COMMUNITY FINANCIAL SYSTEM, INC.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2026

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-13695

(Exact name of registrant as specified in its charter)

Delaware		16-1213679
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

333 Butternut Drive, Syracuse, New York		13214-2141
(Address of principal executive offices)		(Zip Code)

(315) 445-2282

(Registrant’s telephone number, including area code)

	NONE
	(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $1.00 par value per share		CBU		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock, par value $1.00 per share, outstanding as of the close of business on July 31, 2026: 52,615,905 shares

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TABLE OF CONTENTS

Part I.		Financial Information		Page

Item 1.		Financial Statements (Unaudited)

		Consolidated Statements of Condition June 30, 2026 and December 31, 2025		3

		Consolidated Statements of Income Three and six months ended June 30, 2026 and 2025		4

		Consolidated Statements of Comprehensive Income Three and six months ended June 30, 2026 and 2025		5

		Consolidated Statements of Changes in Shareholders’ Equity Three and six months ended June 30, 2026 and 2025		6

		Consolidated Statements of Cash Flows Six months ended June 30, 2026 and 2025		8

		Notes to the Consolidated Financial Statements June 30, 2026		9

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		41

Item 3.		Quantitative and Qualitative Disclosures about Market Risk		69

Item 4.		Controls and Procedures		71

Part II.		Other Information

Item 1.		Legal Proceedings		71

Item 1A.		Risk Factors		71

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		72

Item 3.		Defaults Upon Senior Securities		72

Item 4.		Mine Safety Disclosures		72

Item 5.		Other Information		73

Item 6.		Exhibits		74

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Part I. Financial Information

Item 1. Financial Statements

COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)

(In Thousands, Except Share Data)


	June 30,		December 31,
	2026		2025
Assets:
Cash and cash equivalents (includes restricted cash of $14,760 at June 30, 2026 and December 31, 2025)	$	258,174	$	301,755
Available-for-sale investment securities, includes pledged securities that can be sold or repledged of $318,329 and $319,478, respectively (cost of $3,237,809 and $3,148,728, respectively)		2,957,963		2,875,341
Held-to-maturity securities, includes pledged securities that can be sold or repledged of $9,090 and $0, respectively (fair value of $1,372,481 and $1,370,464, respectively)		1,478,386		1,454,166
Equity and other securities		87,857		77,252

Loans		11,282,824		10,949,757
Allowance for credit losses		(91,696)		(87,921)
Loans, net of allowance for credit losses		11,191,128		10,861,836

Goodwill		900,650		887,975
Core deposit intangibles, net		15,732		14,754
Other intangibles, net		47,312		39,987
Goodwill and intangible assets, net		963,694		942,716

Premises and equipment, net		250,251		246,505
Accrued interest and fees receivable		60,888		57,734
Equity method investments		36,276		37,065
Other assets		479,153		448,926

Total assets	$	17,763,770	$	17,303,296

Liabilities:
Noninterest-bearing deposits	$	3,872,611	$	3,683,442
Interest-bearing deposits		10,837,798		10,703,643
Total deposits		14,710,409		14,387,085

Overnight borrowings		172,800		0
Securities sold under agreement to repurchase, short-term		157,577		231,163
Federal Home Loan Bank and other borrowings		433,720		458,770
Accrued interest and other liabilities		216,499		220,244
Total liabilities		15,691,005		15,297,262

Commitments and contingencies (See Note H)

Shareholders’ equity:
Preferred stock, $1.00 par value, 500,000 shares authorized, 0 shares issued		0		0
Common stock, $1.00 par value, 75,000,000 shares authorized; 55,067,544 and 54,907,426 shares issued, respectively		55,067		54,907
Additional paid in capital		1,100,368		1,088,047
Retained earnings		1,456,743		1,387,636
Accumulated other comprehensive loss		(417,627)		(418,990)
Treasury stock, at cost (2,469,140 shares, including 79,939 shares held by deferred compensation arrangements at June 30, 2026, and 2,225,209 shares including 94,479 shares held by deferred compensation arrangements at December 31, 2025)		(126,355)		(110,945)
Deferred compensation arrangements (79,939 and 94,479 shares, respectively)		4,569		5,379
Total shareholders’ equity		2,072,765		2,006,034

Total liabilities and shareholders’ equity	$	17,763,770	$	17,303,296

See accompanying notes to consolidated financial statements (unaudited).

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COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In Thousands, Except Per-Share Data)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2026		2025		2026		2025
Interest income:
Interest and fees on loans	$	157,530	$	146,534	$	311,908	$	289,438
Interest and dividends on taxable investments		23,932		23,581		46,819		45,550
Interest and dividends on nontaxable investments		2,890		2,763		5,612		5,537
Total interest income		184,352		172,878		364,339		340,525

Interest expense:
Interest on deposits		39,382		40,637		78,755		79,924
Interest on borrowings		5,826		7,493		11,728		15,641
Total interest expense		45,208		48,130		90,483		95,565

Net interest income		139,144		124,748		273,856		244,960
Provision for credit losses		4,607		4,117		10,243		10,807
Net interest income after provision for credit losses		134,537		120,631		263,613		234,153

Noninterest revenues:
Deposit service fees		15,493		14,519		31,410		28,826
Mortgage banking		1,191		972		2,291		1,970
Other banking services		4,605		4,567		9,399		8,368
Employee benefit services		34,877		32,380		69,449		65,002
Insurance services		13,195		13,388		25,781		27,589
Wealth management services		10,403		8,683		20,735		18,545
Gain (loss) on equity securities		4,710		(1)		4,309		244
Loss from equity method investments		(463)		0		(789)		0
Total noninterest revenues		84,011		74,508		162,585		150,544

Noninterest expenses:
Salaries and employee benefits		82,431		79,021		162,753		155,463
Data processing and communications		19,686		16,699		37,557		32,821
Occupancy and equipment		13,885		11,486		28,767		24,184
Business development and marketing		2,556		4,001		5,091		7,131
Legal and professional fees		4,314		4,368		9,384		9,217
Amortization of intangible assets		4,408		3,369		8,654		6,851
Other expenses		10,453		10,158		18,563		18,725
Total noninterest expenses		137,733		129,102		270,769		254,392

Income before income taxes		80,815		66,037		155,429		130,305
Income taxes		19,481		14,706		36,877		29,360
Net income	$	61,334	$	51,331	$	118,552	$	100,945

Basic earnings per share	$	1.16	$	0.97	$	2.25	$	1.91
Diluted earnings per share	$	1.16	$	0.97	$	2.24	$	1.90

See accompanying notes to consolidated financial statements (unaudited).

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COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In Thousands)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2026		2025		2026		2025
Pension and other post-retirement obligations:
Amortization of actuarial losses (gains) included in net periodic pension cost, gross	$	4	$	(50)	$	10	$	(101)
Tax effect		(1)		12		(3)		25
Amortization of actuarial losses (gains) included in net periodic pension cost, net		3		(38)		7		(76)

Amortization of prior service cost included in net periodic pension cost, gross		87		112		172		224
Tax effect		(22)		(28)		(43)		(56)
Amortization of prior service cost included in net periodic pension cost, net		65		84		129		168

Other comprehensive income related to pension and other post-retirement obligations, net of taxes		68		46		136		92

Net unrealized holding gains on investment securities:
Net unrealized holding gains on investment securities, gross		10,975		24,307		5,531		81,534
Tax effect		(2,773)		(6,074)		(1,398)		(20,376)
Net unrealized holding gains on investment securities, net		8,202		18,233		4,133		61,158

Other comprehensive gain related to unrealized holding gains on investment securities, net of taxes		8,202		18,233		4,133		61,158

Derivatives designated as hedging instruments:
Net unrealized losses on cash flow hedges, gross		(2,719)		0		(4,111)		0
Tax effect		683		0		1,035		0
Net unrealized losses on cash flow hedges, net		(2,036)		0		(3,076)		0

Reclassification adjustment for realized losses included in net income on cash flow hedges, gross		175		0		227		0
Tax effect		(44)		0		(57)		0
Reclassification adjustment for realized losses included in net income on cash flow hedges, net		131		0		170		0

Other comprehensive loss related to cash flow hedges, net of taxes		(1,905)		0		(2,906)		0

Other comprehensive income, net of taxes		6,365		18,279		1,363		61,250
Net income		61,334		51,331		118,552		100,945
Comprehensive income	$	67,699	$	69,610	$	119,915	$	162,195


	As of
	June 30,		December 31,
	2026		2025
Accumulated Other Comprehensive Loss by Component:
Unrecognized prior service cost and net actuarial losses on pension and other post-retirement obligations	$	(8,370)	$	(8,552)
Tax effect		1,982		2,028
Net unrecognized prior service cost and net actuarial losses on pension and other post-retirement obligations		(6,388)		(6,524)

Unrealized loss on investment securities		(537,193)		(542,724)
Tax effect		128,860		130,258
Net unrealized loss on investment securities		(408,333)		(412,466)

Unrealized loss on cash flow hedges		(3,884)		0
Tax effect		978		0
Net unrealized loss on cash flow hedges		(2,906)		0

Accumulated other comprehensive loss	$	(417,627)	$	(418,990)

See accompanying notes to consolidated financial statements (unaudited).

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COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

Three months ended June 30, 2026 and 2025

(In Thousands, Except Share Data)


								Accumulated
	Common Stock			Additional				Other				Deferred
	Shares	Amount		Paid-In		Retained		Comprehensive		Treasury		Compensation
	Outstanding	Issued		Capital		Earnings		Loss		Stock		Arrangements		Total
Balance at March 31, 2026	52,537,421	$	54,997	$	1,094,103	$	1,420,143	$	(423,992)	$	(125,791)	$	4,532	$	2,023,992

Net income							61,334								61,334

Other comprehensive income, net of tax									6,365						6,365

Dividends declared:
Common, $0.47 per share							(24,734)								(24,734)

Common stock activity under employee stock plans	70,052		70		3,545										3,615

Stock-based compensation					2,757										2,757

Distribution of stock under deferred compensation arrangements					(37)								37		0

Treasury stock purchased	(9,069)										(564)				(564)

Balance at June 30, 2026	52,598,404	$	55,067	$	1,100,368	$	1,456,743	$	(417,627)	$	(126,355)	$	4,569	$	2,072,765

Balance at March 31, 2025	52,836,307	$	54,853	$	1,078,253	$	1,300,658	$	(505,114)	$	(99,825)	$	5,250	$	1,834,075

Net income							51,331								51,331

Other comprehensive income, net of tax									18,279						18,279

Dividends declared:
Common, $0.46 per share							(24,329)								(24,329)

Common stock activity under employee stock plans	33,947		34		1,228										1,262

Stock-based compensation					2,515										2,515

Distribution of stock under deferred compensation arrangements					(42)								42		0

Treasury stock purchased	(829)										(42)				(42)

Balance at June 30, 2025	52,869,425	$	54,887	$	1,081,954	$	1,327,660	$	(486,835)	$	(99,867)	$	5,292	$	1,883,091

See accompanying notes to consolidated financial statements (unaudited).

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COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

Six months ended June 30, 2026 and 2025

(In Thousands, Except Share Data)


								Accumulated
	Common Stock			Additional				Other				Deferred
	Shares	Amount		Paid-In		Retained		Comprehensive		Treasury		Compensation
	Outstanding	Issued		Capital		Earnings		Loss		Stock		Arrangements		Total
Balance at December 31, 2025	52,682,217	$	54,907	$	1,088,047	$	1,387,636	$	(418,990)	$	(110,945)	$	5,379	$	2,006,034

Net income							118,552								118,552

Other comprehensive income, net of tax									1,363						1,363

Dividends declared:
Common, $0.94 per share							(49,445)								(49,445)

Common stock activity under employee stock plans	160,118		160		6,449										6,609

Stock-based compensation					5,727										5,727

Distribution of stock under deferred compensation arrangements	15,868				145						665		(810)		0

Treasury stock purchased	(259,799)										(16,075)				(16,075)

Balance at June 30, 2026	52,598,404	$	55,067	$	1,100,368	$	1,456,743	$	(417,627)	$	(126,355)	$	4,569	$	2,072,765

Balance at December 31, 2024	52,667,836	$	54,696	$	1,075,537	$	1,275,331	$	(548,085)	$	(100,539)	$	5,895	$	1,762,835

Net income							100,945								100,945

Other comprehensive income, net of tax									61,250						61,250

Dividends declared:
Common, $0.92 per share							(48,616)								(48,616)

Common stock activity under employee stock plans	190,877		191		1,013										1,204

Stock-based compensation					5,563										5,563

Distribution of stock under deferred compensation arrangements	12,361				(159)						762		(603)		0

Treasury stock purchased	(1,649)										(90)				(90)

Balance at June 30, 2025	52,869,425	$	54,887	$	1,081,954	$	1,327,660	$	(486,835)	$	(99,867)	$	5,292	$	1,883,091

See accompanying notes to consolidated financial statements (unaudited).

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COMMUNITY FINANCIAL SYSTEM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In Thousands)


	Six Months Ended
	June 30,
	2026		2025
Operating activities:
Net income	$	118,552	$	100,945
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		11,341		7,301
Amortization of intangible assets		8,654		6,851
Net amortization on securities, loans, finance leases and borrowings		6,932		6,394
Stock-based compensation		5,727		5,563
Provision for credit losses		10,243		10,807
Amortization of mortgage servicing rights		415		386
Gain on equity securities		(4,309)		(244)
Income from bank-owned life insurance policies		(2,023)		(1,376)
Net gain on sale of assets		(1,051)		(989)
Loss from equity method investments		789		0
Change in other assets and liabilities		(32,661)		(19,441)
Net cash provided by operating activities		122,609		116,197
Investing activities:
Proceeds from maturities, calls, and paydowns of available-for-sale investment securities		33,741		27,399
Proceeds from maturities, calls, and paydowns of held-to-maturity investment securities		21,113		11,750
Proceeds from maturities and redemptions of equity and other investment securities, net		707		1,332
Proceeds from sales of equity and other investment securities		5,819		0
Purchases of held-to-maturity investment securities		(30,914)		(83,110)
Purchases of equity and other securities, net		(12,687)		(280)
Net increase in loans		(354,195)		(114,426)
Cash paid for acquisitions, net of cash acquired		(26,592)		(302)
Proceeds from sales of premises, equipment and other assets		1,505		1,522
Purchases of premises and equipment		(20,934)		(27,858)
Net cash used in investing activities		(382,437)		(183,973)
Financing activities:
Net increase in deposits		203,249		260,061
Net increase in overnight borrowings		172,800		12,400
Net decrease in securities sold under agreement to repurchase, short-term		(73,586)		(80,932)
Payments on and maturities of Federal Home Loan Bank and other borrowings		(24,879)		(35,733)
Payments of contingent consideration for acquisitions		(2,338)		(378)
Proceeds from the issuance of common stock for employee stock plans		10,099		3,667
Purchases of treasury stock		(16,075)		(90)
Cash dividends paid		(49,533)		(48,512)
Withholding taxes paid on share-based compensation		(3,490)		(2,463)
Net cash provided by financing activities		216,247		108,020
Change in cash, cash equivalents and restricted cash		(43,581)		40,244
Cash, cash equivalents and restricted cash at beginning of period		301,755		197,004
Cash, cash equivalents and restricted cash at end of period	$	258,174	$	237,248

Supplemental disclosures of cash flow information:
Cash paid for interest	$	91,509	$	96,258
Cash paid for income taxes		28,990		23,353
Supplemental disclosures of noncash financing and investing activities:
Dividends declared and unpaid		24,912		24,514
Transfers from loans to other real estate		427		6,542
Transfers from premises and equipment, net to other assets		4,811		0
Acquisitions:
Fair value of assets acquired, excluding acquired cash and intangibles		121,329		94
Fair value of liabilities assumed		121,503		131
Contingent consideration in exchange for acquired assets		1,565		3,499

See accompanying notes to consolidated financial statements (unaudited).

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COMMUNITY FINANCIAL SYSTEM, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2026

NOTE A: BASIS OF PRESENTATION

The interim financial data as of and for the three and six months ended June 30, 2026 is unaudited; however, in the opinion of Community Financial System, Inc. (the “Company”), the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results for the interim periods in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and Article 10 of Regulation S-X. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. The Company’s unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2026.

NOTE B: ACQUISITIONS

Subsequent Period Acquisitions

On August 1, 2026, the Company, through its subsidiary OneGroup, NY, Inc. (“OneGroup”), completed the acquisition of certain assets of an insurance agency based in New York for approximately $3.1 million in cash plus contingent consideration. The transaction is expected to expand the insurance services revenue and offerings of the Company. The effects of the acquisition will be included in the consolidated financial statements from that date.

Current and Prior Period Acquisitions

On June 1, 2026, the Company, through its subsidiary Community Bank, N.A. (“CBNA”), completed the acquisition of ClearPoint Federal Bank & Trust (“ClearPoint”). The transaction expands the wealth management services offerings of the Company. Total consideration was $39.0 million, of which $28.2 million was paid as of June 30, 2026 and the remaining $10.8 million is accrued and not yet paid. The Company recorded investment securities of $118.2 million, deposits of $120.1 million, core deposit intangibles of $3.1 million, other intangibles consisting of a customer list intangible of $8.1 million, and goodwill of $10.4 million. The acquired investments consist primarily of available-for-sale securities, and the deposits consist primarily of core savings deposits. The effects of the acquired assets and liabilities for the acquisitions have been included in the consolidated financial statements since that date. For the three and six months ended June 30, 2026, revenues were $0.7 million and direct expenses were $0.5 million.

During the first six months of 2026, the Company, through its subsidiaries OneGroup and Benefit Plans Administrative Services, LLC (“BPA”), completed the acquisitions of five financial services companies based in New York and Florida. Total aggregate consideration for the OneGroup acquisitions was $5.6 million in cash and contingent consideration with an estimated fair value of $1.5 million at the acquisition date. Total consideration for the BPA acquisition was $0.1 million in cash plus contingent consideration with an estimated fair value of $0.1 million at acquisition date. The contingent consideration arrangements require additional consideration to be paid by the Company based on a percentage of revenue over periods ranging from one to three years following the acquisition date. The fair value of the contingent consideration at the acquisition date was determined by forecasting estimated amounts of revenue for each applicable period and applying the appropriate factor to those amounts based on the purchase agreement. The effects of the acquired assets are included in the consolidated financial statements from that date. Net assets acquired included $5.8 million of customer list intangible assets and the Company recorded $2.1 million of goodwill in conjunction with the acquisitions. Revenues and direct expenses for the three and six months ended June 30, 2026 were immaterial.

On November 7, 2025, the Company, through its subsidiary CBNA, completed the acquisition of seven branch locations in the Allentown, Pennsylvania area from Santander Bank, N.A. (“Santander”), including certain branch-related loans and deposits, acquiring $31.8 million of loans and $543.7 million of deposits. The assumed deposits consist primarily of core deposits (checking, savings and money market accounts) and the purchased loans consist of in-market performing loans, primarily residential real estate loans. Total consideration was $80.9 million, including a deposit premium of 8%, or $43.5 million, and the Company recorded core deposit intangibles of $11.9 million and goodwill of $32.1 million. The effects of the acquired assets and liabilities for the acquisitions have been included in the consolidated financial statements since that date.

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During 2025, the Company, through its subsidiaries Nottingham Investment Services, Inc. (“NISI”), OneGroup, BPA, Benefit Plans Administrative Services, Inc. (“BPAS”), completed the acquisitions of certain assets of financial services companies based in Pennsylvania, Florida, Kentucky, New York, Kansas, Minnesota and Missouri. Total aggregate consideration was $4.5 million in cash and contingent consideration with an estimated fair value of $6.7 million at the acquisition date. The contingent consideration arrangements require additional consideration to be paid by the Company based on a percentage of revenue over periods ranging from one to four years following the acquisition date. The fair value of the contingent consideration at the acquisition date was determined by forecasting estimated amounts of revenue for each applicable period and applying the appropriate factor to those amounts based on the purchase agreement. The effects of the acquired assets are included in the consolidated financial statements from that date. Net assets acquired included $8.4 million of customer list intangible assets and the Company recorded $2.9 million of goodwill in conjunction with the acquisitions. Revenues and direct expenses for the three and six months ended June 30, 2026 and 2025 were immaterial.

The assets and liabilities assumed in the acquisitions were recorded at their estimated fair values based on management’s best estimates using information available at the dates of the acquisitions.

The Santander transaction accelerates CBNA’s overall expansion in the strategic Greater Lehigh Valley and complements its existing commercial and consumer lending presence in the market. The ClearPoint, NISI, OneGroup, BPA and BPAS transactions generally expand the Company’s wealth management services, insurance services and employee benefit services presence. Management expects that the Company will benefit from greater geographic diversity and the advantages of other synergistic business development opportunities.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed in acquisitions considered to be business combinations:


	2026						2025
(000's omitted)	ClearPoint		Other⁽¹⁾		Total		Santander		Other⁽²⁾		Total
Consideration:
Cash	$	38,990	$	5,655	$	44,645	$	80,944	$	4,521	$	85,465
Contingent consideration		0		1,565		1,565		0		6,724		6,724
Total net consideration		38,990		7,220		46,210		80,944		11,245		92,189

Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		16,951		6		16,957		546,042		0		546,042
Investment securities		118,225		0		118,225		0		0		0
Loans, net of allowance for credit losses		0		0		0		31,755		0		31,755
Premises and equipment		609		108		717		4,394		98		4,492
Accrued interest and fees receivable		984		0		984		230		0		230
Core deposit intangibles		3,100		0		3,100		11,900		0		11,900
Other intangibles		8,100		5,757		13,857		0		8,441		8,441
Other assets		1,207		196		1,403		45		0		45
Deposits		(120,075)		0		(120,075)		(543,734)		0		(543,734)
Other liabilities		(473)		(955)		(1,428)		(1,804)		(210)		(2,014)
Total identifiable assets, net		28,628		5,112		33,740		48,828		8,329		57,157
Goodwill	$	10,362	$	2,108	$	12,470	$	32,116	$	2,916	$	35,032

(1)	Includes amounts for OneGroup and BPA acquisitions completed as of June 30, 2026.

(2)	Includes amounts for NISI, OneGroup, BPA and BPAS acquisitions completed in 2025.

The Company acquired loans from Santander for which there was no evidence of a more-than-insignificant deterioration in credit quality since origination (purchased seasoned loans) with an unpaid principal balance of $31.8 million at the acquisition date. Total fair value adjustments for these loans resulted in an immaterial net discount, comprised of a noncredit premium of $0.5 million and an allowance for credit losses of $0.5 million. There were no acquired purchased credit deteriorated (“PCD”) loans.

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The fair value of checking, savings and money market deposit accounts acquired in the ClearPoint and Santander transactions were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Certificate of deposit accounts acquired in the Santander acquisition were valued at the present value of the certificates’ expected contractual payments discounted at market rates for similar certificates, which resulted in a premium of $0.5 million. Core deposit intangibles were valued using the cost savings approach, which is a variant of the income approach, where the spread between the cost of deposits and an alternative funds rate is calculated and the cost savings are discounted to present value using a risk adjusted discount rate. The total core deposit intangible for the ClearPoint acquisition was $3.1 million and $11.9 million for the Santander acquisition.

The goodwill, which is not amortized for book purposes, was assigned to the Insurance Services segment for the OneGroup acquisitions. The goodwill was assigned to the Banking and Corporate segment for the Santander acquisition, the Wealth Management Services segment for the NISI and ClearPoint acquisitions and the Employee Benefits Services segment for the BPA and BPAS acquisitions. The goodwill arising from the ClearPoint acquisition is not deductible for tax purposes, while the goodwill from the remaining acquisitions completed in 2026 and 2025 is deductible for tax purposes.

Disclosure of the pro forma revenue and earnings assuming the ClearPoint and Santander acquisitions had been completed as of January 1, 2025 and January 1, 2024, respectively, is not considered practicable. Retrospective application to that date would require assumptions about management's intent in prior periods that cannot be independently substantiated. It is not possible to objectively distinguish information about significant estimates of amounts that provide evidence of circumstances that existed on the dates at which those amounts would be recognized, measured, or disclosed under retrospective application and would have been available when the financial statements for that prior period were issued.

NOTE C: ACCOUNTING POLICIES

The notes to the consolidated financial statements appearing in the Company’s 2025 Annual Report on Form 10-K, which include descriptions of significant accounting policies, as updated by the information contained in this report, should be read in conjunction with these interim consolidated financial statements.

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of June 30, 2026, $40.3 million of accounts receivable, including $9.3 million of unbilled fee revenue and $1.4 million of unearned revenue, was recorded in the consolidated statements of condition. As of December 31, 2025, $44.0 million of accounts receivable, including $8.5 million of unbilled fee revenue and $1.1 million of unearned revenue, was recorded in the consolidated statements of condition.

Hedging

The Company enters into certain derivative instruments to manage exposure to variability in future expected cash flows related to financial items. Cash flow hedges are designated and accounted for in accordance with FASB ASC 815, Derivatives and Hedging. The Company may use interest rate swaps or other qualifying derivative instruments to hedge exposure to variability in cash flows attributable to changes in interest rates on financial items. All derivative instruments designated as cash flow hedges are recognized on the balance sheet at fair value on the trade date. At inception, the Company formally documents (1) the hedging relationship; (2) the risk management objective and strategy; (3) the hedged forecasted transaction; (4) the nature of the risk being hedged; and (5) the method to assess hedge effectiveness.

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Derivatives designated as hedging relationships are remeasured at fair value at each reporting date. Changes in fair value of the effective portion of the hedge is recorded in accumulated other comprehensive income or loss (“AOCI”), while the ineffective portion is recognized immediately in earnings. Hedge effectiveness is assessed at inception and on a quarterly basis thereafter. The Company uses a qualitative or quantitative effectiveness assessment method, as appropriate, to conclude that the hedge is expected to be highly effective in offsetting changes in cash flows attributable to the hedged risk. Amounts deferred in AOCI are reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings. Reclassifications are recorded in the same income statement line item as the hedged item. Hedge accounting is discontinued prospectively if (1) the hedging instrument expires or is terminated; (2) the hedge no longer meets effectiveness criteria; or (3) the forecasted transaction is no longer probable. Upon discontinuance, amounts in AOCI remain until the forecasted transaction impacts earnings, unless the transaction is no longer probable, in which case amounts are immediately recognized in earnings.

Reclassifications

Certain reclassifications have been made to prior period balances to conform to the current period’s presentation.

New Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, to enhance the disclosure of expenses by requiring further disaggregation of relevant expense captions as well as disclosures about selling expenses. ASU 2024-03 is applicable to all public business entities for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact this will have on the consolidated financial statements but does not expect it will have a material impact on the Company’s consolidated financial statements.

In November 2025, the FASB issued ASU 2025-09, Hedge Accounting Improvements, which amends certain aspects of the existing hedge accounting guidance to more closely align hedge accounting with the economics of an entity's risk management activities. ASU 2025-09 is applicable to all public business entities for annual reporting periods beginning after December 15, 2026 and for interim periods within those annual reporting periods, with early adoption permitted. The amendments are required to be applied prospectively, with certain transition provisions available for existing hedging relationships. The Company is evaluating the impact this will have on the consolidated financial statements but does not expect it will have a material impact on the Company’s consolidated financial statements.

NOTE D: INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities as of June 30, 2026 and December 31, 2025 are as follows:


	June 30, 2026								December 31, 2025
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
(000’s omitted)	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
Available-for-Sale Portfolio:
U.S. Treasury and agency securities	$	2,427,277	$	16	$	207,912	$	2,219,381	$	2,399,478	$	0	$	204,252	$	2,195,226
Obligations of state and political subdivisions		462,678		562		27,247		435,993		417,414		430		25,927		391,917
Government agency mortgage-backed securities		329,485		53		45,087		284,451		322,253		96		43,464		278,885
Corporate debt securities		8,508		0		37		8,471		5,000		0		88		4,912
Government agency collateralized mortgage obligations		9,861		13		207		9,667		4,583		0		182		4,401
Total available-for-sale portfolio	$	3,237,809	$	644	$	280,490	$	2,957,963	$	3,148,728	$	526	$	273,913	$	2,875,341

Held-to-Maturity Portfolio:
U.S. Treasury and agency securities	$	1,183,312	$	0	$	107,538	$	1,075,774	$	1,168,487	$	0	$	87,003	$	1,081,484
Government agency mortgage-backed securities		295,074		2,537		904		296,707		285,679		3,537		236		288,980
Total held-to-maturity portfolio	$	1,478,386	$	2,537	$	108,442	$	1,372,481	$	1,454,166	$	3,537	$	87,239	$	1,370,464

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As of June 30, 2026, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $3.7 million and investment securities without readily determinable fair values carried at $84.2 million, including Federal Home Loan Banks of New York, Boston, and Indianapolis (collectively, “FHLB”) common stock of $40.4 million, Federal Reserve Bank (“FRB”) common stock of $33.3 million, equity securities of $5.3 million and other investment securities of $5.2 million.

As of December 31, 2025, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $4.4 million and equity securities without readily determinable fair values carried at $72.8 million; including FHLB common stock of $33.2 million, FRB common stock of $33.3 million and other equity securities of $6.3 million.

The investment in FRB stock represents approximately half of the total required subscription, and the remaining half is unpaid and remains subject to call by the FRB.

The amount of upward and downward adjustments to equity securities without readily determinable fair values was not material for the three and six months ended June 30, 2026 and 2025.

The gains and losses on equity and other securities for the three and six months ended June 30, 2026 and 2025 are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(000's omitted)	2026		2025		2026		2025
Net gain (loss) recognized on equity securities	$	4,710	$	(1)	$	4,309	$	244
Less: Net (gain) loss recognized on equity securities sold during the period		(4,234)		0		(4,234)		0
Unrealized gain (loss) recognized on equity securities still held	$	476	$	(1)	$	75	$	244

A summary of investment securities that have been in a continuous unrealized loss position is as follows:

As of June 30, 2026


	Less than 12 Months					12 Months or Longer				Total
				Gross				Gross				Gross
				Unrealized				Unrealized				Unrealized
(000’s omitted)		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Available-for-Sale Portfolio:
U.S. Treasury and agency securities		$	20,294	$	114	$	2,194,720	$	207,798	$	2,215,014	$	207,912
Obligations of state and political subdivisions			88,426		1,090		253,871		26,157		342,297		27,247
Government agency mortgage-backed securities			29,213		241		251,086		44,846		280,299		45,087
Corporate debt securities			3,496		12		4,975		25		8,471		37
Government agency collateralized mortgage obligations			4,763		20		3,387		187		8,150		207
Total available-for-sale investment portfolio		$	146,192	$	1,477	$	2,708,039	$	279,013	$	2,854,231	$	280,490

Held-to-Maturity Portfolio:
U.S. Treasury and agency securities		$	0	$	0	$	1,075,774	$	107,538	$	1,075,774	$	107,538
Government agency mortgage-backed securities			76,666		800		7,575		104		84,241		904
Total held-to-maturity portfolio		$	76,666	$	800	$	1,083,349	$	107,642	$	1,160,015	$	108,442

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As of December 31, 2025


	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross				Gross
			Unrealized				Unrealized				Unrealized
(000’s omitted)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Available-for-Sale Portfolio:
U.S. Treasury and agency securities	$	0	$	0	$	2,195,226	$	204,252	$	2,195,226	$	204,252
Obligations of state and political subdivisions		12,210		22		284,268		25,905		296,478		25,927
Government agency mortgage-backed securities		200		0		272,150		43,464		272,350		43,464
Corporate debt securities		0		0		4,912		88		4,912		88
Government agency collateralized mortgage obligations		0		0		4,397		182		4,397		182
Total available-for-sale investment portfolio	$	12,410	$	22	$	2,760,953	$	273,891	$	2,773,363	$	273,913

Held-to-Maturity Portfolio:
U.S. Treasury and agency securities	$	0	$	0	$	1,081,484	$	87,003	$	1,081,484	$	87,003
Government agency mortgage-backed securities		31,274		146		13,662		90		44,936		236
Total held-to-maturity portfolio	$	31,274	$	146	$	1,095,146	$	87,093	$	1,126,420	$	87,239

The unrealized losses reported pertaining to available-for-sale securities issued by the U.S. government and its sponsored entities include treasuries, agencies, and mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, which are currently rated Aa1 by Moody’s Investor Services, AA+ by Standard & Poor’s, AA+ by Fitch and carry either an explicit or implicit guarantee by the U.S. government. The majority of the obligations of state and political subdivisions carry a credit rating of A or better. Additionally, a portion of the obligations of state and political subdivisions carry a secondary level of credit enhancement. The Company holds corporate debt securities in an unrealized loss position and, based on an analysis of the financial position of the issuers including financial performance, liquidity and regulatory capital ratios, the issuers of the securities show a remote risk of default. Timely interest payments continue to be made on the securities. The unrealized losses in the portfolios are primarily attributable to changes in interest rates. As such, management does not believe any individual unrealized loss as of June 30, 2026 represents credit losses and no unrealized losses have been recognized in the provision for credit losses. Accordingly, there is no allowance for credit losses on the Company’s available-for-sale portfolio as of June 30, 2026. Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $11.3 million at June 30, 2026 and is excluded from the estimate of credit losses.

Securities classified as held-to-maturity are included under the Current Expected Credit Loss (“CECL”) methodology. Calculation of expected credit loss under CECL is done on a collective (“pooled”) basis, with assets grouped when similar risk characteristics exist. The Company notes that at June 30, 2026, all securities in the held-to-maturity classification are U.S. Treasury securities and government agency mortgage-backed securities, therefore they share the same risk characteristics and can be evaluated on a collective basis. The expected credit loss on these securities is evaluated based on historical credit losses of this security type and the expected possibility of default in the future as these securities are guaranteed by the U.S. government. U.S. Treasury securities and government agency mortgage-backed securities often receive the highest credit rating by rating agencies and the Company has concluded that the possibility of default is considered remote. The U.S. Treasury securities and government agency mortgage-backed securities held by the Company in the held-to-maturity category carry an Aa1 rating from Moody’s Investor Services, AA+ rating from Standard & Poor’s, and AA+ from Fitch. The Company concludes that the long history with no credit losses for these securities (adjusted for current conditions and reasonable and supportable forecasts) indicates an expectation that nonpayment of the amortized cost basis is zero. Management has concluded that the prepayment risk associated with these securities is insignificant and it is expected to recover the recorded investment. Accordingly, there is no allowance for credit losses on the Company’s held-to-maturity debt portfolio as of June 30, 2026. Accrued interest receivable on held-to-maturity debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $6.1 million at June 30, 2026 and is excluded from the estimate of credit losses. The Company has the intent and ability to hold the securities to maturity.

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The amortized cost and estimated fair value of debt securities at June 30, 2026, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, including government agency mortgage-backed securities and government agency collateralized mortgage obligations, are shown separately.


	Held-to-Maturity				Available-for-Sale
	Amortized		Fair		Amortized		Fair
(000’s omitted)	Cost		Value		Cost		Value
Due in one year or less	$	0	$	0	$	502,545	$	495,584
Due after one through five years		408,697		392,465		1,479,371		1,400,752
Due after five years through ten years		176,879		169,518		467,320		409,077
Due after ten years		597,736		513,791		449,227		358,432
Subtotal		1,183,312		1,075,774		2,898,463		2,663,845
Government agency mortgage-backed securities		295,074		296,707		329,485		284,451
Government agency collateralized mortgage obligations		0		0		9,861		9,667
Total	$	1,478,386	$	1,372,481	$	3,237,809	$	2,957,963

Investment securities with a carrying value of $2.15 billion and $2.06 billion at June 30, 2026 and December 31, 2025, respectively, were pledged to collateralize certain deposits, borrowings, and swaps. Securities pledged to collateralize certain deposits and borrowings included $318.3 million and $319.5 million of U.S. Treasury securities that were pledged as collateral for securities sold under agreement to repurchase at June 30, 2026 and December 31, 2025, respectively.

On August 3, 2026, the Company sold $296.8 million of lower-yielding available-for-sale U.S. Treasury securities and the proceeds from the sale were used to repay higher cost overnight borrowings. The sale resulted in a pre-tax realized loss of $3.0 million.

NOTE E: LOANS AND ALLOWANCE FOR CREDIT LOSSES

The segments of the Company’s loan portfolio are summarized as follows:


	June 30,		December 31,
(000’s omitted)	2026		2025
CRE – multifamily	$	951,856	$	917,586
CRE – owner occupied		892,342		871,801
CRE – non-owner occupied		1,848,158		1,670,451
Commercial & industrial and other business loans		1,348,263		1,274,029
Consumer mortgage		3,629,301		3,617,186
Consumer indirect		1,871,343		1,859,354
Consumer direct		202,387		205,595
Home equity		539,174		533,755
Gross loans, including deferred origination costs		11,282,824		10,949,757
Allowance for credit losses		(91,696)		(87,921)
Loans, net of allowance for credit losses	$	11,191,128	$	10,861,836

The following table presents the aging of the amortized cost basis of the Company’s past due loans by segment as of June 30, 2026 and December 31, 2025:


	Past Due		90+ Days Past
(000’s omitted)	30 – 89		Due and				Total
June 30, 2026	Days		Still Accruing		Nonaccrual		Past Due		Current		Total Loans
CRE – multifamily	$	333	$	0	$	437	$	770	$	951,086	$	951,856
CRE – owner occupied		2,171		0		4,286		6,457		885,885		892,342
CRE – non-owner occupied		587		0		1,795		2,382		1,845,776		1,848,158
Commercial & industrial and other business loans		2,993		0		11,109		14,102		1,334,161		1,348,263
Consumer mortgage		30,620		4,917		29,590		65,127		3,564,174		3,629,301
Consumer indirect		19,459		859		0		20,318		1,851,025		1,871,343
Consumer direct		1,839		153		0		1,992		200,395		202,387
Home equity		3,080		1,183		2,473		6,736		532,438		539,174
Total	$	61,082	$	7,112	$	49,690	$	117,884	$	11,164,940	$	11,282,824

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	Past Due		90+ Days Past
(000’s omitted)	30 – 89		Due and				Total
December 31, 2025	Days		Still Accruing		Nonaccrual		Past Due		Current		Total Loans
CRE – multifamily	$	861	$	0	$	437	$	1,298	$	916,288	$	917,586
CRE – owner occupied		1,050		0		6,687		7,737		864,064		871,801
CRE – non-owner occupied		399		0		87		486		1,669,965		1,670,451
Commercial & industrial and other business loans		3,372		0		12,533		15,905		1,258,124		1,274,029
Consumer mortgage		28,206		4,497		27,686		60,389		3,556,797		3,617,186
Consumer indirect		24,052		1,052		0		25,104		1,834,250		1,859,354
Consumer direct		2,123		393		0		2,516		203,079		205,595
Home equity		3,861		1,006		2,079		6,946		526,809		533,755
Total	$	63,924	$	6,948	$	49,509	$	120,381	$	10,829,376	$	10,949,757

Interest income on nonaccrual loans of $0.1 million and $0.5 million was recognized during the three and six months ended June 30, 2026, respectively, and $0.1 million and $0.2 million during the three and six months ended June 30, 2025, respectively.

The Company uses several credit quality indicators to assess credit risk in an ongoing manner. The Company’s primary credit quality indicator for its business lending portfolio is an internal credit risk rating system that categorizes loans as “pass”, “special mention”, “substandard”, or “doubtful”. Credit risk ratings are applied to loans individually based on a case-by-case evaluation. Business lending loans under $250,000 are assigned either a “pass” or “substandard” risk rating. Business lending relationships with total exposures above management-defined thresholds are subject to a formal annual review to affirm the appropriate risk rating. Quarterly credit evaluations may also be completed based on the borrower’s risk rating. For all business lending relationships regardless of exposure size, risk ratings are refreshed when a borrower makes a new loan request, a loan is renewed or automated tools indicate a possible change in a borrower’s credit risk profile. In general, the following are the definitions of the Company’s credit quality indicators.


Pass		The condition of the borrower and the performance of the loans are satisfactory or better.
Special Mention		The condition of the borrower has deteriorated and the loan has potential weaknesses, although the loan performs as agreed. Loss may be incurred at some future date if conditions deteriorate further.
Substandard		The condition of the borrower has significantly deteriorated and the loan has a well-defined weakness or weaknesses. The performance of the loan could further deteriorate and incur loss if deficiencies are not corrected.
Doubtful		The condition of the borrower has deteriorated to the point that collection of the balance is improbable based on current facts and conditions and loss is likely.

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The following tables show the amount of business lending loans by credit quality category at June 30, 2026 and December 31, 2025:


													Revolving		Revolving
													Loans		Loans
(000’s omitted)	Term Loans Amortized Cost Basis by Origination Year												Amortized		Converted
June 30, 2026	2026		2025		2024		2023		2022		2021 & Prior		Cost Basis		to Term		Total
CRE – multifamily:
Risk rating
Pass	$	28,917	$	146,543	$	10,540	$	88,803	$	127,902	$	155,335	$	153,482	$	201,261	$	912,783
Special mention		0		0		0		0		3,559		9,056		0		1,076		13,691
Substandard		0		0		0		8,805		0		13,588		97		2,892		25,382
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE – multifamily	$	28,917	$	146,543	$	10,540	$	97,608	$	131,461	$	177,979	$	153,579	$	205,229	$	951,856
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

CRE – owner occupied:
Risk rating
Pass	$	62,090	$	98,070	$	82,212	$	34,915	$	55,518	$	253,112	$	56,778	$	200,099	$	842,794
Special mention		3,133		1,298		1,043		4,678		3,562		2,959		470		11,996		29,139
Substandard		0		1,562		1,783		0		4,662		9,948		316		2,138		20,409
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE – owner occupied	$	65,223	$	100,930	$	85,038	$	39,593	$	63,742	$	266,019	$	57,564	$	214,233	$	892,342
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	0	$	134	$	0	$	0	$	0	$	0	$	134

CRE – non-owner occupied:
Risk rating
Pass	$	177,019	$	173,575	$	66,630	$	73,904	$	174,673	$	372,123	$	429,740	$	217,234	$	1,684,898
Special mention		0		0		1,395		8,421		2,087		23,082		14,790		24,798		74,573
Substandard		0		0		79		9,398		46,175		10,877		5,460		15,910		87,899
Doubtful		0		0		0		0		0		788		0		0		788
Total CRE – non-owner occupied	$	177,019	$	173,575	$	68,104	$	91,723	$	222,935	$	406,870	$	449,990	$	257,942	$	1,848,158
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

Commercial & industrial and other business loans:
Risk rating
Pass	$	120,323	$	200,667	$	128,243	$	42,499	$	45,544	$	107,244	$	516,855	$	94,288	$	1,255,663
Special mention		3,715		1,530		6,600		1,012		2,242		1,255		24,316		6,674		47,344
Substandard		36		2,045		3,204		2,133		2,662		6,206		21,101		4,611		41,998
Doubtful		0		1,532		0		0		0		0		0		1,726		3,258
Total commercial & industrial and other business loans	$	124,074	$	205,774	$	138,047	$	45,644	$	50,448	$	114,705	$	562,272	$	107,299	$	1,348,263
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	777	$	0	$	0	$	0	$	243	$	302	$	1,322

Total business lending:
Risk rating
Pass	$	388,349	$	618,855	$	287,625	$	240,121	$	403,637	$	887,814	$	1,156,855	$	712,882	$	4,696,138
Special mention		6,848		2,828		9,038		14,111		11,450		36,352		39,576		44,544		164,747
Substandard		36		3,607		5,066		20,336		53,499		40,619		26,974		25,551		175,688
Doubtful		0		1,532		0		0		0		788		0		1,726		4,046
Total business lending	$	395,233	$	626,822	$	301,729	$	274,568	$	468,586	$	965,573	$	1,223,405	$	784,703	$	5,040,619
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	777	$	134	$	0	$	0	$	243	$	302	$	1,456

(1)For the six months ended June 30, 2026.

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													Revolving		Revolving
													Loans		Loans
(000’s omitted)	Term Loans Amortized Cost Basis by Origination Year												Amortized		Converted
December 31, 2025	2025		2024		2023		2022		2021		2020 & Prior		Cost Basis		to Term		Total
CRE – multifamily:
Risk rating
Pass	$	138,662	$	13,544	$	90,834	$	125,581	$	38,245	$	130,435	$	131,129	$	173,234	$	841,664
Special mention		0		0		8,522		9,317		9,019		5,089		4,979		24,825		61,751
Substandard		0		0		0		387		1,084		8,109		1,647		2,944		14,171
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE – multifamily	$	138,662	$	13,544	$	99,356	$	135,285	$	48,348	$	143,633	$	137,755	$	201,003	$	917,586
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	0	$	0	$	19	$	82	$	428	$	0	$	529

CRE – owner occupied:
Risk rating
Pass	$	119,369	$	87,429	$	39,911	$	60,476	$	47,869	$	228,439	$	20,295	$	192,919	$	796,707
Special mention		1,310		6,357		3,082		751		0		4,995		339		28,113		44,947
Substandard		1,449		1,571		1,024		7,066		3,073		9,895		337		5,732		30,147
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE – owner occupied	$	122,128	$	95,357	$	44,017	$	68,293	$	50,942	$	243,329	$	20,971	$	226,764	$	871,801
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	0	$	47	$	0	$	9	$	0	$	0	$	56

CRE – non-owner occupied:
Risk rating
Pass	$	182,535	$	67,569	$	97,829	$	189,423	$	97,178	$	311,706	$	351,501	$	218,249	$	1,515,990
Special mention		3,067		1,407		4,748		0		2,593		19,642		19,024		24,679		75,160
Substandard		0		86		7,958		45,008		1,621		6,319		6,292		12,017		79,301
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE – non-owner occupied	$	185,602	$	69,062	$	110,535	$	234,431	$	101,392	$	337,667	$	376,817	$	254,945	$	1,670,451
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	0	$	0	$	1,111	$	0	$	0	$	3,198	$	4,309

Commercial & industrial and other business loans:
Risk rating
Pass	$	244,969	$	149,911	$	48,679	$	59,557	$	47,301	$	86,492	$	441,487	$	85,982	$	1,164,378
Special mention		2,175		10,772		1,289		2,810		1,342		860		35,197		8,109		62,554
Substandard		3,223		2,348		4,420		3,236		2,091		5,176		21,029		3,996		45,519
Doubtful		0		0		0		0		0		0		1,578		0		1,578
Total commercial & industrial and other business loans	$	250,367	$	163,031	$	54,388	$	65,603	$	50,734	$	92,528	$	499,291	$	98,087	$	1,274,029
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	235	$	209	$	150	$	50	$	303	$	1,293	$	2,240

Total business lending:
Risk rating
Pass	$	685,535	$	318,453	$	277,253	$	435,037	$	230,593	$	757,072	$	944,412	$	670,384	$	4,318,739
Special mention		6,552		18,536		17,641		12,878		12,954		30,586		59,539		85,726		244,412
Substandard		4,672		4,005		13,402		55,697		7,869		29,499		29,305		24,689		169,138
Doubtful		0		0		0		0		0		0		1,578		0		1,578
Total business lending	$	696,759	$	340,994	$	308,296	$	503,612	$	251,416	$	817,157	$	1,034,834	$	780,799	$	4,733,867
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	235	$	256	$	1,280	$	141	$	731	$	4,491	$	7,134

(1)For the year ended December 31, 2025.

All other loans are underwritten and structured using standardized criteria and characteristics, primarily payment performance, and are monitored collectively on a monthly basis. These are typically loans to individuals in the consumer categories and are delineated as either performing or nonperforming. Performing loans include loans classified as current as well as those classified as 30 - 89 days past due. Nonperforming loans include 90+ days past due and still accruing and nonaccrual loans.

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The following tables detail the balances in all other loan categories at June 30, 2026 and December 31, 2025:


													Revolving		Revolving
													Loans		Loans
(000’s omitted)	Term Loans Amortized Cost Basis by Origination Year												Amortized		Converted
June 30, 2026	2026		2025		2024		2023		2022		2021 & Prior		Cost Basis		to Term		Total
Consumer mortgage:
FICO AB⁽¹⁾
Performing	$	110,051	$	270,214	$	266,555	$	286,536	$	284,958	$	1,056,651	$	24,210	$	162,648	$	2,461,823
Nonperforming		0		0		848		1,353		705		3,666		0		191		6,763
Total FICO AB		110,051		270,214		267,403		287,889		285,663		1,060,317		24,210		162,839		2,468,586
FICO CDE⁽²⁾
Performing		52,655		125,218		137,644		121,927		119,595		507,259		7,996		60,677		1,132,971
Nonperforming		0		704		3,730		3,971		5,361		12,743		152		1,083		27,744
Total FICO CDE		52,655		125,922		141,374		125,898		124,956		520,002		8,148		61,760		1,160,715
Total consumer mortgage	$	162,706	$	396,136	$	408,777	$	413,787	$	410,619	$	1,580,319	$	32,358	$	224,599	$	3,629,301
Current period gross charge-offs⁽³⁾	$	0	$	0	$	0	$	0	$	0	$	94	$	0	$	0	$	94

Consumer indirect:
Performing	$	396,772	$	650,588	$	363,254	$	236,079	$	153,238	$	70,553	$	0	$	0	$	1,870,484
Nonperforming		0		242		170		170		205		72		0		0		859
Total consumer indirect	$	396,772	$	650,830	$	363,424	$	236,249	$	153,443	$	70,625	$	0	$	0	$	1,871,343
Current period gross charge-offs⁽³⁾	$	230	$	1,386	$	1,770	$	1,398	$	1,163	$	700	$	0	$	0	$	6,647

Consumer direct:
Performing	$	51,859	$	65,632	$	39,728	$	20,860	$	9,478	$	7,581	$	7,045	$	51	$	202,234
Nonperforming		0		43		7		8		0		58		37		0		153
Total consumer direct	$	51,859	$	65,675	$	39,735	$	20,868	$	9,478	$	7,639	$	7,082	$	51	$	202,387
Current period gross charge-offs⁽³⁾⁽⁴⁾	$	21	$	542	$	531	$	206	$	166	$	482	$	2,183	$	0	$	4,131

Home equity:
Performing	$	21,812	$	60,221	$	56,276	$	40,122	$	42,455	$	100,139	$	186,525	$	27,968	$	535,518
Nonperforming		0		47		538		722		482		761		928		178		3,656
Total home equity	$	21,812	$	60,268	$	56,814	$	40,844	$	42,937	$	100,900	$	187,453	$	28,146	$	539,174
Current period gross charge-offs⁽³⁾	$	0	$	0	$	0	$	27	$	0	$	3	$	11	$	0	$	41

(1)FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720.

(2)FICO CDE refers to loans with FICO scores less than 720 and potentially higher risk.

(3)For the six months ended June 30, 2026.

(4)Includes overdraft gross charge-offs.

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													Revolving		Revolving
													Loans		Loans
(000’s omitted)	Term Loans Amortized Cost Basis by Origination Year												Amortized		Converted
December 31, 2025	2025		2024		2023		2022		2021		2020 & Prior		Cost Basis		to Term		Total
Consumer mortgage:
FICO AB⁽¹⁾
Performing	$	293,599	$	279,289	$	302,498	$	298,302	$	382,256	$	736,261	$	22,665	$	148,004	$	2,462,874
Nonperforming		0		572		981		718		875		2,872		0		0		6,018
Total FICO AB		293,599		279,861		303,479		299,020		383,131		739,133		22,665		148,004		2,468,892
FICO CDE⁽²⁾
Performing		117,026		141,528		127,586		126,599		140,660		400,453		14,422		53,855		1,122,129
Nonperforming		0		3,845		3,626		4,325		1,546		11,964		0		859		26,165
Total FICO CDE		117,026		145,373		131,212		130,924		142,206		412,417		14,422		54,714		1,148,294
Total consumer mortgage	$	410,625	$	425,234	$	434,691	$	429,944	$	525,337	$	1,151,550	$	37,087	$	202,718	$	3,617,186
Current period gross charge-offs⁽³⁾	$	0	$	0	$	21	$	5	$	0	$	30	$	0	$	0	$	56

Consumer indirect:
Performing	$	760,499	$	458,410	$	312,256	$	217,772	$	69,818	$	39,547	$	0	$	0	$	1,858,302
Nonperforming		101		279		236		223		70		143		0		0		1,052
Total consumer indirect	$	760,600	$	458,689	$	312,492	$	217,995	$	69,888	$	39,690	$	0	$	0	$	1,859,354
Current period gross charge-offs⁽³⁾	$	1,199	$	3,323	$	4,127	$	2,838	$	1,135	$	948	$	0	$	0	$	13,570

Consumer direct:
Performing	$	88,898	$	53,200	$	29,486	$	15,546	$	4,904	$	5,846	$	7,251	$	71	$	205,202
Nonperforming		39		74		65		56		4		51		97		7		393
Total consumer direct	$	88,937	$	53,274	$	29,551	$	15,602	$	4,908	$	5,897	$	7,348	$	78	$	205,595
Current period gross charge-offs⁽³⁾	$	205	$	891	$	701	$	392	$	55	$	25	$	232	$	0	$	2,501

Home equity:
Performing	$	65,113	$	60,987	$	44,399	$	46,641	$	45,505	$	66,152	$	172,782	$	29,091	$	530,670
Nonperforming		0		290		773		543		71		704		620		84		3,085
Total home equity	$	65,113	$	61,277	$	45,172	$	47,184	$	45,576	$	66,856	$	173,402	$	29,175	$	533,755
Current period gross charge-offs⁽³⁾	$	0	$	0	$	112	$	0	$	0	$	34	$	7	$	0	$	153

(1)FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720.

(2)FICO CDE refers to loans with FICO scores less than 720 and potentially higher risk.

(3)For the year ended December 31, 2025.

For business lending loans on nonaccrual greater than $500,000 that do not share the same risk characteristics with a pool of loans, the company establishes individually assessed reserves using methods prescribed by GAAP. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. A summary of individually assessed business loans as of June 30, 2026 and December 31, 2025 follows:


	June 30, 2026						December 31, 2025
					Specifically						Specifically
	Carrying		Contractual		Allocated		Carrying		Contractual		Allocated
(000’s omitted)	Balance		Balance		Allowance		Balance		Balance		Allowance
Loans with allowance allocation:
CRE – non-owner occupied	$	1,607	$	1,607	$	782	$	0	$	0	$	0
Commercial & industrial and other business loans		4,258		4,269		3,264		3,669		4,000		1,403
Total	$	5,865	$	5,876	$	4,046	$	3,669	$	4,000	$	1,403

Loans without allowance allocation:
CRE – owner occupied	$	3,968	$	4,366	$	0	$	6,369	$	6,735	$	0
Commercial & industrial and other business loans		5,412		8,640		0		7,686		10,345		0
Total	$	9,380	$	13,006	$	0	$	14,055	$	17,080	$	0

The average carrying balance of individually assessed loans was $16.2 million and $17.1 million for the three months ended June 30, 2026 and 2025, respectively. The average carrying balance of individually assessed loans was $18.2 million and $39.5 million for the six months ended June 30, 2026 and 2025, respectively. An immaterial amount of interest income was recognized on individually assessed loans for the three and six months ended June 30, 2026 and 2025.

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Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, payment delay, or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Company provides multiple types of modifications on one loan. Typically, one type of modification, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification, such as principal forgiveness, may be granted. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The estimate of the allowance for credit losses includes historical losses from loans that were modified due to borrower financial difficulty, therefore a charge to the allowance for credit losses is generally not recorded upon modification.

The following table presents the amortized cost basis of loans at June 30, 2026 and 2025 that were both experiencing financial difficulty and modified during the three and six months ended June 30, 2026 and 2025, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below.


	Amortized Cost
				Combination -
				Other Payment	Total Class of
	Term			Delay and Term	Financing
	Extension			Extension	Receivable
Three Months Ended June 30, 2026
CRE - non-owner occupied	$	0	$	5,432	0.29	%
Consumer mortgage		267		0	0.01	%
Total	$	267	$	5,432	0.05	%

Three Months Ended June 30, 2025
Commercial & industrial and other business loans	$	5,716	$	0	0.46	%
Total	$	5,716	$	0	0.05	%

‌


	Amortized Cost
				Combination -
				Other Payment	Total Class of
	Term			Delay and Term	Financing
	Extension			Extension	Receivable
Six months ended June 30, 2026
CRE - non-owner occupied	$	0	$	5,432	0.29	%
Consumer mortgage		267		0	0.01	%
Total	$	267	$	5,432	0.05	%

Six months ended June 30, 2025
Commercial & industrial and other business loans	$	5,716	$	0	0.46	%
Consumer mortgage		449		0	0.01	%
Total	$	6,165	$	0	0.06	%

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The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified in the last 12 months.


	June 30, 2026
					90+ Days Past
			Past Due 30 –		Due and Still
(000's omitted)	Current		89 Days		Accruing		Non-Accrual		Total
CRE - non-owner occupied	$	5,432	$	0	$	0	$	0	$	5,432
Consumer mortgage		51		0		0		335		386
Total	$	5,483	$	0	$	0	$	335	$	5,818

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three and six months ended June 30, 2026.


		Weighted-Average Term Extension
		(Years)
Three months ended June 30, 2026
CRE - non-owner occupied		2.0
Consumer mortgage		8.0
Total		2.3

Six months ended June 30, 2026
CRE - non-owner occupied		2.0
Consumer mortgage		8.0
Total		2.3

There were no loans modified to borrowers with financial difficulty that had a payment default subsequent to modification during the three and six months ended June 30, 2026 and 2025.

Allowance for Credit Losses

The following presents by segment the activity in the allowance for credit losses during the three and six months ended June 30, 2026 and 2025:


	Three Months Ended June 30, 2026
	Beginning		Charge-						Ending
(000’s omitted)	balance		offs		Recoveries		Provision		balance
Business lending	$	49,952	$	(1,101)	$	213	$	1,891	$	50,955
Consumer mortgage		12,583		(45)		0		80		12,618
Consumer indirect		20,690		(3,190)		2,076		1,008		20,584
Consumer direct⁽¹⁾		4,456		(1,896)		678		1,701		4,939
Home equity		1,512		(32)		0		120		1,600
Unallocated		1,000		0		0		0		1,000
Allowance for credit losses – loans		90,193		(6,264)		2,967		4,800		91,696
Liability for off-balance sheet credit exposures		1,453		0		0		(193)		1,260
Total allowance for credit losses and liability for off-balance sheet credit exposures	$	91,646	$	(6,264)	$	2,967	$	4,607	$	92,956

(1)	Includes overdraft charge-offs and recoveries.

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	Three Months Ended June 30, 2025
	Beginning		Charge-						Ending
(000’s omitted)	balance		offs		Recoveries		Provision		balance
Business lending	$	42,988	$	(4,897)	$	350	$	2,713	$	41,154
Consumer mortgage		13,679		(18)		5		530		14,196
Consumer indirect		19,746		(2,620)		2,414		345		19,885
Consumer direct		4,033		(657)		324		433		4,133
Home equity		1,394		(16)		1		104		1,483
Unallocated		1,000		0		0		0		1,000
Allowance for credit losses – loans		82,840		(8,208)		3,094		4,125		81,851
Liability for off-balance sheet credit exposures		867		0		0		(8)		859
Total allowance for credit losses and liability for off-balance sheet credit exposures	$	83,707	$	(8,208)	$	3,094	$	4,117	$	82,710


	Six Months Ended June 30, 2026
							Acquisition
	Beginning		Charge-				Allowance				Ending
(000’s omitted)	balance		offs		Recoveries		Adjustment		Provision		balance
Business lending	$	46,155	$	(1,456)	$	379	$	4	$	5,873	$	50,955
Consumer mortgage		14,005		(94)		2		3		(1,298)		12,618
Consumer indirect		20,914		(6,647)		4,307		0		2,010		20,584
Consumer direct⁽¹⁾		4,257		(4,131)		1,412		0		3,401		4,939
Home equity		1,590		(41)		0		(21)		72		1,600
Unallocated		1,000		0		0		0		0		1,000
Allowance for credit losses – loans		87,921		(12,369)		6,100		(14)		10,058		91,696
Liability for off-balance sheet credit exposures		1,075		0		0		0		185		1,260
Total allowance for credit losses and liability for off-balance sheet credit exposures	$	88,996	$	(12,369)	$	6,100	$	(14)	$	10,243	$	92,956

(1)	Includes overdraft charge-offs and recoveries.


	Six Months Ended June 30, 2025
	Beginning		Charge-						Ending
(000’s omitted)	balance		offs		Recoveries		Provision		balance
Business lending	$	37,201	$	(5,620)	$	449	$	9,124	$	41,154
Consumer mortgage		15,017		(23)		11		(809)		14,196
Consumer indirect		20,895		(6,585)		4,108		1,467		19,885
Consumer direct		3,453		(1,217)		556		1,341		4,133
Home equity		1,548		(23)		1		(43)		1,483
Unallocated		1,000		0		0		0		1,000
Allowance for credit losses – loans		79,114		(13,468)		5,125		11,080		81,851
Liability for off-balance sheet credit exposures		1,132		0		0		(273)		859
Total allowance for credit losses and liability for off-balance sheet credit exposures	$	80,246	$	(13,468)	$	5,125	$	10,807	$	82,710

The allowance for credit losses increased to $91.7 million at June 30, 2026 compared to $87.9 million at December 31, 2025 and $81.9 million at June 30, 2025, reflective of an increase in loans outstanding and partially offset by improvements in credit quality metrics.

Accrued interest receivable on loans, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $38.3 million at June 30, 2026 and is excluded from the estimate of credit losses and amortized cost basis of loans.

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The Company utilizes the historical loss rate on its loan portfolio as the initial basis for the estimate of credit losses using the cumulative loss, vintage loss and line loss methods, which are derived from the Company’s historical loss experience. To address changes and trends in current period credit metrics, qualitative adjustments to historical loss experience are made for differences in current loan-specific risk characteristics and to address current period delinquencies, charge-off rates, risk ratings, lack of loan level data through an entire economic cycle, changes in loan sizes and underwriting standards as well as the addition of acquired loans which were not underwritten by the Company. The Company considered historical losses immediately prior, through and following the Great Recession compared to the historical period used for modeling to adjust the historical information to account for longer-term expectations for loan credit performance. Under CECL, the Company is required to consider future economic conditions to determine current expected credit losses. Management selected an eight-quarter reasonable and supportable forecast period with a four-quarter reversion to the historical mean to use as part of the economic forecast and utilizes a two-quarter lag adjustment for economic factors that are not dependent on collateral values, and no lag for factors that utilize collateral values. Management determined that these qualitative adjustments were needed to adjust historical information for expected losses and to reflect changes as a result of current conditions.

For qualitative macroeconomic adjustments, the Company uses third-party forecasted economic data scenarios utilizing a base scenario and two alternative scenarios that are weighted, with forecasts available as of June 30, 2026. The results of these forecasts are applied to the quantitative loss history to calculate the qualitative economic adjustment component of the allowance for credit losses. The scenarios utilized forecast stable unemployment levels and modest growth in GDP, real household income, and housing prices, offset by slowing growth in auto and commercial real estate prices.

Management developed expected loss estimates considering factors for segments as outlined below:

●

Business lending – non real estate: The Company selected projected unemployment and GDP as indicators of forecasted losses related to business lending and utilizes both factors with equal weight for the calculation. The Company also considered delinquencies, risk rating changes, recent charge-off history and acquired loans as part of the review of estimated losses.

●

Business lending – real estate: The Company selected projected unemployment and commercial real estate values as indicators of forecasted losses related to commercial real estate loans and utilizes both factors with equal weight for the calculation. For office properties, the Company selected projected office-specific commercial real estate values and vacancy rates and utilizes both factors with equal weight for the calculation. The Company also considered the factors noted in business lending – non real estate.

●

Consumer mortgages and home equity: The Company selected projected unemployment and residential real estate values as indicators of forecasted losses related to mortgage lending and utilizes both factors with equal weight for the calculation. In addition, current delinquencies, charge-offs and acquired loans were considered.

●

Consumer indirect: The Company selected projected unemployment and vehicle valuation indices as indicators of forecasted losses related to indirect lending and utilizes both factors with equal weight for the calculation. In addition, current delinquencies, charge-offs and acquired loans were considered.

●

Consumer direct: The Company selected projected unemployment and inflation-adjusted household income as indicators of forecasted losses related to consumer direct lending and utilizes both factors with equal weight for the calculation. In addition, current delinquencies, charge-offs and acquired loans were considered.

At June 30, 2026 and December 31, 2025, loans with a carrying amount of approximately $7.06 billion and $6.83 billion, respectively, were pledged for the availability to secure certain borrowings with the FHLB and FRB. There were $598.0 million and $450.0 million of borrowings outstanding under these arrangements at June 30, 2026 and December 31, 2025, respectively.

At June 30, 2026 and December 31, 2025, the carrying amount of residential real estate property in the process of foreclosure was $12.6 million and $9.4 million, respectively.

During the six months ended June 30, 2026 the Company purchased $0.3 million of consumer mortgage loans and sold $34.4 million of secondary market eligible residential consumer mortgage loans. During the six months ended June 30, 2025, the Company did not purchase any loans and sold $34.1 million of secondary market eligible residential consumer mortgage loans.

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NOTE F: GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

The gross carrying amount and accumulated amortization for each type of identifiable intangible asset are as follows:


	June 30, 2026						December 31, 2025
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
(000’s omitted)	Amount		Amortization		Amount		Amount		Amortization		Amount
Amortizing intangible assets:
Core deposit intangibles	$	29,471	$	(13,739)	$	15,732	$	26,371	$	(11,617)	$	14,754
Other intangibles		136,532		(89,220)		47,312		122,675		(82,688)		39,987
Total amortizing intangible assets	$	166,003	$	(102,959)	$	63,044	$	149,046	$	(94,305)	$	54,741

The estimated aggregate amortization expense for each of the five succeeding fiscal years ended December 31 is as follows:


(000’s omitted)
July - Dec 2026	$	9,299
2027		11,259
2028		9,224
2029		7,804
2030		6,466
Thereafter		18,992
Total	$	63,044

A reconciliation of the carrying amount of the Company’s goodwill at December 31, 2025 and June 30, 2026 is as follows:


(000’s omitted)	December 31, 2025		Additions/Adjustments		June 30, 2026
Goodwill	$	887,975	$	12,675	$	900,650

NOTE G: EARNINGS PER SHARE

The two-class method is used in the calculations of basic and diluted earnings per share. Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared and participation rights in undistributed earnings. Basic earnings per share are computed based on the weighted-average number of common shares outstanding for the period. Diluted earnings per share are based on the weighted-average number of shares outstanding, adjusted for the effect of potentially dilutive common shares such as the assumed exercise of stock options and the assumed issuance of restricted stock units (“RSUs”) and performance stock units (“PSUs”), which is calculated using the treasury stock method. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive.

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The following is a reconciliation of basic to diluted earnings per share for the three and six months ended June 30, 2026 and 2025:


		Three Months Ended			Six Months Ended
		June 30,			June 30,
(000’s omitted, except per share data)	2026		2025		2026		2025
Net income	$	61,334	$	51,331	$	118,552	$	100,945
Income attributable to unvested stock-based compensation awards		(154)		(240)		(351)		(431)
Income available to common shareholders	$	61,180	$	51,091	$	118,201	$	100,514

Weighted-average common shares outstanding – basic		52,613		52,785		52,634		52,745
Basic earnings per share	$	1.16	$	0.97	$	2.25	$	1.91

Net income	$	61,334	$	51,331	$	118,552	$	100,945
Income attributable to unvested stock-based compensation awards		(154)		(240)		(351)		(431)
Income available to common shareholders	$	61,180	$	51,091	$	118,201	$	100,514

Weighted-average common shares outstanding – basic		52,613		52,785		52,634		52,745
Assumed exercise of stock options and vesting of RSUs & PSUs		170		84		170		132
Weighted-average common shares outstanding – diluted		52,783		52,869		52,804		52,877
Diluted earnings per share	$	1.16	$	0.97	$	2.24	$	1.90

Anti-dilutive stock awards⁽¹⁾		336		193		311		349

(1)	Represents the amount of stock options, RSUs, and PSUs that were excluded from the calculation of diluted earnings per share as the impact would have been anti-dilutive.

Stock Repurchase Program

At its December 2025 meeting, the Board of Directors of the Company (the “Board”) approved a new stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,633,000 shares of the Company’s common stock, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2026. Any repurchased shares will be used for general corporate purposes, including those related to stock plan activities. The timing and extent of repurchases will depend on market conditions and other corporate considerations as determined at the Company’s discretion. There were 8,471 shares and 258,471 shares of treasury stock purchases made under this authorization during the three and six months ended June 30, 2026, respectively, with an average price paid per share of $62.11 and $61.87, respectively.

At its December 2024 meeting, the Board approved a new stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,628,000 shares of the Company’s common stock, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2025. Any repurchased shares were be used for general corporate purposes, including those related to stock plan activities. The timing and extent of repurchases depended on market conditions and other corporate considerations as determined at the Company’s discretion. There were no shares of treasury stock purchases made under this authorization during the first six months of 2025.

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NOTE H: COMMITMENTS, CONTINGENT LIABILITIES AND RESTRICTIONS

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit and standby letters of credit. Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. These commitments consist principally of unused commercial and consumer credit lines. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of an underlying contract with a third party. The credit risks associated with commitments to extend credit and standby letters of credit are essentially the same as that involved with extending loans to customers and are subject to the Company’s normal credit policies. The Company’s liability for off-balance sheet credit exposures related to commitments to extend credit is included in accrued interest and other liabilities on the consolidated statements of condition and detailed in Note E. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness. The fair value of the standby letters of credit is immaterial for disclosure.

The contract amounts of these commitments and contingencies are as follows:


	June 30,		December 31,
(000’s omitted)	2026		2025
Commitments to extend credit	$	2,019,553	$	1,912,429
Standby letters of credit		159,344		92,145
Total	$	2,178,897	$	2,004,574

The Company entered into agreements to invest a total of $10.0 million and $8.5 million in investment tax credits generated by a solar energy producing company during the second quarter of 2026 and 2025, respectively. The Company has elected to account for the investments using the proportional amortization method. At June 30, 2026, the balance of the Company’s investment in these tax credits was $11.8 million and the unfunded commitment related to the solar energy tax credit investments was $10.0 million. At December 31, 2025, the balance of the Company’s investment in these tax credits was $3.4 million and the unfunded commitment related to the solar energy tax credit investments was $1.5 million. These amounts are reflected in other assets and accrued interest and other liabilities, respectively, in the consolidated statements of condition. The Company funded the outstanding commitment at December 31, 2025 during the second quarter of 2026 and anticipates funding the outstanding commitment at June 30, 2026 by the end of 2026. During the three months ended June 30, 2026 and 2025, the Company recognized $0.5 million and $2.5 million respectively, of federal tax credits and $0.7 million and $2.7 million, respectively, of amortization of income tax credit investments in income taxes in the consolidated statements of income related to solar energy tax credits. During the six months ended June 30, 2026 and 2025, the Company recognized $0.9 million and $2.5 million, respectively, of federal tax credits and $1.6 million and $2.8 million, respectively, of amortization of income tax credit investments in income taxes in the consolidated statements of income related to solar energy tax credits.

Legal Contingencies

On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with pending or threatened legal proceedings or other matters in which claims for monetary damages are asserted. For those matters where it is probable that the Company will incur losses and the amounts of the losses are reasonably estimable, the Company records an expense and corresponding liability in its consolidated financial statements. To the extent such matters could result in exposure in excess of that liability, the amount of such excess is not currently estimable. The range of losses that are reasonably possible for matters where an exposure is not currently estimable or considered probable is not believed to be material in the aggregate. This is based on information currently available to the Company and involves elements of judgment and significant uncertainties.

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On June 25, 2026, the United States Department of Labor (“DOL”) filed a complaint in the U.S. District Court for the Southern District of Texas against the Company’s subsidiary, Hand Benefits & Trust Company (“HB&T”), Hand Composite Employee Benefit Trust (the “Trust”), and certain current and former HB&T officers and directors, captioned Sonderling v. Hand Benefits & Tr. Co., et al., Case No. 4:26-cv-05025 (S.D. Tex). The complaint alleges, among other things, that HB&T and the individual defendants breached their fiduciary duties under ERISA in connection with the selection and monitoring of certain collective investment funds (“CIFs”) and their subadvisors, and by causing certain CIFs to enter into short-term loans in connection with participant withdrawals, resulting in alleged losses to the Trust and its participating trusts. The Company and the named defendants dispute these allegations and intend to vigorously defend themselves. Based on the preliminary stage of the proceeding, the nature of the claims asserted, and the current status of discovery and related proceedings, the Company believes that a loss is reasonably possible but not probable. Accordingly, no accrual has been recorded. At this time, the Company is unable to reasonably estimate a possible loss or range of loss, if any. The outcome of litigation is inherently uncertain, and adverse developments could materially affect the Company’s results of operations or financial condition in future periods.

NOTE I: FAIR VALUE

Accounting standards establish a framework for measuring fair value and require certain disclosures about such fair value instruments. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. exit price). Inputs used to measure fair value are classified into the following hierarchy:


● Level 1 -	Quoted prices in active markets for identical assets or liabilities.
● Level 2 -	Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
● Level 3 -	Significant valuation assumptions not readily observable in a market.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis. There were no transfers between any of the levels for the periods presented.


	June 30, 2026
							Total Fair
(000’s omitted)	Level 1		Level 2		Level 3		Value
Available-for-sale investment securities:
U.S. Treasury and agency securities	$	2,143,656	$	75,725	$	0	$	2,219,381
Obligations of state and political subdivisions		0		435,993		0		435,993
Government agency mortgage-backed securities		0		284,451		0		284,451
Corporate debt securities		0		8,471		0		8,471
Government agency collateralized mortgage obligations		0		9,667		0		9,667
Total available-for-sale investment securities		2,143,656		814,307		0		2,957,963
Equity securities		3,661		0		0		3,661
Mortgage loans held for sale		0		1,571		0		1,571
Commitments to originate real estate loans for sale		0		0		391		391
Interest rate swap agreements asset		0		4,137		0		4,137
Interest rate swap agreements liability		0		(8,054)		0		(8,054)
Total	$	2,147,317	$	811,961	$	391	$	2,959,669

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	December 31, 2025
							Total Fair
(000’s omitted)	Level 1		Level 2		Level 3		Value
Available-for-sale investment securities:
U.S. Treasury and agency securities	$	2,133,932	$	61,294	$	0	$	2,195,226
Obligations of state and political subdivisions		0		391,917		0		391,917
Government agency mortgage-backed securities		0		278,885		0		278,885
Corporate debt securities		0		4,912		0		4,912
Government agency collateralized mortgage obligations		0		4,401		0		4,401
Total available-for-sale investment securities		2,133,932		741,409		0		2,875,341
Equity securities		4,414		0		0		4,414
Mortgage loans held for sale		0		108		0		108
Commitments to originate real estate loans for sale		0		0		154		154
Forward sales commitments		0		15		0		15
Interest rate swap agreements asset		0		7,524		0		7,524
Interest rate swap agreements liability		0		(7,524)		0		(7,524)
Total	$	2,138,346	$	741,532	$	154	$	2,880,032

The valuation techniques used to measure fair value for the items in the table above are as follows:

●

Available-for-sale investment securities and equity securities – The fair values of available-for-sale investment securities are based upon quoted prices, if available. If quoted prices are not available, fair values are measured using quoted market prices for similar securities or model-based valuation techniques. Level 1 securities include U.S. Treasury obligations and marketable equity securities that are traded by dealers or brokers in active over-the-counter markets. Level 2 securities include U.S. agency securities, mortgage-backed securities issued by government-sponsored entities, obligations of state and political subdivisions and corporate debt securities that are valued by reference to prices for similar securities or through model-based techniques in which all significant inputs, such as reported trades, trade execution data, interest rate swap yield curves, market prepayment speeds, credit information, market spreads, and the security’s terms and conditions, are observable. See Note D for further disclosure of the fair value of investment securities.

●

Mortgage loans held for sale – The Company has elected to value loans held for sale at fair value in order to more closely match the gains and losses associated with loans held for sale with the gains and losses on forward sales contracts. Accordingly, the impact on the valuation is recognized in the Company’s consolidated statements of income. All mortgage loans held for sale are current and in performing status. The fair value of mortgage loans held for sale is determined using quoted secondary-market prices of loans with similar characteristics and, as such, has been classified as a Level 2 valuation. The unpaid principal value of mortgage loans held for sale was approximately $1.6 million and $0.1 million at June 30, 2026 and December 31, 2025, respectively. Mortgage loans held for sale are included in other assets in the consolidated statements of condition. The unrealized gain on mortgage loans held for sale is recognized in mortgage banking revenues in the consolidated statements of income and is immaterial.

●

Commitments to originate real estate loans for sale – The Company enters into various commitments to originate residential real estate loans for sale. Such commitments are considered to be derivative financial instruments and therefore are carried at estimated fair value in the other asset or other liability section of the consolidated statements of condition. The estimated fair value of these commitments is determined using quoted secondary market prices obtained from certain government-sponsored entities. Additionally, accounting guidance requires the expected net future cash flows related to the associated servicing of the loan to be included in the fair value measurement of the derivative. The expected net future cash flows are based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. Such assumptions include estimates of the cost of servicing loans, appropriate discount rate and prepayment speeds. The determination of expected net cash flows is considered a significant unobservable input contributing to the Level 3 classification of commitments to originate real estate loans for sale.

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●

Forward sales commitments – The Company enters into forward sales commitments to sell certain residential real estate loans. Such commitments are considered to be derivative financial instruments and, therefore, are carried at estimated fair value in the other asset or other liability section of the consolidated statements of condition. The fair value of these forward sales commitments is primarily measured by obtaining pricing from certain government-sponsored entities and reflects the underlying price the entity would pay the Company for an immediate sale on these mortgages. As such, these instruments are classified as Level 2 in the fair value hierarchy.

●

Interest rate swaps – The interest rate swaps are reported at their fair value utilizing Level 2 inputs from a third-party provider. The fair value measurement of the interest rate swap is determined by calculating the difference between the discounted fixed rate cash flows and the discounted variable rate cash flows. Variable cash flows are based on the expectation of future interest rates derived from observed market interest rate curves.

The changes in Level 3 assets measured at fair value on a recurring basis are immaterial.

The fair value information of assets and liabilities measured on a non-recurring basis presented below is not as of the period-end, but rather as of the date the fair value adjustment was recorded closest to the date presented.


	June 30, 2026								December 31, 2025
							Total Fair								Total Fair
(000's omitted)	Level 1		Level 2		Level 3		Value		Level 1		Level 2		Level 3		Value
Individually assessed loans	$	0	$	0	$	2,402	$	2,402	$	0	$	0	$	14,361	$	14,361
Other real estate owned		0		0		5,354		5,354		0		0		5,778		5,778
Mortgage servicing rights		0		0		908		908		0		0		853		853
Contingent consideration		0		0		(7,345)		(7,345)		0		0		(9,220)		(9,220)
Total	$	0	$	0	$	1,319	$	1,319	$	0	$	0	$	11,772	$	11,772

Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans calculated when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using independent appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace, adjusted for non-observable inputs. Thus, the resulting nonrecurring fair value measurements are generally classified as Level 3. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and, therefore, such valuations classify as Level 3.

Other real estate owned (“OREO”) is valued at the time the loan is foreclosed upon and the asset is transferred to OREO. The value is based primarily on third-party appraisals, less estimated costs to sell, and may be further discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the customer and customer’s business. Such non-observable assumptions result in a Level 3 classification of the inputs for determining fair value. The carrying value of OREO may be limited by the contractual balance of the related former loan and when this occurs OREO is not considered to be carried at fair value or included in the fair value hierarchy disclosures. OREO is reviewed and evaluated on at least an annual basis for additional impairment and adjusted accordingly, based on the same factors identified above. The Company recovers the carrying value of OREO through the sale of the property. The ability to affect future sales prices is subject to market conditions and factors beyond the Company’s control and may impact the estimated fair value of a property.

Originated mortgage servicing rights are recorded at their fair value at the time of sale of the underlying loan, and are amortized in proportion to and over the estimated period of net servicing income. The fair value of mortgage servicing rights is based on a valuation model incorporating inputs that market participants would use in estimating future net servicing income. Such inputs include estimates of the cost of servicing loans, appropriate discount rate and prepayment speeds and are considered to be unobservable and contribute to the Level 3 classification of mortgage servicing rights. In accordance with GAAP, the Company records impairment charges, on a nonrecurring basis, when the carrying value of a stratum exceeds its estimated fair value. Impairment is recognized through a valuation allowance. There was a valuation allowance of approximately $0.3 million at June 30, 2026 and December 31, 2025.

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The Company has recorded contingent consideration liabilities that arise from acquisition activity. The contingent consideration is recorded at fair value at the date of acquisition. The valuation of contingent consideration is calculated using an income approach method, which provides an estimation of the fair value of an asset or liability based on future cash flows over a discrete projection period, discounted to present value using an appropriate rate of return. The assumptions used in the valuation calculation are based on significant unobservable inputs, therefore such valuations classify as Level 3.

During 2025, the Company made the final required payment for the Creative Plan Designs Limited (“CPD”) contract holdback contingent consideration of $0.1 million, the first required payment for the CPD revenue-based contingent consideration arrangement of $0.6 million, and aggregate payments of $1.0 million for contingent consideration arrangements related to OneGroup acquisitions in 2023 and 2024 and BPA acquisitions made in 2025.

During the first six months of 2026, the Company made aggregate payments of $3.4 million for contingent consideration arrangements related to prior period OneGroup, BPAS, and NISI acquisitions.

The Company evaluates goodwill for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. The Company did not recognize an impairment charge during the three and six months ended June 30, 2026 and 2025. See Note F for more detail.

The Company determines fair values based on quoted market values, where available, estimates of present values, or other valuation techniques. Those techniques are significantly affected by the assumptions used, including, but not limited to, the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in immediate settlement of the instrument. The significant unobservable inputs used in the determination of fair value of assets classified as Level 3 on a recurring or non-recurring basis are as follows:


					Significant Unobservable
	Fair Value at				Input Range
(000's omitted, except per loan data)	June 30, 2026		Valuation Technique	Significant Unobservable Inputs	(Weighted Average)
Individually assessed loans	$	2,402	Fair value of collateral	Estimated cost of disposal/market adjustment	23.3% - 89.0% (33.8%)
Other real estate owned		5,354	Fair value of collateral	Estimated cost of disposal/market adjustment	27.2	%
Commitments to originate real estate loans for sale		391	Discounted cash flow	Embedded servicing value	1.0	%
Mortgage servicing rights		908	Discounted cash flow	Weighted average constant prepayment rate	23.8% - 24.7% (24.6%)
				Weighted average discount rate	5.2% - 5.7% (5.6%)
Contingent consideration		(7,345)	Discounted cash flow	Discount rate	11.9% - 18.4% (13.0%)
				Probability of achievement	30.0% - 82.0% (57.0%)


					Significant Unobservable
	Fair Value at				Input Range
(000's omitted, except per loan data)	December 31, 2025		Valuation Technique	Significant Unobservable Inputs	(Weighted Average)
Individually assessed loans	$	14,361	Fair value of collateral	Estimated cost of disposal/market adjustment	27.2	%
Other real estate owned		5,778	Fair value of collateral	Estimated cost of disposal/market adjustment	9.0% - 27.2% (26.8%)
Commitments to originate real estate loans for sale		154	Discounted cash flow	Embedded servicing value	1.0	%
Mortgage servicing rights		853	Discounted cash flow	Weighted average constant prepayment rate	22.6% - 25.5% (22.8%)
				Weighted average discount rate	4.9% - 5.5% (5.5%)
Contingent consideration		(9,220)	Discounted cash flow	Discount rate	12.2% - 18.4% (13.6%)
				Probability of achievement	30.0% - 82.0% (65.6%)

The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that, if changed, could result in higher or lower fair value measurements of these assets as of the reporting date. The weighted average of the estimated cost of disposal/market adjustment for individually assessed loans was calculated by dividing the total of the book value of the collateral of the individually assessed loans classified as Level 3 by the total of the fair value of the collateral of the individually assessed loans classified as Level 3. The weighted average of the estimated cost of disposal/market adjustment for other real estate owned was calculated by dividing the total of the differences between the appraisal values of the real estate and the book values of the real estate by the totals of the appraisal values of the real estate. The weighted average of the constant prepayment rate for mortgage servicing rights was calculated by adding the constant prepayment rates used in each loan pool weighted by the balance in each loan pool. The weighted average of the discount rate for mortgage servicing rights was calculated by adding the discount rates used in each loan pool weighted by the balance in each loan pool. The weighted average of the discount rate for the contingent consideration was calculated by adding the discount rates used for the calculation of the fair value of each payment of contingent consideration, weighted by the amount of the payment as part of the total fair value of contingent consideration. The weighted average of the probability of achievement was determined by calculating the proportion of the probability-weighted payment of the total maximum payment, weighted by the amount of the payment as part of the total fair value of contingent consideration.

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Certain financial instruments and all nonfinancial instruments are excluded from fair value disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The carrying amounts and estimated fair values of the Company’s other financial instruments that are not accounted for at fair value at June 30, 2026 and December 31, 2025 are presented below. The table presented below excludes other financial instruments for which the carrying value approximates fair value including cash and cash equivalents, accrued interest receivable and accrued interest payable.


	June 30, 2026				December 31, 2025
	Carrying		Fair		Carrying		Fair
(000’s omitted)	Value		Value		Value		Value
Financial assets:
Net loans	$	11,191,128	$	10,995,577	$	10,861,836	$	10,745,154
Held-to-maturity securities		1,478,386		1,372,481		1,454,166		1,370,464
Other investment securities		5,194		5,194		0		0
Financial liabilities:
Deposits		14,710,409		14,699,447		14,387,085		14,377,084
Securities sold under agreement to repurchase, short-term		157,577		157,577		231,163		231,163
Other Federal Home Loan Bank borrowings		425,576		427,624		450,439		456,821

The following is a further description of the principal valuation methods used by the Company to estimate the fair values of its financial instruments.

Loans have been classified as a Level 3 valuation. Fair values for variable rate loans that reprice frequently are based on carrying values. Fair values for fixed rate loans are estimated using discounted cash flows and interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

The fair values of held-to-maturity U.S. Treasury investment securities are based upon quoted prices, if available. If quoted prices are not available, fair values are measured using quoted market prices for similar securities or model-based valuation techniques. Held-to-maturity U.S. Treasury securities have been classified as a Level 1 valuation. Held-to-maturity government agency mortgage-backed securities have been classified as a Level 2 valuation. The fair values of held-to-maturity government agency mortgage-backed securities are based on current market rates for similar products.

Deposits have been classified as a Level 2 valuation. The fair value of demand deposits, interest-bearing checking deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date. The fair value of time deposit obligations are based on current market rates for similar securities.

Borrowings have been classified as a Level 2 valuation. The fair value of overnight borrowings and securities sold under agreement to repurchase, short-term, is the amount payable on demand at the reporting date. Fair values for other FHLB borrowings are estimated using discounted cash flows and interest rates currently being offered on similar securities.

Other financial assets and liabilities: cash and cash equivalents have been classified as a Level 1 valuation, while accrued interest receivable and accrued interest payable have been classified as a Level 2 valuation. The fair values of each approximate the respective carrying values because the instruments are payable on demand or have short-term maturities and present relatively low credit risk and interest rate risk.

NOTE J: DERIVATIVE INSTRUMENTS

The Company is party to derivative financial instruments in the normal course of business to meet the financing needs of its customers and to manage its exposure to fluctuation in interest rates and credit risk. These financial instruments have been limited to interest rate swap agreements and risk participation agreements. The Company does not hold or issue derivative financial instruments for trading or other speculative purposes.

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Interest Rate Swaps

The Company enters into certain interest rate swaps to hedge the exposure to variability in forecasted cash flows from floating-rate loans. These swaps are considered derivatives and are designated as cash flow hedges. Interest rate swaps are recorded within other assets or accrued interest and other liabilities in the consolidated statements of condition at their estimated fair value. For qualifying cash flow hedges, changes in the fair value of the derivatives are recorded in other comprehensive income and recognized in the consolidated statements of income as the hedged item affects net income. Derivative amounts affecting net income are recognized in the consolidated statements of income consistent with the classification of the hedged item in net interest income. If the hedge relationship is terminated, then the change in value of the derivative recorded in accumulated other comprehensive loss is recognized in net income when the cash flows that were hedged affect net income. For hedge relationships that are discontinued because a forecasted transaction is expected to not occur according to the original hedge forecast, any related derivative values recorded in accumulated other comprehensive loss are immediately recognized in net income. There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for the periods presented.

The Company enters into certain interest rate swaps to assist customers in managing their interest rate risk. These swaps are considered derivatives, but are not designated as hedging relationships. These instruments have associated interest rate and credit risk. To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties, which are also considered derivatives and are not designated as hedging relationships. Interest rate swaps are recorded within other assets or accrued interest and other liabilities on the consolidated statements of condition at their estimated fair value. The terms of the interest rate swaps with the customer and the counterparties offset each other, with the only difference being counterparty credit risk. Any changes in the fair value of the underlying derivative contracts are reported in other banking services noninterest revenue in the consolidated statements of income.

Risk Participation Agreements

The Company may enter into a risk participation agreement (“RPA”) with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed, referred to as an “RPA sold”. In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Company has provided a loan structured with a derivative, the Company may purchase an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared, referred to as an “RPA purchased”.

Forward Sales Commitments

The Company enters into forward sales commitments for the future delivery of residential mortgage loans, and interest rate lock commitments to fund loans at a specified interest rate. The forward sales commitments are utilized to reduce interest rate risk associated with interest rate lock commitments and loans held for sale. Changes in the estimated fair value of the forward sales commitments and interest rate lock commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. At inception and during the life of the interest rate lock commitment, the Company includes the expected net future cash flows related to the associated servicing of the loan as part of the fair value measurement of the interest rate lock commitments.

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Notional values and fair values of derivative instruments as of June 30, 2026 and December 31, 2025 are as follows:


	June 30, 2026
	Derivative Assets					Derivative Liabilities
			Consolidated					Consolidated
	Notional		Statement of	Fair		Notional		Statement of	Fair
(000’s omitted)	Amount		Condition Location	Value		Amount		Condition Location	Value
Derivatives designated as hedging instruments under Subtopic 815-20:
Interest rate swaps	$	0	Other assets	$	0	$	375,000	Accrued interest and other liabilities	$	3,917

Derivatives not designated as hedging instruments under Subtopic 815-20:
Commitments to originate real estate loans for sale		15,452	Other assets		391		0	Accrued interest and other liabilities		0
Interest rate swaps		562,912	Other assets		4,137		562,912	Accrued interest and other liabilities		4,137
RPA sold		0	Other assets		0		121,728	Accrued interest and other liabilities		0
RPA purchased		70,364	Other assets		0		0	Accrued interest and other liabilities		0
Subtotal		648,728			4,528		684,640			4,137

Total derivatives	$	648,728		$	4,528	$	1,059,640		$	8,054


	December 31, 2025
	Derivative Assets					Derivative Liabilities
			Consolidated					Consolidated
	Notional		Statement of	Fair		Notional		Statement of	Fair
(000’s omitted)	Amount		Condition Location	Value		Amount		Condition Location	Value
Derivatives not designated as hedging instruments under Subtopic 815-20:
Commitments to originate real estate loans for sale	$	5,631	Other assets	$	154	$	0	Accrued interest and other liabilities	$	0
Forward sales commitments		763	Other assets		15		0	Accrued interest and other liabilities		0
Interest rate swaps		459,251	Other assets		7,524		459,251	Accrued interest and other liabilities		7,524
RPA sold		0	Other assets		0		83,843	Accrued interest and other liabilities		0
RPA purchased		73,976	Other assets		0		0	Accrued interest and other liabilities		0
Total derivatives	$	539,621		$	7,693	$	543,094		$	7,524

The notional amount for interest rate swaps represents the underlying principal amount used to calculate interest payments that are exchanged periodically. The notional amount for risk participation agreements represents the amount of exposure assumed or shared in case of borrower default. The notional amount for commitments to originate real estate loans for sale represents the unpaid principal amount of loans that have been committed to originate.

The following table presents derivative instruments, by contract type, used in cash flow hedge accounting relationships, and the amounts reclassified from AOCI to income and amounts recorded in other comprehensive income (“OCI”) for the three and six months ended June 30, 2026.


	Three Months Ended June 30, 2026
		Amounts reclassified		Amounts recorded		Total change in
(000’s omitted)		from AOCI to income		in OCI		OCI for period
Contract type
Interest rate⁽¹⁾	$	(175)	$	(2,719)	$	(2,544)

(1)	Gains and losses on cash flow hedging relationships are recorded in interest income.

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	Six Months Ended June 30, 2026
		Amounts reclassified		Amounts recorded		Total change in
(000’s omitted)		from AOCI to income		in OCI		OCI for period
Contract type
Interest rate⁽¹⁾	$	(227)	$	(4,111)	$	(3,884)

(1)	Gains and losses on cash flow hedging relationships are recorded in interest income.

Over the next 12 months, the Company expects that approximately $1.2 million of after-tax net loss recorded in accumulated other comprehensive loss at June 30, 2026 related to cash flow hedges will be recognized in net income. No cash flow hedges have been terminated.

Fee income earned on interest rate swaps and risk participation agreements is recognized in other banking services noninterest revenues in the consolidated statements of income during the period the derivative instrument is executed. During the three and six months ended June 30, 2026, the Company recognized $0.2 million and $1.2 million, respectively, of fee income associated with interest rate swaps and RPAs and $0.6 million and $0.9 million during the three and six months ended June 30, 2025, respectively.

Cash collateral is posted by the Company with counterparties to secure certain derivatives, which is restricted cash and is included in cash and cash equivalents on the consolidated statements of condition. The amount of such collateral was $14.8 million at June 30, 2026 and December 31, 2025. At June 30, 2026, U.S. Treasury securities with a carrying value of $9.1 million were also pledged with counterparties to secure certain derivatives, which is included in held-to-maturity securities on the consolidated statements of condition.

The Company assessed its counterparty risk at June 30, 2026 and determined any credit risk inherent in the derivative contracts was not material. Further information about the fair value of derivative financial instruments can be found in Note I to these consolidated financial statements.

NOTE K: SEGMENT INFORMATION

Operating segments are components of an enterprise, which are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM is the President and Chief Executive Officer of the Company. The Company has identified (1) Banking and Corporate, (2) Employee Benefit Services, (3) Insurance Services, and (4) Wealth Management Services as its reportable segments and determined that segment adjusted income before income taxes is the reported measure of segment profit or loss. See “Note A Summary of Significant Accounting Policies” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC on February 27, 2026, for further detail on the factors used to identify the Company’s reportable segments and reported measure of segment profit or loss.

CBNA operates the Banking and Corporate segment that provides a wide array of lending and depository-related products and services to individuals, businesses, and governmental units with branch locations in Upstate New York as well as Northeastern Pennsylvania, Vermont, Western Massachusetts and Southern New Hampshire. In addition to these general intermediation services, the Banking and Corporate segment provides treasury management solutions and payment processing services. The Banking and Corporate segment also includes certain corporate overhead-related expenses.

The Employee Benefit Services segment, which includes the operating subsidiaries of BPA, BPAS Actuarial & Pension Services, LLC, BPAS Trust Company of Puerto Rico, Northeast Retirement Services, LLC, Global Trust Company, Inc., Hand Benefits & Trust Company and Hand Securities Inc., provides employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, health and welfare consulting services and introducing broker-dealer services.

The Insurance Services segment includes the operating subsidiary OneGroup, a full-service insurance agency offering personal and commercial lines of insurance and other risk management products and services, as well as the Company’s equity method investment in Leap Holdings, Inc., a Delaware corporation (“Leap”).

The Wealth Management Services segment is comprised of wealth management services including trust services provided by the Nottingham Trust and ClearPoint Trust divisions within the Bank, broker-dealer and investment advisory services provided by NISI and Nottingham Wealth Partners, Inc., as well as asset management services provided by Nottingham Advisors, Inc.

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The accounting policies used in the disclosure of business segments are the same as those described in “Note A Summary of Significant Accounting Policies” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC on February 27, 2026, except as follows. Segment operating revenues exclude certain items considered non-core to the operating performance of the business including realized and unrealized gains or losses on investment securities. Significant segment expenses are the expense categories significant to the segment, regularly provided to or easily computed from information regularly provided to the CODM and included in segment adjusted income before income taxes. Segment adjusted income before income taxes also excludes certain items considered non-core to the operating performance of the business including amortization of intangible assets, acquisition expenses and litigation accrual. Both segment operating revenues and significant segment expenses include certain intersegment activity associated with transactions between the segments and are eliminated in consolidation. Segment assets include certain segment cash balances held as deposits with CBNA and are eliminated in consolidation.

The CODM uses segment adjusted income before income taxes to measure performance and allocate resources, including employees, property and financial or capital resources, for all of the Company’s segments. The CODM considers current period actual-to-current period budget and current period actual-to-prior period actual variances on a monthly basis for each of the Company’s segments along with comparisons of the actual segment results with one another. Segment adjusted income before income taxes is also used as a factor in the determination of incentive compensation for key employees of the segments including the segment leaders.

There are no transactions with a single customer that result in revenues that exceed 10 percent of consolidated total revenues.

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Information about reportable segments and reconciliation of the information to the consolidated financial statements follows:


			Employee				Wealth
	Banking and		Benefit		Insurance		Management
(000’s omitted)	Corporate		Services		Services		Services		Total
Three Months Ended June 30, 2026
Net interest income (expense) from external customers	$	139,089	$	139	$	0	$	(84)	$	139,144
Noninterest revenues from external customers		21,239		34,885		13,195		10,445		79,764
Revenues from external customers		160,328		35,024		13,195		10,361		218,908
Equity in net loss of investees accounted for by the equity method		0		0		(463)		0		(463)
Intersegment revenues		(902)		1,336		79		857		1,370
		159,426		36,360		12,811		11,218		219,815

Reconciliation of revenues (segment operating revenues):
Elimination of intersegment revenues										(1,370)
Other revenues ^(a)										4,710
Total consolidated revenues									$	223,155

Less segment expenses: ^(b)
Provision for credit losses		4,607		0		0		0
Salaries and employee benefits		52,003		16,182		8,638		6,439
Data processing and communications		16,640		1,254		947		845
Occupancy and equipment		12,383		987		412		129
Legal and professional fees		2,513		1,812		88		88
Business development and marketing		2,036		159		272		89
Other segment items ^(c)		7,556		2,125		449		186
Segment adjusted income before income taxes	$	61,688	$	13,841	$	2,005	$	3,442	$	80,976

Reconciliation of profit or loss (segment adjusted income before income taxes):
Gain on equity securities										4,710
Amortization of intangible assets										(4,408)
Litigation accrual										(335)
Acquisition-related contingent consideration adjustments										103
Acquisition expenses										(231)
Total consolidated income before income taxes									$	80,815

Other segment disclosures:
Interest income	$	184,178	$	831	$	54	$	481	$	185,544

Reconciliation of interest income:
Elimination of intersegment interest income										(1,192)
Total consolidated interest income									$	184,352

Interest expense	$	46,280	$	0	$	0	$	120	$	46,400

Reconciliation of interest expense:
Elimination of intersegment interest expense										(1,192)
Total consolidated interest expense									$	45,208

Depreciation ^(d)	$	5,707	$	235	$	85	$	59	$	6,086
Amortization of intangible assets		1,057		1,827		1,191		333		4,408
Goodwill		764,714		91,046		30,816		14,074		900,650
Core deposit intangibles, net		12,689		0		0		3,043		15,732
Other intangibles, net		435		16,445		21,167		9,265		47,312
Segment assets		17,436,748		228,872		114,278		204,383		17,984,281

Reconciliation of segment assets:
Elimination of intersegment cash and deposits										(220,511)
Total consolidated assets									$	17,763,770

^(a)Other revenues includes $4,710 of gain on equity securities.

^(b)	The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.

^(c)Other segment items for each reportable segment includes:

Banking and Corporate – FDIC insurance expense, office supplies and postage expense, fraud losses and other writedowns, education, recruiting and travel expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

Employee Benefit Services – Certain intersegment technology and rent related overhead expense allocations, education, recruiting and travel expense, office supplies and postage expense and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

Insurance Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

Wealth Management Services – Education, recruiting and travel expense, certain intersegment technology and rent related overhead expense allocations and various miscellaneous expenses partially offset by a benefit related to the non-service related components of the Company's pension.

^(d)The amount of depreciation disclosed by reportable segment is included within the data processing and communications and occupancy and equipment expense captions.

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			Employee				Wealth
	Banking and		Benefit		Insurance		Management
(000’s omitted)	Corporate		Services		Services		Services		Total
Three Months Ended June 30, 2025
Net interest income from external customers	$	124,615	$	133	$	0	$	0	$	124,748
Noninterest revenues from external customers		19,728		32,681		13,388		8,712		74,509
Revenues from external customers		144,343		32,814		13,388		8,712		199,257
Intersegment revenues		(421)		1,078		76		507		1,240
		143,922		33,892		13,464		9,219		200,497

Reconciliation of revenues (segment operating revenues):
Elimination of intersegment revenues										(1,240)
Other revenues ^(a)										(1)
Total consolidated revenues									$	199,256

Less segment expenses: ^(b)
Provision for credit losses		4,117		0		0		0
Salaries and employee benefits		48,647		16,574		8,884		5,699
Data processing and communications		13,953		1,196		855		694
Occupancy and equipment		10,107		881		391		133
Legal and professional fees		2,600		1,570		179		202
Business development and marketing		3,644		71		260		27
Other segment items ^(c)		6,362		1,689		648		115
Segment adjusted income before income taxes	$	54,492	$	11,911	$	2,247	$	2,349	$	70,999

Reconciliation of profit or loss (segment adjusted income before income taxes):
Loss on equity securities										(1)
Amortization of intangible assets										(3,369)
Restructuring expenses										(1,525)
Acquisition expenses										(67)
Total consolidated income before income taxes									$	66,037

Other segment disclosures:
Interest income	$	172,745	$	595	$	50	$	130	$	173,520

Reconciliation of interest income:
Elimination of intersegment interest income										(642)
Total consolidated interest income									$	172,878

Interest expense	$	48,772	$	0	$	0	$	0	$	48,772

Reconciliation of interest expense:
Elimination of intersegment interest expense										(642)
Total consolidated interest expense									$	48,130

Depreciation ^(d)	$	3,328	$	176	$	102	$	51	$	3,657
Amortization of intangible assets		585		1,774		883		127		3,369
Goodwill		732,598		90,959		27,822		3,438		854,817
Core deposit intangibles, net		3,963		0		0		0		3,963
Other intangibles, net		621		21,992		16,082		906		39,601
Segment assets		16,429,774		223,464		72,623		39,132		16,764,993

Reconciliation of segment assets:
Elimination of intersegment cash and deposits										(99,975)
Total consolidated assets									$	16,665,018

^(a)Other revenues includes $1 of loss on equity securities.

^(b)	The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.

^(c)Other segment items for each reportable segment includes:

^(d)The amount of depreciation disclosed by reportable segment is included within the data processing and communications and occupancy and equipment expense captions.

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			Employee				Wealth
	Banking and		Benefit		Insurance		Management
(000’s omitted)	Corporate		Services		Services		Services		Total
Six Months Ended June 30, 2026
Net interest income (expense) from external customers	$	273,668	$	272	$	0	$	(84)	$	273,856
Noninterest revenues from external customers		42,991		69,476		25,781		20,817		159,065
Revenues from external customers		316,659		69,748		25,781		20,733		432,921
Equity in net loss of investees accounted for by the equity method		0		0		(789)		0		(789)
Intersegment revenues		(1,702)		2,923		150		1,548		2,919
		314,957		72,671		25,142		22,281		435,051

Reconciliation of revenues (segment operating revenues):
Elimination of intersegment revenues										(2,919)
Other revenues ^(a)										4,309
Total consolidated revenues									$	436,441

Less segment expenses: ^(b)
Provision for credit losses		10,243		0		0		0
Salaries and employee benefits		102,133		32,828		17,220		12,360
Data processing and communications		31,588		2,471		1,918		1,580
Occupancy and equipment		25,675		2,016		854		273
Legal and professional fees		5,509		3,882		167		312
Business development and marketing		4,259		263		412		157
Other segment items ^(c)		14,251		3,043		717		250
Segment adjusted income before income taxes	$	121,299	$	28,168	$	3,854	$	7,349	$	160,670

Reconciliation of profit or loss (segment adjusted income before income taxes):
Gain on equity securities										4,309
Amortization of intangible assets										(8,654)
Litigation accrual										(335)
Acquisition-related contingent consideration adjustments										103
Acquisition expenses										(664)
Total consolidated income before income taxes									$	155,429

Other segment disclosures:
Interest income	$	364,031	$	1,777	$	99	$	652	$	366,559

Reconciliation of interest income:
Elimination of intersegment interest income										(2,220)
Total consolidated interest income									$	364,339

Interest expense	$	92,583	$	0	$	0	$	120	$	92,703

Reconciliation of interest expense:
Elimination of intersegment interest expense										(2,220)
Total consolidated interest expense									$	90,483

Depreciation ^(d)	$	10,629	$	435	$	173	$	104	$	11,341
Amortization of intangible assets		2,152		3,661		2,379		462		8,654

^(a)Other revenues includes $4,309 of gain on equity securities.

^(b)	The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.

^(c)Other segment items for each reportable segment includes:

^(d)The amount of depreciation disclosed by reportable segment is included within the data processing and communications and occupancy and equipment expense captions.

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			Employee				Wealth
	Banking and		Benefit		Insurance		Management
(000’s omitted)	Corporate		Services		Services		Services		Total
Six Months Ended June 30, 2025
Net interest income from external customers	$	244,702	$	258	$	0	$	0	$	244,960
Noninterest revenues from external customers		38,544		65,565		27,589		18,602		150,300
Revenues from external customers		283,246		65,823		27,589		18,602		395,260
Intersegment revenues		(852)		2,185		145		1,103		2,581
		282,394		68,008		27,734		19,705		397,841

Reconciliation of revenues (segment operating revenues):
Elimination of intersegment revenues										(2,581)
Other revenues ^(a)										244
Total consolidated revenues									$	395,504

Less segment expenses: ^(b)
Provision for credit losses		10,807		0		0		0
Salaries and employee benefits		95,772		32,629		17,231		11,429
Data processing and communications		27,440		2,279		1,728		1,373
Occupancy and equipment		21,292		1,837		832		275
Legal and professional fees		6,070		2,996		279		310
Business development and marketing		6,567		87		446		31
Other segment items ^(c)		13,681		2,829		863		303
Segment adjusted income before income taxes	$	100,765	$	25,351	$	6,355	$	5,984	$	138,455

Reconciliation of profit or loss (segment adjusted income before income taxes):
Gain on equity securities										244
Amortization of intangible assets										(6,851)
Restructuring expenses										(1,525)
Acquisition expenses										(68)
Litigation accrual										50
Total consolidated income before income taxes									$	130,305

Other segment disclosures:
Interest income	$	340,267	$	1,196	$	94	$	258	$	341,815

Reconciliation of interest income:
Elimination of intersegment interest income										(1,290)
Total consolidated interest income									$	340,525

Interest expense	$	96,855	$	0	$	0	$	0	$	96,855

Reconciliation of interest expense:
Elimination of intersegment interest expense										(1,290)
Total consolidated interest expense									$	95,565

Depreciation ^(d)	$	6,628	$	364	$	208	$	101	$	7,301
Amortization of intangible assets		1,288		3,491		1,807		265		6,851

^(a)Other revenues includes $244 of gain on equity securities.

^(b)	The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.

^(c)Other segment items for each reportable segment includes:

^(d)The amount of depreciation disclosed by reportable segment is included within the data processing and communications and occupancy and equipment expense captions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) primarily reviews the financial condition and results of operations of Community Financial System, Inc. (the “Company” or “CFSI”) as of and for the three and six months ended June 30, 2026 and 2025, although in some circumstances the first quarter of 2026 is also discussed in order to more fully explain recent trends. The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and related notes that appear on pages 3 through 40. All references in the discussion of the financial condition and results of operations refer to the consolidated position and results of the Company and its subsidiaries taken as a whole. Unless otherwise noted, the term “this year” and equivalent terms refers to results in calendar year 2026, “last year” and equivalent terms refer to calendar year 2025, “second quarter” refers to the three months ended June 30, 2026, “YTD” refers to the six months ended June 30, 2026 and earnings per share (“EPS”) figures refer to diluted EPS.

This MD&A contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are set herein under the caption “Forward-Looking Statements” on page 65.

Critical Accounting Policies and Estimates

As a result of the complex and dynamic nature of the Company’s business, management must exercise judgment in selecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with current accounting principles generally accepted in the United States of America (“GAAP”) but also reflects management’s discretion with regard to choosing the most suitable methodology for reporting the Company’s financial performance. It is management’s opinion that the accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates affect the reported amounts of assets and liabilities as well as disclosures of revenues and expenses during the reporting period. Actual results could meaningfully differ from these estimates. Management considers its critical accounting estimates those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s financial condition or results of operations. Management believes that the critical accounting estimates include the allowance for credit losses; actuarial assumptions associated with the pension, post-retirement and other employee benefit plans; and the carrying value of goodwill and other intangible assets. A summary of the critical accounting policies and estimates used by management is disclosed in the MD&A on pages 38-40 of the most recent Form 10-K (fiscal year ended December 31, 2025) filed with the Securities and Exchange Commission (“SEC”) on February 27, 2026. There have been no material changes other than those described below regarding the Allowance for Credit Losses. A summary of new accounting policies used by management is disclosed in Note C, “Accounting Policies” on page 12 of this Form 10-Q.

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Allowance for Credit Losses

The allowance for credit losses (“ACL”) represents management’s judgment of an estimated amount of lifetime losses on outstanding loans at the balance sheet date. This is estimated using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The determination of the appropriateness of the ACL is complex and applies significant and highly subjective estimates. The ACL is measured on a collective (pooled) basis for loan segments that share similar risk characteristics, including collateral type, credit ratings/scores, size, duration, interest rate structure, origination vintage and payment structure. The Company utilizes three methods for calculating the ACL: cumulative loss, vintage loss and line loss. Historical credit loss experience provides the basis for the estimation of expected future credit losses in all three methodologies. Qualitative adjustments are made for differences in portfolio risk characteristics such as differences in underwriting standards, portfolio mix, acquisition status, current levels of delinquencies, net charge-offs and risk ratings, as well as actual and forecasted macroeconomic variables. Macroeconomic data includes unemployment rates, changes in collateral values such as home prices, commercial real estate prices including office property-specific price forecasts, office property-specific vacancy rates, automobile prices, gross domestic product, and median household income net of inflation. Management utilizes judgment in determining and applying the qualitative factors and weighting the economic scenarios used, which include baseline, upside and downside forecasts. During the first quarter of 2026, the Company updated the ACL model to add 2025 data into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures. With the update, the quantitative reserve in the first quarter of 2026 now includes loss history for business loans that previously was not captured in the historical quantitative loss data and was instead addressed through the use of qualitative overlays. As a result, the Company decreased the additional qualitative reserve for business loans related to size and volume of the loans in that portfolio during the first quarter of 2026 and again in the second quarter of 2026, as other components of the model were determined to have adequately captured the risk associated with these loans. The decreases in the business lending qualitative factor decreased the ACL by $7.5 million as compared to the prior factor in use at December 31, 2025. The update to the historical quantitative loss data increased the ACL by $3.5 million as compared to the quantitative loss rates in use at December 31, 2025.

One of the most significant estimates and judgments influencing the results of the ACL calculation is the macroeconomic forecasts. Changes in these economic forecasts could significantly affect the estimated expected credit losses and lead to materially different amounts from one period to the next. To illustrate the sensitivity of the ACL calculation to these economic forecasts, management performed a hypothetical sensitivity analysis using a weighting of 100% to the downside forecast, rather than the existing weighting of baseline, upside and downside of 40%, 20% and 40%, respectively. The scenario-weighted average unemployment rate and GDP growth forecasts used in the ACL model at June 30, 2026 were 5.4% and 1.3%, respectively, compared to 5.5% and 1.3%, respectively, at December 31, 2025. The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, rising energy prices, a peak unemployment rate of 8.5% and an average unemployment rate of 7.1%. The Company calculated that this hypothetical scenario would increase the ACL and provision for credit losses as of and for the three and six months ended June 30, 2026 by approximately $4.5 million, and decrease net income by $3.4 million (net of tax). This change is reflective of the sensitivity of the various economic factors used in the ACL model. The resulting difference is not intended to represent an expected increase in allowance levels, as future conditions are uncertain and there are several other quantitative and qualitative factors that will also fluctuate at the same time that economic conditions are changing, which would affect the results of the ACL calculation. The impact that the economic factors have on the model is affected by the upside or downside severity of the scenarios used, the product type mix, and the interaction of the economic factors with other quantitative and qualitative factors in the model, as changes in any particular factor or input may not occur at the same rate or be directionally consistent across all loan segments. Improvements in one factor may offset deterioration in other factors, both qualitative and quantitative. The third-party downside economic forecast used in the hypothetical scenario described does not predict a severe economic downturn, but rather a moderate recessionary environment. The Company’s geographic distribution of loans being primarily outside of major metropolitan areas, combined with low statistical correlation between its historical losses and national economic indicators, is reflected in the current methodology that would produce changes to the allowance that are less significant as compared to economic metric-based modeling that is more directly correlated, and therefore sensitive, to fluctuations in historical and projected national economic activity.

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Supplemental Reporting of Non-GAAP Results of Operations

The Company also provides supplemental reporting of its results on an “operating” or “tangible” basis. Results on an “operating” basis exclude the after-tax effects of acquisition expenses, acquisition-related contingent consideration adjustments, litigation accrual, gain (loss) on equity securities, restructuring expenses and amortization of intangible assets. Results on a “tangible” basis exclude goodwill and intangible asset balances, net of accumulated amortization and applicable deferred tax amounts. Although these items are non-GAAP measures, the Company’s management believes this information helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisition or restructuring activities. In addition, the Company provides supplemental reporting for “operating pre-tax, pre-provision net revenues,” which excludes the provision for credit losses, acquisition expenses, acquisition-related contingent consideration adjustments, litigation accrual, gain (loss) on equity securities, restructuring expenses and amortization of intangible assets from income before income taxes. Although operating pre-tax, pre-provision net revenue is a non-GAAP measure, the Company’s management believes this information helps investors and analysts measure and compare the Company’s performance through a credit cycle by excluding the volatility in the provision for credit losses associated with Current Expected Credit Loss (“CECL”) allowance methods, helps investors and analysts measure underlying core performance and improves comparability to other organizations that have not engaged in acquisition or restructuring activities. The Company also provides supplemental reporting of its interest income, net interest income and net interest margin on a fully tax-equivalent (“FTE”) basis, which includes an adjustment to interest income and net interest income that represents taxes that would have been paid had nontaxable investment securities and loans been taxable. Although fully tax-equivalent interest income, net interest income and net interest margin are non-GAAP measures, the Company’s management believes this information helps enhance comparability of the performance of earning assets that have different tax profiles. Reconciliations of GAAP amounts with corresponding non-GAAP amounts are presented in Table 14.

Executive Summary

The Company’s business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services, including employee benefit services, insurance services, and wealth management services, to retail, commercial, institutional, and governmental customers. The Company’s banking subsidiary is Community Bank, N.A. (the “Bank” or “CBNA”). The Company’s Benefit Plans Administrative Services, Inc. (“BPAS”) subsidiary is a leading provider of employee benefits administration, trust services, collective investment fund administration, and actuarial consulting services to customers on a national scale. In addition, the Company offers comprehensive financial planning, trust administration and wealth management services through its Nottingham Financial Group operating unit and insurance services through its OneGroup NY, Inc. (“OneGroup”) subsidiary.

The Company’s core operating objectives are: (i) maintain diverse revenue streams to achieve positive operating results in all four of the Company’s business units: banking and corporate, employee benefit services, insurance services, and wealth management services, (ii) increase the noninterest component of total revenues through both organic and acquisition strategies, (iii) optimize the branch network and digital banking delivery systems, primarily through disciplined acquisition strategies, de novo expansions and divestitures/consolidations, (iv) build profitable loan and deposit bases using both organic and acquisition strategies, (v) utilize technology to deliver customer-responsive products and services and improve efficiencies, and (vi) manage an investment securities portfolio to complement the Company’s loan and deposit strategies and mitigate interest rate and liquidity risk and optimize net interest income generation.

Significant factors reviewed by management to evaluate achievement of the Company’s operating objectives, results and financial condition include, but are not limited to: net income and earnings per share; return on assets and equity; components of net interest margin; noninterest revenues; noninterest expenses; asset quality metrics; loan and deposit growth; capital management; performance of individual banking and financial services units; performance of specific product lines and customers; liquidity and interest rate sensitivity; enhancements to customer products and services and their underlying performance characteristics; technology advancements; market share; peer comparisons; the performance of recently acquired businesses and the performance of recently opened and consolidated branch offices.

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The Company reported net income of $61.3 million for the second quarter which increased $10.0 million, or 19.5%, from the prior year’s second quarter, while YTD net income of $118.6 million increased $17.6 million, or 17.4%, compared to the equivalent 2025 timeframe. Earnings per share of $1.16 for the second quarter increased $0.19, or 19.6%, from the second quarter of 2025, while YTD earnings per share of $2.24 increased $0.34, or 17.9%, from the 2025 YTD period. The increases in net income and earnings per share were primarily driven by increases in net interest income and noninterest revenues, partially offset by increases in noninterest expenses and income taxes.

Net interest income increased to $139.1 million in the second quarter, a $14.4 million, or 11.5%, increase from the prior year’s second quarter. YTD net interest income of $273.9 million increased $28.9 million, or 11.8%, from the prior YTD period. The increases were primarily due to lower funding costs, along with increases in the yield on average interest-earning assets and average loan balances. The provision for credit losses of $4.6 million in the second quarter increased $0.5 million, or 11.9%, from last year’s second quarter while the YTD provision for credit losses of $10.2 million decreased $0.6 million, or 5.2% from the 2025 YTD period, reflective of stability in the Company's asset quality metrics between the periods.

Noninterest revenues were $84.0 million in the second quarter, a $9.5 million, or 12.8%, increase from the second quarter of 2025. YTD noninterest revenues of $162.6 million increased $12.0 million, or 8.0%, from the 2025 YTD period. The increases in noninterest revenues were comprised of increases in banking, employee benefit services and wealth management services noninterest revenues, partially offset by a decrease in insurance services noninterest revenues that were impacted by a decrease in contingent commissions. Included in noninterest revenues, gain on equity securities increased $4.7 million on a quarterly basis and $4.1 million on a YTD basis driven by a $3.3 million gain associated with the sale of a limited partnership investment and a $0.9 million gain associated with the conversion of certain Visa Class B shares to Visa Class C shares.

Noninterest expenses were $137.7 million in the second quarter, an increase of $8.6 million, or 6.7%, from the prior year’s second quarter. YTD noninterest expenses of $270.8 million increased $16.4 million, or 6.4%, from the comparable 2025 YTD period. The increases in noninterest expenses were driven primarily by increases in salaries and employee benefits, data processing and communications expenses and occupancy and equipment. These increases were due in part to annual merit-based salary increases, the Company’s continued investment in customer-facing and back-office technologies and operating expenses associated with acquisitions completed and de novo branches and regional headquarters opened between the periods. Income taxes increased for the quarter and YTD periods, driven by increases in pre-tax income and certain state income taxes.

Net interest margin for the second quarter of 3.46% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.49% both increased 19 basis points from the prior year’s second quarter. YTD net interest margin of 3.45% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.47% increased 21 basis points and 20 basis points, respectively, from the 2025 YTD period. The yield on average interest earning assets increased 5 basis points compared to the prior year’s second quarter and increased 8 basis points on a YTD basis, primarily driven by higher loan yields. The Company’s total cost of funds decreased 14 basis points from both the prior year’s second quarter and the prior YTD period primarily due to decreases in the rate paid on interest-bearing deposits.

The Company’s average and ending interest-earning assets both increased as compared to the prior year second quarter and YTD period, primarily reflective of strong organic loan growth. Average and ending deposits also increased as compared to the prior year second quarter and YTD period, primarily driven by organic growth in non-governmental deposit balances, along with the deposits assumed in the Santander Bank N.A. (“Santander”) branch and ClearPoint Federal Bank & Trust (“ClearPoint”) acquisitions. Average and ending borrowings decreased from the prior year’s second quarter and YTD reflective of growth in deposit balances outpacing loan growth, including the net funding provided from the Santander branch acquisition.

Asset quality remained solid in the second quarter. The net charge-off ratio decreased from 20 basis points of average loans in the second quarter of 2025 to 12 basis points of average loans in the second quarter of 2026. On a YTD basis, the net charge-off ratio decreased 5 basis points versus the prior year period to 11 basis points of average loans. The nonperforming loan ratio decreased 1 basis point from June 30, 2025 to 0.50% of loans outstanding at June 30, 2026, while the delinquent loan ratio increased 3 basis points compared to twelve months earlier to 1.04% of loans outstanding.

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Second quarter and YTD operating net income, a non-GAAP measure, increased $6.1 million, or 10.9%, as compared to the second quarter of 2025 and increased $15.2 million, or 14.1%, compared to June YTD 2025. Second quarter and YTD operating earnings per share, a non-GAAP measure, increased $0.12, or 11.5%, compared to the second quarter of 2025 and increased $0.29, or 14.4%, compared to June YTD 2025. Second quarter and YTD operating pre-tax, pre-provision net revenue (“PPNR”), a non-GAAP measure, increased $10.5 million, or 13.9%, compared to the second quarter of 2025 and increased $21.7 million, or 14.5%, compared to June YTD 2025. Second quarter and YTD operating PPNR per share, a non-GAAP measure, increased $0.21, or 14.9%, compared to the second quarter of 2025 and increased $0.42, or 14.9%, compared to June YTD 2025. These results demonstrate improvement in the Company’s core operating performance between the periods, particularly net interest margin expansion.

Net Income and Profitability

As shown in Table 1, net income for the second quarter and June YTD of $61.3 million and $118.6 million, respectively, increased $10.0 million, or 19.5%, as compared to the second quarter of 2025 and increased $17.6 million, or 17.4%, compared to June YTD 2025. Earnings per share of $1.16 for the second quarter of 2026 increased $0.19, or 19.6%, compared to the second quarter of 2025, while earnings per share for the first six months of 2026 of $2.24 increased $0.34, or 17.9%, compared to the first six months of 2025. The increase in net income and earnings per share for the quarter was the result of increases in net interest income and noninterest revenues, partially offset by increases in the provision for credit losses, noninterest expenses and income taxes. The increase in net income and earnings per share for the YTD period as compared to the prior year was the result of an increase in net interest income and noninterest revenues as well as a decrease in the provision for credit losses, partially offset by increases in noninterest expenses and income taxes. Operating net income, a non-GAAP measure, of $61.5 million and $122.6 million for the second quarter and June YTD 2026, respectively, increased $6.1 million, or 10.9%, as compared to the second quarter of 2025 and increased $15.2 million, or 14.1%, compared to June YTD 2025. Operating earnings per share, a non-GAAP measure, of $1.16 for the second quarter increased $0.12 compared to the second quarter of 2025, while operating earnings per share of $2.32 for the first six months of 2026 increased $0.29 compared to the first six months of 2025. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

As reflected in Table 1, second quarter net interest income of $139.1 million increased $14.4 million, or 11.5%, from the comparable prior year period. Net interest income for the first six months of 2026 increased $28.9 million, or 11.8%, compared to the first six months of 2025. The quarterly and YTD increases were the result of higher yields on interest-earning assets and a decrease in the rate paid on interest-bearing liabilities.

Reflective of stable credit quality metrics and organic loan growth, the provision for credit losses of $4.6 million for the second quarter and $10.2 million for June YTD increased $0.5 million as compared to the prior year second quarter and decreased $0.6 million as compared to the first six months of 2025.

Second quarter and YTD noninterest revenues totaled $84.0 million and $162.6 million, respectively, which increased $9.5 million, or 12.8%, from the second quarter of 2025 and increased $12.0 million, or 8.0%, from the first six months of 2025. Total operating noninterest revenues, a non-GAAP measure, for the second quarter and June YTD were $79.3 million and $158.3 million, respectively, an increase of $4.8 million, or 6.4%, and $8.0 million, or 5.3%, from the prior year second quarter and YTD period, respectively. The increase over the prior year second quarter was driven by a $3.6 million, or 6.5%, increase in nonbanking financial services business revenues and a $1.2 million, or 6.1%, increase in banking noninterest revenues, as well as a $4.7 million increase in gains on equity securities. The increase over the prior June YTD period was driven by a $4.0 million, or 3.6%, increase in nonbanking financial services business revenues and a $3.9 million, or 10.0%, increase in banking noninterest revenues, as well as a $4.1 million increase in gain on equity securities. The increase in nonbanking financial services business revenues for the second quarter of 2026 and June YTD period was comprised of increases in employee benefit services revenue of $2.5 million and $4.4 million, respectively; an increase in wealth management services revenue of $1.7 million and $2.2 million, respectively, including $0.7 million of revenue related to the ClearPoint acquisition in the second quarter of 2026; partially offset by a decrease in insurance services revenue of $0.2 million and $1.8 million, respectively and a loss from equity method investments of $0.4 million and $0.8 million, respectively.

Noninterest expenses of $137.7 million and $270.8 million for the second quarter and June YTD periods, respectively, reflected an increase of $8.6 million, or 6.7%, from the second quarter of 2025 and an increase of $16.4 million, or 6.4%, from the first six months of 2025. The increase in noninterest expenses for the second quarter and June YTD periods was primarily driven by higher salaries and employee benefits expenses, data processing and communications expenses, and occupancy and equipment expenses, partially offset by a decrease in business development and marketing expenses and restructuring expenses. Operating noninterest expenses, a non-GAAP measure, increased $8.7 million, or 7.0%, from the prior year second quarter and $15.2 million, or 6.2%, from the prior June YTD.

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The effective income tax rates were 24.1% and 23.7% for the second quarter and YTD 2026, respectively, as compared to 22.3% and 22.5% for the comparable prior year periods, primarily due to an increase in pre-tax income and certain state income taxes.

A condensed income statement is as follows:

Table 1: Condensed Income Statements


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(000's omitted, except per share data)	2026		2025		2026		2025
Net interest income	$	139,144	$	124,748	$	273,856	$	244,960
Provision for credit losses		4,607		4,117		10,243		10,807
Noninterest revenues		84,011		74,508		162,585		150,544
Noninterest expenses		137,733		129,102		270,769		254,392
Income before income taxes		80,815		66,037		155,429		130,305
Income taxes		19,481		14,706		36,877		29,360
Net income	$	61,334	$	51,331	$	118,552	$	100,945

Diluted weighted average common shares outstanding		52,915		53,117		52,960		53,103
Diluted earnings per share	$	1.16	$	0.97	$	2.24	$	1.90

Net Interest Income

Net interest income is the amount by which interest, dividends and fees on interest-earning assets (loans, investments and cash equivalents) exceeds the cost of funds, which consists primarily of interest paid to the Company's depositors and interest paid on borrowings. Net interest margin is the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities as a percentage of interest-earning assets.

Net interest income totaled $139.1 million for the second quarter of 2026 compared to $124.7 million for the second quarter of 2025. As shown in Table 2a, fully tax-equivalent net interest income, a non-GAAP measure, for the second quarter was $140.0 million, an increase of $14.4 million from the prior year second quarter. The increase was driven by a 5 basis point increase in the yield on average interest-earning assets, an $823.2 million increase in average interest-earning asset balances and an 18 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $539.7 million increase in average interest-bearing liability balances in comparison to the second quarter of 2025. As reflected in Table 3 for the quarter, the favorable net interest income impacts of the volume increase in average interest-earning asset balances of $9.4 million, the increase in the yield on average interest-earning assets of $2.0 million and the decrease in the rate paid on average interest-bearing liabilities of $5.2 million were partially offset by the volume increase in average interest-bearing liability balances of $2.3 million. Net interest margin of 3.46% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.49% for the second quarter of 2026 both increased 19 basis points compared to the prior year period.

Net interest income totaled $273.9 million for the first six months of 2026 compared to $245.0 million for the first six months of 2025. As shown in Table 2b, June YTD fully tax-equivalent net interest income, a non-GAAP measure, of $275.6 million increased $28.9 million from the prior year period. The June YTD increase was driven by a 7 basis point increase in the yield on average interest-earning assets, a $799.2 million increase in average interest-earning asset balances and a 17 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $561.4 million increase in average interest-bearing liability balances. As reflected in Table 3 for June YTD, the favorable net interest income impacts of the volume increase in average interest-earning asset balances of $18.2 million, the increase in the yield on average interest-earning assets of $5.6 million and the decrease in the rate paid on average interest-bearing liabilities of $9.7 million were partially offset by the volume increase in average interest-bearing liability balances of $4.6 million. Net interest margin of 3.45% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.47% for the June YTD 2026 increased 21 basis points and 20 basis points, respectively, compared to the prior year period.

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The 5 basis point increase in the average yield on interest-earning assets for the quarter was the result of increases in the yield on average loans while the yield on average investments, including cash equivalents, remained consistent with the prior year periods. The yield on average loans for the second quarter increased 3 basis points compared to the second quarter of 2025. The increase in loan yields was reflective of an increase in the proportion of higher rate loan originations over recent periods. The 7 basis point increase in the average yield on interest-earning assets for the June YTD period was driven by the same factors, with a 7 basis point increase in the yield on average loans and a consistent yield on average investments, including cash equivalents that carried a lower rate in 2026, when compared with the prior year period.

The second quarter and YTD average book balance of investments, including cash equivalents, increased $101.7 million and $124.7 million, respectively, as compared to the corresponding prior year period primarily due to the ClearPoint acquisition in the second quarter of 2026, partially offset by investment maturities, calls and principal payments during the periods. The cash equivalents component of average interest-earning assets increased $61.4 million and $80.6 million for the second quarter and June YTD periods, respectively, compared to the corresponding prior year periods. Average loan balances increased $721.5 million for the quarter and $674.5 million YTD as compared to the prior year, with increases in all five major loan portfolios between both periods primarily due to organic growth.

The rate paid on average interest-bearing liabilities decreased 18 basis points compared to the prior year quarter as the average rate paid on interest-bearing deposits decreased 15 basis points and the average rate paid on external borrowings increased 7 basis points from the comparable prior period. For the first six months of 2026, the rate paid on average interest-bearing liabilities decreased 17 basis points as the rate paid on average interest-bearing deposits decreased 14 basis points and the average rate paid on external borrowings decreased 1 basis point. The decrease in the rate paid on average interest-bearing deposits and changes in the rate paid on average borrowings were due to market-related interest rate changes between the periods, as well as a change in the proportion of overnight borrowings and term borrowings to total borrowings during the periods.

Average interest-bearing deposits increased $740.1 million compared to the prior year quarter and $779.4 million compared to the prior YTD period, including increases in demand deposits, interest checking, savings, and money market for both periods. The average balance of time deposits decreased in the second quarter compared to the prior year, while the average balance increased for the June YTD period as compared to the prior year. The average borrowing balance, which primarily includes borrowings at the Federal Home Loan Banks of New York, Boston, and Indianapolis (collectively, “FHLB”) and securities sold under agreement to repurchase (customer repurchase agreements), decreased $200.5 million for the quarter and $218.0 million for the June YTD period.

Tables 2a and 2b below sets forth information related to average interest-earning assets and interest-bearing liabilities and their associated yields and rates for the periods indicated. Interest income and yields are on a fully tax-equivalent (“FTE”) basis using a marginal income tax rate of 25.2% in 2026 and 25.1% in 2025. Average balances are computed by totaling the daily ending balances in a period and dividing by the number of days in that period. Loan interest income and yields include amortization of deferred loan income and costs, loan prepayment, late and other fees and the amortization or accretion of acquired loan purchase discounts and premiums, decreasing loan interest income by $7.2 million for the second quarter and $14.1 million for June YTD period. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.

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Table 2a: Quarterly Average Balance Sheet


	Three Months Ended						Three Months Ended
	June 30, 2026						June 30, 2025
					Avg.						Avg.
	Average				Yield/Rate		Average				Yield/Rate
(000's omitted except yields and rates)	Balance		Interest		Paid		Balance		Interest		Paid
Interest-earning assets:
Cash equivalents	$	221,063	$	1,986	3.60	%	$	159,688	$	1,725	4.33	%
Taxable investment securities ⁽¹⁾		4,294,350		21,946	2.05	%		4,256,943		21,856	2.06	%
Nontaxable investment securities ⁽¹⁾		420,288		3,612	3.45	%		417,323		3,446	3.31	%
Loans (net of unearned discount) ⁽²⁾		11,177,112		157,701	5.66	%		10,455,637		146,735	5.63	%
Total interest-earning assets		16,112,813		185,245	4.61	%		15,289,591		173,762	4.56	%
Noninterest-earning assets		1,508,253						1,301,150
Total assets	$	17,621,066					$	16,590,741

Interest-bearing liabilities:
Interest checking, savings and money market deposits	$	8,857,654		23,943	1.08	%	$	8,094,208		22,485	1.11	%
Time deposits		2,102,360		15,439	2.95	%		2,125,683		18,152	3.43	%
Customer repurchase agreements		190,610		689	1.45	%		240,817		793	1.32	%
Overnight borrowings		15,709		154	3.93	%		16,408		187	4.56	%
FHLB and other borrowings		437,956		4,983	4.56	%		587,523		6,513	4.45	%
Total interest-bearing liabilities		11,604,289		45,208	1.56	%		11,064,639		48,130	1.74	%
Noninterest-bearing liabilities:
Noninterest checking deposits		3,799,141						3,522,734
Other liabilities		184,982						166,403
Shareholders' equity		2,032,654						1,836,965
Total liabilities and shareholders' equity	$	17,621,066					$	16,590,741

Net interest earnings (FTE) (non-GAAP)			$	140,037					$	125,632

Net interest spread					3.03	%					2.79	%
Net interest spread (FTE) (non-GAAP)					3.05	%					2.82	%
Net interest margin					3.46	%					3.27	%
Net interest margin (FTE) (non-GAAP)					3.49	%					3.30	%

Fully tax-equivalent adjustment (non-GAAP) ⁽³⁾			$	893					$	884

(1)Averages for investment securities are based on amortized cost basis and the yields do not give effect to changes in fair value that is reflected as a component of noninterest-earning assets, shareholders’ equity and deferred taxes.

(2)Includes nonaccrual loans. The impact of interest and fees not recognized on nonaccrual loans was immaterial.

(3)The FTE adjustment represents taxes that would have been paid had nontaxable investment securities and loans been fully taxable.

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Table 2b: Quarterly Average Balance Sheet


	Six Months Ended						Six Months Ended
	June 30, 2026						June 30, 2025
					Avg.						Avg.
	Average				Yield/Rate		Average				Yield/Rate
(000's omitted except yields and rates)	Balance		Interest		Paid		Balance		Interest		Paid
Interest-earning assets:
Cash equivalents	$	225,802	$	4,039	3.61	%	$	145,249	$	3,110	4.32	%
Taxable investment securities ⁽¹⁾		4,283,359		42,780	2.01	%		4,234,557		42,440	2.02	%
Nontaxable investment securities ⁽¹⁾		413,896		7,012	3.42	%		418,527		6,907	3.33	%
Loans (net of unearned discount) ⁽²⁾		11,103,915		312,251	5.67	%		10,429,456		289,846	5.60	%
Total interest-earning assets		16,026,972		366,082	4.61	%		15,227,789		342,303	4.53	%
Noninterest-earning assets		1,518,383						1,287,678
Total assets	$	17,545,355					$	16,515,467

Interest-bearing liabilities:
Interest checking, savings and money market deposits	$	8,772,166		46,695	1.07	%	$	7,997,426		42,746	1.08	%
Time deposits		2,143,508		32,060	3.02	%		2,138,825		37,178	3.51	%
Customer repurchase agreements		202,420		1,406	1.40	%		245,454		1,652	1.36	%
Overnight borrowings		12,574		245	3.93	%		36,687		833	4.58	%
FHLB and other borrowings		444,265		10,077	4.57	%		595,138		13,156	4.46	%
Total interest-bearing liabilities		11,574,933		90,483	1.58	%		11,013,530		95,565	1.75	%
Noninterest-bearing liabilities:
Noninterest checking deposits		3,751,589						3,521,356
Other liabilities		194,390						170,128
Shareholders' equity		2,024,443						1,810,453
Total liabilities and shareholders' equity	$	17,545,355					$	16,515,467

Net interest earnings (FTE) (non-GAAP)			$	275,599					$	246,738

Net interest spread					3.01	%					2.76	%
Net interest spread (FTE) (non-GAAP)					3.03	%					2.78	%
Net interest margin					3.45	%					3.24	%
Net interest margin (FTE) (non-GAAP)					3.47	%					3.27	%

Fully tax-equivalent adjustment (non-GAAP) ⁽³⁾			$	1,743					$	1,778

(2)Includes nonaccrual loans. The impact of interest and fees not recognized on nonaccrual loans was immaterial.

(3)The FTE adjustment represents taxes that would have been paid had nontaxable investment securities and loans been fully taxable.

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As discussed above and disclosed in Table 3 below, the change in net interest income (FTE basis) may be analyzed by segregating the volume and rate components of the changes in interest income and interest expense for each underlying category.

Table 3: Rate/Volume


	Three months ended June 30, 2026						Six months ended June 30, 2026
	versus June 30, 2025						versus June 30, 2025
	Increase (Decrease) Due to Change in ⁽¹⁾						Increase (Decrease) Due to Change in ⁽¹⁾
					Net						Net
(000's omitted)	Volume		Yield/Rate		Change		Volume		Yield/Rate		Change
Interest earned on:
Cash equivalents	$	585	$	(324)	$	261	$	1,506	$	(577)	$	929
Taxable investment securities		191		(101)		90		487		(147)		340
Nontaxable investment securities		24		142		166		(76)		181		105
Loans (net of unearned discount)		10,176		790		10,966		18,932		3,473		22,405
Total interest-earning assets ⁽²⁾		9,446		2,037		11,483		18,188		5,591		23,779

Interest paid on:
Interest checking, savings and money market deposits		2,077		(619)		1,458		4,126		(177)		3,949
Time deposits		(197)		(2,516)		(2,713)		80		(5,198)		(5,118)
Customer repurchase agreements		(177)		73		(104)		(297)		51		(246)
Overnight borrowings		(8)		(25)		(33)		(484)		(104)		(588)
FHLB and other borrowings		(1,698)		168		(1,530)		(3,415)		336		(3,079)
Total interest-bearing liabilities ⁽²⁾		2,269		(5,191)		(2,922)		4,619		(9,701)		(5,082)

Net interest earnings (FTE) (non-GAAP) ⁽²⁾	$	6,953	$	7,452	$	14,405	$	13,316	$	15,545	$	28,861

(1)	The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of such change in each component.

(2)	Changes due to volume and rate are computed from the respective changes in average balances and rates of the totals; they are not a summation of the changes of the components.

Noninterest Revenues

The Company’s sources of noninterest revenues are of four primary types: 1) general banking services related to loans, including mortgage banking, deposits, customer interest rate swap fees, commercial real estate (“CRE”) financing and structuring fees, and other core customer activities typically provided through the branch network, commercial banking offices, and digital banking channels (performed by CBNA); 2) employee benefit trust, collective investment fund, transfer agency, actuarial, benefit plan administration and recordkeeping services (performed by BPAS and its subsidiaries); 3) wealth management services, comprised of trust services (performed by the Nottingham Trust and ClearPoint Trust divisions within CBNA), broker-dealer and investment advisory products and services (performed by NISI) and Nottingham Wealth Partners, Inc.) and asset management services (performed by Nottingham Advisors, Inc.), collectively referred to as Nottingham Financial Group; and 4) insurance and risk management products and services (performed by OneGroup). Additionally, the Company has other transactions that impact noninterest revenues, including income earned on bank owned life insurance, realized and unrealized gains or losses on investment securities, and income or losses on equity method investments.

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Table 4: Noninterest Revenues


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(000’s omitted)	2026			2025			2026			2025
Employee benefit services	$	34,877		$	32,380		$	69,449		$	65,002
Insurance services		13,195			13,388			25,781			27,589
Wealth management services		10,403			8,683			20,735			18,545
Deposit service charges and fees		8,105			7,849			17,049			15,695
Debit interchange and ATM fees		7,388			6,670			14,361			13,131
Mortgage banking		1,191			972			2,291			1,970
Other banking revenues		4,605			4,567			9,399			8,368
Gain (loss) on equity securities		4,710			(1)			4,309			244
Loss from equity method investments		(463)			0			(789)			0
Total noninterest revenues	$	84,011		$	74,508		$	162,585		$	150,544

Noninterest revenues/total revenues		37.6	%		37.4	%		37.3	%		38.1	%
Operating noninterest revenues/operating revenues (FTE basis) (non-GAAP) ⁽¹⁾		36.2	%		37.2	%		36.5	%		37.9	%

(1)

Operating noninterest revenues, a non-GAAP measure, excludes gain (loss) on equity securities from total noninterest revenues. Operating revenues, a non-GAAP measure, is defined as net interest income on a FTE basis plus noninterest revenues, excluding gain (loss) on equity securities. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

As displayed in Table 4, noninterest revenues totaled $84.0 million for the second quarter of 2026 and $162.6 million for the first six months of 2026. This represents an increase of $9.5 million, or 12.8%, for the quarter and an increase of $12.0 million, or 8.0%, in comparison to the equivalent 2025 periods. The Company recognized a $4.7 million gain on equity securities during the second quarter of 2026 including a $3.3 million gain associated with the sale of a limited partnership investment and a $0.9 million gain associated with the conversion of certain Visa Class B shares to Visa Class C shares. Operating noninterest revenues, a non-GAAP measure as defined in the table above, totaled $79.3 million and $158.3 million for the second quarter of 2026 and June YTD periods, respectively, an increase of $4.8 million, or 6.4%, from the prior year’s second quarter and $8.0 million, or 5.3%, from the prior June YTD period.

Employee benefit services revenues increased $2.5 million, or 7.7%, and $4.4 million, or 6.8%, for the three and six months ended June 30, 2026, respectively, as compared to the equivalent prior year periods. The increases were driven by revenue growth in the recordkeeping and third-party administration services business line due in part to revenue growth from acquisitions and higher average market values of assets under administration.

Insurance services revenues decreased $0.2 million, or 1.4%, and $1.8 million, or 6.6%, for the three and six months ended June 30, 2026, respectively, primarily due to decreases in contingent commission revenues.

Wealth management services revenues increased $1.7 million, or 19.8%, and $2.2 million, or 11.8%, for the three and six months ended June 30, 2026, respectively, reflective of higher average market values of assets under management and revenue growth from the ClearPoint acquisition in the second quarter of 2026.

Banking noninterest revenues increased $1.2 million, or 6.1%, between the second quarter of 2025 and 2026 and increased $3.9 million, or 10.0%, between the first six months of 2025 and 2026. Deposit service charges and fees increased $0.3 million, or 3.3%, and $1.4 million, or 8.6%, compared to the prior year second quarter and June YTD periods, respectively. Other banking revenues for the second quarter were consistent with the prior year and increased $1.0 million, or 12.3%, for the June YTD period, driven by increases in CRE financing and structuring fees and an increase in the cash surrender value of bank-owned life insurance policies. Debit interchange and ATM fees increased $0.7 million, or 10.8%, for the second quarter and $1.2 million, or 9.4%, for the June YTD period, and mortgage banking revenues increased $0.2 million, or 22.5% for the second quarter and $0.3 million, or 16.3%, for the June YTD period.

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The ratio of noninterest revenues to total revenues was 37.6% for the second quarter of 2026 and 37.3% for the first six months of 2026, compared to 37.4% and 38.1% for the prior year’s second quarter and June YTD periods, respectively. The quarterly increase was due to noninterest revenues increasing 12.8%, including the $4.7 million gain on equity securities, while net interest income increased 11.5%. The YTD decrease was due to net interest income increasing 11.8% for June YTD while noninterest revenues increased 8.0%.

The ratio of operating noninterest revenues to operating revenues (FTE), a non-GAAP measure as defined in the table above, was 36.2% for the quarter and 36.5% for June YTD, compared to 37.2% and 37.9% for the respective prior year periods. The decreases between the quarterly and YTD periods were due to an 11.5% and 11.7% increase, respectively, in fully tax-equivalent net interest income, a non-GAAP measure, while operating noninterest revenues, a non-GAAP measure, increased 6.4% and 5.3%, respectively, excluding the $4.7 million gain on equity securities.

Noninterest Expenses

Table 5 below sets forth the quarterly results of the major noninterest expense categories for the current and prior year, as well as efficiency ratios (defined below), a standard measure of expense utilization effectiveness commonly used in the banking industry.

Table 5: Noninterest Expenses


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(000's omitted)	2026			2025			2026			2025
Salaries and employee benefits	$	82,431		$	79,021		$	162,753		$	155,463
Data processing and communications		19,686			16,699			37,557			32,821
Occupancy and equipment		13,885			11,486			28,767			24,184
Business development and marketing		2,556			4,001			5,091			7,131
Legal and professional fees		4,314			4,368			9,384			9,217
Amortization of intangible assets		4,408			3,369			8,654			6,851
Litigation accrual		335			0			335			(50)
Acquisition expenses		231			67			664			68
Acquisition-related contingent consideration adjustments		(103)			0			(103)			0
Restructuring expenses		0			1,525			0			1,525
Other		9,990			8,566			17,667			17,182
Total noninterest expenses	$	137,733		$	129,102		$	270,769		$	254,392

Noninterest expenses/average assets		3.14	%		3.12	%		3.11	%		3.11	%
Operating noninterest expenses⁽¹⁾ /average assets (non-GAAP)		3.02	%		3.04	%		3.00	%		3.02	%
Efficiency ratio		61.7	%		64.8	%		62.0	%		64.3	%
Operating efficiency ratio (non-GAAP)⁽²⁾		60.6	%		62.0	%		60.2	%		62.0	%

(1)

Operating noninterest expenses, a non-GAAP measure, is calculated as total noninterest expenses less litigation accrual, acquisition expenses, acquisition-related contingent consideration adjustments, restructuring expenses, and amortization of intangible assets. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

(2)

Operating efficiency ratio, a non-GAAP measure, is calculated as operating noninterest expenses as defined in footnote (1) above divided by net interest income on a FTE basis plus noninterest revenues excluding gain (loss) on equity securities. See Table 14 for Reconciliation of GAAP to Non-GAAP Measures.

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As shown in Table 5, the Company recorded noninterest expenses of $137.7 million for the second quarter of 2026 and $270.8 million for the June YTD period, representing an increase of $8.6 million, or 6.7%, and $16.4 million, or 6.4%, from the respective prior year periods. The change was primarily attributable to an increase in salaries and employee benefits (an increase of $3.4 million for the quarter and $7.3 million YTD), data processing and communications (an increase of $3.0 million for the quarter and $4.7 million YTD), and occupancy and equipment (an increase of $2.4 million for the quarter and $4.6 million YTD). The remaining change to noninterest expenses is attributable to other expenses (an increase of $1.4 million for the quarter and $0.5 million YTD), amortization of intangible assets (an increase of $1.0 million for the quarter and $1.8 million YTD), business development and marketing (a decrease of $1.4 million for the quarter and $2.0 million YTD), acquisition expenses (an increase of $0.1 million for the quarter and $0.5 million YTD), legal and professional fees (a decrease of $0.1 million for the quarter and an increase of $0.2 million YTD), litigation accrual (an increase of $0.3 million for the quarter and $0.4 million YTD), and restructuring expenses (a decrease of $1.5 million for the quarter and YTD).

The increase in salaries and benefits expense for the quarter was primarily driven by incremental costs associated with acquisitions and de novo bank branches opened between the periods, along with the impact of annual merit-based increases. Data processing increases were reflective of the Company’s continued investment in customer-facing and back-office technologies, including artificial intelligence applications and other workflow efficiency initiatives. Increases in occupancy and equipment expenses were primarily due to incremental costs associated with the opening of de novo bank branches and regional headquarters and the Santander branch acquisition. Amortization of intangible assets increased primarily due to the Santander and ClearPoint acquisitions. The increase in acquisition expenses was driven by the transaction-related costs associated with the ClearPoint acquisition. The decreases in business development and marketing expenses was attributable to the Company’s efforts to more selectively allocate marketing resources toward channels with higher expected returns.

The Company’s efficiency ratio was 61.7% for the second quarter of 2026, 3.1 percentage points favorable to the comparable quarter of 2025. This resulted from total revenues increasing 12.0%, primarily due to higher net interest income, while total noninterest expenses increased 6.7% due to the factors noted above. The efficiency ratio for June YTD of 62.0% was 2.3 percentage points favorable to the prior June YTD period, resulting from total revenues increasing 10.4% while total noninterest expenses increased 6.4%.

The Company’s operating efficiency ratio, a non-GAAP measure as defined in the table above, was 60.6% for the second quarter, 1.4 percentage points favorable to the comparable quarter of 2025. This resulted from operating revenues (FTE), a non-GAAP measure as defined in Table 5, increasing 9.5% while operating noninterest expenses, a non-GAAP measure as described above, increased 7.0%. The Company’s operating efficiency ratio, a non-GAAP measure, of 60.2% for the June YTD period was 1.8 percentage points favorable to the comparable period of 2025, a result of operating revenues (FTE), a non-GAAP measure as defined in Table 5, increasing 9.3% while operating noninterest expenses, a non-GAAP measure as described above, increased 6.2%.

Annualized current quarter noninterest expenses as a percentage of average assets was slightly higher than the prior year as noninterest expenses increased 6.7% and average assets increased 6.2%. Annualized current quarter operating noninterest expenses, a non-GAAP measure as defined in the table above, as a percentage of average assets was consistent with the second quarter of the prior year. Noninterest expenses increased between the periods due to the factors noted above and average assets increased between the periods primarily due to an increase in interest earning assets driven by organic growth in deposit balances and the impact of the Santander and ClearPoint acquisitions.

Income Taxes

The second quarter and June YTD effective income tax rate were 24.1% and 23.7%, respectively, as compared to 22.3% and 22.5% for the comparable periods of 2025. The increase in the second quarter and June YTD effective income tax rate is primarily attributable to an increase in certain state income taxes. The second quarter and June YTD tax expense associated with the amortization of income tax credit investments was $0.8 million and $1.9 million, respectively, as compared to $3.0 million and $3.3 million for the comparable periods of 2025. In addition, the tax benefit associated with stock-based compensation for the second quarter of 2026 was immaterial and was $0.7 million for June YTD, as compared to a $0.1 million and $0.6 million tax benefit for the comparable periods of 2025. The effective tax rates adjusted to exclude the income tax impact of stock-based compensation and amortization of income tax credit investments for the second quarter and YTD 2026 were 23.1% and 23.0%, respectively, as compared to 18.0% and 20.5% for the comparable periods of 2025. These increases reflect a decrease in federal income tax credits associated with the Company’s investment in tax credits generated by a solar energy producing company.

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Investment Securities

The carrying value of investment securities (including unrealized gains and losses) was $4.52 billion at the end of the second quarter, an increase of $117.4 million, or 2.7%, from December 31, 2025 and an increase of $174.1 million, or 4.0%, from June 30, 2025. The book value of investment securities (excluding unrealized gains and losses) of $4.80 billion at the end of the second quarter increased $122.7 million, or 2.6%, from December 31, 2025 and increased $115.9 million, or 2.5%, from June 30, 2025. The increase from the end of the prior year’s second quarter was primarily driven by acquiring $118.1 million of investment securities obtained through the ClearPoint acquisition, which was completed during the second quarter of 2026. Exclusive of the investments acquired from ClearPoint, during the first six months of 2026 the Company purchased $30.9 million of U.S. government agency mortgage-backed securities with an average yield of 4.99%, which the Company classified as held-to-maturity. These additions were offset by $51.3 million of investment maturities, calls and principal payments during the first six months of 2026. Additionally, there was $19.2 million of net accretion of discounts on investment securities during the first six months of 2026. The effective duration of the investment securities portfolio was 5.0 years at the end of the second quarter of 2026, as compared to 5.8 years at the end of the second quarter of 2025.

The change in the carrying value of investment securities is also impacted by the amount of net unrealized gains or losses. At June 30, 2026, the investment portfolio (excluding held-to-maturity investment securities) had a $276.4 million net unrealized loss, a $5.2 million increase from the $271.2 million net unrealized loss at December 31, 2025 and a $58.3 million decrease from the $334.7 million net unrealized loss at June 30, 2025. These changes were principally driven by the general movements in medium to long-term interest rates, as well as the volume and yields associated with the securities purchases and maturities that occurred during the 12 months.

The following table sets forth the carrying value of the Company’s investment securities portfolio:

Table 6: Investment Securities


	June 30,		December 31,		June 30,
(000's omitted)	2026		2025		2025
Available-for-Sale Portfolio:
U.S. Treasury and agency securities	$	2,219,381	$	2,195,226	$	2,154,944
Obligations of state and political subdivisions		435,993		391,917		375,240
Government agency mortgage-backed securities		284,451		278,885		291,927
Government agency collateralized mortgage obligations		9,667		4,401		5,430
Corporate debt securities		8,471		4,912		4,829
Total available-for-sale portfolio		2,957,963		2,875,341		2,832,370

Held-to-Maturity Portfolio:
U.S. Treasury and agency securities		1,183,312		1,168,487		1,153,480
Government agency mortgage-backed securities		295,074		285,679		277,511
Total held-to-maturity portfolio		1,478,386		1,454,166		1,430,991

Equity and Other Securities:
Equity securities without readily determinable fair value
Federal Home Loan Bank common stock		40,374		33,232		44,859
Federal Reserve Bank common stock		33,271		33,331		33,331
Other equity securities without readily determinable fair value		5,357		6,275		5,922
Total equity securities without readily determinable fair value		79,002		72,838		84,112
Equity securities with readily determinable fair value		3,661		4,414		2,597
Other investment securities		5,194		0		0
Total equity and other securities		87,857		77,252		86,709

Total investment securities	$	4,524,206	$	4,406,759	$	4,350,070

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On August 3, 2026, the Company sold $296.8 million of lower-yielding available-for-sale U.S. Treasury securities resulting in a pre-tax realized loss of $3.0 million. The proceeds were used to repay overnight borrowings with interest rates approximately 240 basis points higher than the yields on the securities sold, which was immediately accretive to net interest income. Based on current assumptions, the Company estimates an earn-back period of approximately 0.4 years and believes the transaction provides increased visibility into future earnings and net interest margin.

Loans

Loans ended the second quarter at $11.28 billion, $333.1 million, or 3.0%, higher than December 31, 2025 and $763.7 million, or 7.3%, higher than June 30, 2025 ending loans.

Mortgages on commercial property combined with general-purpose business lending to commercial, industrial, non-profit and governmental customers is characterized as the Company’s business lending activity. The business lending portfolio increased $499.4 million, or 11.0%, from June 30, 2025, and $306.8 million, or 6.5%, from December 31, 2025, driven by organic growth over both periods. As compared to December 31, 2025, multifamily increased $34.3 million, or 3.7%, business non-real estate loans, including commercial and industrial lending, increased $74.2 million, or 5.8%, non-owner occupied CRE increased $177.7 million, or 10.6%, and owner occupied CRE increased $20.5 million, or 2.4%. The Company’s non-owner occupied CRE exposure (including multifamily) remains diverse both geographically and by property type, and remains relatively low at 16% of total assets, 25% of total loans and 201% of total bank-level regulatory capital. CRE lending represents 73.3% of the total business lending portfolio at June 30, 2026, compared to 73.1% at December 31, 2025 and 72.7% at June 30, 2025. Other commercial and industrial lending represents the remaining 26.7% of total business lending at June 30, 2026, compared to 26.9% at December 31, 2025 and 27.3% at June 30, 2025. The Company’s largest non-owner occupied CRE lending concentration by property type is multifamily at 25.8% of total CRE lending, followed by office and lodging, at 10.6% and 9.7%, respectively. The Company’s largest owner occupied lending concentration by industry is retail trade at 7.0% of total CRE lending, followed by manufacturing and arts, entertainment and recreation that comprise 2.9% and 2.5%, respectively, of total CRE lending. These levels demonstrate the Company’s diversity in the lending portfolio, as there are no significant industry concentrations as noted above, and minimal geographic concentrations, as reflected by no metropolitan statistical area (“MSA”) accounting for more than 14% of the CRE portfolio and a very low level of CRE lending being conducted in major metropolitan areas. See Table 7 below for concentrations of CRE lending by borrower type and Table 8 below for concentrations of CRE by property location.

The business loan balance increases are reflective of continued high demand for non-owner occupied CRE, expansion of internal resources and proactive business development and pricing in the Company’s market areas, as well as the Company’s strong liquidity profile relative to competitors that creates opportunities to gain market share. The Company strives to generate growth in its business portfolio in a manner that adheres to its goals of maintaining strong credit quality and producing profitable margins. The Company continues to invest in additional personnel, technology and business development resources to further strengthen its capabilities in this important product category. To assist business lending customers in managing their interest rate risk, the Company enters into interest rate swaps which have associated interest rate and credit risk; for additional detail on the Company’s use of interest rate swaps, see Note J beginning on page 32 of this Form 10-Q.

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The following table presents the concentration by borrower type of the Company’s CRE loan balances as of June 30, 2026 and December 31, 2025.

Table 7: Concentrations of CRE Lending by Borrower Type


	June 30, 2026				December 31, 2025
	Amortized		Percentage of		Amortized		Percentage of
(000’s omitted, except percentages)	Cost		Total		Cost		Total
Non-owner occupied CRE by property type:
Multifamily	$	951,856	25.8	%	$	917,586	26.5	%
Office		393,270	10.6	%		374,194	10.8	%
Lodging		357,235	9.7	%		332,943	9.6	%
Retail		305,236	8.3	%		268,329	7.8	%
Commercial Construction		303,894	8.2	%		297,038	8.6	%
Other Lessors of CRE		264,261	7.1	%		173,451	5.1	%
Warehouse/Industrial		161,471	4.4	%		160,769	4.6	%
Nursing/Assisted Living		50,219	1.4	%		52,373	1.5	%
Residential Construction		3,286	0.1	%		3,849	0.1	%
All Other		9,286	0.2	%		7,505	0.2	%
Total non-owner occupied CRE		2,800,014	75.8	%		2,588,037	74.8	%

Owner occupied CRE by industry:
Retail Trade		259,066	7.0	%		277,213	8.0	%
Manufacturing		108,192	2.9	%		70,735	2.0	%
Arts, Entertainment and Recreation		91,023	2.5	%		83,453	2.4	%
Real Estate Rental and Leasing		83,330	2.3	%		91,600	2.6	%
Health Care and Social Assistance		76,737	2.1	%		78,529	2.3	%
Other Services		74,840	2.0	%		77,657	2.2	%
Agriculture and Forestry		52,609	1.4	%		51,081	1.5	%
Accommodation and Food Services		41,183	1.1	%		41,398	1.2	%
Construction		27,584	0.7	%		18,974	0.5	%
Wholesale Trade		22,206	0.6	%		22,854	0.7	%
Transportation and Warehousing		13,401	0.4	%		10,583	0.3	%
Professional, Scientific and Technical Services		10,410	0.3	%		9,876	0.3	%
Educational Services		6,665	0.2	%		5,241	0.2	%
All Other		25,096	0.7	%		32,607	1.0	%
Total owner occupied CRE		892,342	24.2	%		871,801	25.2	%

Total CRE	$	3,692,356	100.0	%	$	3,459,838	100.0	%

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The following table presents the geographic concentrations of the Company’s CRE loan balances by property location (MSA) as of June 30, 2026 and December 31, 2025.

Table 8: Concentrations of CRE by Property Location


June 30, 2026	Multifamily CRE				Owner occupied CRE				Other Non-owner occupied CRE				Total CRE
(000’s omitted, except percentages)	Amortized Cost		Percentage of Total CRE		Amortized Cost		Percentage of Total CRE		Amortized Cost		Percentage of Total CRE		Amortized Cost		Percentage of Total CRE
MSA:
Albany-Schenectady-Troy, NY	$	98,480	2.7	%	$	101,833	2.8	%	$	286,028	7.7	%	$	486,341	13.2	%
Burlington-South Burlington, VT		201,471	5.5	%		54,627	1.5	%		151,379	4.1	%		407,477	11.1	%
Rochester, NY		37,249	1.0	%		88,059	2.4	%		163,326	4.4	%		288,634	7.8	%
Buffalo-Cheektowaga, NY		104,945	2.8	%		51,242	1.4	%		126,790	3.4	%		282,977	7.6	%
Syracuse, NY		18,316	0.5	%		92,683	2.5	%		147,197	4.0	%		258,196	7.0	%
Scranton Wilkes-Barre, PA		69,438	1.9	%		63,697	1.7	%		116,932	3.2	%		250,067	6.8	%
Utica-Rome, NY		51,738	1.4	%		43,463	1.2	%		54,336	1.5	%		149,537	4.1	%
Boston-Cambridge-Newton, MA-NH		4,393	0.1	%		3,662	0.1	%		115,535	3.1	%		123,590	3.3	%
Allentown-Bethlehem-Easton, PA-NJ		1,484	0.0	%		15,224	0.4	%		83,309	2.3	%		100,017	2.7	%
All Other MSA - NY⁽¹⁾⁽²⁾		114,329	3.1	%		65,891	1.8	%		103,205	2.8	%		283,425	7.7	%
All Other MSA - PA⁽¹⁾⁽²⁾		65,420	1.8	%		49,133	1.3	%		98,526	2.7	%		213,079	5.8	%
All Other MSA⁽¹⁾		93,713	2.5	%		66,534	1.8	%		183,452	4.9	%		343,699	9.2	%

Non-MSAs:
NY		47,742	1.3	%		156,357	4.2	%		172,560	4.7	%		376,659	10.2	%
All Other Non-MSA		43,138	1.2	%		39,937	1.1	%		45,583	1.2	%		128,658	3.5	%
Total	$	951,856	25.8	%	$	892,342	24.2	%	$	1,848,158	50.0	%	$	3,692,356	100.0	%


December 31, 2025	Multifamily CRE				Owner occupied CRE				Other Non-owner occupied CRE				Total CRE
(000’s omitted, except percentages)	Amortized Cost		Percentage of Total CRE		Amortized Cost		Percentage of Total CRE		Amortized Cost		Percentage of Total CRE		Amortized Cost		Percentage of Total CRE
MSA:
Albany-Schenectady-Troy, NY	$	97,325	2.8	%	$	102,096	3.0	%	$	250,237	7.2	%	$	449,658	13.0	%
Burlington-South Burlington, VT		208,942	6.0	%		33,426	1.0	%		144,998	4.2	%		387,366	11.2	%
Rochester, NY		37,120	1.1	%		98,468	2.8	%		156,316	4.5	%		291,904	8.4	%
Buffalo-Cheektowaga, NY		106,187	3.1	%		56,535	1.6	%		121,919	3.5	%		284,641	8.2	%
Syracuse, NY		14,123	0.4	%		80,427	2.3	%		137,027	4.0	%		231,577	6.7	%
Scranton Wilkes-Barre, PA		70,371	2.0	%		61,458	1.8	%		94,771	2.7	%		226,600	6.5	%
Utica-Rome, NY		52,965	1.5	%		42,916	1.2	%		53,718	1.6	%		149,599	4.3	%
Glens Falls, NY		43,332	1.3	%		2,405	0.1	%		19,971	0.6	%		65,708	2.0	%
All Other MSA - NY⁽¹⁾⁽²⁾		74,036	2.1	%		63,606	1.8	%		79,012	2.3	%		216,654	6.2	%
All Other MSA - PA⁽¹⁾⁽²⁾		29,468	0.9	%		62,222	1.8	%		175,917	5.1	%		267,607	7.8	%
All Other MSA⁽¹⁾		92,036	2.7	%		64,397	1.9	%		209,183	6.0	%		365,616	10.6	%

Non-MSAs:
NY		49,930	1.4	%		157,146	4.5	%		183,374	5.3	%		390,450	11.2	%
All Other Non-MSA		41,751	1.2	%		46,699	1.4	%		44,008	1.3	%		132,458	3.9	%
Total	$	917,586	26.5	%	$	871,801	25.2	%	$	1,670,451	48.3	%	$	3,459,838	100.0	%

(1)	The MSAs within these captions are individually less than 2% of total CRE exposure.

(2)	The MSAs within these captions include certain counties in adjacent states with a high degree of economic and social integration with the respective core city in New York or Pennsylvania.

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Consumer mortgages increased $106.3 million, or 3.0%, from one year ago (including $4.1 million acquired in the Santander transaction) and increased $12.1 million, or 0.3%, from December 31, 2025, with the increases over both periods primarily representing organic growth, including the impact of certain secondary market sales of new volume production. The Company sold $16.7 million and $34.5 million of consumer mortgage production during the second quarter and June YTD periods, respectively, as compared to $16.6 million and $34.1 million in the comparable prior year periods. Over the past year, the Company produced organic growth in the consumer mortgage segment due to the Company’s competitive product offerings, recruitment of additional mortgage loan originators and proactive business development efforts, while also benefitting from the comparatively stable housing market conditions in the Company’s primary markets relative to the national environment. Home equity loans increased $45.0 million, or 9.1%, from one year ago (including $16.9 million acquired in the Santander transaction) and increased $5.4 million, or 1.0%, from December 31, 2025, in part a result of competitive pricing and lower levels of payoffs and paydowns related to consumer mortgage refinancing in a relatively high interest rate environment.

Consumer installment loans, both those originated directly in the branches and online (referred to as “consumer direct”) and indirectly in automobile, marine and recreational vehicle dealerships (referred to as “consumer indirect”), increased $113.0 million, or 5.8%, from one year ago (including $9.3 million acquired in the Santander transaction), and increased $8.8 million, or 0.4%, from December 31, 2025. The Company is focused on maintaining a profitable in-market and contiguous market indirect portfolio by providing competitive market offerings to its customers and pursuing the expansion of its dealer network. Consumer installment loans have historically provided attractive returns, and the Company strives to grow these key portfolios despite the strong competition from the financing subsidiaries of vehicle manufacturers and other financial intermediaries.

Asset Quality

The following table sets forth the allocation of the allowance for credit losses by loan category as of the end of the periods indicated, as well as the proportional share of each category’s loan balance to total loans. This allocation is based on management’s assessment, at a given point in time, of the risk characteristics of each of the component parts of the total loan portfolio and is subject to change when the risk factors of each component part change. The allocation is not indicative of the specific amount of future net charge-offs that are projected for each of the loan categories, nor should it be taken as an indicator of future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb losses in any category. As shown in Table 9, total allowance for credit losses at the end of the second quarter was $91.7 million, an increase of $9.8 million, or 12.0%, from one year earlier and an increase of $3.8 million, or 4.3%, from the end of 2025.

Table 9: Allowance for Credit Losses by Loan Type


	June 30, 2026				December 31, 2025				June 30, 2025
(000’s omitted except for ratios)	Allowance for Credit Losses		Percent of Total Loan Balances		Allowance for Credit Losses		Percent of Total Loan Balances		Allowance for Credit Losses		Percent of Total Loan Balances
Business lending	$	50,955	44.7	%	$	46,155	43.2	%	$	41,154	43.2	%
Consumer mortgage		12,618	32.2	%		14,005	33.0	%		14,196	33.5	%
Consumer indirect		20,584	16.6	%		20,914	17.0	%		19,885	16.8	%
Consumer direct		4,939	1.7	%		4,257	1.9	%		4,133	1.8	%
Home equity		1,600	4.8	%		1,590	4.9	%		1,483	4.7	%
Unallocated		1,000	0.0	%		1,000	0.0	%		1,000	0.0	%
Total	$	91,696	100.0	%	$	87,921	100.0	%	$	81,851	100.0	%

The consumer direct, consumer indirect and the business lending portfolios carry higher credit risk than the consumer mortgage and home equity portfolios and therefore the Company allocates a higher proportional allowance to these portfolios. The unallocated allowance is maintained for potential losses not captured in the specific allowance categories due to model imprecision. The unallocated allowance of $1.0 million at June 30, 2026 was consistent with December 31, 2025 and June 30, 2025.

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Allowance for credit losses and loan net charge-off ratios are as follows:

Table 10: Loan Ratios


	June 30,			December 31,			June 30,
	2026			2025			2025
Allowance for credit losses/total loans		0.81	%		0.80	%		0.78	%
Allowance for credit losses/nonperforming loans		161	%		156	%		153	%
Nonaccrual loans/total loans		0.44	%		0.45	%		0.44	%
Allowance for credit losses/nonaccrual loans		185	%		178	%		179	%
Net charge-offs (annualized) to average loans outstanding (quarterly):
Business lending		0.07	%		0.06	%		0.40	%
Consumer mortgage		0.01	%		0.00	%		0.00	%
Consumer indirect		0.24	%		0.29	%		0.05	%
Consumer direct⁽¹⁾		1.49	%		0.54	%		0.70	%
Home equity		0.02	%		0.03	%		0.01	%
Total loans⁽²⁾		0.12	%		0.09	%		0.20	%

(1)Excludes overdraft net charge-offs.

(2)Includes overdraft net charge-offs.

Net charge-offs during the second quarter of 2026 were $3.3 million, a decrease of $1.8 million compared to the second quarter of 2025. The business lending portfolio experienced lower net charge-off levels compared with the second quarter of 2025 while the consumer installment, home equity and consumer mortgage portfolios were above the prior year level. The total net charge-off ratio (net charge-offs annualized as a percentage of average loans outstanding for the quarter) for the second quarter was 0.12%, 3 basis points higher than the ratio for the fourth quarter of 2025 and 8 basis points lower than the ratio for the second quarter of 2025. The net charge-off ratios for the second quarter of 2026 for the business lending and home equity portfolios were below the Company’s average for the trailing eight quarters, while the net charge-off ratio for the consumer mortgage and consumer installment portfolios were above the Company’s average for the trailing eight quarters.

Other real estate owned (“OREO”) at June 30, 2026 was $7.7 million. This compares to $8.2 million at December 31, 2025 and $8.0 million at June 30, 2025. At June 30, 2026, OREO consisted of 38 residential properties with a total value of $2.3 million and 1 commercial lending relationship consisting of multiple properties with an aggregate value of $5.4 million. This compares to 42 residential properties with a total value of $2.9 million and 1 commercial lending relationship consisting of multiple properties with an aggregate value of $5.4 million at December 31, 2025, and 44 residential properties with a total value of $2.6 million and 1 commercial lending relationship consisting of multiple properties with an aggregate value of $5.4 million at June 30, 2025.

Approximately 31% of the nonperforming loans at June 30, 2026 were related to the business lending portfolio, which is comprised of business loans broadly diversified by geography, collateral category and industry. Of the nonperforming loans in the business lending portfolio, other commercial and industrial loans represents 63% of the balance, owner occupied CRE represents 24% of the balance, non-owner occupied CRE represents 10% of the balance, and multifamily represents 2% of the balance. Nonperforming business loans as a percentage of total loans decreased 7 basis points as compared to December 31, 2025 and decreased 5 basis points as compared to June 30, 2025.

Approximately 61% of nonperforming loans at June 30, 2026 were comprised of consumer mortgages. Collateral values of residential properties within most of the Company’s market areas have generally remained stable or increased over the past several years. Inflation rates and the unemployment rate also remain relatively stable. This has contributed to the credit performance in the consumer mortgage loan portfolio remaining favorable. The remaining 8% of nonperforming loans relate to consumer installment and home equity loans, with home equity nonperforming loan levels being driven by the same factors that were identified for consumer mortgages. Nonperforming loan levels in the consumer installment category are typically lower than the other portfolios because they are generally charged off before they reach non-performing status. The allowance for credit losses to nonperforming loans ratio, a general measure of coverage adequacy, was 161% at the end of the second quarter, as compared to 156% at year-end 2025 and 153% at June 30, 2025. The increase in this ratio versus the end of 2025 and one year ago was due to the allowance for credit losses increasing proportionally more than nonperforming loan levels.

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The Company’s asset quality metrics, including net charge-offs and delinquent and nonperforming loans, remain relatively favorable compared to the banking industry, reflecting the Company’s robust risk management practices and disciplined credit quality standards.

The Company’s senior management, special asset officers and business lending management review all delinquent and nonaccrual loans and OREO regularly in order to identify deteriorating situations, monitor known problem credits and discuss any needed changes to collection efforts, if warranted. Based on this analysis, a relationship may be assigned a special assets officer or other senior lending officer to meet with the borrowers, assess the collateral and recommend an action plan. This plan could include foreclosure, restructuring loans, issuing demand letters, or other actions. The Company’s larger criticized credits (greater than $2.0 million exposure) are also reviewed on a quarterly basis by banking senior management, senior credit administration management, special assets officers and business lending management to monitor their status and discuss relationship management plans. Business lending management reviews the criticized business loan portfolio on a monthly basis.

Delinquent loans (defined as loans 30 days or more past due or in nonaccrual status) as a percent of total loans was 1.04% at the end of the second quarter, 6 basis points below the 1.10% at year-end 2025 and 3 basis points above the 1.01% at June 30, 2025. The business lending delinquency ratio at the end of the first quarter of 0.47% was 7 basis points below the level of 0.54% at December 31, 2025 and 3 basis points below the level of 0.50% at June 30, 2025. The changes in the delinquent loan ratios over the indicated prior periods were related to certain CRE loans that were charged off or substantially repaid during the periods. The delinquency rates for consumer mortgage loan portfolios increased as compared to the levels at December 31, 2025, while home equity and consumer installment decreased. The delinquency rates for consumer mortgage, home equity and consumer installment loan portfolios increased as compared to the levels at June 30, 2025.

The Company recorded a $4.6 million provision for credit losses in the second quarter of 2026. The second quarter provision for credit losses was $0.5 million higher than the equivalent prior year period’s provision for credit losses of $4.1 million. The allowance for credit losses of $91.7 million as of June 30, 2026 increased $9.8 million from the level one year ago, primarily due to organic loan growth. The allowance for credit losses to total loans ratio was 0.81% at June 30, 2026, 1 and 3 basis points higher than the levels at December 31, 2025 and June 30, 2025, respectively. Refer to Note E: Loans and Allowance for Credit Losses in the notes to the consolidated financial statements for a discussion of management’s methodology used to estimate the allowance for credit losses.

As of June 30, 2026, the net purchase discount related to the $697.0 million of remaining non-purchased credit deteriorated (“PCD”) loan balances purchased through acquisition transactions was approximately $13.1 million, or 1.9% of that portfolio.

Deposits

As shown in Table 11, average deposits of $14.76 billion in the second quarter were $1.02 billion, or 7.4%, higher than the second quarter of 2025 and increased $447.7 million, or 3.1%, from the fourth quarter of 2025. On an ending basis, total deposits increased $323.3 million, or 2.2%, from December 31, 2025 and were $1.01 billion, or 7.4%, higher than one year prior. Average non-governmental deposits for the second quarter of 2026 increased $445.8 million, or 3.7%, versus the fourth quarter of 2025 and increased $1.13 billion, or 9.9%, versus the year-earlier period. The increase from the end of the prior year’s fourth quarter was primarily driven by higher average balances of consumer non-time deposits and the increase from the end of the prior year’s second quarter was driven by higher average balances of consumer and business non-time deposits. The increases in both periods include the effects of additional deposit accounts assumed as part of the Santander branch and ClearPoint acquisitions. Average reciprocal deposits for the second quarter of 2026 increased $41.7 million versus the fourth quarter of 2025 and increased $149.7 million from the second quarter of 2025, primarily driven by an expansion of the Company’s reciprocal deposit relationship base and certain governmental customers moving from standard deposit products and customer repurchase agreements, a non-deposit product categorized as borrowings, to reciprocal deposit products. Average governmental deposits for the second quarter decreased $39.7 million, or 2.0%, from the fourth quarter of 2025, driven by seasonal outflows of governmental deposits, and decreased $265.4 million, or 12.2%, from the second quarter of 2025, due in part to government customers migrating to reciprocal deposit products. Average governmental deposits as a percentage of total average deposits decreased from 15.8% in the second quarter of 2025 to 12.9% in the second quarter of 2026. The decrease in average governmental deposits from the prior year’s second quarter is reflective of lower average governmental money market and time deposit balances.

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Average noninterest checking deposits as a percentage of average total deposits was 25.7% in the second quarter compared to 25.9% in the fourth quarter of 2025 and 25.6% in the second quarter of 2025. Average non-maturity deposits represented 85.8% of the Company’s average deposit funding base in the second quarter of 2026 and time deposits represented 14.2% of total average deposits. In comparison, time deposits represented 15.5% of total average deposits during the second quarter of 2025 and 14.9% of total average deposits during the fourth quarter of 2025.

The quarterly average cost of deposits was 1.07% for the second quarter of 2026, compared to 1.19% in the second quarter of 2025 and 1.15% in the fourth quarter of 2025, reflective of the decrease in certain deposit interest rates, as well as the decrease in proportion of relatively higher-cost time deposits. The Company continues to focus on expanding its deposit relationship base through its competitive product offerings, high-quality customer service and market expansion initiatives.

The Company’s deposit base is well diversified across customer segments, which as of June 30, 2026 is comprised of approximately 59% consumer, 29% business and 12% governmental, and broadly dispersed with an average consumer deposit balance per account of approximately $13,000 and average business deposit relationship of approximately $84,000, while the Company’s total average deposit balance per account is under $20,000. In addition, at the end of the quarter, 64% of the Company’s total deposit balances were in checking and predominantly low-rate savings accounts and the weighted-average age of the Company’s non-maturity deposit accounts was approximately 15 years.

The total estimated amount of deposits that exceeded the $250,000 insured limit provided by the Federal Deposit Insurance Corporation (“FDIC”), net of collateralized and intercompany deposits, was approximately $2.82 billion at June 30, 2026. This amount is determined by adjusting the amounts reported in the Bank Call Report by intercompany deposits, which are not external customers and are therefore eliminated in consolidation, and governmental deposits whose uninsured balances are collateralized by certain pledged investment securities. The Bank Call Report estimated uninsured deposit balances at June 30, 2026, reported gross, totaled $4.69 billion, which includes intercompany account balances of $337.6 million, and collateralized deposits of $1.53 billion. Estimated insured deposits, net of collateralized and intercompany deposits, represent 81% of ending total deposits at June 30, 2026. These estimates are based on the determination of known deposit account balances of each depositor and the insurance guidelines provided by the FDIC.

Table 11: Quarterly Average Deposits


	June 30,		December 31,		June 30,
(000’s omitted)	2026		2025		2025
Noninterest checking deposits	$	3,799,141	$	3,702,200	$	3,522,734
Interest checking deposits		3,116,199		3,012,487		2,949,860
Savings deposits		2,536,831		2,427,894		2,328,638
Money market deposits		3,204,624		3,030,459		2,815,710
Time deposits		2,102,360		2,138,368		2,125,683
Total deposits	$	14,759,155	$	14,311,408	$	13,742,625

Nongovernmental deposits	$	12,620,068	$	12,174,277	$	11,487,910
Governmental deposits		1,901,449		1,941,153		2,166,824
Reciprocal deposits		237,638		195,978		87,891
Total deposits	$	14,759,155	$	14,311,408	$	13,742,625

Borrowings

Borrowings, excluding securities sold under agreement to repurchase, at the end of the second quarter of 2026 totaled $606.5 million. This was $147.7 million, or 32.2%, higher than borrowings at December 31, 2025 and $107.3 million, or 15.0%, below the balance at June 30, 2025. The increase from the end of 2025 was attributable to a $172.8 million increase in overnight borrowings, partially offset by a $25.1 million decrease in FHLB and other borrowings reflective of the scheduled paydowns of amortizing advances. The decrease from June 30, 2025 was comprised of a $149.7 million decrease in FHLB and other borrowings that included the impact of the FHLB exercising their put option on a $100.0 million advance with a rate of 3.73% in August 2025 along with the scheduled paydowns of amortizing advances, partially offset by a $42.4 million increase in overnight borrowings.

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Securities sold under agreement to repurchase, also referred to as customer repurchase agreements, represent collateralized governmental and commercial funding from customers that price and operate similar to a governmental deposit instrument, including the requirement to collateralize uninsured balances. Customer repurchase agreements were $157.6 million at the end of the second quarter of 2026, $73.6 million, or 31.8%, lower than December 31, 2025, and $23.0 million, or 12.8%, lower than June 30, 2025, driven by lower governmental balances due in part to certain customers transferring funds to the Company’s reciprocal deposit product offerings that generally do not require collateralization.

Shareholders’ Equity and Regulatory Capital

Total shareholders’ equity of $2.07 billion at the end of the second quarter of 2026 represents an increase of $66.7 million, or 3.3%, from the balance at December 31, 2025. The increase was primarily driven by net income of $118.6 million, partially offset by common stock dividends declared of $49.4 million and common stock repurchased as part of the Company’s publicly announced stock repurchase program of $15.5 million. Over the past 12 months, total shareholders’ equity increased $189.7 million, or 10.1%, as net income, an increase in the after-tax market value adjustment on investments, the issuance of common stock in association with the employee stock plans and adjustments to the overfunded status of the Company’s employee retirement plans more than offset common stock dividends declared and common stock repurchased.

The dividend payout ratio (dividends declared divided by net income) for the first six months of 2026 was 41.7%, compared to 48.2% for the first six months of 2025. The decrease in the dividend payout ratio was due to the 17.4% growth in YTD net income versus last year significantly exceeding the 1.7% increase in dividends declared for the same periods. The Company’s quarterly dividend per share was raised from $0.46 to $0.47 in the third quarter of 2025, an increase of 2.2% for the second quarter of 2026 compared to one year earlier, while total shares outstanding decreased 0.5% due to common stock repurchases between the periods, partially offset by issuances from the Company’s employee stock plans.

During the third quarter of 2026, the Company announced a 2 cent, or 4.3%, increase in the quarterly dividend to $0.49 per share on its common stock, which marked the 34^th consecutive year of dividend increases for the Company.

The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s dividend paying ability and financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets and certain liabilities and off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Company and the Bank are required to maintain a “capital conservation buffer”, composed entirely of common equity Tier 1 capital, in addition to minimum risk-based capital ratios. The required capital conservation buffer is 2.5% as of June 30, 2026, December 31, 2025 and June 30, 2025. Therefore, to satisfy both the minimum risk-based capital ratios and the capital conservation buffer as of those dates, the Company and the Bank must maintain:

(i) Common equity Tier 1 capital to total risk-weighted assets (“Common equity tier 1 capital ratio”) of at least 7.0%,

(ii) Tier 1 capital to total risk-weighted assets (“Tier 1 risk-based capital ratio”) of at least 8.5%, and

(iii) Total capital (Tier 1 capital plus Tier 2 capital) to total risk-weighted assets (“Total risk-based capital ratio”) of at least 10.5%.

In addition, the Company and Bank must maintain a ratio of ending Tier 1 capital to adjusted quarterly average assets (“Tier 1 leverage ratio”) of at least 5.0% to be considered “well capitalized” under the regulatory framework for prompt corrective action.

As of June 30, 2026, December 31, 2025 and June 30, 2025, the Company and Bank meet all applicable capital adequacy requirements to be considered “well capitalized”. As of June 30, 2026, December 31, 2025 and June 30, 2025, the regulatory capital ratios for the Company and Bank are presented below.

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Table 12: Regulatory Ratios


	June 30, 2026				December 31, 2025				June 30, 2025
	Community				Community				Community
	Financial		Community		Financial		Community		Financial		Community
	System, Inc.		Bank, N.A.		System, Inc.		Bank, N.A.		System, Inc.		Bank, N.A.
Tier 1 leverage ratio	9.26	%	7.86	%	9.21	%	7.85	%	9.42	%	7.99	%
Common equity Tier 1 capital ratio	13.75	%	11.72	%	14.04	%	12.02	%	14.68	%	12.49	%
Tier 1 risk-based capital ratio	13.75	%	11.73	%	14.04	%	12.02	%	14.68	%	12.50	%
Total risk-based capital ratio	14.56	%	12.54	%	14.85	%	12.84	%	15.48	%	13.30	%

The Company’s tier 1 leverage ratio was 9.26% at the end of the second quarter, an increase of 5 basis points from December 31, 2025 and a decrease of 16 basis points from its level one year earlier. The increase in the Tier 1 leverage ratio in comparison to December 31, 2025 was the result of ending shareholders’ equity, excluding intangibles net of deferred tax liabilities associated with intangibles (“net intangibles”) and other comprehensive income or loss items, increasing 3.0%, while average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, increased a lesser 2.5%. The Tier 1 leverage ratio decreased compared to the prior year’s second quarter as shareholders’ equity, excluding net intangibles and other comprehensive income or loss items, increased 3.7%, while average assets, excluding net intangibles and the market value adjustment, increased a greater 5.6%. The increases in shareholders’ equity, excluding net intangibles and other comprehensive income or loss items, were primarily a result of net earnings retention while the increases in average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, were primarily driven by organic loan growth and the Santander and ClearPoint acquisitions.

The shareholders’ equity-to-assets ratio was 11.67% at the end of the second quarter of 2026 compared to 11.59% at December 31, 2025 and 11.30% at June 30, 2025. The tangible equity-to-tangible assets ratio, a non-GAAP measure, of 6.86% increased 11 basis points from December 31, 2025 and increased 35 basis points from June 30, 2025. The increase in the tangible equity-to-tangible assets ratio, a non-GAAP measure, from one year prior was driven by a $125.9 million, or 12.2%, increase in tangible equity, a non-GAAP measure, while tangible assets, a non-GAAP measure, increased $1.03 billion, or 6.5%. The increase in the tangible equity-to-tangible assets ratio, a non-GAAP measure, from December 31, 2025 was driven by a $47.7 million, or 4.3%, increase in tangible equity, a non-GAAP measure, while tangible assets, a non-GAAP measure, increased $441.5 million, or 2.7%. Over the past twelve months, the increase in tangible equity, a non-GAAP measure, was mainly due to net earnings retention and a decrease in accumulated other comprehensive loss related to the investment securities portfolio, while the increase in tangible assets, a non-GAAP measure, was reflective of organic loan growth and the Santander branch and ClearPoint acquisitions. During the first six months of 2026, the increase in tangible equity, a non-GAAP measure, was primarily due to net earnings retention, while the increase in tangible assets, a non-GAAP measure, was driven by organic loan growth and the ClearPoint acquisition. See Table 14 for Reconciliation of Quarterly GAAP to Non-GAAP Measures.

Liquidity

Liquidity risk is a measure of the Company’s ability to raise cash when needed at a reasonable cost and minimize any loss. The Company maintains appropriate liquidity levels in both normal operating conditions as well as stressed environments. The Company must be capable of meeting all obligations to its customers at any time and, therefore, the active management of its liquidity position remains an important management objective. The Bank has appointed the Asset Liability Committee (“ALCO”) to manage liquidity risk using policy guidelines and limits on indicators of potential liquidity risk. The indicators are monitored using a scorecard with three risk level limits. These risk indicators measure core liquidity and funding needs, capital at risk and change in available funding sources. The risk indicators are monitored using such metrics as the core basic surplus ratio, unencumbered securities to average assets, free loan collateral to average assets, loans to deposits, deposits to total funding and borrowings to total funding ratios.

Given the uncertain nature of the Company’s customers' demands, as well as the Company's desire to take advantage of earnings enhancement opportunities, the Company must have adequate sources of on and off-balance sheet funds available that can be utilized when needed. Accordingly, in addition to the liquidity provided by balance sheet cash flows, liquidity must be supplemented with additional sources such as borrowings from the FHLB and the Federal Reserve Bank (“FRB”) and credit lines from correspondent banks. Other funding alternatives may also be appropriate from time to time, including wholesale and customer repurchase agreements, large certificates of deposit, and the brokered CD market. The primary sources of funds are deposits, which totaled $14.71 billion at June 30, 2026. The primary sources of non-deposit funds are customer repurchase agreements, FHLB and FRB term borrowings and overnight advances. At June 30, 2026, there were $157.6 million of customer repurchase agreements, $425.6 million of FHLB term borrowings outstanding, and $172.8 million of overnight borrowings.

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The Company’s primary sources of available liquidity include unrestricted cash and cash equivalents, borrowing capacity at the FHLB and FRB, as well as net unpledged investment securities that could be sold, subject to market conditions, or used to collateralize additional funding. Table 13 below details the available sources of liquidity at June 30, 2026. In addition, there was $75.0 million available in unsecured lines of credit with correspondent banks at June 30, 2026. The Company’s sources of immediately available liquidity of $6.74 billion as of June 30, 2026 represent approximately 239% of the Company’s estimated uninsured deposits (deposits in excess of FDIC limits), net of collateralized and intercompany deposits (“net estimated uninsured deposits”), estimated to be approximately $2.82 billion.

Table 13: Sources of Liquidity


	June 30,			December 31,				June 30,
(000's omitted)	2026			2025				2025
Unrestricted cash and cash equivalents	$	243,414		$	286,995		$	231,178
FHLB borrowing capacity		1,461,142			1,576,124			1,273,712
FRB borrowing capacity		2,872,299			2,776,607			2,615,301
Net unpledged investment securities		2,167,622			2,177,896			1,823,420
Total sources of liquidity	$	6,744,477		$	6,817,622		$	5,943,611

Net estimated uninsured deposits	$	2,822,244		$	2,739,971		$	2,411,874

Total sources of liquidity/net estimated uninsured deposits		239	%		249	%		246	%

To measure intermediate risk over the next twelve months, the Company produces and reviews a liquidity sources and uses projection. As of June 30, 2026, sufficient liquidity is available over the next year to cover projected cash outflows. In addition, stress tests on the cash flows are performed for various scenarios ranging from high probability events with a low impact on the liquidity position to low probability events with a high impact on the liquidity position. The results of the stress tests as of June 30, 2026 indicate the Company has sufficient sources of liquidity for the next year in all simulated stressed scenarios.

To measure longer-term liquidity, a baseline projection of growth in interest-earning assets and interest-bearing liabilities for five years is made to reflect how liquidity levels could change over time. This five-year measure reflects ample liquidity for loan and other asset growth over the next five years.

The possibility of a funding crisis exists at all financial institutions. A funding crisis would most likely result from a shock to the financial system which disrupts orderly short-term funding operations or from a significant tightening of monetary policy that limits the national money supply. Accordingly, management has addressed this issue by formulating a Liquidity Contingency Plan, which has been reviewed and approved by both the Board of Directors (the “Board”) and the Company’s ALCO. The plan addresses the actions that the Company would take in response to both a short-term and long-term funding crisis. Triggers within the plan and liquidity risk monitor are not by themselves definitive indicators of insufficient liquidity, but rather a mechanism for management to monitor conditions and possibly provide advance warning which could avert or reduce the impact of a crisis. Liquidity triggers are set based on a variety of factors, including Company history, trends, and current operating performance, industry observations, and, as warranted, changes in internal and external economic factors. Indicators include: core liquidity and funding needs such as the core basic surplus, unencumbered securities to average assets, and free FHLB and FRB loan collateral to average assets; heightened funding needs indicators such as average loans to average deposits, average governmental and nongovernmental deposits to total funding, and average borrowings to total funding; capital at risk indicators including regulatory ratios; asset quality indicators; and decrease in funds availability indicators which are a combination of internal and external risk factors that could result in increased restrictions on borrowing or indicate a downturn in the credit market. The Company has established three risk levels for these liquidity triggers that inform the response based on the severity of the circumstances. Responses vary from an assessment of possible funding deficiencies with no impact on normal business operations to immediate action being required due to impending funding problems. For more information regarding the risk factor associated with the possibility of a funding crisis, refer to the discussion under the heading “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the SEC on February 27, 2026.

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Forward-Looking Statements

This report contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties. Forward-looking statements often use words such as “anticipate,” “could,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “forecast,” “believe,” or other words of similar meaning. These statements are based on the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from the results discussed in the forward-looking statements. Moreover, the Company’s plans, objectives and intentions are subject to change based on various factors (some of which are beyond the Company’s control). Factors that could cause actual results to differ from those discussed in the forward-looking statements include: (1) adverse developments in the banking industry related to bank failures and the potential impact of such developments on customer confidence and regulatory responses to these developments; (2) current and future economic and market conditions, including the effects of changes in housing or vehicle prices, higher unemployment rates, disruptions in the commercial real estate market, labor shortages, supply chain disruption, inability to obtain raw materials and supplies, U.S. fiscal debt, budget and tax matters, geopolitical matters and conflicts, the effects of announced or future tariff increases, changes in global trade policies, and any changes in global economic growth; (3) the effect of, and changes in, monetary and fiscal policies and laws, including future changes in Federal and state statutory income tax rates and interest rate and other policy actions of the Board of Governors of the Federal Reserve System; (4) the effect of changes in the level of checking or savings account deposits on the Company’s funding costs and net interest margin including the possibility of a sudden withdrawal of the Company’s deposits due to rapid spread of information or disinformation regarding the Company’s well-being; (5) future provisions for credit losses on loans and debt securities; (6) changes in nonperforming assets; (7) the effect of a fall in stock market or bond prices on the Company’s fee income businesses, including its employee benefit services, wealth management, trust, and insurance businesses; (8) risks related to credit quality; (9) inflation, interest rate, liquidity, market and monetary fluctuations; (10) the strength of the U.S. economy in general and the strength of the local economies where the Company conducts its business; (11) the timely development of new products and services and customer perception of the overall value thereof (including features, pricing and quality) compared to competing products and services; (12) changes in consumer spending, borrowing and savings habits; (13) technological changes and implementation and financial risks associated with transitioning to new technology-based systems involving large multi-year contracts; (14) the ability of the Company to maintain the security, including cybersecurity, of its financial, accounting, technology, data processing and other operating systems, facilities and data, including customer data; (15) effectiveness of the Company’s risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, the Company’s ability to manage its credit or interest rate risk, the sufficiency of its allowance for credit losses and the accuracy of the assumptions or estimates used in preparing the Company’s financial statements and disclosures; (16) failure of third parties to provide various services that are important to the Company’s operations; (17) any acquisitions or mergers that might be considered or consummated by the Company and the costs and factors associated therewith, including differences in the actual financial results of the acquisition or merger compared to expectations and the realization of anticipated cost savings and revenue enhancements; (18) the ability to maintain and increase market share and control expenses; (19) the nature, timing and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of the Company and its subsidiaries, including changes in laws and regulations concerning taxes, accounting, banking, service fees, risk management, securities, capital requirements and other aspects of the financial services industry; (20) changes in the Company’s organization, compensation and benefit plans and in the availability of, and compensation levels for, employees in its geographic markets; (21) the outcome of pending or future litigation and government proceedings; (22) the effect of opening new branches to expand the Company’s geographic footprint, including the cost associated with opening and operating the branches and the uncertainty surrounding their success including the ability to meet expectations for future deposit and loan levels and commensurate revenues; (23) the effects of natural disasters could create economic and financial disruption; (24) the effects from changes in governmental leadership which expose the Company and its customers to a variety of political, economic, and regulatory risks, including the risk of changes in laws (including labor, trade, tax and other laws) and the potential for disruption in governmental agencies, services provided by the government, funding of government sponsored projects, and changes in the domestic political environment; (25) the effect of total or partial governmental shutdowns; (26) material differences in the actual financial results of investment activities compared with the Company's initial expectations, including the growth of the Insurtech market; (27) other risk factors outlined in the Company’s filings with the SEC from time to time; and (28) the success of the Company at managing the risks of the foregoing.

The foregoing list of important factors is not all-inclusive. For more information about factors that could cause actual results to differ materially from the Company’s expectations, refer to the discussion under the heading “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the SEC on February 27, 2026. Any forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statement, whether written or oral, to reflect events or circumstances after the date on which such statement is made. If the Company does update or correct one or more forward-looking statements, investors and others should not conclude that the Company will make additional updates or corrections with respect thereto or with respect to other forward-looking statements.

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Reconciliation of GAAP to Non-GAAP Measures

Table 14: GAAP to Non-GAAP Reconciliations


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(000’s omitted)		2026		2025		2026		2025
Operating pre-tax, pre-provision net revenue (non-GAAP)
Net income (GAAP)	$	61,334	$	51,331	$	118,552	$	100,945
Income taxes		19,481		14,706		36,877		29,360
Income before income taxes		80,815		66,037		155,429		130,305
Provision for credit losses		4,607		4,117		10,243		10,807
Pre-tax, pre-provision net revenue (non-GAAP)		85,422		70,154		165,672		141,112
Acquisition expenses		231		67		664		68
Acquisition-related contingent consideration adjustments		(103)		0		(103)		0
Litigation accrual		335		0		335		(50)
Restructuring expenses		0		1,525		0		1,525
(Gain) loss on equity securities		(4,710)		1		(4,309)		(244)
Amortization of intangible assets		4,408		3,369		8,654		6,851
Operating pre-tax, pre-provision net revenue (non-GAAP)	$	85,583	$	75,116	$	170,913	$	149,262

Operating pre-tax, pre-provision net revenue per share (non-GAAP)
Diluted earnings per share (GAAP)	$	1.16	$	0.97	$	2.24	$	1.90
Income taxes		0.37		0.27		0.70		0.55
Income before income taxes		1.53		1.24		2.94		2.45
Provision for credit losses		0.09		0.08		0.19		0.20
Pre-tax, pre-provision net revenue per share (non-GAAP)		1.62		1.32		3.13		2.65
Acquisition expenses		0.00		0.00		0.01		0.00
Acquisition-related contingent consideration adjustments		0.00		0.00		0.00		0.00
Litigation accrual		0.01		0.00		0.01		0.00
Restructuring expenses		0.00		0.03		0.00		0.03
(Gain) loss on equity securities		(0.09)		0.00		(0.08)		0.00
Amortization of intangible assets		0.08		0.06		0.16		0.13
Operating pre-tax, pre-provision net revenue per share (non-GAAP)	$	1.62	$	1.41	$	3.23	$	2.81

Operating net income (non-GAAP)
Net income (GAAP)	$	61,334	$	51,331	$	118,552	$	100,945
Acquisition expenses		231		67		664		68
Tax effect of acquisition expenses		(53)		(12)		(152)		(14)
Subtotal (non-GAAP)		61,512		51,386		119,064		100,999
Acquisition-related contingent consideration adjustments		(103)		0		(103)		0
Tax effect of acquisition-related contingent consideration adjustments		24		0		24		0
Subtotal (non-GAAP)		61,433		51,386		118,985		100,999
Litigation accrual		335		0		335		(50)
Tax effect of litigation accrual		(78)		0		(77)		10
Subtotal (non-GAAP)		61,690		51,386		119,243		100,959
Restructuring expenses		0		1,525		0		1,525
Tax effect of restructuring expenses		0		(274)		0		(313)
Subtotal (non-GAAP)		61,690		52,637		119,243		102,171
(Gain) loss on equity securities		(4,710)		1		(4,309)		(244)
Tax effect of (gain) loss on equity securities		1,090		0		989		50
Subtotal (non-GAAP)		58,070		52,638		115,923		101,977
Amortization of intangible assets		4,408		3,369		8,654		6,851
Tax effect of amortization of intangible assets		(1,020)		(605)		(1,987)		(1,404)
Operating net income (non-GAAP)	$	61,458	$	55,402	$	122,590	$	107,424

Table of Contents


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(000's omitted)	2026			2025			2026			2025
Operating diluted earnings per share (non-GAAP)
Diluted earnings per share (GAAP)	$	1.16		$	0.97		$	2.24		$	1.90
Acquisition expenses		0.00			0.00			0.01			0.00
Tax effect of acquisition expenses		0.00			0.00			0.00			0.00
Subtotal (non-GAAP)		1.16			0.97			2.25			1.90
Acquisition-related contingent consideration adjustments		0.00			0.00			0.00			0.00
Tax effect of acquisition-related contingent consideration adjustments		0.00			0.00			0.00			0.00
Subtotal (non-GAAP)		1.16			0.97			2.25			1.90
Litigation accrual		0.01			0.00			0.01			0.00
Tax effect of litigation accrual		0.00			0.00			0.00			0.00
Subtotal (non-GAAP)		1.17			0.97			2.26			1.90
Restructuring expenses		0.00			0.03			0.00			0.03
Tax effect of restructuring expenses		0.00			(0.01)			0.00			(0.01)
Subtotal (non-GAAP)		1.17			0.99			2.26			1.92
(Gain) loss on equity securities		(0.09)			0.00			(0.08)			0.00
Tax effect of (gain) loss on equity securities		0.02			0.00			0.02			0.00
Subtotal (non-GAAP)		1.10			0.99			2.20			1.92
Amortization of intangible assets		0.08			0.06			0.16			0.13
Tax effect of amortization of intangible assets		(0.02)			(0.01)			(0.04)			(0.03)
Operating diluted earnings per share (non-GAAP)	$	1.16		$	1.04		$	2.32		$	2.02

Return on assets
Net income (GAAP)	$	61,334		$	51,331		$	118,552		$	100,945
Average total assets		17,621,066			16,590,741			17,545,355			16,515,467
Return on assets (GAAP)		1.40	%		1.24	%		1.36	%		1.23	%

Operating return on assets (non-GAAP)
Operating net income (non-GAAP)	$	61,458		$	55,402		$	122,590		$	107,424
Average total assets		17,621,066			16,590,741			17,545,355			16,515,467
Operating return on assets (non-GAAP)		1.40	%		1.34	%		1.41	%		1.31	%

Return on equity
Net income (GAAP)	$	61,334		$	51,331		$	118,552		$	100,945
Average total equity		2,032,654			1,836,965			2,024,443			1,810,453
Return on equity (GAAP)		12.10	%		11.21	%		11.81	%		11.24	%

Operating return on equity (non-GAAP)
Operating net income (non-GAAP)	$	61,458		$	55,402		$	122,590		$	107,424
Average total equity		2,032,654			1,836,965			2,024,443			1,810,453
Operating return on equity (non-GAAP)		12.13	%		12.10	%		12.21	%		11.97	%

Net interest margin
Net interest income	$	139,144		$	124,748		$	273,856		$	244,960
Total average interest-earning assets		16,112,813			15,289,591			16,026,972			15,227,789
Net interest margin		3.46	%		3.27	%		3.45	%		3.24	%

Net interest margin (FTE) (non-GAAP)
Net interest income	$	139,144		$	124,748		$	273,856		$	244,960
Fully tax-equivalent adjustment (non-GAAP)		893			884			1,743			1,778
Fully tax-equivalent net interest income (non-GAAP)		140,037			125,632			275,599			246,738
Total average interest-earning assets		16,112,813			15,289,591			16,026,972			15,227,789
Net interest margin (FTE) (non-GAAP)		3.49	%		3.30	%		3.47	%		3.27	%

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
(000’s omitted)	2026			2025			2026			2025
Operating noninterest revenues (non-GAAP)
Noninterest revenues (GAAP)	$	84,011		$	74,508		$	162,585		$	150,544
(Gain) loss on equity securities		(4,710)			1			(4,309)			(244)
Total operating noninterest revenues (non-GAAP)	$	79,301		$	74,509		$	158,276		$	150,300

Operating noninterest expenses (non-GAAP)
Noninterest expenses (GAAP)	$	137,733		$	129,102		$	270,769		$	254,392
Acquisition expenses		(231)			(67)			(664)			(68)
Acquisition-related contingent consideration adjustments		103			0			103			0
Litigation accrual		(335)			0			(335)			50
Restructuring expenses		0			(1,525)			0			(1,525)
Amortization of intangible assets		(4,408)			(3,369)			(8,654)			(6,851)
Total operating noninterest expenses (non-GAAP)	$	132,862		$	124,141		$	261,219		$	245,998

Operating revenues (non-GAAP)
Net interest income (GAAP)	$	139,144		$	124,748		$	273,856		$	244,960
Noninterest revenues (GAAP)		84,011			74,508			162,585			150,544
Total revenues (GAAP)		223,155			199,256			436,441			395,504
(Gain) loss on equity securities		(4,710)			1			(4,309)			(244)
Total operating revenues (non-GAAP)	$	218,445		$	199,257		$	432,132		$	395,260

Noninterest revenues/total revenues
Total noninterest revenues (GAAP) – numerator	$	84,011		$	74,508		$	162,585		$	150,544
Total revenues (GAAP) – denominator		223,155			199,256			436,441			395,504
Noninterest revenues/total revenues (GAAP)		37.6	%		37.4	%		37.3	%		38.1	%

Operating noninterest revenues/operating revenues (FTE) (non-GAAP)
Total operating noninterest revenues (non-GAAP) – numerator	$	79,301		$	74,509		$	158,276		$	150,300
Total operating revenues (non-GAAP)		218,445			199,257			432,132			395,260
Fully tax-equivalent adjustment (non-GAAP)		893			884			1,743			1,778
Total operating revenues (FTE) (non-GAAP) – denominator		219,338			200,141			433,875			397,038
Operating noninterest revenues/operating revenues (FTE) (non-GAAP)		36.2	%		37.2	%		36.5	%		37.9	%

Efficiency ratio (GAAP)
Total noninterest expenses (GAAP) – numerator	$	137,733		$	129,102		$	270,769		$	254,392
Total revenues (GAAP) – denominator		223,155			199,256			436,441			395,504
Efficiency ratio (GAAP)		61.7	%		64.8	%		62.0	%		64.3	%

Operating efficiency ratio (non-GAAP)
Total operating noninterest expenses (non-GAAP) – numerator	$	132,862		$	124,141		$	261,219		$	245,998
Total operating revenues (FTE) (non-GAAP) – denominator		219,338			200,141			433,875			397,038
Operating efficiency ratio (non-GAAP)		60.6	%		62.0	%		60.2	%		62.0	%

Return on tangible equity (non-GAAP)
Net income (GAAP)	$	61,334		$	51,331		$	118,552		$	100,945
Amortization of intangible assets, net of tax		3,388			2,764			6,667			5,447
Net income, excluding amortization of intangible assets (non-GAAP)		64,722			54,095			125,219			106,392
Average shareholders’ equity		2,032,654			1,836,965			2,024,443			1,810,453
Average goodwill and intangible assets, net		(944,432)			(899,416)			(943,571)			(899,970)
Average deferred taxes on goodwill and intangible assets, net		44,813			44,490			44,889			44,477
Average tangible common equity (non-GAAP)		1,133,035			982,039			1,125,761			954,960
Return on tangible equity (non-GAAP)		22.91	%		22.09	%		22.43	%		22.47	%

Operating return on tangible equity (non-GAAP)
Operating net income (non-GAAP)	$	61,458		$	55,402		$	122,590		$	107,424
Average tangible common equity (non-GAAP)		1,133,035			982,039			1,125,761			954,960
Operating return on tangible equity (non-GAAP)		21.76	%		22.63	%		21.96	%		22.68	%

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	June 30,			December 31,			June 30,
(000’s omitted)	2026			2025			2025
Total tangible assets (non-GAAP)
Total assets (GAAP)	$	17,763,770		$	17,303,296		$	16,665,018
Goodwill and intangible assets, net		(963,694)			(942,716)			(898,381)
Deferred taxes on goodwill and intangible assets, net		45,873			43,905			44,336
Total tangible assets (non-GAAP)	$	16,845,949		$	16,404,485		$	15,810,973

Total tangible common equity (non-GAAP)
Shareholders’ equity (GAAP)	$	2,072,765		$	2,006,034		$	1,883,091
Goodwill and intangible assets, net		(963,694)			(942,716)			(898,381)
Deferred taxes on goodwill and intangible assets, net		45,873			43,905			44,336
Total tangible common equity (non-GAAP)	$	1,154,944		$	1,107,223		$	1,029,046

Shareholders’ equity-to-assets ratio at quarter end
Total shareholders' equity (GAAP) - numerator	$	2,072,765		$	2,006,034		$	1,883,091
Total assets (GAAP) - denominator		17,763,770			17,303,296			16,665,018
Shareholders’ equity-to-assets ratio at quarter (GAAP)		11.67	%		11.59	%		11.30	%

Tangible equity-to-tangible assets ratio at quarter end (non-GAAP)
Total tangible common equity (non-GAAP) - numerator	$	1,154,944		$	1,107,223		$	1,029,046
Total tangible assets (non-GAAP) - denominator		16,845,949			16,404,485			15,810,973
Tangible equity-to-tangible assets ratio at quarter end (non-GAAP)		6.86	%		6.75	%		6.51	%

Book value (GAAP)
Total shareholders’ equity (GAAP) – numerator	$	2,072,765		$	2,006,034		$	1,883,091
Period end common shares outstanding – denominator		52,598			52,682			52,869
Book value (GAAP)	$	39.41		$	38.08		$	35.62

Tangible book value (non-GAAP)
Total tangible common equity (non-GAAP) – numerator	$	1,154,944		$	1,107,223		$	1,029,046
Period end common shares outstanding – denominator		52,598			52,682			52,869
Tangible book value (non-GAAP)	$	21.96		$	21.02		$	19.46

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates, prices or credit risk. Credit risk associated with the Company’s loan portfolio has been previously discussed in the asset quality section of the MD&A. Management believes that the tax risk of the Company’s obligations of state and political subdivisions associated with potential future changes in statutory, judicial and regulatory actions is minimal. Treasury, agency, mortgage-backed and collateralized mortgage obligation securities issued by government agencies comprise 90.0% of the total portfolio and are currently rated AAA by Moody’s Investor Services and AA+ by Standard & Poor’s. Obligations of state and political subdivisions and corporate debt securities account for 10.0% of the total portfolio, of which 95.6% carry a minimum rating of A-. The Company does not have material foreign currency exchange rate risk exposure. Therefore, almost all the market risk in the investment portfolio is related to interest rates.

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The ongoing monitoring and management of both interest rate risk and liquidity over the short- and long-term time horizons is an important component of the Company's asset/liability management process, which is governed by guidelines established in the policies reviewed and approved annually by the Company’s Board. The Board delegates responsibility for carrying out the policies to the ALCO, which meets each month. The committee is made up of the Company's senior management, corporate finance and risk personnel as well as regional and line-of-business managers who oversee specific earning asset classes and various funding sources. As the Company does not believe it is possible to reliably predict future interest rate movements, it has maintained an appropriate process and set of measurement tools which enables it to identify and quantify sources of interest rate risk in varying rate environments. The primary tool used by the Company in managing interest rate risk is income simulation. This begins with the development of a base case scenario, which projects net interest income (“NII”) over the next twelve-month period. The base case scenario NII may increase or decrease significantly from quarter to quarter, reflective of changes during the most recent quarter in the Company’s: (i) earning assets and liabilities balances, (ii) composition of earning assets and liabilities, (iii) earning asset yields, (iv) cost of funds and (v) various model assumptions including loan and time deposit spreads and core deposit betas, as well as current market interest rates, including the slope of the yield curve and projected changes in the slope of the yield curve over the twelve month period. The direction of interest rates, the slope of the yield curve, the modeled changes in deposit balances and the cost of funds, including the Company’s deposit and funding betas, are not easily predicted in the current market environment, and therefore a wide variety of strategic balance sheet and treasury yield curve scenarios are modeled on an ongoing basis.

The following reflects the Company's estimated NII sensitivity as compared to the base case scenario over the subsequent twelve months based on:

●	Balance sheet levels using June 30, 2026 as a starting point.

●	The model assumes the Company’s average deposit balances will increase approximately 2.4% over the next twelve months.

●	The model assumes the Company’s average earning asset balances will increase approximately 2.1% over the next twelve months, largely due to forecasted loan growth.

●	Cash flows on earning assets are based on contractual maturity, optionality, and amortization schedules along with applicable prepayments derived from internal historical data and external sources.

●	The model assumes approximately $30.0 million of additional mortgage-backed security purchases over the next twelve months. Investment cash inflows will be used to fund these purchases with any excess inflows being used to pay down overnight borrowings and fund loan growth.

●

In the rising/falling rates scenarios, the prime rate, the federal funds rate, and the 3-month treasury rate are assumed to move up/down in a straight-line manner by the amounts listed below over a 12-month period. The remainder of the treasury curve normalizes to a historical shape based off a historical spread between the 3-month treasury and each point on the treasury curve, which also occurs over a 12-month period. Deposit balance and mix changes and the resultant deposit and funding betas are assumed to move in a manner that reflects the Company’s (i) long-term historical relationship between the Company’s deposit rate movement and changes in the federal funds rate, (ii) recent interest rate cycle experience, (iii) significant management judgment and (iv) other factors, including recent market behaviors of customers and competitors.

Net Interest Income Sensitivity Model


	Calculated annualized increase		Calculated annualized increase
	(decrease) in projected net interest		(decrease) in projected net interest
	income at June 30, 2026		income at June 30, 2026
Interest rate scenario	(000’s omitted)		(%)
+200 basis points	$	(3,856)	(0.7)	%
+100 basis points	$	(2,345)	(0.4)	%
-100 basis points	$	(26)	0.0	%
-200 basis points	$	(747)	(0.1)	%

Projected NII over the 12-month forecast period decreases in the up 100 and up 200 interest rate environments largely due to higher funding costs outpacing the higher income on loans and interest earning cash.

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Projected NII decreases slightly in the down 100 and down 200 interest rate environments largely due to lower income on cash balances, investments, and loans all mostly offset by lower funding costs.

The analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions: the nature and timing of interest rate levels (including yield curve shape), prepayments on loans and securities, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and other factors. While the assumptions are developed based upon a reasonable outlook for national and local economic and market conditions, the Company cannot make any assurances as to the predictive efficacy of these assumptions, including how customer preferences or competitor influences might change. Furthermore, the sensitivity analysis does not reflect actions that the ALCO might take in responding to or anticipating changes in interest rates and other developments.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures, as defined in Rule 13a -15(e) and 15d – 15(e) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”), designed to ensure information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is: (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and (ii) accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on management’s evaluation of the effectiveness of the Company’s disclosure controls and procedures, with the participation of the Chief Executive Officer and the Chief Financial Officer, it has concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, these disclosure controls and procedures were effective as of June 30, 2026.

Changes in Internal Control over Financial Reporting

The Company regularly assesses the adequacy of its internal controls over financial reporting. There have been no changes in the Company’s internal controls over financial reporting in connection with the evaluation referenced in the paragraph above that occurred during the Company’s quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

The Company and its subsidiaries are subject in the normal course of business to various pending and threatened legal proceedings or other matters in which claims for monetary damages are asserted. Information on current legal proceedings and other matters is set forth in Note H to the consolidated financial statements included under Part I, Item 1.

Item 1A. Risk Factors

There have been no material changes in the risk factors disclosure from that contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC on February 27, 2026.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

a) Not applicable.

b) Not applicable.

c) At its December 2025 meeting, the Board approved a new stock repurchase program authorizing the repurchase, at the discretion of senior management, of up to 2,633,000 shares, or 5.0% of the Company’s common stock outstanding, in accordance with securities and banking laws and regulations, during the twelve-month period starting January 1, 2026. Any repurchased shares will be used for general corporate purposes, including those related to stock plan activities. The timing and extent of repurchases will depend on market conditions and other corporate considerations as determined at the Company’s discretion.

The following table presents stock purchases made during the second quarter of 2026:

Issuer Purchases of Equity Securities


	Total			Total Number of Shares	Maximum Number of
	Number of	Average		Purchased as Part of	Shares That May Yet Be
	Shares	Price Paid		Publicly Announced	Purchased Under the Plans
Period	Purchased	Per Share		Plans or Programs	or Programs
April 1-30, 2026	843	$	61.52	0	2,383,000
May 1-31, 2026	9,240		62.24	8,471	2,374,529
June 1-30, 2026	0		0.00	0	2,374,529
Total ⁽¹⁾	10,083	$	62.18	8,471

(1)

Included in the common shares repurchased were 598 shares acquired by the Company in connection with the administration of a deferred compensation plan and 1,014 shares acquired by the Company in connection with the vesting of restricted stock awards in satisfaction of applicable tax withholding obligations. These shares were not repurchased as part of the publicly announced repurchase plan described above.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

a) Not applicable.

b) Not applicable.

c) Certain of the Company’s officers or directors have made elections to participate in, and are participating in, the Company’s dividend reinvestment plan, deferred compensation plans, and 401(k) plan, and have made, and may from time to time make, elections to have shares withheld to cover withholding taxes or pay the exercise price of options or the settlement of restricted stock, each of which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K). During the fiscal quarter ended June 30, 2026, none of the Company’s directors or officers informed the Company of the adoption of or termination of a “Rule 10b5-1 trading agreement” or a “non-Rule 10b5-1 trading agreement,” as those terms are defined in Item 408 of Regulation S-K.

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Item 6. Exhibits

Exhibit No.		Description
31.1		Certification of Dimitar A. Karaivanov, President and Chief Executive Officer of the Registrant, pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.⁽¹⁾
31.2		Certification of Marya Burgio Wlos, Executive Vice President, Treasurer and Chief Financial Officer of the Registrant, pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.⁽¹⁾
32.1		Certification of Dimitar A. Karaivanov, President and Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.⁽²⁾
32.2		Certification of Marya Burgio Wlos, Executive Vice President, Treasurer and Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.⁽²⁾
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. ⁽¹⁾
101.SCH		Inline XBRL Taxonomy Extension Schema Document ⁽¹⁾
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document ⁽¹⁾
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document ⁽¹⁾
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document ⁽¹⁾
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document ⁽¹⁾
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) ⁽¹⁾

(1)	Filed herewith.

(2)	Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Community Financial System, Inc.

Date: August 7, 2026	/s/ Dimitar A. Karaivanov
	Dimitar A. Karaivanov, President and Chief Executive Officer

Date: August 7, 2026	/s/ Marya Burgio Wlos
	Marya Burgio Wlos, Executive Vice President, Treasurer and Chief Financial Officer