2026, compared to 3.87% in the nine months ended September 30, 2025, which increased interest expense $1.6 million.

Previous wording

Average interest-bearing liabilities of $4.54 billion for the six months ended June 30, 2026 were $24.0 million higher than the six months ended June 30, 2025. On average, interest-bearing deposits increased $29.5 million from $4.30 billion for the six months ended June 30, 2025 to $4.33 billion for the six months ended June 30, 2026, and noninterest-bearing demand deposits (a principal component of net free funds) increased $22.3 million to $947.3 million for the six months ended June 30, 2026. The modest increase in average interest-bearing deposits was primarily due to an increase in average time deposits. For further discussion of deposits, refer to the “Funding Activities–Deposits” section of this Management’s Discussion and Analysis.

Current wording

Average interest-bearing liabilities of $4.55 billion for the nine months ended September 30, 2026 were $61.6 million higher than the nine months ended September 30, 2025. On average, interest-bearing deposits increased $73.3 million from $4.27 billion for the nine months ended September 30, 2025 to $4.34 billion for the nine months ended September 30, 2026, and noninterest-bearing demand deposits (a principal component of net free funds) increased $14.2 million to $951.1 million for the nine months ended September 30, 2026, and resulted in a $2.4 million increase in interest expense. The increase in average interest-bearing deposits was primarily due to an increase in average time deposits. For further discussion of deposits, refer to the “Funding Activities–Deposits” section of this Management’s Discussion and Analysis. On average, total borrowings decreased $11.8 million, resulting in a $1.1 million decrease to interest expense.

Previous wording

Total noninterest income increased $337 thousand, or 3.2%, for the second quarter of 2026, compared to the second quarter of 2025. For the six months ended June 30, 2026, total noninterest income increased $637 thousand, or 3.0%, compared to the six months ended June 30, 2025. Detail on select categories with notable variances follows.

Current wording

Total noninterest income decreased $1.6 million, or 13%, for the third quarter of 2026, compared to the third quarter of 2025. For the nine months ended September 30, 2026, total noninterest income decreased $962 thousand, or 3%, compared to the nine months ended September 30, 2025. Details on select categories with notable variances follows.

Previous wording

Investment advisory income of $3.3 million for the second quarter of 2026 increased $402 thousand, or 14%, compared to $2.9 million for the second quarter of 2025. Investment advisory income for the six months ended June 30, 2026 increased $726 thousand to $6.3 million, compared to $5.6 million for the six months ended June 30, 2025. The increase for both periods reflected new business and market-driven gains, as Courier Capital’s assets under management increased to $4.02 billion as of June 30, 2026.

Current wording

Investment advisory income of $3.3 million for the third quarter of 2026 increased $320 thousand, or 11%, compared to $3.0 million for the third quarter of 2025. Investment advisory income for the nine months ended September 30, 2026 increased $1.0 million to $9.7 million, compared to $8.6 million for the nine months ended September 30, 2025. The increase for both periods reflected new business and market-driven gains, as Courier Capital’s assets under management continued to exceed $4.0 billion as of September 30, 2026.

Previous wording

A loss on investments in limited partnerships of $140 thousand was recognized for the second quarter of 2026, compared to income of $307 thousand for the second quarter of 2025. Income from our investments in limited partnerships fluctuates based on the maturity and performance of the underlying investments.

Current wording

A loss on investments in limited partnerships of $274 thousand and $190 thousand was recognized for the third quarter of 2026 and nine months ended September 30, 2026, respectively, compared to income of $223 thousand and $945 thousand, for the comparable periods in 2025, respectively. Income from our investments in limited partnerships fluctuates based on the maturity and performance of the underlying investments.

Previous wording

The net loss on other assets of $454 thousand for the six months ended June 30, 2026 included the net loss on the write-down of two branch locations that were moved to held for sale in the first quarter of 2026.

Current wording

The net loss on other assets of $454 thousand for the nine months ended September 30, 2026 included the net loss on the write-down of two branch locations that were moved to held for sale in the first quarter of 2026.

Previous wording

Total noninterest expense of $35.6 million for the second quarter of 2026 was flat compared to the second quarter of 2025. For the six months ended June 30, 2026, total noninterest expense of $71.2 million increased $1.8 million, or 3%, compared to $69.4 million for the six months ended June 30, 2025. Detail on select categories with notable variances follows.

Current wording

Total noninterest expense of $36.8 million for the third quarter of 2026 and $108.0 million for the nine months ended September 30, 2026, increased 3%, compared to the same periods in 2025. Details on select categories with notable variances follows.

Previous wording

Salaries and employee benefits expense increased $1.1 million, or 6%, to $19.2 million for the second quarter of 2026, compared to $18.1 million for the second quarter of 2025. For the first six months of 2026, salaries and employee benefit expense increased $2.8 million, or 8%, to $37.8 million, compared to $35.0 million for the six months ended June 30, 2025. The increases in both periods reflected a combination of factors, including annual merit increases, increased incentive compensation and investments in personnel, partially offset by lower medical claims incurred in the current periods compared to the prior year.

Current wording

Salaries and employee benefits expense increased $1.1 million, or 6%, to $19.7 million for the third quarter of 2026, compared to $18.5 million for the third quarter of 2025. For the first nine months of 2026, salaries and employee benefit expense increased $3.9 million, or 7%, to $57.4 million, compared to $53.5 million for the nine months ended September 30, 2025. The increases in both periods reflected a combination of factors, including annual merit increases, higher incentive compensation and investments in personnel.

Previous wording

FDIC assessments expense decreased $405 thousand, or 29%, to $987 thousand for the second quarter of 2026, compared to $1.4 million for the second quarter of 2025, and decreased $886 thousand, or 31%, for the first six months of 2026 to $2.0 million for the comparable period of 2025. FDIC assessment expense was higher for both periods in 2025, reflecting the impact of the deposit-related fraud loss we experienced in March 2024.

Current wording

FDIC assessments expense decreased $159 thousand, or 13%, to $1.1 million for the third quarter of 2026, compared to $1.2 million for the third quarter of 2025, and decreased $1.0 million, or 26%, for the first nine months of 2026 to $3.0 million from $4.1 million for the comparable period of 2025. FDIC assessment expense was higher for both periods in 2025, reflecting the impact of the deposit-related fraud loss we experienced in March 2024.

Previous wording

Our efficiency ratio for the second quarter of 2026 was 55.33%, compared with 59.68% for the second quarter of 2025, and our efficiency ratio for the six months ended June 30, 2026 was 56.18%, compared with 59.24% for the comparable period in 2025. The efficiency ratio is calculated by dividing total noninterest expense by net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains on investment securities. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income, while a decrease indicates a more efficient allocation of resources. The efficiency ratio, a banking industry financial measure, is not required by GAAP. However, the efficiency ratio is used by management in its assessment of financial performance specifically as it relates to noninterest expense control. Management also believes such information is useful to investors in evaluating Company performance.

Current wording

Our efficiency ratio for the third quarter of 2026 was 56.84%, compared with 56.78% for the third quarter of 2025, and our efficiency ratio for the nine months ended September 30, 2026 was 56.40%, compared with 58.38% for the comparable period in 2025. The efficiency ratio is calculated by dividing total noninterest expense by net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains on investment securities. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income, while a decrease indicates a more efficient allocation of resources. The efficiency ratio, a banking industry financial measure, is not required by GAAP. However, the efficiency ratio is used by management in its assessment of financial performance specifically as it relates to noninterest expense control. Management also believes such information is useful to investors in evaluating Company performance.

Previous wording

For the second quarter of 2026, we recorded income tax expense of $4.4 million, compared to $4.0 million for the second quarter of 2025, and $8.3 million for the six months ended June 30, 2026, compared to $7.7 million for the six months ended June 30, 2025. In the second quarter of 2026, we recognized federal and state tax benefits related to tax credit investments placed in service and/or amortized during the period resulting in a reduction in income tax expense of $1.0 million, compared to $1.1 million for the same period in the prior year. The first six months of 2026 and 2025 also included related tax credit benefits of $2.1 million and $2.2 million, respectively.

Current wording

For the third quarter of 2026, we recorded income tax expense of $4.1 million, compared to $4.8 million for the third quarter of 2025, and $12.3 million for the nine months ended September 30, 2026, compared to $12.5 million for the nine months ended September 30, 2025. In the third quarter of 2026, we recognized federal and state tax benefits related to tax credit investments placed in service and/or amortized during the period resulting in a reduction in income tax expense of $1.0 million, compared to $1.1 million for the same period in the prior year. The first nine months of 2026 and 2025 also included related tax credit benefits of $2.1 million and $3.3 million, respectively.

Previous wording

Our effective tax rate for the second quarter of 2026 was 17.3%, versus 18.4%, for the second quarter of 2025, and 16.4% for the six months ended June 30, 2026, compared to 18.3% for the six months ended June 30, 2025. The effective tax rate typically fluctuates on a quarterly basis primarily due to the level of pre-tax earnings, and may differ from statutory rates due to the impact of items of income and expense that are not subject to federal or state taxation. Our effective tax rates reflect the impact of these items, which include, but are not limited to, interest income from tax-exempt securities, earnings on company owned life insurance and the impact of tax credit investments. In addition, our effective tax rates for 2026 and 2025 reflect the New York State tax benefit generated by our real estate investment trust.

Current wording

Our effective tax rate for the third quarter of 2026 was 16.9%, versus 18.9%, for the third quarter of 2025, and 16.5% for the nine months ended September 30, 2026, compared to 18.5% for the nine months ended September 30, 2025. The effective tax rate typically fluctuates on a quarterly basis primarily due to the level of pre-tax earnings, and may differ from statutory rates due to the impact of items of income and expense that are not subject to federal or state taxation. Our effective tax rates reflect the impact of these items, which include, but are not limited to, interest income from tax-exempt securities, earnings on company owned life insurance and the impact of tax credit investments. In addition, our effective tax rates for 2026 and 2025 reflect the New York State tax benefit generated by our real estate investment trust.

Previous wording

Our available for sale (“AFS”) investment securities portfolio decreased $12.0 million from December 31, 2025 to June 30, 2026. The AFS portfolio had a net unrealized loss of $49.2 million at June 30, 2026, which consisted of a $52.5 million unrealized loss and a $3.3 million unrealized gain, and a net unrealized loss of $35.7 million at December 31, 2025, which consisted of a $46.3 million unrealized loss and a $10.6 million unrealized gain. The fair value of most of the investment securities in the AFS portfolio fluctuates as market interest rates change.

Current wording

Our available for sale (“AFS”) investment securities portfolio increased $35.8 million from $922.5 million at December 31, 2025 to $958.2 million at September 30, 2026. The AFS portfolio had a net unrealized loss of $90.6 million at September 30, 2026, which consisted of a $90.9 million unrealized loss and a $312 thousand unrealized gain, compared to a net unrealized loss of $35.7 million at December 31, 2025, which consisted of a $46.3 million unrealized loss and a $10.6 million unrealized gain. The fair value of most of the investment securities in the AFS portfolio fluctuates as market interest rates change.

Previous wording

As of June 30, 2026, there were 59 Agency MBS securities in the AFS portfolio with an aggregate fair value of $510.2 million that were in an unrealized loss position with unrealized losses totaling $52.0 million. Of these, 40 were Agency MBS in an unrealized loss position for 12 months or longer and had an aggregate fair value of $272.1 million and unrealized losses of $49.2 million, while 19 were in an unrealized loss position for less than 12 months and had an aggregate fair value of $238.1 million and unrealized losses of $2.8 million. The unrealized loss of these securities was driven by the timing of the purchases of fixed-rate securities during the extended low-interest rate environments experienced in prior years, which has been compounded with subsequent increases in benchmark interest rates. However, these fixed-rate securities were purchased with the expectation that they will continue to prepay principal, and the proceeds will be invested at current market rates.

Current wording

As of September 30, 2026, there were 81 Agency MBS securities in the AFS portfolio with an aggregate fair value of $773.4 million that were in an unrealized loss position with unrealized losses totaling $89.8 million. Of these, 40 were Agency MBS in an unrealized loss position for 12 months or longer and had an aggregate fair value of $253.3 million and unrealized losses of $63.6 million, while 41 were in an unrealized loss position for less than 12 months and had an aggregate fair value of $520.1 million and unrealized losses of $26.2 million. The unrealized loss of these securities was driven by the timing of the purchases of fixed-rate securities during the extended low-interest rate environments experienced in prior years, which has been compounded with subsequent increases in benchmark interest rates. However, these fixed-rate securities were purchased with the expectation that they will continue to prepay principal, and the proceeds will be invested at current market rates.

Previous wording

We also hold subordinated debt of bank holding companies with a maturity of 10 years, with a call in 5 years. As of June 30, 2026, there were 15 corporate bonds with an aggregate fair value of $34.5 million, in an unrealized loss position for less than 12 months of $424 thousand.

Current wording

We also hold subordinated debt of bank holding companies with a maturity of 10 years, with a call in 5 years. As of September 30, 2026, there were 13 corporate bonds with an aggregate fair value of $33.8 million, in an unrealized loss position for less than 12 months of $974 thousand.

Previous wording

As a member of the FHLB, the Bank is required to hold FHLB stock. The amount of required FHLB stock is based on the Bank’s asset size and the amount of borrowings from the FHLB. We have assessed the ultimate recoverability of our FHLB stock and believe that no impairment currently exists. As a member of the FRB system, we are required to maintain a specified investment in FRB stock based on a ratio relative to our capital. At June 30, 2026, our ownership of FHLB and FRB stock totaled $14.0 million and $9.2 million, respectively, and is included in other assets and recorded at cost, which approximates fair value.

Current wording

As a member of the FHLB, the Bank is required to hold FHLB stock. The amount of required FHLB stock is based on the Bank’s asset size and the amount of borrowings from the FHLB. We have assessed the ultimate recoverability of our FHLB stock and believe that no impairment currently exists. As a member of the FRB system, we are required to maintain a specified investment in FRB stock based on a ratio relative to our capital. At September 30, 2026, our ownership of FHLB and FRB stock totaled $13.7 million and $9.2 million, respectively, and is included in other assets and recorded at cost, which approximates fair value.

Previous wording

For AFS securities in an unrealized loss position, we first assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is affirmative, any previously recognized allowances are charged-off and the security’s amortized cost is written down to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported in our income statement as a component of credit loss expense. AFS securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met. For the three and six months ended June 30, 2026 and 2025, no allowance for credit losses was recognized on AFS securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality.

Current wording

For AFS securities in an unrealized loss position, we first assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is affirmative, any previously recognized allowances are charged-off and the security’s amortized cost is written down to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported in our income statement as a component of credit loss expense. AFS securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met. For the three and nine months ended September 30, 2026 and 2025, no allowance for credit losses was recognized on AFS securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality.

Previous wording

Total loans were $4.75 billion at June 30, 2026, an increase of $95.1 million from $4.66 billion at December 31, 2025. The composition of our loan portfolio, excluding loans held for sale and including net unearned income and net deferred fees and costs, is summarized as follows (dollars in thousands):

Current wording

Total loans were $4.86 billion at September 30, 2026, an increase of $198.0 million from $4.66 billion at December 31, 2025. The composition of our loan portfolio, excluding loans held for sale and including net unearned income and net deferred fees and costs, is summarized as follows (dollars in thousands):

Previous wording

Total commercial loans of $3.21 billion represented 68% of total loans as of June 30, 2026, compared to $3.08 billion, or 66% of total loans as of December 31, 2025. Commercial business loans of $768.5 million, or 16% of total loans, were up $30.2 million, or 4%, from December 31, 2025, primarily due to organic growth, and total commercial mortgage loans of $2.44 billion, or 51% of total loans, were up $99.6 million, from $2.34 billion as of December 31, 2025. The increase in total commercial mortgage loans was attributable to increases in construction, non-owner occupied, and owner occupied loans, partially offset by a decrease in multifamily loans. As of June 30, 2026, commercial real estate (“CRE”) loans made up approximately 67% of total commercial loans, and 45% of total loans, commercial and industrial loans approximated 28% of total commercial loans, and 19% of total loans, and business banking unit loans were approximately 5% of total commercial loans and 3% of total loans. Our CRE committed credit exposure at June 30, 2026 related to approximately 44% multi-family, 22% office, 10% retail, 8% land, 8% hospitality, 5% industrial property, 2% other and 1% home builder properties. Approximately 70% of our office exposure at June 30, 2026, or 15% of our total CRE exposure, related to Class B or medical office space. Approximately 75% of our office and more than 90% of our multifamily CRE loans have full or limited personal or corporate recourse.

Current wording

Total commercial loans of $3.31 billion represented 68% of total loans as of September 30, 2026, compared to $3.08 billion, or 66% of total loans as of December 31, 2025. Commercial business loans of $773.0 million, or 16% of total loans, were up $34.7 million, or 5%, from December 31, 2025, primarily due to organic growth, and total commercial mortgage loans of $2.53 billion, or 52% of total loans, were up $190.2 million, from $2.34 billion as of December 31, 2025. The increase in total commercial mortgage loans was attributable to increases in construction, non-owner occupied, and owner occupied loans, partially offset by a decrease in multifamily loans. As of September 30, 2026, commercial real estate (“CRE”) loans made up approximately 68% of total commercial loans, and 46% of total loans, commercial and industrial loans approximated 27% of total commercial loans, and 19% of total loans, and business banking unit loans were approximately 5% of total commercial loans and 3% of total loans. Our CRE committed credit exposure at September 30, 2026 related to approximately 44% multi-family, 21% office, 10% retail, 8% hospitality, 7% land, 6% industrial property, 3% other and 1% home builder properties. Approximately 70% of our office exposure at September 30, 2026, or 15% of our total CRE exposure, related to Class B or medical office space. Approximately 75% of our office and more than 90% of our multifamily CRE loans have full or limited personal or corporate recourse.

Previous wording

Total consumer loans of $1.54 billion, or 33% of total loans at June 30, 2026, decreased $34.7 million from December 31, 2025. Consumer loans at June 30, 2026 were comprised of residential real estate loans and lines of credit of $738.7 million, or 16% of total loans, consumer indirect loans of $771.1 million, or 16% of total loans, and other consumer loans of $32.8 million, or 1% of total loans. During the second quarter of 2026, we originated $141.6 million in indirect automobile loans with a mix of approximately 29% new automobile and 71% used automobile loans. This compares with the $165.1 million originated of indirect automobile loans with a mix of approximately 27% new automobile and 73% used automobile loans for the second quarter of 2025. Origination volumes and the mix of new and used vehicles financed fluctuate depending on general market conditions.

Current wording

Total consumer loans of $1.55 billion, or 32% of total loans at September 30, 2026, decreased $26.9 million from December 31, 2025. Consumer loans at September 30, 2026 were comprised of residential real estate loans and lines of credit of $740.5 million, or 15% of total loans, consumer indirect loans of $779.1 million, or 16% of total loans, and other consumer loans of $30.7 million, or 1% of total loans. During the third quarter of 2026, we originated $236.3 million in indirect automobile loans with a mix of approximately 30% new automobile and 70% used automobile loans. This compares with the $259.5 million originated of indirect automobile loans with a mix of approximately 30% new automobile and 70% used automobile loans for the third quarter of 2025. Origination volumes and the mix of new and used vehicles financed fluctuate depending on general market conditions.

Previous wording

Loans held for sale (not included in the loan portfolio composition table) were entirely comprised of residential real estate loans and totaled $2.5 million and $3.4 million as of June 30, 2026 and December 31, 2025, respectively.

Current wording

Loans held for sale (not included in the loan portfolio composition table) were entirely comprised of residential real estate loans and totaled $1.9 million and $3.4 million as of September 30, 2026 and December 31, 2025, respectively.

Previous wording

We sell certain qualifying newly originated or refinanced residential real estate loans on the secondary market. Residential real estate loans serviced for others, which are not included in the consolidated statements of financial condition, amounted to $302.1 million and $293.3 million as of June 30, 2026 and December 31, 2025, respectively.

Current wording

We sell certain qualifying newly originated or refinanced residential real estate loans on the secondary market. Residential real estate loans serviced for others, which are not included in the consolidated statements of financial condition, amounted to $309.3 million and $293.3 million as of September 30, 2026 and December 31, 2025, respectively.

Previous wording

Net charge-offs of $1.3 million for the second quarter of 2026 represented 0.11% of average loans on an annualized basis compared to net charge-offs of $4.1 million, or 0.36%, of average loans for the second quarter of 2025. Increased net charge-offs in the second quarter of 2025 were primarily driven by the partial charge-off of a previously disclosed commercial business relationship placed on nonaccrual status in 2023 for which a specific reserve was in place. The allowance for credit losses–loans was $47.5 million at June 30, 2026, compared with $47.3 million at June 30, 2025. The increase in allowance for credit losses–loans was due to a combination of factors, including the impact of an increase in loan outstandings and higher qualitative factors, partially offset by a decrease in loss rate for pooled loans. The ratio of the allowance for credit losses–loans to total loans was 1.00% at June 30, 2026 and 1.04% at June 30, 2025. The ratio of allowance for credit losses–loans to non-performing loans was 122% at June 30, 2026, compared with 146% at June 30, 2025. Non-performing loans increased $3.3 million to $39.0 million at June 30, 2026, compared to $35.8 million at June 30, 2025. The increase in non-performing loans primarily reflects a well-collateralized commercial business loan that moved to nonaccrual status in the first quarter of 2026, offset in part by the partial charge-off of the previously disclosed commercial business relationship.

Current wording

Net charge-offs of $4.0 million for the third quarter of 2026 represented 0.33% of average loans on an annualized basis compared to net charge-offs of $2.1 million, or 0.18%, of average loans for the third quarter of 2025. Net charge-offs of $10.4 million for the first nine months of 2026 represented 0.30% of average loans on an annualized basis compared to net charge-offs of $8.5 million for the comparable period of 2025, representing 0.25% of average loans on an annualized basis.

Previous wording

Non-performing assets include non-performing loans and foreclosed assets. Non-performing assets at June 30, 2026 were $39.6 million, an increase of $3.7 million from the $35.8 million balance at December 31, 2025. The primary component of non-performing assets is non-performing loans, which were $39.0 million or 0.82% of total loans at June 30, 2026 and $35.8 million or 0.77% of total loans at December 31, 2025. The increase in non-performing loans reflects a well-collateralized commercial business loan that moved to nonaccrual status in the first quarter of 2026, offset in part by the partial charge-off of a previously disclosed commercial business relationship.

Current wording

Non-performing assets include non-performing loans and foreclosed assets. Non-performing assets at September 30, 2026 were $42.1 million, an increase of $6.2 million from the $35.8 million balance at December 31, 2025. The primary component of non-performing assets is non-performing loans, which were $38.5 million or 0.79% of total loans at September 30, 2026 and $35.8 million or 0.77% of total loans at December 31, 2025.

Previous wording

Approximately $659 thousand, or 2%, of the $39.0 million in non-performing loans as of June 30, 2026 were current with respect to payment of principal and interest but were classified as non-accruing because repayment in full of principal and/or interest was uncertain.

Current wording

Approximately $1.0 million, or 3%, of the $38.5 million in non-performing loans as of September 30, 2026 were current with respect to payment of principal and interest but were classified as non-accruing because repayment in full of principal and/or interest was uncertain.