Although the Bank may sometimes purchase or fund loan participation interests outside of its primary market areas, the Bank generally originates residential mortgage, commercial, and consumer loans largely to customers throughout Oswego and Onondaga counties. Although the Bank has a diversified loan portfolio, a substantial portion of its borrowers’ abilities to honor their loan contracts is dependent upon the counties’ employment and economic conditions.

Periodically, the Bank acquires diversified pools of loans and participation interests in credit facilities, originated by unrelated third parties, as part of the Company’s overall balance sheet management strategies. During the first and second quarters of 2026, the Company acquired participation interests in two revolving commercial lines of credit. The following tables detail the purchased loan positions held by the Bank at June 30, 2026 and December 31, 2025. The date of earliest acquisition is depicted within the tables below:


	June 30, 2026
(In thousands, except number of loans)	Original Balance		Current Balance		Unamortized Premium/ (Discount)			Number of Loans		Maturity Range (in years)	Cumulative net charge-offs
Commercial and industrial loans (6/2019)	$	6,800	$	390	$	-			12	1-3	$	-
Home equity lines of credit (8/2019)		21,900		2,400		-			68	3-24		74
Residential real estate loans (12/2019)		4,300		3,800		251			50	15-25		-
Unsecured consumer loan pool 1 (12/2019)		5,400		6		-			3	0-1		-
Unsecured consumer installment loans pool 3 (12/2019)		10,300		35		-			29	0-7		145
Secured consumer installment loans pool 4 (12/2020)		14,500		7,700		(1,130	)		444	19-23		-
Unsecured consumer loans pool 5 (1/2021) 1		24,400		10,100		(288	)		535	5-20		1,461
Secured consumer installment loans (11/2021)		21,300		13,900		(2,410	)		759	15-23		1,061
Unsecured consumer loans pool 6 (11/2021) 1		22,200		12,800		(1,724	)		475	5-22		1,654
Revolving commercial line of credit 1 (7/2024)		1,050		14,000		14			1	0-1		-
Revolving commercial line of credit 2 (3/2026)		5,000		4,400		9			1	0-1		-
Revolving commercial line of credit 3 (5/2026)		360		360		10			1	0-1		-
Total	$	137,510	$	69,891	$	(5,268	)		2,378		$	4,395

	December 31, 2025
(In thousands, except number of loans)	Original Balance		Current Balance		Unamortized Premium/ (Discount)			Number of Loans		Maturity Range (in years)	Cumulative net charge-offs
Commercial and industrial loans (6/2019)	$	6,800	$	700	$	-			16	1-4	$	-
Home equity lines of credit (8/2019)		21,900		2,700		2			74	3-24		103
Residential real estate loans (12/2019)		4,300		3,900		266			51	15-23		-
Unsecured consumer loan pool 1 (12/2019)		5,400		100		-			29	0-1		-
Unsecured consumer installment loans pool 3 (12/2019)		10,300		45		1			31	0-7		112
Secured consumer installment loans pool 4 (12/2020)		14,500		8,100		(1,189	)		452	20-23		24
Unsecured consumer loans pool 5 (1/2021) 1		24,400		10,800		(313	)		552	5-20		1,361
Secured consumer installment loans (11/2021)		21,300		14,700		(2,537	)		771	15-23		803
Unsecured consumer loans pool 6 (11/2021) 1		22,200		13,500		(1,822	)		490	5-20		1,573
Revolving commercial line of credit 1 (7/2024)		1,050		14,000		19			1	0-1		-
Total	$	132,150	$	68,545	$	(5,573	)		2,467		$	3,976

1 On December 7, 2023, the Bank settled two pay-fixed interest rate swap derivative contracts, previously established with an unaffiliated third party and designated as fair value interest rate hedges. The hedging swap contracts were related to two purchased consumer installment loan pools comprised of loans secured by residential home solar power infrastructure. These contracts were entered into on February 13, 2021 (notional amount of $12.2 million) and December 8, 2021 (notional amount of $8.5 million). The Bank realized gains related to the settlement of these two hedging contracts were $117,000 and $694,000, respectively. These gains on the extinguishments of the hedging swap contracts are reported as a reduction of the carrying value of the hedged loan pools and will be recognized as an enhancement to the reported yield on those loan pools over the original contractual life of the hedging swap contracts. The unamortized portion of these gains totaled $570,000 at June 30, 2026.

At June 30, 2026 and December 31, 2025, the ACL related to the purchased loan pools were $2.3 million and $2.8 million, respectively.

As of June 30, 2026, the Company had $105.5 million in residential and commercial real estate mortgage loans pledged to FHLB-NY, and $9.4 million in home equity loans pledged to the FRB-NY.

As of December 31, 2025, the Company had $108.4 million in residential and commercial real estate mortgage loans pledged to FHLB-NY, and $9.9 million in home equity loans pledged to FRB-NY.

The Company’s lending policies and procedures are presented in Note 5 to the audited consolidated financial statements included in the 2025 Annual Report filed with the SEC on March 30, 2026 and have not changed. As part of the execution of the Company’s overall balance sheet management strategies, the Bank will acquire participating interests in loans originated by unrelated third parties on an occasional basis. The purchase of participations in loans that are originated by third parties only occurs after the completion of thorough pre-acquisition due diligence. Loans in which the Company acquires a participating interest are determined to meet, in all material respects, the Company’s internal underwriting policies, including credit and collateral suitability thresholds, prior to acquisition. In addition, the financial condition of the originating financial institutions, which are generally retained as the ongoing loan servicing provider for participations acquired by the Bank, are analyzed prior to the acquisition of the participating interests and monitored on a regular basis thereafter for the life of those interests.

To develop and document a systematic methodology for determining the ACL, the Company has divided the loan portfolio into three portfolio segments, each with different risk characteristics but with similar methodologies for assessing risk. Each portfolio segment is broken down into loan classes where appropriate. Loan classes contain unique measurement attributes, risk characteristics, and methods for monitoring and assessing risk that are necessary to develop the ACL. Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class.

The following table illustrates the portfolio segments and classes for the Company’s loan portfolio:

The following tables present the classes of the loan portfolio as of June 30, 2026, summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of the dates indicated:


	Term Loans By Origination Year
(In thousands)	2026		2025		2024		2023			2022			Prior			Revolving loans		Revolving loans converted to term loans		Total
Commercial real estate:
Pass	$	13,773	$	56,235	$	43,142	$	29,145		$	49,012		$	149,785		$	-	$	-	$	341,092
Special Mention		-		-		6,048		11,758			560			8,753			-		-		27,119
Substandard		-		3,474		824		1,232			7,247			7,116			-		-		19,893
Doubtful		-		-		-		-			-			50			-		-		50
Total commercial real estate		13,773		59,709		50,014		42,135			56,819			165,704			-		-		388,154
Commercial lines of credit:
Pass		-		-		-		-			-			-			65,788		3,979		69,767
Special Mention		-		-		-		-			-			-			5,965		147		6,112
Substandard		-		-		-		-			-			-			1,915		78		1,993
Doubtful		-		-		-		-			-			-			14		-		14
Total commercial lines of credit		-		-		-		-			-			-			73,682		4,204		77,886
Other commercial and industrial:
Pass		4,572		12,463		12,084		9,573			10,240			12,526			2,304		-		63,762
Special Mention		-		916		1,168		2,026			-			463			-		-		4,573
Substandard		-		-		189		170			-			4,938			-		-		5,297
Doubtful		-		-		-		2,355			-			-			-		-		2,355
Total other commercial and industrial		4,572		13,379		13,441		14,124			10,240			17,927			2,304		-		75,987
Paycheck Protection Program loans:
Pass		-		-		-		-			-			41			-		-		41
Special Mention		-		-		-		-			-			-			-		-		-
Substandard		-		-		-		-			-			-			-		-		-
Doubtful		-		-		-		-			-			-			-		-		-
Total Paycheck Protection Program loans		-		-		-		-			-			41			-		-		41
Tax exempt loans:
Pass		-		2,150		2		-			-			360			-		-		2,512
Special Mention		-		-		-		-			-			-			-		-		-
Substandard		-		-		-		-			-			-			-		-		-
Doubtful		-		-		-		-			-			-			-		-		-
Total tax exempt loans		-		2,150		2		-			-			360			-		-		2,512
1-4 family first-lien residential mortgages:
Pass		9,155		11,650		10,086		13,596			24,944			159,380			-		-		228,811
Special Mention		-		123		-		-			156			2,070			-		-		2,349
Substandard		-		-		-		-			97			1,495			-		-		1,592
Doubtful		-		-		-		107			-			642			-		-		749
Total 1-4 family first-lien residential mortgages		9,155		11,773		10,086		13,703			25,197			163,587			-		-		233,501
Residential construction:
Pass		533		709		-		-			-			-			-		-		1,242
Special Mention		-		-		-		-			-			-			-		-		-
Substandard		-		-		-		-			-			-			-		-		-
Doubtful		-		-		-		-			-			-			-		-		-
Total residential construction		533		709		-		-			-			-			-		-		1,242
Home equity and junior liens:
Pass		3,511		1,850		2,243		3,112			2,554			11,604			25,800		1,137		51,811
Special Mention		-		-		-		40			229			52			-		6		327
Substandard		-		-		-		-			27			202			840		-		1,069
Doubtful		-		-		-		-			-			12			-		-		12
Total home equity and junior liens		3,511		1,850		2,243		3,152			2,810			11,870			26,640		1,143		53,219
Other Consumer:
Pass		1,170		2,135		1,905		47,002			1,985			2,840			-		-		57,037
Special Mention		-		-		26		-			-			78			-		-		104
Substandard		-		-		27		-			1			63			-		-		91
Doubtful		-		-		-		-			-			-			-		-		-
Total other consumer		1,170		2,135		1,958		47,002			1,986			2,981			-		-		57,232
Net deferred loan fees		84		57		42		(6	)		(158	)		(818	)		-		-		(799	)
Loans, net of deferred fees	$	32,798	$	91,762	$	77,786	$	120,110		$	96,894		$	361,652		$	102,626	$	5,347	$	888,975

The following tables present the classes of the loan portfolio as of December 31, 2025, summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of the dates indicated:


	Term Loans By Origination Year
(In thousands)	2025			2024		2023			2022			2021			Prior			Revolving loans		Revolving loans converted to term loans		Total
Commercial real estate:
Pass	$	49,693		$	42,604	$	29,527		$	51,634		$	35,764		$	121,653		$	-	$	-	$	330,875
Special Mention		-			6,113		11,761			7,747			-			4,875			-		-		30,496
Substandard		3,474			830		1,235			2,220			8,456			2,674			-		-		18,889
Doubtful		-			-		-			-			-			51			-		-		51
Total commercial real estate		53,167			49,547		42,523			61,601			44,220			129,253			-		-		380,311
Commercial lines of credit:
Pass		-			-		-			-			-			-			64,594		2,516		67,110
Special Mention		-			-		-			-			-			-			6,080		-		6,080
Substandard		-			-		-			-			-			-			2,119		47		2,166
Doubtful		-			-		-			-			-			-			15		-		15
Total commercial lines of credit		-			-		-			-			-			-			72,808		2,563		75,371
Other commercial and industrial:
Pass		14,970			14,164		12,205			11,416			2,234			12,413			999		-		68,401
Special Mention		959			1,422		2,013			-			21			1,339			-		-		5,754
Substandard		-			189		310			-			9			4,192			-		-		4,700
Doubtful		-			-		2,355			-			-			-			-		-		2,355
Total other commercial and industrial		15,929			15,775		16,883			11,416			2,264			17,944			999		-		81,210
Paycheck Protection Program loans:
Pass		-			-		-			-			-			63			-		-		63
Special Mention		-			-		-			-			-			-			-		-		-
Substandard		-			-		-			-			-			-			-		-		-
Doubtful		-			-		-			-			-			-			-		-		-
Total Paycheck Protection Program loans		-			-		-			-			-			63			-		-		63
Tax exempt loans:
Pass		2,619			4		-			-			-			4,093			-		-		6,716
Special Mention		-			-		-			-			-			-			-		-		-
Substandard		-			-		-			-			-			-			-		-		-
Doubtful		-			-		-			-			-			-			-		-		-
Total tax exempt loans		2,619			4		-			-			-			4,093			-		-		6,716
1-4 family first-lien residential mortgages:
Pass		14,993			10,769		14,905			26,481			42,090			125,533			-		-		234,771
Special Mention		123			-		-			160			949			1,317			-		-		2,549
Substandard		-			-		107			100			89			1,429			-		-		1,725
Doubtful		-			-		-			-			-			647			-		-		647
Total 1-4 family first-lien residential mortgages		15,116			10,769		15,012			26,741			43,128			128,926			-		-		239,692
Residential construction:
Pass		2,039			-		-			-			-			-			-		-		2,039
Special Mention		-			-		-			-			-			-			-		-		-
Substandard		-			-		-			-			-			-			-		-		-
Doubtful		-			-		-			-			-			-			-		-		-
Total residential construction		2,039			-		-			-			-			-			-		-		2,039
Home equity and junior liens:
Pass		4,623			2,502		3,298			2,694			2,517			10,459			21,313		883		48,289
Special Mention		-			-		41			205			-			66			64		6		382
Substandard		-			-		-			27			-			208			865		-		1,100
Doubtful		-			-		-			-			12			-			-		-		12
Total home equity and junior liens		4,623			2,502		3,339			2,926			2,529			10,733			22,242		889		49,783
Other Consumer:
Pass		2,738			2,407		51,295			2,665			1,414			2,033			-		-		62,552
Special Mention		10			27		11			13			-			91			-		-		152
Substandard		-			40		4			12			65			-			-		-		121
Doubtful		-			-		-			-			-			-			-		-		-
Total other consumer		2,748			2,474		51,310			2,690			1,479			2,124			-		-		62,825
Net deferred loan fees		(371	)		62		(9	)		(170	)		(158	)		(694	)		-		-		(1,340	)
Loans, net of deferred fees	$	95,870		$	81,133	$	129,058		$	105,204		$	93,462		$	292,442		$	96,049	$	3,452	$	896,670

Management has reviewed its loan portfolio and determined that, to the best of its knowledge, no material exposure exists to sub-prime or other high-risk residential mortgages. The Company is not in the practice of originating these types of loans.

Loans are considered past due if the required principal and interest payments have not been received within thirty days of the payment due date. Loans are placed on nonaccrual when the contractual payment of principal and interest has become 90 days past due or when management has serious doubts about further collectability of principal or interest, even though the loan may be currently performing.

An aging analysis of past due loans, not including net deferred loan costs, segregated by portfolio segment and class of loans, as of June 30, 2026 and December 31, 2025, are detailed in the following tables:


	As of June 30, 2026
	30-59 Days		60-89 Days		90 Days		Total				Total Loans
(In thousands)	Past Due		Past Due		and Over		Past Due		Current		Receivable
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	2,734	$	847	$	2,080	$	5,661	$	227,840	$	233,501
Construction		-		-		-		-		1,242		1,242
Total residential mortgage loans		2,734		847		2,080		5,661		229,082		234,743
Commercial loans:
Real estate		1,170		-		22,762		23,932		364,222		388,154
Lines of credit		155		49		1,885		2,089		75,797		77,886
Other commercial and industrial		214		265		8,065		8,544		67,443		75,987
Paycheck Protection Program loans		-		-		-		-		41		41
Tax exempt loans		-		-		-		-		2,512		2,512
Total commercial loans		1,539		314		32,712		34,565		510,015		544,580
Consumer loans:
Home equity and junior liens		520		232		511		1,263		51,956		53,219
Other consumer		589		471		407		1,467		55,765		57,232
Total consumer loans		1,109		703		918		2,730		107,721		110,451
Total loans	$	5,382	$	1,864	$	35,710	$	42,956	$	846,818	$	889,774

	As of December 31, 2025
	30-59 Days		60-89 Days		90 Days		Total				Total Loans
(In thousands)	Past Due		Past Due		and Over		Past Due		Current		Receivable
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	2,871	$	2,934	$	1,977	$	7,782	$	231,910	$	239,692
Construction		-		-		-		-		2,039		2,039
Total residential mortgage loans		2,871		2,934		1,977		7,782		233,949		241,731
Commercial loans:
Real estate		9,042		7,461		15,567		32,070		348,241		380,311
Lines of credit		444		-		1,135		1,579		73,792		75,371
Other commercial and industrial		315		508		7,914		8,737		72,473		81,210
Paycheck Protection Program loans		-		-		-		-		63		63
Tax exempt loans		-		-		-		-		6,716		6,716
Total commercial loans		9,801		7,969		24,616		42,386		501,285		543,671
Consumer loans:
Home equity and junior liens		615		229		537		1,381		48,402		49,783
Other consumer		649		399		431		1,479		61,346		62,825
Total consumer loans		1,264		628		968		2,860		109,748		112,608
Total loans	$	13,936	$	11,531	$	27,561	$	53,028	$	844,982	$	898,010

At June 30, 2026, the Bank's 86 nonperforming loans represented 4.0% of total loans, with an aggregate outstanding balance of $35.7 million, as compared to 88 loans, representing 3.1% of total loans, with an aggregate outstanding balance of $27.6 million at December 31, 2025. The increase primarily reflected certain legacy loans associated with two commercial relationships that may have been less than 90 days delinquent but were identified as having unique risk characteristics through the Company’s previously disclosed comprehensive review of approximately 90% of the Bank’s commercial portfolio in 2025. Specific reserves for these exposures were established prior to 2026.

The measurement of individually evaluated loans is generally based upon the present value of future cash flows discounted at the historical effective interest rate, except that all collateral-dependent loans are measured based on the fair value of the collateral, less costs to sell. The Company utilizes the DCF method for its pooled segment calculation. The DCF method implements a probability of default with loss given default and loss exposure at default estimation. The probability of default and loss given default are applied to future cash flows that are adjusted to present value and these discounted expected losses become the ACL.

When the Company modifies a loan with a borrower experiencing financial difficulty, a potential impairment is analyzed either based on the present value of the expected future cash flows discounted at the interest rate of the original loan terms or the fair value of the collateral less costs to sell. If it is determined that the value of the loan is less than its recorded investment, then impairment is recognized as a component of the provision for credit losses, an associated increase to the ACL or as a charge-off to the ACL in the current period.

Because the effect of most loan modifications made with borrowers experiencing financial difficulty is already included in the ACL, a change to the ACL is generally not recorded upon modification. In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession such as an interest rate reduction, may be granted. Nonaccrual loans that are modified will remain on nonaccrual status but may move to accrual status after they have performed according to the modified terms for a period of time of at least six consecutive months.

The financial impact of commercial loan modifications made to borrowers experiencing financial difficulty outstanding as of June 30, 2026 related to four borrowers that were granted either maturity extensions or an interest rate modification. There were no commercial loan modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2026. During the six months ended June 30, 2026, one borrower was granted a term extension. 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 payment status of modified loans were current as of June 30, 2026. There were two borrowers experiencing financial difficulty that were granted loan modifications during the three months ended June 30, 2025, and three borrowers during the six months ended June 30, 2025.

The following tables present the amortized cost basis of loans modified for borrowers experiencing financial difficulty, by class and by type of modification.


	Three Months Ended June 30, 2026					Three Months Ended June 30, 2025
(Dollars in thousands)	Term Extension		Total Class of Receivable			Term Extension		Total Class of Receivable
Residential mortgage loans	$	-		-		$	-		-
Commercial real estate		-		-			-		-
Commercial lines of credit		-		-			-		-
Commercial and industrial		-		-			2,369		2.8	%
Home equity and consumer		-		-			-		-
Total	$	-		0.0	%	$	2,369		2.8	%


	As of June 30, 2026					As of June 30, 2025
(In thousands)	Term Extension		Total Class of Receivable			Term Extension		Total Class of Receivable
Residential mortgage loans	$	-		-		$	-		-
Commercial real estate		-		-			2,017		0.5	%
Commercial lines of credit		25		0.0	%		-		-
Commercial and industrial		2,355		3.1	%		2,369		2.8	%
Home equity and consumer		-		-			-		-
Total	$	2,380		3.1	%	$	4,386		3.3	%


	Three Months Ended June 30, 2026					Three Months Ended June 30, 2025
(Dollars in thousands)	Interest Rate Reduction		Total Class of Receivable			Interest Rate Reduction		Total Class of Receivable
Residential mortgage loans	$	-		-		$	-		-
Commercial real estate		-		-			11,495		3.0	%
Commercial lines of credit		-		-			-		-
Commercial and industrial		-		-			-		-
Home equity and consumer		-		-			-		-
Total	$	-		0.0	%	$	11,495		3.0	%


	As of June 30, 2026					As of June 30, 2025
(In thousands)	Interest Rate Reduction		Total Class of Receivable			Interest Rate Reduction		Total Class of Receivable
Residential mortgage loans	$	-		-		$	-		-
Commercial real estate		11,495		3.0	%		11,495		3.0	%
Commercial lines of credit		-		-			-		-
Commercial and industrial		1,305		1.7	%		-		-
Home equity and consumer		-		-			-		-
Total	$	12,800		4.7	%	$	11,495		3.0	%